Lead time: the number only you can supply
Lead time is the number of days between placing a purchase order and having that stock on the shelf, counted and sellable. You calculate it by timing your own last few orders in calendar days, not by trusting the figure on your supplier's quote.
What lead time means in inventory
Lead time is the total number of days between committing to a purchase order and that stock being receivable, counted and available to sell. It is a duration, not a date. It belongs to one supplier and one shipping method, which is why two SKUs in the same store can sit six weeks apart.
The calculation is a sum, not a formula with a clever constant in it. Add every stage the goods pass through before a customer can buy them:
- Time from sending the order to the supplier confirming it
- Production or picking time at the supplier
- Transit, by air, sea or road
- Customs, clearance and inland delivery
- Your own receiving: unloading, counting, quality check, putaway, listing
That last line is the one merchants leave out. Stock sitting on a pallet in the back of the unit is not stock you can sell, so the clock keeps running until it is counted in.
A worked example
| Stage | What it covers | Days |
|---|---|---|
| Order to confirmation | You send the PO, supplier confirms and invoices | 2 |
| Production | Manufacture or pick and pack at source | 14 |
| Transit | Sea freight to port of arrival | 21 |
| Clearance and delivery | Customs, duty, inland leg to your unit | 3 |
| Receiving | Count, check, putaway, stock updated in Shopify | 2 |
| Lead time | The number you enter for this SKU | 42 |
How to measure your own lead time
- Start the clock at the purchase order
Use the date you sent the order, not the date the supplier shipped. The waiting before dispatch is still waiting, and it is where most delay hides.
- Count calendar days
Working days make the number look better and get you nothing. Demand does not pause at the weekend, so neither should the count.
- Pull your last three to five orders for that supplier
Open the emails, note the order date and the date stock went live, and write down the gap for each. You now have a range instead of a guess.
- Pick the high end of normal, not the average
If four orders landed in 38, 40, 42 and 61 days, 42 is your working number and 61 was the container that missed a sailing. Averaging pulls you below the line you actually need.
- Set it per SKU, not per store
One number across a catalogue with domestic and overseas suppliers is wrong in both directions. Air freight at ten days and sea freight at forty deserve their own entries.
- Revisit it each quarter
Lead time drifts. A supplier shutdown, a change of freight forwarder or a move to a new warehouse all shift it, and a stale number quietly moves your reorder point to the wrong place.
Why nobody can calculate it for you
Sales velocity comes out of your order history, so software can read it. Lead time does not sit there. It lives in your inbox, in a message thread with a factory, in the habits of your freight forwarder. There is no API for how long your supplier really takes.
That is the trade-off with any reorder tool. It will do the arithmetic and watch the clock, but the accuracy of the output rests on the honesty of the number you type in. Round up when you are unsure. Being a week early ties up a little extra cash in stock. Being a week late costs you the sales themselves.
Related terms
- Sales velocity: units sold per day, measured over a chosen window. Multiply it by lead time and you get lead time demand.
- Lead time demand: how many units you expect to sell while an order is in transit. This is the floor your stock should not drop below.
- Reorder point: lead time demand plus whatever buffer you keep. Cross it and it is time to place the order.
- Safety stock: the cushion that covers a late delivery or an unusually good week. It exists because lead time varies, not only because demand does.
- Days of inventory remaining: current stock divided by daily velocity. Compare it to lead time and you know whether you are already late.
For how these join up into an actual order date, read the pillar guide on when to reorder, which walks through the velocity and lead time calculation end to end.
Questions
Is lead time the same as shipping time?
No. Shipping time is one stage inside lead time. A supplier who ships in three days but takes two weeks to start production has a seventeen day lead time, not a three day one.
Should I include the time it takes to receive stock into my warehouse?
Yes. Stock you cannot sell does not count as stock. If counting and putaway reliably take two days, those two days belong in the number.
What if my supplier's lead time varies a lot?
Use the high end of the normal range rather than the average, and hold safety stock for the tail. If one supplier swings from three weeks to nine, the variability is the problem to fix, not the number to average.
What lead time do I use for a brand new supplier?
Start with their quoted figure, add a margin for the first order, then correct it once you have real dates. First orders usually run longer than repeat ones because nothing is set up yet.
Can lead time be different for the same product from two suppliers?
Yes, and it usually is. Record lead time against the supplier and route you actually intend to use for the next order, since that is the wait you will be living with.
Do I need lead time to calculate a reorder point?
It is the whole point. Without it you only know how fast stock is leaving, not how far ahead you have to order to beat it.