Projects are all about product quality and service to the customer. These elements’ quality is mostly defined by the time span they are performed. This time span is called the Lead Time in the production industry. The calculation of lead time is very important for the entire process. In this article, we will discuss how to calculate lead time in Excel with 2 examples. Before that, we need to understand the lead time and its types in detail. Without further delay, let’s jump into the article.
What Is Lead Time?
Lead time is the time period between the start of a process and the ending of it. Elaborately, it is the amount of time to manufacture a product or service for use by the customer. Lead time is mostly used in the manufacturing industry, supply chain, and project management.
The general formula for calculating lead time is as follows:
The average lead time is different in each industry. These differences occur according to the time it takes for individual steps to complete the task. For example, the lead time of a customer placing an order and receiving it is lower than the lead time of a retailer for purchasing and receiving it from the factory.
Lead time is necessary to schedule work and provide clients with a deadline for receiving their desired product. Another important role of lead time is that it helps to determine the preprocessing, processing, and postprocessing time period. Therefore, the manufacturer can determine the amount of time consumed and make decisions to cut time where needed.
Types of Lead Time
As we know the ins and outs of lead time, let us go through its types. We can find lead time in four different sectors. They are:
- Customer Lead Time
It is the span of time between the customer placing an order and receiving it. The customer lead time is determined by numerous elements, such as the process of manufacturing, shipping techniques or any other source of delay.
- Material Lead Time
Material lead time is the quantity of time that is required to purchase a material until producing a product out of that material. The lead time of the Supplier, transportation hours and delay in receiving materials influence the amount of lead time.
- Production Lead Time
It is the time span of making a product after gathering all the materials. It can be affected by the manufacturing methods, the available number of workers, and machinery downtime.
- Cumulative Lead Time
The amount of time that a product needs during production is called the cumulative lead time. This process includes active production and time spent assembling materials or manpower.
Cycle Time vs. Lead Time
As we are talking about the lead time, organically the question arises, what is cycle time then? Many people mix up these two terms. But there is a huge difference between them.
The cycle time is the period that a product requires to complete from scratch. It is only measured in the production process. Whereas, the lead time defines the time required between the order placing and to delivery of it properly.
How to Calculate Lead Time in Excel: 2 Suitable Examples
Now, let us go through some examples to understand lead time in detail.
1. Lead Time Calculation for Manufacturer in Excel
Let us describe the lead time from the point of view of a manufacturer. In this example, we will calculate the lead time for manufacturing considering all the elements that are required throughout this process.
- In the beginning, insert the Description of the components for manufacturing in the cell range B5:B7.
- Then, type the Start Date of manufacturing in cell C5.
- As you can see, the date is in Text format, we need to modify it for calculation.
- Therefore, right-click on it and select Format Cells from the Context Menu.
- Next, select Date under the Number group.
- Here, change the format from the Type section.
- Afterward, press OK.
- That’s it, you can see the Start Date is in the correct format now.
- Similarly, insert all the Start Date and End Dates in the cell range C5:D7.
- Now, type this formula in cell E5 to get the Lead Time for manufacturing.
- Afterward, press Enter to see the output.
- Then, use the AutoFill tool to get all the lead times for each component.
- Make sure to keep the lead time values in the Number format.
- Finally, use this formula in cell E8.
- Lastly, hit Enter and you will get the Total Lead Time that a Manufacturer requires.
Read More: How to Calculate Lag Time in Excel
2. Calculate Lead Time in Excel for Retailer
Let us see another example of calculating lead time. This time we will discuss it from the perspective of a retailer. To do the task, follow the steps below.
- First, insert the Description of the components in the cell range B5:B7.
- Then, insert the Start and End Dates for each component in the cell range C5:D7.
- Make sure to format the dates as we described above.
- Next, type this formula in cell E5 to get the Lead Time for the first component.
- Following, press Enter > AutoFill to get all the lead times.
- Now, insert this formula in cell E8.
- Finally, hit Enter and you will get the Total Lead Time for a Retailer.
- Finally, you can see that the amount of Lead Time is variable based on the type, process, and components. Therefore, we found that the Lead Time for manufacturing is larger than that of purchasing it as a retailer.
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That was all in this article on how to calculate lead time in Excel with 2 examples. Let us know your feedback on this one.
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