Lead Time

AAA

DEFINITION of 'Lead Time'

The amount of time that elapses between when a process starts and when it is completed. Lead time is examined closely in manufacturing, supply chain management and project management, as companies want to reduce the amount of time it takes to deliver products to the market. In business, lead time minimization is normally preferred.

BREAKING DOWN 'Lead Time'

Lead time is broken into several components: preprocessing, processing and post processing. Preprocessing involves determining resource requirements and initiating the steps required to fill an order. Processing involves the actual manufacturing or creation of the order. Post processing involves delivery of products to the market. Companies look at each component and compare it against benchmarks to determine where slowdowns are occurring.

RELATED TERMS
  1. Supply Shock

    An unexpected event that changes the supply of a product or commodity, ...
  2. Idle Time

    Unproductive time on the part of employees or machines as a result ...
  3. Aggregate Supply

    The total supply of goods and services produced within an economy ...
  4. Supply Chain

    The network created amongst different companies producing, handling ...
  5. Common Carrier

    A commercial entity that gets paid to transport goods or people. ...
  6. Transloading

    Transferring goods from one mode of transportation to another ...
Related Articles
  1. Insurance

    Working Capital Works

    A company's efficiency, financial strength and cash-flow health show in its management of working capital.
  2. Investing Basics

    Economic Indicators That Do-It-Yourself Investors Should Know

    Understanding these investing tools will put the market in your hands.
  3. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  4. Entrepreneurship

    Getting To Know Business Models

    Learning how to assess business models helps investors identify companies that are the best investments.
  5. Markets

    Intangible Assets Provide Real Value To Stocks

    Intangible assets don't appear on balance sheets, but they're crucial to judging a company's value.
  6. Retirement

    The Evolution Of Enterprise Risk Management

    This growing sector can tell you a lot about the companies you are investing in.
  7. Insurance

    What Does Errors and Omissions Insurance Cover?

    Errors and omissions insurance protects companies and individuals against claims made by clients for inadequate work or negligent actions.
  8. Investing Basics

    How Southwest Airlines Has Won Over Travelers

    Understand what Southwest Airlines' competitive advantages are and how they manage to edge out other airlines.
  9. Professionals

    Types of Business Guidance Funded by Government

    To access the right type of advice and support for your business from a variety of government-funded services, know what's out there and what you need.
  10. Investing

    Letter of Credit

    A letter of credit is a document from a bank promising to pay the holder a certain amount if the holder fulfills certain obligations. Sellers in commercial transactions often require buyers to ...
RELATED FAQS
  1. How do companies calculate the estimated duration of a new project?

    Different kinds of companies use different techniques to estimate project duration. For internal projects, estimation requires ... Read Full Answer >>
  2. What are the advantages of foreign portfolio investment?

    Foreign portfolio investment is the type of investment that an investor has abroad. There are many benefits of having a foreign ... Read Full Answer >>
  3. How is the concept of long tail growth used in marketing?

    Long-tail marketing refers to a business stocking a great variety of products that are not fast sellers to make huge total ... Read Full Answer >>
  4. What types of data are mined for business intelligence?

    Generally, businesses mine whatever data can be computerized for analysis and studied to improve operational efficiency, ... Read Full Answer >>
  5. What is the difference between a direct and an indirect distribution channel?

    A direct distribution channel is organized and managed by the firm itself. An indirect distribution channel relies on intermediaries ... Read Full Answer >>
  6. How does a company efficiently keep track of its distribution channels?

    Tracking distribution channels is a critical and challenging process. A company must understand how to communicate with vendors, ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  2. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  3. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  4. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  5. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
  6. Bear Market

    A market condition in which the prices of securities are falling, and widespread pessimism causes the negative sentiment ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!