While lead time and the delivery date may appear adjacent in logistics, they do not carry the same meaning. The delivery date is defined as the day that goods are scheduled to arrive, or be given over. In contrast, lead time refers to the length of time before this event occurs. This period can encompass order confirmation, supplier preparation, warehouse processing, carrier collection, delivery, inbound activities, and occasionally additional inspection before updating stock status.
Imagine that you have a customer requesting goods to arrive by Friday. In this scenario, Friday is your delivery date. Now, imagine working backwards. The supplier may require 2 days to fulfill a request, the warehouse may require additional time for order picking, packing, and shipping, and the carrier may require one or more days to execute the route. If any of these individual steps extend beyond the timeline, then achieving the Friday delivery date becomes progressively more challenging. The whole collection of waiting and processing steps preceding that one date is what is known as lead time.
Understanding this distinction becomes essential for novice logisticians because there exists a high likelihood they will point a finger at the incorrect location of a supply chain bottleneck. If a delivery date changes, it does not necessarily mean that it moved on account of being en route. Instead, the delay could have occurred when the purchase order was confirmed at a late time, when a stock discrepancy was detected at the time of picking, when the goods were packed prior to dispatch and the accompanying packing list had to be revised, or the shipment remained on schedule according to the carrier route, even though the lead time was already expanded by earlier process steps.
The best approach for learning about lead time is to divide it into manageable components. Take one example order and list each step alongside the estimated duration: supplier confirmation, stock assessment, warehouse picking, goods packing, order shipping, goods transportation, goods receipt, and delivery confirmation. There is no need to engage in sophisticated math at this time. Rather, the objective is to identify that the lead time is comprised of numerous process steps, rather than simply the duration of the goods in transit. You will quickly learn what steps allow for any margin and which steps do not.
Another way that lead time impacts decision making is that it helps you to analyze your stock. If the level of inventory is running low, it is not enough to understand that stock has been ordered on an open purchase order. In order to know whether stock on hand will suffice or not, you need to know when the stock will be available to you. Stock on a purchase order is different from stock that is available to you on the shelf. Stock that is in a state of goods packing is different from stock that has been received and available for you to consume in your inventory. This explains why re-ordering levels and shortages relate closely to lead time; if you delay your reorder too long, the time gap between the moment a stockout occurs and a supplier can deliver will become longer.
To write a good logistics status note, use simple wording. A good update will go beyond saying simply that “the delivery has slipped into the following week,” and would instead note that the delay has occurred because supplier processing took longer than expected, that the shipping dock has delayed dispatch by a day, that pickup by the truck carrier has missed its window, or that the inbound process will take an extra day because of a mismatch with the packing list. A more specific status note will lead to a more precise understanding of why the delivery date has shifted, and will also help you to identify where you need to focus attention during the lead time.