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The lead time meaning is considered to be the time between which the customer confirms an order and the time the delivery is made, or say the scheduled pick up based on terms and conditions. Lead time might vary based on the customers and the product.
There are several types, but the most important ones are discussed below:
Factory or Product Lead Time: With the availability of the materials, this indicates how much time does it take to build up the product and shipping of the product.
Material Lead Time: The amount of time taken to place an order along with a supplier to the time taken to receive it in-hand.
Cumulative Lead Time: Suppose you had no material in hand, so starting from the base the time taken to place an order and after aligning all the materials from scratch, the time taken to the delivery of the product from a confirmed order. It is in a way the combination of factory lead time and the material lead time works.
As we all know customer satisfaction is of utter importance, hence lead time is important. The basic criterion of customers is to get a service or goods as fast as possible while putting minimal efforts.
For the assembly and Manufacturing, the very concept lead time has a direct relationship with the number or say the amount of inventory which co-exists at different points in the whole of the supply chain management.
If the customer lead time is less than production lead time, material lead time, or cumulative lead time it will have a direct result in the inventory holdings at some or all points within the supply chain management. Being inconsistent and having variation will mostly compound the matter. This will lead to the holding of the inventory or the stock, hence risks will rise in the supply chain.
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There are several ways to reduce the lead time, some of them are enlisted below: