Supplier Lead Time
Definition
The elapsed time from placing an order with a supplier until the goods are received and available for use, including production, transit, and receiving.
In Practice
Supplier lead time is one of the most consequential numbers in planning. It sets how far ahead orders must be released, drives reorder points, and, together with demand variability, determines how much safety stock you need: longer and more variable lead times require more buffer inventory. Lead time has components, order processing, production or allocation, transit, customs, and receiving, and each can be measured and attacked separately.
The common failure is planning on quoted lead time while actual lead time drifts. If the system says six weeks but the supplier now takes nine, every MRP recommendation is three weeks late. Measuring actual receipt dates against order dates, and updating system parameters, is basic hygiene that many organizations skip.
Example: a planner analyzes twelve months of receipts and finds a supplier's actual lead time averages 52 days with heavy variation, versus the 35 days in the ERP. Updating the parameter and adding safety stock ends a chronic pattern of expedites and shortages.
Related Calculators
Related Terms
A legally binding commercial document a buyer issues to a supplier specifying the items, quantities, prices, delivery dates, and terms of a purchase.
Minimum Order QuantityThe smallest quantity of an item a supplier is willing to sell in a single order, driven by their setup costs, batch sizes, or packaging units.
Supplier ScorecardA periodic report that grades a supplier's performance against agreed metrics such as on-time delivery, quality, cost, and responsiveness.
Landed CostThe total cost of getting a purchased item to your door, including the unit price plus freight, insurance, duties, taxes, and handling charges.