From time to time, I like to look at some of the LinkedIn conversations and put down a few comments on them from my point of view. They can be a bit lengthy, I like to take some time and in this blog and go into some more detail. This blog item appears in LinkedIn, but is also available on Roland Lester's website. The link is at the bottom. It's an interesting perspective on production lead time (not project lead time).
Lead time, from a customer’s perspective, lead time is the time from when you made a commitment to the customer to the day you have committed to deliver that product. Lead time is a basic element of customer value. "How long will it take to get?" is usually the second question asked after "How much is it?" If you cannot deliver a product in an acceptable amount of time, a customer will see no value in your product, and will buy a similar product from a competitor who promises shorter lead time.
For retail, instant gratification detects that this lead time essentially be zero, and the customer is willing to spend more money to slake that thirst. Having the ability to both have and maintain that inventory so that lead time is zero makes a happy customer and generates profits.
At the same time, promising a deliver date and failing to meet that date on a consistent basis with a customer deteriorates customer value, since it is seen as an inability to keep a commitment. Your customer may be willing to pay more to a competitor who delivers on time, leaving poor reviews and bad comments in their wake. In the age of instant, widespread communication, having a bad reputation for on-time delivery can leave a long shadow, even if you have a large share of the market.
So lead time is important because it impacts profitability, demand, and customer value.