Lead time
In one sentenceThe time between issuing the purchase order and the goods arriving at the warehouse ready for sale or use. It is the basis for calculating the reorder point.
Simply put
During this time sales continue, so the balance must last until the order arrives. The longer the lead time, the earlier you need to order.
Record each supplier's actual lead time from the order and receipt dates, not what the supplier promises.
Worked example
A pharmacy sells 30 boxes of an item a day, and the supplier needs 10 days to deliver it.
Daily usage30 boxes
Lead time10 days
Quantity sold while waiting for the order30 × 10 = 300 boxes
Formula: Average daily usage × lead time
Don't confuse it with
Safety stockLead time is the usual period, while safety stock covers going beyond it.