What is lead time demand?

• A. The quantity of demand that occurs during the lead time from order placement to arrival
• B. The demand after the lead time has passed
• C. The demand during production lead time only
• D. The average demand during the next cycle

Answer: (A)

Lead time demand is the amount of customer demand that is expected to occur during the period from when you place an order to when the goods arrive. It represents how much you need to have available or committed to cover while you’re waiting for the replenishment to come in. This concept is key for setting reorder points and safety stock, because you want enough stock on hand to meet demand during that waiting period. For example, if you order today and it takes two weeks to arrive, and you expect to sell 80 units in those two weeks, that 80 units is lead time demand. The other options describe demand after the lead time, only during a production window, or average demand for a cycle, none of which capture the specific window from ordering to arrival.