Placing an order is the first step in the manufacturing lead time.
Manufacturing lead time is the amount of time between placing an order and the customer receiving the order. It includes many different components of the manufacturing process and can be anticipated by a manufacturer with established order handling systems. When customers call a manufacturer to place an order, the manufacturer must provide a lead time quote so the customer knows when to expect the product. These quotes can also be included in catalogs to provide customers with an estimate of how long it will take to receive the items they ordered.
Delays resulting from faulty material may increase delivery time.
The first step in manufacturing lead time is order placement, followed by order processing. This can represent a significant delay if a company has multiple orders to process or limited staff for order entry and scheduling. Once registered in the system, the order goes to the preparation time and the staff schedules the actual manufacturing process of the item.
Items to be manufactured are placed in a queue, where they can wait for varying lengths of time depending on equipment availability, order complexity, and order size. Generic orders tend to move faster than custom-made products because no special equipment adjustments are required. When a manufacturing order arrives, the order moves to setup time, where the team prepares for production, and then to lead time, which is the time actually spent on the manufacturing line being made.
Once produced, the item still needs to be inspected for quality control before being packed. Packaged products are ready for shipment to the end consumer or to a warehouse where stock is held. Shipping can take days or weeks depending on the location of the factory and the customer and the type of shipping method chosen. Manufacturing lead time estimates can be hampered by the time products spend waiting for shipment, as well as other delays resulting from understaffing or over-ordering causing backups at various stages of the process.
Manufacturers keep records of past orders so that when a new order comes in, they can make a reasonable estimate of manufacturing lead time. Computer software used for order management usually calculates the waiting time when an order is placed. Companies can provide some wiggle room by providing a window rather than a hard estimate for a delivery date. If an order exceeds the quoted delivery time, the company may have a compensation policy, such as free shipping or a discounted price for the customer. Companies want to avoid having to do this and are therefore meticulous about estimating manufacturing lead time as accurately as possible.