Lead Time is the time between the initiation of a process and its completion. In Supply Chain Management there are 2 types of lead times:
- Manufacturing Lead Time
- Information Lead Time
Manufacturing lead times
As shown above, there are 4 different types of lead times required to make an item or an item lot.
- Preprocessing Lead Time: The time required to create a work order (discrete job) from the time you learn of the requirement. It is also known as “planning time” or simply “paperwork”.
- Processing Lead Time: The time required to make/manufacture the item.
- Fixed lead time: The fixed lead time is a portion of processing lead time which is not dependent of order quantity
- Variable lead time: Portion of processing lead time which is dependent of order quantity
The total lead time is equal to the fixed lead time plus the variable lead time multiplied by the order quantity. The planning process uses the total lead time to calculate order start dates from order due dates.
Purchasing lead times
Understanding purchasing lead times is simpler.
- Preprocessing Lead Time: The time required to create a Purchase Order from the time you learn of the requirement. As for Make items, the buy item preprocessing lead time is also known as “planning time” or simply “paperwork”.
- Processing Lead Time: The time required to buy an item.
- Postprocessing lead time: The time required to receive a buy or transfer item from the receiving dock to inventory (it includes quarantine, inspection time, etc.)
Cumulative lead times
Please find below an illustration showing the different cumulative lead times you may find in manufacturing processes.
- The Cumulative Manufacturing Lead Time is the time required to manufacture an item if you had all raw materials or components in stock but had to make all subassemblies level by level.
- The Cumulative Total Lead Time is the time required to manufacture an assembly or an item if you had to order all raw materials or components and if you had to make all subassemblies.
- Defining lead times in Oracle eBusiness Suite