Lead time

Lead time has multiple components: supplier production (days to make the goods), supplier handling (cut-off, booking, packing), shipping transit (ocean, air, rail, truck), customs clearance (broker filing, hold release), and last-mile delivery. Each component has its own variability.

Mean lead time alone is a poor planning input. What matters for safety stock and reordering is lead-time variability — the standard deviation, the 95th percentile, the worst-case observed. A supplier with a 30-day mean but a 60-day P95 needs much more buffer than a supplier with a 35-day mean and a 38-day P95.

Lead time is distinct from cycle time. Cycle time is the production step alone — order release to production complete. Lead time wraps cycle time with everything before and after.