What does lead time refer to in inventory management?

Lead time in inventory management specifically refers to the time interval between the placement of an order and the receipt of that order. This concept is crucial for operations and supply chain management because it affects inventory levels, production schedules, and the ability to meet customer demand. Understanding lead time helps businesses determine when to reorder inventory to avoid stockouts and ensure that they have sufficient stock on hand to fulfill orders in a timely manner.

By accurately managing lead time, companies can optimize inventory levels, improve service levels, and streamline their operations. Thus, recognizing the importance of lead time in ensuring efficient supply chain and inventory management is foundational for successful business operations.