Measuring lead time as it actually is
The lead time in your system is the one the supplier quoted when the account was opened.
Every reorder calculation depends on lead time, and the figure in use is almost always the quoted one — a number provided during a sales conversation, sometimes years ago, describing ideal conditions.
Annual labour cost depends on converting working time into a yearly total. For a reference calculation, see this explanation.
Measure it door to shelf
The number that matters is the interval between deciding to order and the goods being available to sell. That includes several delays that are not the supplier's.
- Your own ordering lag — the days between the reorder point being hit and the order actually being placed.
- Supplier processing before despatch.
- Transit.
- Your receiving and putaway time, which is not zero on a busy week.
The first is frequently the largest and is entirely within your control. A business ordering weekly on Fridays has added an average of three days to every lead time in the catalogue.
Ordered, promised, despatched, received, available. Five dates, entered once, and after twenty orders you have a real lead time per supplier rather than a quoted one.
Track the spread, not just the average
A supplier averaging twelve days with a range of ten to fourteen is completely different from one averaging twelve with a range of six to twenty-eight, and they require different amounts of safety stock.
For broader small-business operating guidance, the U.S. Small Business Administration publishes public resources on managing day-to-day business processes.
The second supplier is expensive in a way that does not appear on their invoice: unreliability is paid for in the stock you have to carry to cover it.
Use it in supplier conversations
'Your deliveries take too long' is an opinion. 'Over the last fifteen orders your average was nineteen days against a quoted twelve, and three arrived after twenty-five' is a conversation with evidence.
Suppliers frequently do not know their own performance against a specific account. Presented with the data, many improve, and some explain something useful about how their process works.
Seasonality and shutdowns
Lead times lengthen predictably: holiday periods, factory shutdowns, seasonal peaks in the supplier's own industry.
These are knowable in advance and are worth writing on the calendar with a note to order earlier. Most stockouts around a holiday period were entirely foreseeable in the preceding month.
Reduce your own contribution first
Before pressing a supplier, look at the delay you add. Ordering promptly when the reorder point is hit, rather than in a weekly batch, frequently removes more days than any supplier negotiation would.