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In general terms, order lead time refers to the amount of time it takes to fulfill orders from your customers. In getting more specific, there are four different ways to look at order lead time.
Your average actual order lead time (OLT) is the amount of time it takes to fulfill an order in total after an order has been placed:
(Delivery Date - Order Entry Date)
Discrepancies or anomalies in this data can be a clear indicator that something is going wrong throughout your fulfillment process. However, this metric is a diagnostic tool that you’ll need to augment with additional insights.
Requested order lead time refers to the time elapsed between when a customer placed an order and the date they prefer to receive the order:
(Requested Delivery Date - Order Entry Date)
Requested OLT doesn’t consider your team’s ability to fulfill orders in the requested amount of time. Rather, it simply gives you an idea of how long your customers are willing to wait for their order to be delivered.
With this information, you can then work on optimizing your fulfillment processes to best meet the expectations of your customers.
While requested OLT gives you your customers preferred delivery time, quote OLT looks at the acceptable amount of time for fulfilling an order from your customer’s perspective:
(Customer’s Agreed-Upon Delivery Date - Order Entry Date)
Ideally, your quote OLT is as close to your requested OLT as possible. While your customers will likely give you some leeway in this regard, the best-case scenario is that you’re able to meet — and possibly even exceed — their expectations for fulfillment.
Confirmed order lead time is the amount of time that you’ve agreed to fulfill your orders in:
(Internally Agreed-Upon Delivery Date - Order Entry Date)
This metric assesses your fulfillment team’s ability to keep up its end of the bargain. If your team is unable to fulfill orders in the time that you’ve determined it should take to do so, you’ll need to take a closer look at what’s going wrong throughout the process.