On-time delivery (OTD) is the main metric to measure the efficiency of supply chain processes in your organization. It is an indicator of how capable your organization is to meet customer demand in terms of the requested delivery date (RDD). Many businesses create a monthly aggregated average of OTD that gives a false sense of security on how well their supply chain is genuinely performing in the eyes of the customer. Failing to meet your customers’ requests can lead to all sorts of negative outcomes. Worst case? You lose your customers to competitors.
In fact, throughout our daily work, we experience a vast array of different interpretations and calculations of the on-time delivery metric. This indicates that customer-centric Outside-In™ thinking is not at the heart of every organisation. Over recent years we have made the following observations regarding the measurement of On-time delivery:
All those observations are symptoms of a distorted view of On-time delivery as the metric of your supply chain performance. Frequently, we see surprised looks when we present OTD results at a transactional level that are not anywhere near the 90% On-time performance that was expected by the management.
In order to get a clear understanding of your current On-time (OTD) delivery performance that your customers are truly experiencing, you need the shipping date (ADD) and the customer wish date (RDD) for every order position shipped in the time frame you are observing. Let us now build your OTD baseline performance:
So, tell me, what are your percentages of order lines that are exactly on-time? How many are late and how many are early? What is your SPAN metric and what does it tell you? What might be possible root causes for your baseline performance and the SPAN you calculated? What would you do to reduce the SPAN?
You are invited to connect with me and share your thoughts, experience and comments.