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Lead Time

In the most common definition, lead time is the time that elapses from when a customer places an order until the order is received.

Some variations on the definition of lead time look at the time from when a raw material arrives at a facility until the finished product ships.

Regardless of exactly how your company defines lead time, it should be a customer oriented metric. The shorter your lead time is, the happier your customer will be.

Lead time is a function of cycle time—the time you are actually working on the product—and inventory. The more inventory you have, the longer your lead time will be.

 

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