What lead time actually covers
Lead time is the total elapsed time from the moment you place a replenishment order to the moment that stock is genuinely usable available to sell or use in production, not just "shipped by the supplier." That distinction matters: a supplier that ships in 3 days but takes another 4 days in transit, plus a day for your team to receive and check the delivery in, has an 8-day lead time, not a 3-day one.
For manufactured goods, lead time can include the supplier's own production time in addition to shipping if an item is made to order rather than shipped from existing stock, that production time is part of your lead time too.
Why lead time drives your reorder point
Your reorder point the stock level that should trigger a new order needs to cover expected demand during the lead time, plus safety stock for variability. A longer lead time means you need to reorder earlier (at a higher stock level) to avoid running out before the new stock arrives; a shorter lead time gives you more room to run leaner.
Lead time is also rarely perfectly consistent from order to order a supplier's "usual" 2-week lead time might occasionally stretch to 3 or 4 weeks. Planning your reorder point around the average lead time alone ignores this risk; using a worst-case or high-percentile lead time (or adding it explicitly into your safety stock calculation) accounts for it properly.
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