Delivery Performance is an organization’s ability to supply goods and services per the standards expected by its customers.
It is a critical aspect of Supply Chain Management as it reflects the potential of the firm to meet customer expectations concerning time and cost.
This post provides an overview of delivery performance and its key performance indicators.
What is delivery performance?
Delivery Performance is the level that measures how much the organization can meet the standards expected by its customers. It is an essential aspect of supply chain management as it shows how well the firm can deliver goods on time, using planned resources, without any extra cost to the business. It is also known to reflect a firm’s potential to satisfy customers’ needs.
There are two types,
Measures how efficiently an organization can produce and supply goods or services per the standards.
Look at long-term plans and whether they have been aligned with organizational goals.
Key performance indicators (KPIs) for Delivery Performance usually focus on operational factors such as order fulfillment rates, lead time, stock-outs, etc. However, you should also consider strategic elements such as customer satisfaction, market share, and brand equity.
Contributing factors for delivery performance
1. On-time and in-full delivery from the suppliers
Once an order is placed, it is equally essential that the vendors provide the required items as promised without any changes in the quantity.
That will ensure a smooth production process. To improve on-time delivery, the organization has to boost the operation of all the departments by improving planning, monitoring, and working efficiency.
2. Preparing proper manufacturing schedules
The firm will break down its overall production into various segments and concentrate on fulfilling each segment’s needs to ensure uninterrupted manufacturing.
3. Inventory management
This is important as it ensures enough raw materials for production and enough finished products to dispatch customer orders.
4. Transportation requirements
This will help to calculate and check the number of times the logistics were correct and, if they were wrong, how the business can aim to correct them to ensure no further mistakes.
Delivery performance metrics
The number of deliveries: The number of completed deliveries in a month. It may be the number of deliveries within a quarter or week also. You can also consider the average number of deliveries.
The number of on-time deliveries: deliveries carried out on time to the customer. It is a significant key performance indicator to check the quality of the delivery performance.
Accuracy in order fulfillment can be measured by calculating the order accuracy rate. That is a comparison of total orders and orders with errors.
The order accuracy rate formula is as follows.
Order accuracy rate = (Total orders – Error orders) / Total orders * 100
Transportation time: This metric overviews the time to transit the products from pick-up to drop-up locations. That helps to measure the speed of the drivers and the efficiency of the transporting routes.
The capacity of the means of transportation: It measures the vehicle’s capacity that transports the products. Calculate vehicle capacity by comparing available capacity and the total capacity of that vehicle. That helps to know the inefficiency in loading the products.
Average time per delivery: The average time is taken to complete a delivery. It helps to measure the efficiency of the supply chain network.
The average delivery cost: It is calculated depending on the distance, products, and type of vehicle.
Delivery performance formula
One of the essential key performance indicators to measure delivery is on-time delivery.
Generally, on-time delivery is measured as the number of products divided by the number of total products shipped monthly. The below image shows the on-time delivery calculation.
Delivery Performance (DP) = percentage of orders that were delivered on time / Total number of orders
Calculation of On-time delivery rate
Importance of on-time delivery
- It is a major KPI of delivery performance.
- It helps to monitor and analyze the delivery performance and hence increases efficiency.
- It helps to build trust with your customer.
- It helps to satisfy the customer and improves customer relationships.
- It indicates the efficiency of the supply chain.
- Enhances your reputation in customer place.
How to achieve on-time delivery?
- Track and analyze the reason for previous late delivery.
- Analyze the factors contributing to late delivery and find out the root cause.
- Take corrective actions and concentrate on processing 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. However, delivery performance can be improved by following things.
- Have good forecasting
- Have purchase orders without errors
- Maintain accurate inventory
- Maintain reasonable standard operating procedures
- Reduce production errors
- Reduce the picking and packing errors in the shipping department
- Do on-time delivery
- 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 vital for its credibility.
The company will identify weak areas and improve stress by creating a learning index. In addition, constant improvement policies will lead to an overall improvement in delivery.
KPIs of Delivery Performance
- Order fulfillment rates – The Percentage of orders that are delivered on time or within the agreed timeframe
- Delivery lead time – The average time it takes from when an order has been placed until the customer receives it
- Delivery reliability – The Percentage of deliveries that are made within a specified time frame (order fulfillment rates)
- Delivery cycle time – The average time it takes from when an order has been placed until the customer receives the goods
- Delivery cost per unit – The average costs of delivering one product or service to a customer based on the total expenses incurred by your business
- Stockouts – The number of times a product or service is not available for sale due to stock-outs
- Customer satisfaction – The Percentage of customers who are fully or partially satisfied with the goods or services they have received
- Market share – The percentage of a particular market controlled by your business or its products
- Brand equity – The value of a brand name or trademark as determined by market research
Delivery Performance is an essential aspect of Supply Chain Management and reflects how well an organization can meet customer expectations concerning time and cost.
The post provides a detailed overview of Delivery Performance, key performance indicators, and influencing factors.