What is Demand lead time?

For a small Shopify store, demand lead time sets how far ahead you need to think when you place an order. If your candle supplier takes four weeks to deliver, you need enough stock on the shelf to cover sales for those four weeks starting the day you order, not the day you run out.

Use it to size your reorder point. Multiply your average daily sales by the lead time in days, then add safety stock for demand swings or supplier delays. If you ignore this number, you either order too late and run out, or order too early and tie up cash in stock you do not need yet.

Formula

Example

A candle store sells 10 units a day of its lavender candle. The supplier lead time is 14 days. Demand lead time is 14 days. Expected demand during that window is 10 x 14 = 140 units. If the store wants a safety buffer of 20 units, it should reorder when stock on hand plus incoming stock drops to 160 units.

Common mistakes

• Confusing demand lead time with just the shipping time and forgetting supplier processing days.
• Using an average sales rate that ignores recent spikes or slow spells, which understates the real demand during the lead time.
• Not adding a review period when orders are only placed on fixed days, like once a week.

Demand lead time and SteadyShelf

SteadyShelf calculates demand lead time per SKU from each supplier's lead time and your forecasted sales, then tells you the order-by date so you reorder before the gap opens up.

SteadyShelf is launching on the Shopify App Store. Join early access to get the install link first.

Related terms

Lead time · Reorder point · Safety stock · Lead time demand · Average daily sales

Full inventory glossary

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