What is “Lead Time”?

Lead Time is the amount of time it takes for a process to be completed, from beginning to end, including all activities - both Value Added and Non-Value Added. A major objective of lean and the Toyota Production System (TPS) is the reduction of lead time via the elimination of waste (muda) and improved flow of value. In lean, we often refer to the “Lead Time Model” which is a simple, graphical depiction of some of the various forms of lead time.

Process Lead Time (not shown in the model) is the time it takes to complete any process from beginning to end. The process can be a business process, a manufacturing process, an assembly process, or a service process, etc.

Manufacturing Lead Time is the total amount of time it takes for a product to go through the many processes that are required to transform raw materials and information into a finished good. It is generally measured from the time the production order is released to the shop floor, until the product is completed.

Customer Lead Time is the amount of time that your customer waits for his or her order, and is measured from the time the order is placed until the time the order is received. Note in the model below - it is possible for the Customer Lead Time to bypass the Manufacturing step entirely, if your organization ships from Finished Goods Inventory. In this case the time for Manufacturing is dropped out, and Customer Lead Time can actually be less than the Manufacturing Lead Time. Shipping directly from Finished Goods is a common strategy to shorten Customer Lead Time, and is common in “traditional” batch-and-queue production systems. This strategy is compatible with lean thinking when we view finished goods as a supermarket that we pull from to meet customer requirements, triggering upstream replenishment of the finished goods.

Business Lead Time is the total amount of time it takes for a saleable product or service to go from “Idea” to “Cash”.

This model can easily be extrapolated or adapted to other industries, including Construction, Software, Healthcare, Education, and Services.