Your supplier says two weeks. Your customer wants their order by Friday. And your team needs time to receive the stock, check it and get it back out of the door.
Lead times sit behind all these decisions. Get them wrong and you could run out of stock, promise an unrealistic delivery date or spend money rushing an order through.
Here’s what order and delivery lead times mean, how to measure them and where your business can make improvements.
What does lead time mean?
Lead time is the total amount of time between the start and finish of a defined process. In logistics, that means the time from placing an order to receiving it. Lead times can also be used to measure individual stages of the logistics process, such as manufacturing, warehouse processing and transport.
A supplier’s quoted lead time might end when goods leave their premises. Your purchasing team may need to measure through to arrival at your warehouse. Those are different periods, even if both are described as “lead time”. Always confirm what a quoted figure includes before using it to plan stock or promise delivery.
What is order lead time?
Order lead time is the period between placing an order and receiving the goods.
There are two perspectives:
- Supplier order lead time: How long you wait for goods after placing an order with a supplier.
- Customer order lead time: How long your customer waits between ordering from you and receiving their purchase.
That period can include administration, sourcing or manufacturing, picking, packing and transport processes. An in-stock item skips the production process, while a made-to-order product may spend most of its wait in manufacturing. That is why two products sold by the same business can have very different lead times.
What are delivery lead times?
Some businesses delivery lead times to refer to the full order-to-arrival period. Others use it for the delivery stage after goods are ready or dispatched.
Customers only care about when their order will arrive, so be clear about whether your estimate includes order processing, picking and packing, or just time in transit. A next-day courier service does not automatically mean a customer receives their goods the day after ordering if the order first needs two days to prepare.
Order lead time and delivery time: a simple example
Imagine an in-stock customer order takes:
Stage | Time |
Order processing, picking and packing | 2 days |
Transport after dispatch | 3 days |
Total order-to-arrival period | 5 days |
The customer order lead time is five days, while the transport stage takes three. Real schedules also take working days, order cut-off times, weekends and bank holidays into account, so make sure this matches with your promise to the customer.
How do you calculate lead time?
Lead time = receipt date − order date
If you place an order on the 1st of June and receive it on 11th of June, the lead time is 10 calendar days. If your business works in working days only count weekdays and non-holidays. Review several completed orders rather than relying on the data from one order.
To understand performance, review several completed orders rather than relying on one example.
Record:
- The order date and, where relevant, acceptance date.
- When goods became ready for dispatch.
- The dispatch date.
- The delivery or receipt date.
- Any exceptions, such as stock shortages or failed delivery attempts.
These details help you see where waiting time builds up.
Why do lead times matter to your business?
They influence when you reorder
If replenishment takes two weeks, waiting until your shelves are empty is too late.
You need to plan for the demand you expect during that wait, and you may need extra stock to cover it, for example if you sell 20 units a day and the lead time is ten days, you should order an extra 200 units to last until the next delivery arrives.
They affect cash tied up in stock
Long or unpredictable lead times push you to order earlier or hold more stock.
That can help maintain availability, but it also uses cash and storage space. Tracking actual supplier performance helps you make purchasing decisions with better information.
They shape customer expectations
Customers plan around the dates you give them. For a business customer, a late delivery could affect a project, production schedule or onward sale.
A realistic estimate gives them something useful to work with. If circumstances change, explain the revised timing early.
What causes lead times to increase?
Delays can happen at several points:
- Supplier availability: Materials or finished goods may be unavailable.
- Production demand: A supplier may have more orders than its capacity can comfortably handle.
- Order administration: Missing information or approvals may hold up processing.
- Warehouse workload: Receiving, picking or packing backlogs can delay dispatch.
- Transport: Collection schedules, customs or delivery disruptions can extend the journey.
- Seasonal demand: Busy periods may put pressure on several stages at once.
Before trying to shorten lead times, identify which stage is causing the problem. Faster transport won’t resolve an order that spends several days waiting to be picked.
How can your business manage lead times more effectively?
Track actual performance
Compare quoted times with completed orders. Look at variation as well as the average: a supplier taking between five and fifteen days creates a different planning challenge from one consistently taking ten.
Improve stock visibility
Knowing what is available, allocated to orders or awaiting replenishment helps your team avoid promising products they cannot dispatch.
As your range expands, this becomes harder to manage manually. Our guide to how outsourced inventory supports a growing product range explores the pressures that come with more stock and orders.
Plan ahead for busy periods
Share expected demand with suppliers and logistics partners before promotions, launches or seasonal peaks. Confirm capacity and timing rather than assuming normal arrangements will cover a much busier week.
Review picking and packing
Clear stock locations, accurate order information and suitable packaging can help reduce avoidable delays before dispatch.
Our pick and pack services provide support with preparing orders, helping businesses manage this stage as volumes grow.
Consider holding stock ready for call-off
For suitable products, holding stock in advance and releasing it when needed can reduce dependence on a fresh production order each time. This needs to be balanced against storage costs, cash flow and the risk of unused stock.
Our guide to stock and serve explains how storing packaging and calling it off in smaller quantities can work for businesses.
Can a 3PL partner help improve lead times?
Yes, A third party logistics partner (like us) can help manage the warehousing and fulfilment stages of your operation.
Our order fulfilment service includes receiving goods, storage, order processing, picking, packing, shipping and returns management.
This can support businesses whose own teams are struggling to keep pace with incoming stock and customer orders. Our storage and distribution services also bring together stock storage and the movement of goods.
If receiving, storing and dispatching orders is putting pressure on your business, fill out our contact form and see how we can add value to your business.