A lead time is the latency (delay) between the initiation and execution of a process. For example, the lead time between the placement of an order and delivery of a new car from a manufacturer may be anywhere from 2 weeks to 6 months. In industry, lead time reduction is an important part of lean manufacturing.
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Lead time in publishing describes the amount of time that a journalist has between receiving a writing assignment and submitting the completed piece. Depending on the publication, lead times can be anything from a couple of hours to many months.
A more conventional definition of lead time in the supply chain management realm is the time from the moment the customer places an order (the moment you learn of the requirement) to the moment it is received by the customer. In the absence of finished goods or intermediate (work in progress) inventory, it is the time it takes to actually manufacture the order without any inventory other than raw materials.
In the manufacturing environment, lead time has the same definition as that of Supply Chain Management, but it includes the time required to ship the parts from the supplier. The shipping time is included because the manufacturing company needs to know when the parts will be available for material requirements planning. It is also possible for lead time to include the time it takes for a company to process and have the part ready for manufacturing once it has been received. The time it takes a company to unload a product from a truck, inspect it, and move it into storage is non-trivial. With tight manufacturing constraints or when a company is using Just In Time manufacturing it is important for supply chain to know how long their own internal processes take.
Lead time is made of[1]:
Example
Company A needs a part that can be manufactured in two days once Company B has received an order. It takes three days for company A to receive the part once shipped, and one additional day before the part is ready to go into manufacturing.
About Lead time as per company rules
In very complex manufacturing environment, like the manufacture of microprocessors, a usual Lead Time may be between 5–7 weeks. This is due to the sequence of operations, where there are multiple very similar steps repeated, and none can be skipped. If a manufacture of a CPU requires 35 exposure masks, that translates approximately into 35 x ( photoresist coating, exposure, development, main process step (like etching, diffusion, metal filling), photoresist stripping and/or polishing + other possible steps ) plus additional steps before and after all processing. There are wait times not only associated with scheduling a product into production, since the product lines are busy, but also a beginning run of production goes to scrap (plus tool change and alignment takes time), and there are possible wait times of batches being processed during the production. (Not all machinery works at the same speed, or requires maintenance steps, tool change, plus there is the time it takes to physically transport the silicon wafers from one processing machinery to another in small transport batches.)
In project management lead time is the time it takes to complete a task or a set of interdependent tasks. The lead of the entire project would be the overall duration of the critical path for the project.
Lead time is also the saved time by starting an activity before its predecessor is completed.
According to the PMI (2008), lead is a dependency between two activities (p. 140) [2]. An example would be scheduling the start of a 2 week activity dependent with the finish of the successor activity with a lead of 2 weeks so they will finish at the same time.