On-Time Delivery: A Logistics Metric That Is Essential

Logistic managers are like time masters. This industry is -at the end of the day- about how you can manage time to fulfill goals. So, among the wide variety of supply chain metrics and KPI's, those about time are simply the most important ones for your business success.

Now, before we start measuring our time management, or on-time delivery management, we should clearly define what it is. To deliver on-time not only involves to do it in the expected hour, but also according to client’s preferences and needs.

Modern life means that people don't have enough time, and they need to run from here to there all day long, to do what they must (and what they want, if they have some time left). So, is it useful for a client that has bought a new dinner table and chairs that the company delivers it, for example, on Friday afternoon between 2:00 and 6:00 pm? Absolutely not.

Let’s look at another example, proposed by Inbound Logistics. "Customer A might define on time as pickup within three hours, delivery within one hour", says Tom Nightingale, vice president, transportation logistics at Pittsburgh-based 3PL GENCO, which became part of FedEx in 2015. "But Customer B might define on-time pickup or delivery as within 24 hours." The same carrier might earn a mediocre score for its work with Customer A but an excellent score for Customer B.”

“Late delivery is not the only thing that should be measured in this area -North Carolina State University says-. Deliveries made too early can have a negative impact on performance. For instance, if a manufacturer has little space to store inventory, the material could easily be misplaced and unavailable when it is needed for production. Also, early deliveries could impact the carrying costs incurred by the manufacturer. So it is important to note the potential impacts of early delivery.”

So, on-time delivery is about meeting, (and in some cases beating) client expectations.

This critical metric is a reflexion of the quality of your whole pre-production process. “Complete and timely delivery is synonymous with planning and preparation. When planning is incomplete, the resulting inadequate information flow and poor organization will create preventable and costly problems when it comes to measurable efficiency in global sourcing,” GCI magazine explains.

Now, what are the best ways to measure on-time delivery? The obvious first step is to calculate the percentage of success. This is, how many deliveries have been accomplished just in time and according to client’s specifications?

But managing this metric doesn’t end there. There are several other related KPI’s that your company can develop, and follow to see the evolution and quality of your supply chain and if it is really meeting customer expectations.

Logistics and supply chain management expert Gary Marion has detailed in a About Money article, some basic KPI’s that Logistic Managers should develop to have a comprehensive view of their company’s logistic performance.

- How many units were delivered? 100% of them or just 80%?

- At what specific time was the delivery made? Was it made between the limit hours that the client has specified?  

- If a client asked for several lines of a product, or even different products, did he receive exactly what he wanted in terms of quantity, size, weight or colour?

We would add to this list other related KPI’s, such as:

- Did the products arrive properly packaged?

- Did the products arrived with the right temperature?

- Did the products arrived clean?

- Was the delivery guy nice and helpful?

What other related KPI’s would you like to add to this list? How important is on-time delivery service for your business? We invite you to share your ideas and experience.