Supply Chain Management - How Do I Measure On-Time Delivery?
This All-Important Metric Isn't Easy to Pin Down.
Although every business-owner seeks "on-time delivery", the term may mean different things to different people. For some individuals, on-time delivery refers to receiving good from suppliers, needed to assemble products. For others, it refers to providing products to end customers. In both cases, on-time delivery means getting products into the hands of those who want them, when they want them.
Which Metrics To Measure?
Do suppliers and customers both agree on how on-time delivery is measured? Here are some variables to consider:
- The number of units ordered. If a supplier delivers just 99 of 100 units ordered, and the customer knowingly accepts this deficit, is this considered an on-time delivery? If the supplier delivers 90 units on time, and the customer agrees to accept the remaining 10 units at a later date, is this deemed a 100% on-time delivery, or a 90% on-time delivery?
- Date of delivery. If a customer expects a February 15 delivery, but allows wiggle room to receive the items two days before or after that date, as long as the delivery occurs within that four-day window, is this considered an on-time delivery?
- The number of line items on the order. If the customer orders 10 different items on the same order, must the supplier deliver all 10 products on-time to get 100% on-time delivery? If the supplier delivers nine out of 10 items on time, is this considered 90% on-time delivery?
The different ways of evaluating these metrics make it extremely important to secure a meeting of the minds and an up-front agreement, between senders and recipients.
It's a Date!
There are various terms involved in with shipping products, including:
- Request Date
- Original Promise Date
- Delivery Date
- Dock Date
- Ship Date
- Revised Promise Date
- Actual Ship Date.
Although each of these terms has a specific meaning, they are often used interchangeably. Therefore, business owners, parts suppliers and customers must strive to settle on the same language, to avoid confusion. Supply Agreements, Master Agreements, Quality Agreements and other contractual documents go a long way in making sure there is clarity of language and meaning--across the board.
And So What?
Some supply chain folks don't hold on-time delivery in high importance, because they believe end users expect delays,as an unavoidable part of doing business. But this lower standard results in sub-optimized supply chains, which can cost everyone money, leading many businesses to spike their prices as a result. Contrarily, an optimized supply chain helps ensure reliable delivery, more favorable pricing, and a greater number of satisfied and repeat customers.