Online retailers need to use appropriate metrics that help them verify that customers’ orders arrive quickly, and order lead time is one of those important metrics. It is also in the huge development of electronic commerce as well as the boom in retail trade over the Internet, making the practice of commerce and business differ greatly. This was also reflected in the customers’ expectations, as their expectations became clearly high.
Customers always expect their orders to reach them as quickly as possible and without any delays. Therefore, companies operating in online Retail stores are facing many challenges and operating in a more competitive market. In this article, we will provide you with all the details about the order lead time, its types, and how to calculate it as well.
What is the order lead time?
The order-lead-time is one of the primary metrics that helps retailers check that customers’ orders don’t take much time to reach them.
It plays a large role in the planning of re-orders, which is reflected in the overall inventory control.
The term time off itself carries many meanings, which refer in various forms to the period between the start of a process and the completion of that process.
Order lead time types and their calculations
There is more than one type of order-lead-time and each type has its own formula and definition for the calculation. We will review all of this in detail below:
1. Actual order lead time
Actual order-lead-time is the first type of metric that specializes in measuring how quickly customers receive orders.
This means the total time it can take to complete the request after the request is submitted
The presence of any abnormal data is an indication that something went wrong during the fulfillment process. Besides that metric, you’ll need additional stats to boost its power.
Here is its mathematical formula:
- Actual order lead time = Delivery Date – Order Entry Date
2. Requested order lead time
The second type of metric specialized in measuring the speed of customers receiving orders is Requested order-lead-time.
Which refers to the time between the customer placing the order and the date he wants to receive the order.
The Requested order-lead-time indicator gives you a quick and simple idea of how long customers want to wait to receive orders. Here is its arithmetic:
- Requested order lead time = Requested Delivery Date – Order Entry Date
3. Quote order lead time
The third type of metric that specializes in measuring how quickly customers receive orders is Quote order-lead-time.
It indicates the amount of time acceptable to fulfill the demand from the point of view of your customers, and the following is its arithmetic formula:
- Quote order lead time = Customer’s Agreed – Upon Delivery Date – Order Entry Date
Confirmed order lead time
The last type of metric type that specializes in measuring the speed of customers receiving orders is the Confirmed order-lead-time.
This metric indicates your company’s ability to meet customer-specific demand management. Here is its mathematical formula:
- Confirmed order lead time = Internally Agreed – Upon Delivery Date – Order Entry Date