What is lead time?

Lead time is longer than the supplier's promised delivery date. Count everything from your side of the counter:

1. You decide to order and send the order.
2. The supplier picks and packs, or waits to fill a truck.
3. The goods travel to you, by van, courier, ferry or air freight.
4. You check the delivery in and put it on the shelf.

A supplier who says 'two days' may still mean five by the time stock is sellable.

A shop orders phone chargers from an importer. Over the last five orders, the days from ordering to selling were 4, 6, 5, 9 and 4. The average is 28 / 5 = 5.6 days. The longest was 9 days.

If the shop plans around the average, one order in five could still leave the shelf empty for days. Planning around 6 or 7 days is safer, and the odd long wait is covered by safety stock. Record the dates of every order and delivery for a few months and you will have real numbers rather than a guess.

Lead time sets your reorder point. The longer it is, the more stock you need on hand when you reorder. A product that sells 3 a day with a 2 day lead time needs about 6 units in hand at the moment you order. The same product with a 10 day lead time needs about 30.

• Overseas and island-to-island orders often have long and uneven lead times, which is why many shops keep more stock of imported lines.
• Lead time changes. Holidays, weather and port delays stretch it. Review your numbers each season.
• Shorter is not always better. A reliable seven days beats a promised three that sometimes becomes ten.