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Definition

What is Lead Time?

The days between placing a replenishment order and having stock available to sell.

Lead time spans order processing, manufacturing, transit, customs, and receiving. It is the core input to reorder-point math: the longer and more variable the lead time, the earlier you must reorder and the more safety stock you need. Operators frequently underestimate it by using the supplier's quoted production time and forgetting freight and receiving — then stock out during the gap.

Formula

Reorder Point = (Average Daily Sales × Lead Time Days) + Safety Stock

Example

Selling 40 units/day with a true 35-day lead time means 1,400 units sell during replenishment — the reorder must fire before stock falls to that level plus safety stock.

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Related terms

  • Reorder Point — The inventory level at which a new order must be placed to avoid a stockout.
  • Safety Stock — Buffer inventory held to absorb demand spikes and supplier delays.
  • Inventory Turnover — How many times inventory is sold and replaced in a period.