What does 'Lead Time' refer to in inventory management?

Lead Time in inventory management refers to the time between placing an order and receiving the goods. This timeframe is crucial for managing inventory efficiently, as it helps businesses determine when to reorder and how much stock to maintain to meet customer demand without causing delays.

Understanding lead time is essential for optimizing supply chain operations, as it directly impacts inventory levels, production schedules, and customer satisfaction. By accurately calculating lead times, companies can ensure they have the necessary inventory on hand to fulfill orders promptly, minimizing the risk of stockouts and improving overall operational efficiency.