Being on Time, Every Time: On-Time Delivery & Customer Satisfaction

Meeting customer’s expectations and delivery requirements has to be a priority for every business. In fact, 4 of the top 6 company challenges outlined in the 2020 MHI Annual Industry Report relate to higher customer expectations and faster delivery, including customer demands for lower costs (51%), customer demands on response times (48%), rising customer service expectations (47%), and customer demands for customization (41%). The good news is those expectations are usually pretty simple: orders should be shipped accurately and arrive on-time.

But companies that struggle to meet other key deadlines upstream in their supply chain and during manufacturing find this to be easier said than done. Poor On-Time Delivery (OTD) performance impacts more than customers — it’s usually an indicator of poor production efficiency and materials handling procedures.

Consistent problems with on-time delivery can cause issues that affect many other areas of a company’s supply chain. A few examples include production delays due to material shortages, avoidable expedited shipping costs, and being overwhelmed with customer complaints.

Less appreciated may be the bigger issue that regularly delivering late becomes a difficult habit to change. A ‘routine’ of accepting that poor on-time delivery performance is okay affects every area of a business and can irreparably damage customer relationships.

Image 1: The top 6 challenges as ranked by MHI's 2020 Annual Industry Report.

Measuring On-Time Delivery (OTD)

Different organizations measure on-time delivery in different ways. In basic terms, OTD is a calculation of the amount of shipments delivered on time to the customer in relation to the total number of orders shipped. If the number is below the benchmark, it likely means there are deeper issues that need addressed. Poor OTD is likely just a symptom, not the core problem. And like most things, clearly defining your benchmark OTD is the first step in figuring out how to improve it.

Improving On-Time Delivery

OTD for shipments within a production supply chain is a difficult metric to track, but improvement in this area has obvious value. The arrival of materials needed for production are important because OTD is integral to the efficiency of the production line. It’s this point in the manufacturing process where the importance of good logistics and good inventory management practices intersect.

Technology to the Rescue

Chart 1: Increasing efficiency of materials handling not only improves OTD, but it also reduces the overall production cost of goods.

Levelling production and automating material handling through lean processes are two ways to optimize the availability of materials for production and improve on time delivery percentage.  With both approaches, each step in the production supply chain is accounted for, helping to meet internal production deadlines and keeps lines moving.

For example, materials management of parts and inventory can be tracked by user, task, and location through a centralized system which provides better inventory visibility. Upgrading to automated material handling systems means using technologies such as robotics, sorters, conveyors, and RFID (barcode) scanners. In addition to increasing efficiency in supply chains to improve OTD, automated materials handling also helps improve the flexibility of supply chains, allowing companies to meet rising customer demands for customized products, and improves the safety of operations, including managing dull, dangerous and dirty jobs so employees can focus on more rewarding tasks.


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