On-time delivery

Definition

On-time delivery refers to the ability of a supplier to deliver goods or services by the agreed-upon date, ensuring that operations run smoothly without delays. This key performance indicator is crucial for maintaining customer satisfaction and operational efficiency, as it directly impacts inventory management, production schedules, and overall supply chain performance.

5 Must Know Facts For Your Next Test

1. On-time delivery is often expressed as a percentage, indicating the ratio of deliveries made on time compared to total deliveries.
2. A high on-time delivery rate enhances customer trust and can lead to increased repeat business and customer loyalty.
3. Factors affecting on-time delivery include production capacity, logistics efficiency, and communication between suppliers and customers.
4. In many industries, achieving an on-time delivery rate of 95% or higher is considered an industry standard.
5. Failure to meet on-time delivery commitments can result in penalties, lost contracts, and damage to a company's reputation.

Review Questions

• How does on-time delivery impact supplier selection in a competitive market?
  • On-time delivery significantly influences supplier selection because it directly affects operational efficiency and customer satisfaction. Companies prioritize suppliers who consistently meet their delivery deadlines as this reliability ensures that production schedules are maintained without disruptions. In competitive markets, suppliers with high on-time delivery rates have a better chance of being selected over those with less reliable performance.
• What metrics can be used alongside on-time delivery to evaluate supplier performance comprehensively?
  • Alongside on-time delivery, metrics such as order accuracy, quality of goods, responsiveness to inquiries, and lead times should be considered for a comprehensive evaluation of supplier performance. These metrics provide insights into not only how reliably a supplier delivers but also the overall quality of their service. By combining these indicators, companies can make well-informed decisions about which suppliers to engage with.
• Evaluate the potential consequences of poor on-time delivery performance on a company's supply chain and customer relationships.
  • Poor on-time delivery performance can severely disrupt a company's supply chain by causing delays in production schedules and increasing inventory holding costs. This can lead to stockouts or overstock situations, negatively affecting cash flow. Additionally, customers may lose trust and seek alternatives if their expectations for timely deliveries are not met. Over time, this can result in reduced market share and damage to long-term customer relationships.

Related terms

Lead Time:

The total time taken from the initiation of an order to the completion of delivery, which can significantly affect on-time delivery rates.

Supplier Performance Metrics: Quantitative measures used to assess a supplier's reliability and quality, including on-time delivery rates as a critical metric.

Order Fulfillment: The complete process from when a customer places an order until the product is delivered, where on-time delivery is a vital aspect.