Lead time is one of the most important variables in any inventory plan. It directly influences when you should reorder stock, how much inventory you need to hold, and your ability to meet customer demand.
Today's customers expect fast delivery, and even minor supply chain delays can lead to stockouts, lost sales, and frustrated customers. While global supply chains have become more resilient since the COVID-19 pandemic, disruptions caused by weather events, shipping delays, labour shortages, and geopolitical issues continue to affect businesses worldwide.
A well-managed inventory plan takes lead time into account, helping businesses maintain the right stock levels while reducing risk.
Lead time is the total time between placing a purchase order with a supplier and having that inventory available for sale or production.
Depending on your business, lead time may include:
Accurate lead times allow your inventory plan to recommend the right reorder dates and quantities, helping you avoid both stockouts and excess inventory.
When Australia's peanut industry was severely impacted by drought, New Zealand peanut butter company Pics faced a significant supply challenge.
For years, the business sourced approximately 2,500 tonnes of peanuts annually from Australia. However, after Queensland's peanut production fell dramatically, the company diversified its supply by sourcing peanuts from Zambia, Brazil and, for a short period, Argentina.
Then COVID-19 created additional disruption across global shipping networks.
Rather than relying solely on overseas suppliers, Pics also began experimenting with growing peanuts commercially in New Zealand. Although the long-term outcome remains uncertain, producing peanuts locally could significantly reduce future risks associated with shipping delays, droughts and supply interruptions.
This example highlights an important principle of inventory planning: reducing lead time variability often improves supply reliability.
Why Businesses Are Rethinking Long Lead Times
The pandemic exposed the vulnerabilities of long international supply chains.
As a result, many organisations began exploring ways to shorten lead times by:
Initiatives such as "Buy NZ Made" and "Buy American" gained renewed momentum as businesses looked for greater supply chain resilience.
While domestic sourcing can sometimes increase purchasing costs, many companies now recognise that improved reliability can outweigh higher prices when developing an effective inventory plan.
Shorter Lead Times Create Better Inventory Plans
Another example comes from Australian company Amaero International.
When supplier lead times doubled during COVID-19, the company accelerated plans to manufacture its own powdered metal in Australia rather than relying entirely on overseas suppliers.
Although building a factory isn't realistic for most businesses, the lesson is clear:
Lead times are never static.
Supplier performance changes. Shipping conditions change. Global events happen.
Your inventory plan should adapt as these changes occur rather than relying on outdated assumptions.
How StockTrim Helps Improve Your Inventory Plan
An effective inventory plan depends on accurate lead times.
StockTrim makes it easy to keep lead times up to date so your demand forecasts and purchasing recommendations remain accurate.
By maintaining current lead time information, businesses can:
Instead of reacting to supply chain disruptions after they happen, businesses can proactively adjust their inventory plan as conditions change.
Best Practices for Setting Lead Times in StockTrim
To get the most accurate inventory plan possible, follow these recommendations:
Add Buffer Stock When Needed
If you'd like to maintain approximately one additional month's inventory, simply add 30 days to your supplier's standard lead time.
Include Internal Processing Time
If products require inspection, assembly, labelling or quality control before they can be sold, include this time in your lead time calculation.
Set Item-Specific Lead Times
Where necessary, assign lead times to individual products rather than relying on supplier-wide defaults. This improves inventory planning accuracy for products with unique supply characteristics.
Let Historical Data Improve Accuracy
StockTrim can automatically estimate lead times using your purchase order history alongside your supplier defaults, helping your inventory plan become increasingly accurate over time.
Frequently Asked Questions
Why is lead time important in an inventory plan?
Lead time determines when inventory should be reordered. Accurate lead times help businesses avoid stockouts, reduce excess inventory, and improve customer satisfaction.
How often should lead times be reviewed?
Lead times should be reviewed regularly, especially after supplier changes, shipping disruptions, seasonal fluctuations or significant market events. Many businesses review them monthly or quarterly.
Can software automatically adjust lead times?
Yes. Inventory planning software like StockTrim can use historical purchase order data to calculate more accurate lead times and improve future purchasing recommendations.
Every inventory plan is only as good as the data behind it.
Because lead times constantly change, reviewing and updating them regularly is one of the simplest ways to improve forecast accuracy, reduce inventory risk and keep customers happy.
Businesses that actively monitor lead times are better positioned to respond to supply chain disruptions, optimise inventory levels and make smarter purchasing decisions.