To have a good relationship with customers, on-time delivery is very important. To know about the factors that contribute to the delivery performance and to know how to improve delivery performance, read out this article.
What is delivery performance?
Delivery Performance is the level that measures how much the supply of goods and services by an organization has met the standards expected by its customers.
It is an important aspect of supply chain management(SCM) as it indicates the existing potential of the firm to deliver the goods on time by using the resources as planned and at no extra costs to the business.
The delivery performance is measured by the KPI (key performance indicator). Each contributing crucial factor is taken into account and overall delivery performance is estimated.
What are the factors contribute to the overall delivery performance?
Factors that contribute to the overall delivery performance are on-time delivery, proper manufacturing schedule, good inventory management, and best transportation.
- On-time and in-full delivery from the suppliers: Once an order is placed it is equally important that the vendors provide the required items as promised without any changes in the quantity. This will ensure a smooth production process. To improve on-time delivery organization has to boost the process of all the departments in the organization by improving planning, monitoring, and working efficiency.
- Preparing proper manufacturing schedules: here, the firm will break down its overall production into various segments and will concentrate on fulfilling the needs of each segment to ensure uninterrupted manufacturing at all times.
- Inventory management: This is very important as it ensures that there are enough raw materials for production and also enough finished products for dispatch of customer orders.
- Transportation requirements: This will help to calculate and check the number of times the logistics were right and if they were wrong, how can the business aim to correct them to ensure no further mistakes.
Calculation of On-time delivery
On-time delivery is one of the important key performance indicators to measure delivery performance. Generally, on-time delivery is measured as a ratio of the number of products on-time divided by the number of total products shipped monthly. The below image shows the on-time delivery calculation.
Importance of on-time delivery
- It is major KPI of delivery performance
- It helps to monitor and analyze the delivery performance and hence increases efficiency
- Helps to build the trust with your customer
- Helps to satisfy the customer and improves customer relationship
- Indicates the efficiency of supply chain
- Improves your reputation in customer place
How to do on-time delivery?
- Track and analyze the reason for previous late delivery
- Analyze the factors that contribute to late delivery and find out the root cause
- Take corrective actions and concentrate to process it to avoid late delivery
- Define a plan and implement it for corrective actions
- Observe the result and update it accordingly
How to improve delivery performance?
Late deliveries lead to poor delivery performance. To achieve good delivery performance following are a few tips to keep in mind.
- Have good forecasting
- Have purchase orders without errors
- Maintain accurate inventory
- Maintain good standard operating procedures
- Reduce production errors
- Reduce the picking and packing errors in the shipping department
- Maintain accurate shipping records
- Set realistic deadlines
- Provide online tracking to your customers for their orders
Once the business ascertains an optimal performance level, the firm must evaluate and take appropriate measures to maintain the benchmark as it is important for its credibility.
By creating a learning index the company will be able to identify its weak areas and stress on improving the same. Constant improvement policies will lead to an overall improvement in the delivery
What is Key performance indicator?
A key performance indicator is a measuring tool used to measure how an organization is achieving key business objectives efficiently. It measures the overall long-term performance of an organization.
Here are few tips to develop key performance indicator (KPI).
- Have SMARTER KPI. That means an organization should have specific objectives, frequently measure the objectives, set attainable real-time objectives, have relevant objectives to your organization, have a proper time frame to achieve your objectives, finally evaluate and re-evaluate your objectives.
- Share KPI with your employees. If you share KPI, they have a clear vision about the goals that have to be reached.
- Analyze KPI on monthly basis. Monthly once or if required weekly once track your progress so that you can aware of the success of your KPI.
- Check the applicability of KPI. To make your KPI applicable evaluate your goals, analyze the target with your team, set short and long-term targets, evaluate your performance, and readjust it if required.
Get more definitions about Delivery performance and other ERP related terms here.