What is Lead Time in Shipping?

Forty percent of shoppers are willing to wait 48 hours when paying for fast shipping, according to Conveyco. This means that many consumers don’t want to wait for long periods of time before receiving their parcel. Oftentimes, lead time plays a role in deciding where consumers shop, meaning eCommerce merchants need to prioritize having a strategic shipping plan.

Unfortunately, a poor customer experience will affect your business negatively. In fact, 39% will move on to another e-tailer after just one negative shipping-related experience, according to research. To fill this gap, eCommerce merchants also need to meet the expectations of their customers, which can be achievable through the understanding of delivery times and its calculation.

In this blog post, we’ll explain everything you need to know about this topic so you can meet customer expectations.

Lead Time Meaning: Definition

In simple terms, lead time is the period between when a customer places an order to when it's shipped and delivered. More specifically, the lead time encompasses the time spent on processing and handling goods, right up to delivering goods at the customers’ doorstep.

In this section, we’ll go over different types of lead time and the lead time meaning, so you can get a better understanding.

What is lead time in shipping: The different categories

To help better understand what lead time is, it is important to know that there are different types of it. Here are the different categories:

• Customer lead time: It refers to the time that a company takes from receiving the confirmation of an order until its fulfillment
• Material lead time: This type is targeted toward the company and the supplier. It is the time it takes to place an order for supplies and the time they are received
• Production or manufacturing lead time: This is the period of time that a company takes to produce and deliver the products that raw materials are available for
• Cumulative lead time: This is a combination of all the types mentioned above. The cumulative delivery time is the span of time that a company takes from receiving a confirmation for an order to delivering the product to the customer

What factors impact the shipping lead time?

Both buyers and sellers are vested in trying to meet up with delivery times and avoid delays. Nevertheless, there are factors to consider when it comes to the delivery time so you can understand the lead time formula.

• Production process: In determining the lead time of a particular product, it's important to consider its production process. A product that takes longer to complete will definitely require a longer lead time. Whereas, products with fewer production processes will take less time for delivery.
• Inventory management: An effortless production process would require efficient inventory management. Production processes can be halted if a company is unable to determine the necessary stock levels needed to complete an order. To avoid this, you should know the precise amount of inventory stock needed to complete an order as this can affect the time it would take to get to your customers.
• Supply chain: Because merchants can work with various suppliers, tracking when all inventory stocks are delivered can be difficult. As a result, production becomes difficult and could be delayed. To handle this issue effectively, merchants should ensure that they synchronize supplies to be ready at the same time. This has a great impact as it both reduces delivery time and shipping and receiving costs.

What is a delivery time example?

Let’s say you’re shipping a 3-pound package from New York to the United Kingdom. Using the Easyship Shipping Rates Calculator, USPS Priority Mail Signature offers a delivery time of 2 to 3 business days at $19.90.

As we can see, users can save $13.27 with the Easyship Shipping Rates Calculator/Lead Time Calculator. Easyship customers always save up to 91% off discounted shipping rates on 250+ couriers.

Cycle time vs. lead time: The differences

When it comes to cycle time vs. lead time, cycle time measures the time it takes for a team to fully complete an order. The lead time meaning refers to how long it takes to fulfill one order.

How’s Delivery Time Calculated for Shipping? (Using the Lead Time Formula)

Knowing how to calculate the lead time for shipping is simple yet important, especially for project management. First, we’ll highlight the terms used in the calculation, so you can understand how to manage delivery times like a pro.

• Supply delay: This is the time a supplier takes to fulfill a customer order after the order is placed
• Reordering delay: This refers to the time gap between a fulfilled order and the placement of the following order

Now, we can calculate the delivery time for shipping. Here is the lead time formula so you can understand the complete lead time meaning:

Lead time formula (LT) = Order Delivery Date - Order Request Date

However, this is different in the context of inventory management. Inventory management is the time required to prepare an item for shipping, deliver it, order a replacement item, and receive the new item in the inventory. This also accounts for a reordering delay.

Therefore, in inventory management, the lead time formula is:

Lead time formula (LT) = Supply Delay (SD) + Reordering Delay (RD)

Related post: How to Calculate Reorder Point

How Do You Reduce Shipping Lead Time?

Customers want fast processing times and shipping, but how can merchants meet customer expectations? Here, we'll offer tips to help you reduce lead time in shipping for your eCommerce business.

Consider dropshipping

Dropshipping helps to provide direct delivery of products from the manufacturer to the retailer or customer. With dropshipping, merchants have more time to focus on marketing or lead generation and get hitch-free order fulfillment which invariably leads to a faster shipping time.

Use a reliable shipping platform

Regardless of how much you try to manage and optimize your calculated delivery time, you must also consider the shipping platform you use. With a reliable shipping platform, you're guaranteed of having your goods delivered at the right time.

Simplify the supply chain

Most of the time, delivery gets stretched because supplies are not ready at the designated time. In addition, merchants often get products from many suppliers and it becomes difficult to keep track.

To curb this issue, you should simplify the supply chain. You can achieve this by consolidating your supply vendors so you can track shipments more efficiently. You should only choose suppliers with better modes of operations which can help save time and improve your supply chain management.

How Easyship Helps Reduce Shipping Lead Time

Meeting customer expectations should be at the forefront of any eCommerce business, especially shipping. This is why it’s essential to understand how the delivery time assists eCommerce merchants in predicting sales and having an efficient operations system.

Plus, understanding lead time in shipping helps improve customer satisfaction by keeping them informed of when their parcel will be delivered. Easyship guarantees that you are ahead of others when it comes to keeping track of your delivery time.

Easyship can help you ace shipping for your eCommerce business with the following features:

• Free Shipping Rates Calculator: With this, you get to access high-volume discounts from 250+ couriers. Plus, get instant access to delivery lead times from premium shipping couriers using this lead time calculator
• All-In-One Shipping Dashboard: This helps you manage orders and create shipments instantly. Also, you can keep track of all your delivery lead times in one place
• Optimized Store Checkout: Helps show the cheapest, fastest, and best value shipping options at your store's checkout. This way, customers can know the specific delivery time for their order

Ready to ship? Sign up for a FREE Easyship account and learn how to access the best available shipping rates today

If you found this article informative, you may also want to read the following:

• What is Express Shipping?
• Order Fulfillment Metrics Every Business Should Track
• Cut Holiday Delivery Times