Order Cycle Time - Definition & Meaning
What is Order Cycle Time?
Order cycle time refers to the time period between placing of one order and the next order. It is the time period between two orders that are placed. The time period between placing of an order and receiving it is called the order lead time.
The time during which demand is met is derived by subtracting the optimal order that is backordered from the optimal order quantity and dividing the result by the average demand. The formula can be written as:
Time during which demand is met=
(Optimal order quantity-optimal amount to be backordered)/ Average demand
Time during which demand is backordered can be stated as:
Optimal amount to be backordered/Average Demand
So the
order cycle time is = time during which demand is met+ time during which demand is backordered.
Therefore, the order cycle time is the time between two order fulfilment times.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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