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Part 2 of 7 · Supplier lead time watcher series ~5 min read

How lead time actually gets measured

Lead time sounds like one number and is at least three, and the arguments about supplier performance are usually two people confidently quoting different segments of the same period.

Key takeaways

  • Five timestamps: raised, approved, sent, acknowledged, received.
  • The supplier’s segment starts at sending, or at acknowledgement if you want to be generous.
  • A partial delivery is measured to the point the order was usable, and the rule is stated.
  • Working days need the supplier’s calendar, not yours, when they are in another country.
  • Exclude the orders that were never comparable: expedited, backordered, or changed mid-flight.

Five points and four segments

The five purchase order timestamps and the four segments between themA vertical chain of five steps entered by a box labelled A purchase order through its life. Step one, raised to approved, is entirely ours, with a side note saying it is internal and fixable by us. Step two, approved to sent, is also ours and usually zero. Step three, sent to acknowledged, is theirs and measures responsiveness, with a side note saying it is a leading signal that slips first. Step four, acknowledged to received, is theirs and measures fulfilment. Step five, raised to received, is what stock planning needs. A note says the third segment slips before the fourth does, which makes it the early warning.AWS ACCOUNTA purchase orderthrough its lifeRaised to approvedours, entirelyInternalfixable by usApproved to sentours, and usually zeroSent to acknowledgedtheirs -- responsivenessA leading signalit slips firstAcknowledged to receivedtheirs -- fulfilmentRaised to receivedwhat stock planning needsThe third segment slips before the fourth does, which makes it the early warning.
Fig 1. The four segments of a purchase order’s life. The third one is the most useful and the one nobody records.
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Acknowledgement is the early warning

A supplier under pressure gets slower at replying before they get slower at delivering, because the reply is what a stretched person deprioritises first. An order that used to be acknowledged the same day and now takes three is telling you something several weeks before the deliveries start slipping.

It is also the cheapest timestamp to capture, because it is an email arriving. Most businesses have it and nobody records it.

Which segment is ’the’ lead time

For talking to the supplier: sent to received, because that is the period they control. Using raised-to-received in that conversation means opening with a number that includes four days of your own approval queue, and the meeting is then about that.

For setting a reorder point: raised to received, because the shelf does not care whose fault the delay was. Two numbers, two purposes, and confusing them is the most common error in this area.

The awkward cases

CaseHow it is measuredWhy
Partial deliveryTo the date the ordered quantity was completeA tenth of an order arriving on time is not on time
Substitution acceptedMeasured, and flagged as substitutedIt counts, but it is not the same product
Backordered at their endExcluded from the distribution, counted separatelyIt is a stock failure, not a lead time
We expedited itExcludedIt does not describe normal ordering
We changed the orderClock restarts at the changeIt became a different order
Damaged, replacedTo the replacement’s arrivalThe usable goods arrived then

The exclusions matter as much as the measurements, because a distribution polluted with expedited orders looks better than reality and a distribution polluted with backorders looks worse. Both errors produce a number that fails at the moment somebody relies on it.

What matters most is that the rules are written down and applied the same way every time. A supplier disputing a number is a productive conversation when the rule is stated, and an unwinnable one when it is not.

Calendars

How a supplier's working calendar changes a measured lead timeA horizontal row of five boxes. Sent Thursday at eighteen forty. Their Friday: a public holiday. Weekend: theirs, not ours. Arrives Wednesday: six calendar days. Two working days by their calendar. A note says six days looks bad, two is what actually happened, and they will say so.THE SAME ORDER, TWO ANSWERSSent Thursday18:40Their Fridaya public holidayWeekendtheirs, not oursArrives Wednesday6 calendar days2 working daysby their calendarSix days looks bad. Two is what actually happened, and they will say so.
Fig 2. Why the supplier’s calendar is needed. Counting in calendar days produces numbers that collapse the first time a supplier is asked to explain them.
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This sounds pedantic and it is the difference between a supplier review that lands and one where the supplier is correct and you are not. Their public holidays are a short list, entered once per supplier, and it removes an entire category of wrong number.

The same applies to cut-off times. An order sent at twenty to seven on a Thursday was sent on Friday from the supplier’s point of view, and a cut-off recorded per supplier makes that automatic rather than something somebody remembers to allow for.

Next: which number to actually use.

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