What is lead time in inventory?
Lead time is the time between placing an order with a supplier and having the stock available to sell. It includes the supplier’s production or picking time, shipping, and your own receiving and put-away.
Lead time formula
Measure it per supplier, and often per item:
Lead time = date the stock is available to sell − date the order was placed
Average your last 10 to 20 deliveries and record the spread as well as the average; the spread is what drives safety stock.
Why lead time variability matters
A reorder point covers lead time demand, the stock you expect to sell while you wait. A supplier who takes 10 days on average but sometimes 16 forces you to hold far more safety stock than one who always takes 12. In the standard safety stock formula, lead time variation is multiplied by the square of daily demand, so for fast sellers it often dominates.
Lead time vs cycle time
Lead time is measured from the buyer’s point of view: order placed to goods available. Cycle time is measured inside a process: how long one unit takes from the start of production to the end. A short cycle time does not guarantee a short lead time if orders wait in a queue first.
How to reduce lead time
- Order smaller quantities more often if the supplier allows it.
- Share forecasts with key suppliers so they can plan ahead.
- Move only your A items to faster shipping.
- Speed up your own receiving: stock waiting on the dock is not available to sell.
Last reviewed 2026-11-01.