"Fixed lead time" is a term that is used to describe the amount of time that is necessary to successfully fill an order, even if there are changes in the quantity of items necessary to fill that order. The idea behind this particular type of lead time is that the number of units ordered has no real effect on the preparation time required to fill the order. Whether the customer orders one or 1,000 units, the processes required to create and fill the order will still require the same amount of time to complete.
With fixed lead time, the manufacturer must still allow the same amount of time for certain processes essential to the creation of the goods ordered, regardless of how many units a customer requires. For example, if the goods in question are items that must be cast or cured before they are available to fill an order, it doesn’t matter if the client placed a very small order or a very large one. The curing and casting will likely take the same amount of time for each unit produced, so the delivery date for the order will be the same even if fewer units are ordered.
It is important to note that fixed lead time is very different from variable lead time. With a variable production lead time, the factor of quantity does make a difference. For example, if the manufacturer cannot produce the total number of units ordered in a single lot, this means that the order may be broken down into several different lots. The end result is that the customer may have the option of receiving the order in several shipments as the lots are completed, or wait until the total amount necessary to fill the order is complete. This means that if the customer had ordered fewer units, the order would be completed faster. In contrast, fixed lead time indicates that the entire order will be ready for delivery by a certain date, since the production process or time constraints do not change with quantity.
Calculating fixed lead time is very important to many companies. Knowing how long each process takes in the successful completion of finished goods aids in establishing reasonable expectations from customers. By letting customers know how long it will take to fill the order and allowing time for the delivery to take place, it is possible to provide a delivery date that the customer can rely upon. This is especially important if the items ordered are important to the ongoing operation of the customer’s business, since unanticipated delays could lead to costly downtime for that customer and motivate the client to seek a new vendor.