If there is only one Lead Time for a SKU that has lots of components each of which has a different Lead Time then how does the output of the algorithm work

The finished good's lead time should be the maximum of the components lead time.

However, each component will be calculated depending on its own lead time.  

This will mean that components with a longer lead time will need to be ordered more in advance, and higher quantities to make sure you have enough to manufacture your required finished goods.