Business owners have a lot to worry about, from accounting to marketing and operations. In business, there is never enough time. A long lead time can have detrimental effects on your business if you miscalculate your safety stock levels. Especially if you face a reorder delay or worse, a supply delay. You will also need to factor in manufacturing lead time if you order finished products.
Lead Time Calculator
Lead time
—
What Is Lead Time?
In inventory management, lead time is the amount of time between when you place an order and when it is received. If you manage lead time well you can reduce wastage and downtime, avoid holding costs, and maximise your profits.
If you do not track lead time, you will likely see major issues in your processes, whether it's a lack of raw material for a development process or finished stock for your shelves. Calculating lead time is also an important part of project management.
There are many different factors that go into how lead time is calculated. Lead time can be affected by factors beyond your control like distance, customs processing time, etc. Since these factors are outside your control, you can only complete your lead time calculations to efficiently manage your safety stock and inventory turnover.
How To Calculate Lead Time
Step one is to factor in the reordering delay. For example, if your supplier accepts orders once a week and you placed the order four days before they will accept it, you have to factor that into your cycle time. That four days is a reordering delay. The supply delay is how many days it takes for a fulfilled order, which means when the order is in your possession.
The lead time formula is simple.
Supply delay + reorder delay = lead time
Use the above lead time calculator to quickly determine the amount of time between placing your order and receiving it.
How To Use The Lead Time Calculator
Lead time impacts your total inventory levels, and the longer the lead time the more holding stock you will need. A longer lead time makes your deliveries unpredictable, which means you are heavily reliant on accurate demand forecasts.
Once you have accurate figures for your supply and reorder delays, you can input these numbers into the lead time calculator to calculate your lead time.
How QuickBooks can help
Inventory management software can do an excellent job handling the heavy lifting for you. With QuickBooks, you will be able to track your inventory to get real-time stock value, low stock alerts and many more features. Visit our pricing page to get a 30-day free trial.
Our free tools and templates hub has more free assets that can help you run and grow your business.
