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How Lead Time Affects the Supply Chain

How Lead Time Affects the Supply Chain

When customers place an order with a supplier or manufacturer, there’s always a lead time. The lead time is how long it will take from the order being placed to being delivered.

There are tons of factors that influence lead times, they can be anywhere from a week to a year.

Businesses should regularly review lead times and look for opportunities to reduce them. Unexpected delays decrease output and productivity. Long lead times negatively impact customer service.

Lead times within the supply chain

There are 5 aspects of effective supply chain management:

  1. Planning
  2. Sourcing
  3. Manufacturing
  4. Delivery
  5. Returns

Lead Time for the Company = Procurement Time + Manufacturing Time + Shipping Time

Manufacturing lead times impact each of these. The longer the lead times are, and more unexpected delays that happen all have a negative effect.

During the planning stage, businesses try to predict their customer needs and plan how to meet them. Accurate planning depends on having accurate lead times.

Sourcing covers ordering, receiving, and managing the inventory of raw materials. Poor sourcing can add significantly to the lead times. If a manufacturer is stuck waiting for their sourcing materials, lead times increase.

Manufacturing lead time is the time needed to manufacture an item. This includes order prep time, wait times, setup time, production run time, move time, inspection time, and even stocking time.

Delivery is the last piece of lead time. Maintaining good logistics and shipping requires the shipping company to have accurate knowledge of supply times throughout the supply chain.

Make to order vs Make to stock lead times

Make to order (MTO) and Make to stock (MTS) are two inventory management strategies used by manufacturers and their customers. Manufacturing leads times are different for each of these.

With MTO, the customer places their order, and the manufacturer starts working on it. With MTS, the manufacturer produces inventory based on their customers’ future orders.

MTO lead time is the time between the order being placed and the product being shipped to the customer. MTS lead time is the time between the order and the inventory being stocked. 

One of the drawbacks of make to order is longer lead times. Since no inventory is kept on-hand, more time is required for order receipt, manufacturing, shipping, and related processes.

What affects lead times?

Lead times are primarily affected by sourcing, manufacturing, and shipping.


Sourcing or procurement is the process of getting the raw materials required to manufacture the product. A good relationship between manufacturers and their suppliers can help, but delays and longer lead times are outside of the manufacturer’s control.

We saw the negative effects of this in the automotive industry when the manufacturers were unable to get computer chips from their supplier. This sourcing delay caused major delays for car manufacturers, dealerships, and customers.


The manufacturer is in control of their lead times, for the most part. Manufacturers will have longer lead times when they’re short staffed, don’t have adequate equipment, inefficient processes, or make mistakes during manufacturing.

Working with a manufacturer that has a good network of suppliers and manufacturing partners, as well as more industry experience, significantly improves lead time.


Shipping times vary greatly depending on where the customer is ordering from, and how the manufacturer ships products to their customers. Better and more predictable shipping times is one of the main benefits of working with a domestic manufacturer. Outside factors like weather or natural disasters can cause delays.

Optimize lead times

While some things will always be out of your control, there are steps you can take to reduce lead times.

1. Use a local/domestic supplier

When your suppliers are nearby, you can expect faster lead times. Being closer significantly reduces shipping times. It’s also typically easier to communicate with your suppliers when you’re in the same time zone.

2. Consolidate suppliers

Coordinating and managing multiple suppliers can add to lead times. While you may not want to or be able to rely on a single supplier, reducing the number of suppliers you’re working with can improve supply chain efficiency and streamline processes.

3. Reassess your processes

Take a step back and review your supply chain processes. Tracking key performance indicators in your supply chain process is essential. Some KPIs to pay attention to include average lead times, supplier defect rate, and supplier availability.

Spex offers a large selection of custom precision machined parts for whatever your project needs. We are an ISO 9001:2015 certified company, and our team specializes in precision machining and supply chain efficiency.

Reach out to our team to get a quote for precision machined parts, and supply chain solutions. 

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