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Customer Lead Time or total lead time

Customer lead time or Total lead time is defined as the time it takes for a customer to receive a good or service from the time the customer places the order or performs a purchase transaction.
The customer lead time can be viewed as a general measure of efficiency of the entire supply chain KPI of an organization. It is not to be confused with production lead time or processing lead time, which are both components of customer lead time or total lead time as it is sometimes referred to.

Components of Customer Lead Time

Customer lead time is generally referred to a supply chain KPI but can be dissected into different components that can illustrate the performance of several components of the organisation and may be more useful in evaluating and improving operations to improve customer lead time which is what the customer perceives. The components of Customer lead time or Total lead time are:

Order processing time: this is the time from when a customer places an order through to purchase order or production orders/signals are generated until production begins on that particular order. This can be also viewed as the administration time of that order before production or processing starts.

Production lead time: this is the time required to produce or process the order. Take note this is only the time where the product is produced or manufactured. This time includes all value added and idle times during the production process.

Delivery lead time: this is the time it takes for an order or product to be delivered to the customer once the product has been produced and all relevant production activities such as quality testing completed and the item is released for delivery

So from when the customer places his or her order there are three major components of time until he or she receives the order. The sum of the order processing time, production lead time and delivery lead time is referred to as the total lead time or customer lead time. This can be seen in the illustration below. Processing times in some instance can be referred to as the order processing time

Total Lead Time and Customer Lead Time Illustration

  Fig 1. Total Lead Time or Customer Lead time components and stages

    More process KPI's