What is Lead Time? All information about the latest Lead Time

In manufacturing, optimizing product completion time not only helps save human resources but also improves customer trust and satisfaction with the business. So what is Lead Time and what are the popular types of Lead Time today? Find out with 1C Vietnam right away through the article below.

1. What is Lead Time?

Lead Time is the time needed to produce a product or service to meet customer needs. Lead Time is applied in most different industries from manufacturing to supply chain management, project management and especially in the Logistics industry.

What is Lead Time in Logistics? It is a type of parameter calculated by the time from receiving an order until the product is delivered to the customer. Lead Time is often used to measure the ability of Logistics businesses to meet goods needs.

2. Why is it necessary to control Lead Time in production?

Thanks to Lead Time, companies and goods supply chains can analyze the working stages in the production process. From there, businesses can plan production or come up with appropriate solutions to improve productivity and work efficiency. The reasons to control Lead Time are:

• Lead Time is a parameter used to measure and ensure effective use of resources. When observing actual Lead Time, businesses will know productivity as well as internal potential. From there, administrators can come up with operational improvement plans for relevant departments to reduce production time.
• Lead Time also helps control inventory effectively. Applying Lead Time accurately will help businesses accurately estimate labor productivity and produce products in balance with customer needs.

3. Popular types of Lead Time today

Currently, in the manufacturing sector, Lead Time is often divided into the following 5 basic types:

• Order Lead Time: Is the total time from the time the customer places an order at the business until the customer receives the completed product.
• Shipping Lead Time (Manufacturing Lead Time): Is the total time from the time the customer places an order until the goods are ready to be shipped to the customer.
• Delivery Lead Time: Is the period of time calculated from the time the design is completed until the customer receives the product.
• Procurement Lead Time: Is the amount of time it takes for a company to source raw materials and basic available items to create a finished product.
• Inventory Management Lead Time: Is the period of time calculated from preparing the product for delivery to the shipping unit until receiving new goods in the warehouse.

4. Specific example of Lead Time

A business ordered the production of T-shirts for 1,000 employees on the occasion of the company's founding anniversary on December 1. Meanwhile, the starting date for ordering is November 15 and businesses require goods to be available before November 28. The time from ordering to receiving the finished product is 10 days.

Based on the order time and estimated budget for each shirt, the production unit will select service providers that suit the requirements. Accordingly, to produce the above order, businesses will need at least:

• It takes 1 day to complete the shirt design.
• Set aside 1 to 2 days to print samples, finalize designs and sample materials.
• It takes 1 or 2 days to mass produce and print shirts.
• It takes 1 day to ship to the customer.
• 1 day of planning and handling arising problems.

Thus, the required Lead Time must be at least 5 to 7 days (from the time the order is received). Normally, businesses will contact many different suppliers. Under equal budget conditions, the unit with the shorter production time will be chosen by the customer to cooperate.

5. How to calculate Lead Time quickly and accurately

Lead Time is often divided into a number of different factors such as: Preparation time, processing time, waiting time, etc. Based on the above factors, businesses can calculate Lead Time more accurately. .

In production, Lead Time is often calculated according to the following formula:

Lead time = Preparation time + Processing time + Waiting time

For a manufacturing enterprise, the preparation time is the stage of purchasing, taking raw materials and delivering them to the production factory. Processing time is the production stage and creating finished products. And finally, the waiting time is the stage of preparing goods and shipping the final product to the customer.

6. Distinguish between Lead Time and Cycle Time

Before learning and distinguishing the differences between Cycle Time and Lead Time, businesses need to clearly understand what Cycle Time is.

Cycle Time is the time from the start of production until the product is delivered to the customer. Below is a detailed comparison table of Cycle Time and Lead Time:

7. The secret to reducing Lead Time and increasing production efficiency

It can be said that in today's competitive era, shortening Lead Time will help businesses dominate the market. Because effective application of Lead Time helps increase service ability and maintain customer satisfaction.

However, businesses need to pay attention, in the process of shortening Lead Time, never neglect the quality of the products created. Here are some tips for businesses to effectively optimize Lead Time:

• Simplify the production process: Consolidating and streamlining production steps will help businesses easily track order completion time.
• Organize scientific production apparatus: Optimize the organization of production apparatus, build a team of highly specialized human resources. This helps the company avoid wasting time, human resources, costs and production errors.
• Produce ready-made goods in stock if there are enough resources: Businesses need to focus on improving the quick delivery process to satisfy and increase customer trust in the business.
• Smart production management with software: 1C:Company Management software is an effective Lead Time optimization support solution with features to support flexible management. The software allows connecting Sales - Purchasing - Production - Warehouse - Finance - Human Resources, Payroll - CRM departments on a single system, saving time, costs and increasing productivity by up to 60%. operating capacity.

To keep up with today's digital technology age, businesses need to find ways to effectively optimize resources and production time. If your business is looking for an effective solution to help reduce Lead Time, immediately use 1C:Company Management software. Hopefully through the above article, businesses will clearly understand what Lead Time is and how to effectively optimize this time. If you have any questions, please contact 1C Vietnam immediately for detailed advice.