Suppy Chain

Lead Time Definition (I)

What is definition of lead time? What is the difference between traditional definition of lead time and strategic lead time?

Posted: Jun 2009

The product life cycles are getting shorter in today's economy. Changes in technology and consumer demand creates more changing markets where a product can become obsolete almost as it reaches the market. 

There are many recent examples of shrink life cycles. Maybe the personal computer market is the one with the quickest changes and the highest rate of product redundancy. Simply, computer after 6 months can be devaluated by 50% due to changes of the technology. 
 
Such shortening of life cycles creates significant problems for supply chain management. Reducing life cycles demand shorter lead times. Traditional definition of lead time need to change. 

Lead time is traditionally defined as the elapsed time from receipt of customer order to delivery. In today's environment there is a wider perspective that should be taken into account. The real lead time is the time from the design board, material procurement, production and distribution to the end market. This is the concept of strategic lead time and the management of this time range is the key to success in managing supply chain.  

There are already situations occurring where the life cycle of the products shorter than the strategic lead time. This means that the life of a product on the market is less than the time it takes to design, procure, produce and distribute that same product. The implications of this are significant for supply chain. In a global context the problem is more complex due to longer transportation times involved.  

The only way of achieving success and competitive advantage in such markets is to accelerate movement through the supply chain and to make a whole logistics system far more flexible and responsive to these fast-changing trends in markets, in order to maintain the optimal lead time.