Customer Order Lead Times

Companies operate in different order lead time environments because customer requirements are very different. Order lead times can be very short - I met a company this week that promises same day shipments when the order is received by 4pm! Order lead time can also be very, very, very long. Some typical lead times are described below from longest to shortest:

ETO - If the Air Force orders a new airplane it expects to wait until it is designed, engineered, assembled, and tested. This is typically described as engineered to order (ETO).

MTO - Often a company has a standard product but does not produce it. or any components, until a firm customer order has been received. This is typically described as make to order (MTO).

ATO - If a company has one or more standard products that use the same components or subassemblies, the company stocks these components but does not build the product until a firm customer order is received. This arrangement is referred to assemble to order (ATO).

MTS - Frequently a company will manufacture a product and even ship it to a forward warehouse, distributor or 3PL before a customer order is received. This is referred to as make to stock and typically has the shortest lead time.

Of course there are many more types of order lead times, depending on the industry and customer needs. Let us help you optimize your customer service by designing a lead time policy for your business.