Ways of calculating delivery lead time
Let’s shed some light on the calculation process. Although it might sound like a complex puzzle, we’ll break it down into digestible components:
- First, you’ll need to round up the intel and gather as much data as possible. Snag details on order dates, shipping timelines, and delivery dates — think of it as your data treasure hunt over a specific month.
- Next, become the lead time wizard! Cast your subtraction spells by taking the order placement date and time away from the delivery date and time. Abracadabra! You’ve got your lead times for each order.
- Now get ready for the lead time showdown! Pit all those individual lead times against each other and see who comes out on top.
- And for the grand finale! The average time is the VIP guest, and you’re handing out invitations by dividing the lead time sum by the total number of orders. Get the confetti ready — we’re throwing an average lead time celebration!
Here’s a useful formula to help with the process:
Delivery lead time = (When order was received) − (when order was placed)
This is called the subtraction method, and it can allow you to calculate the DLT for specific instances. To get accurate results, it’s important that you choose a unit of time, such as months, days, hours, or even minutes, depending on how granular you want your data to be.
For example, an online electronics retailer wants to determine the DLT for delivering a smartphone from the moment the customer places the order to when it’s received. The order was placed on August 17th at 2:00 PM, and the customer received it on August 20th at 11:30 AM. Therefore, DLT = (August 20th at 11:30 AM – August 17th at 2:00 PM), with the result being 3 days.