What does the term "lead time" refer to in supply chain management?

The term "lead time" refers specifically to the time from process initiation to completion that affects order fulfillment. In supply chain management, lead time is a critical metric as it encompasses the total time taken from placing an order with a supplier to when that order is received and available for use. This includes the time required for processing the order, manufacturing, and shipping.

Understanding lead time is essential for efficient inventory management and planning, as it helps organizations determine how much inventory to hold, when to reorder, and how to manage their supply chain effectively to meet customer demand. A shorter lead time can enhance responsiveness and agility in the supply chain, allowing organizations to serve their customers more effectively.