On time delivery: Understanding, Calculating and Improving this KPI

Zahava Dalin-Kaptzan

Curious what on time delivery is, why it’s so important, and most importantly, how to improve it? This post is for you. 

What is on time delivery?

On time delivery, or OTD, is the metric used to measure supply chain efficiency. This KPI shows whether or not an organization is meeting its goals in regards to promised delivery times, and is critical for both measuring carrier performance and maintaining customer satisfaction. 

Measuring on time delivery rates reveals just how effective a courier service and brand are, and can help improve rates of customer satisfaction and return purchases.

Here’s where most companies run into problems:: 

Delivery volumes are expanding at an unprecedented rate. It is becoming harder to get deliveries out and to customers on time, resulting in missed and late deliveries.

Dropping on time delivery rates is an issue both for customers (frustration, lack of trust in the brand) as well as for logistics operations. Even a single failed delivery attempt can have a domino effect and cause a delay in lead times for the rest of the orders delivered on the driver’s run. Since customers with bad shipping experiences will not order again from the same brand, increasing on time delivery metrics should be an imperative for every brand, 3pl logistics provider, carrier, and anyone who does deliveries.

1 in 5 consumers won’t forgive brands who don’t deliver on time.

EY Research

In this post we’ll dive into the main issues surrounding on time delivery, and what you need to do to improve your OTD KPIs and in turn, increase customer retention.

Why is on time delivery so important?

On time delivery is one of the key ways in which customers judge the delivery experience, and therefore a critical factor in customer retention. Lower on time delivery rates lead to more customer complaints, customer service calls and subsequent costs for your business, as well as irate customers who will choose not to order again.

Competition is fierce and customers have high expectations today. They don’t care about supply chain issues, problems with inventory management, or any other reason that may cause their order to be delayed, whether it be due to the suppliers, delivery person, stock problems, etc. They want their orders to arrive on the delivery date, within the correct time window. 

The numbers don’t lie: according to a GreyOrange Survey, 45% of consumers today expect 2-day shipping or less when they place an online order. Even more staggering is the fact that 57% of customers won’t return to a retailer after three late deliveries. 

In today’s digital era, those customer complaints may quickly turn into negative reviews online, on a brand’s website or on social media. Delivery providers, too, risk giving their shippers a bad reputation and losing their clients.

The bottom line: on time delivery service is a key factor in maintaining high customer retention rates and keeping customers satisfied.

What causes a business to deliver after the promised delivery date or time?

There are a few primary reasons for late delivery (aka delivering after the specific date specified). If these issues are prioritized and addressed, the OTD rates will rise. 

1. Inventory Management

If your teams do not have inventory management under control, customers can place orders for products that simply aren’t in stock. This creates long lead times and unavoidable delays which will most likely cause customer complaints and in other circumstances, cancelations.

2. Inefficient order fulfillment processes

With the number of eCommerce orders skyrocketing, companies must focus on efficiency in the eCommerce fulfillment process. This process includes picking the specific items, preparing them for shipping by packaging them, and getting shipments out the door to the delivery or courier service. If this process gets delayed, on time delivery is essentially impossible to achieve.

SHIP DATE – The ship date is the date that the order is shipped from the warehouse or distribution center to the recipient. If there is a delay in the ship date due to problems in the fulfillment center, the delivery will be late.

3. Other problems with the delivery itself

A lot can go wrong along the delivery route. First of all, planning the route is a critical step to making sure that drivers can get as many packages delivered as possible in minimal time. This includes making sure that the truck is packed efficiently and planning the route appropriately.

4. Lack of visibility

Most companies track orders once they are out of the warehouse. However, too many decision-makers are blind to how inefficient or time-consuming earlier stages of lead times are: time in warehouse, for example, as well as the time it takes providers to perform white glove delivery services (e.g. over-the-threshold delivery, assembly and installation). Without visibility across every second of the fulfillment schedule, it is impossible to accurately determine what is causing delays in shipments.

Different types of OTD KPIs

There is a wide range of KPIs that can be used to measure on time delivery. 

Let’s start with the most basic one: general on time delivery rate. To calculate this, you need the total number of deliveries as well as the number of deliveries that were late. Once you have these numbers, just divide. If you had 1000 deliveries this month and 17 were late, your OTD metric is 98%. On the other hand, if 100 were late, your OTD metric is 90%. 

From here we can break down the different KPIs into smaller sections in an effort to figure out why deliveries aren’t arriving by promised delivery dates. For example time-based KPIs. In order to understand why promised delivery dates are missed, you can divide the last mile into multiple steps, each with its own time-based KPI. 

Some of these metrics may be:

  • Time in fulfillment or distribution center
  • Time to deliver
  • Time on site
  • Time back to base

The issue here is that many companies don’t measure these things separately but rather group them together as part of the delivery process (or in some cases, they may not measure some of them at all!). Diving into these numbers can be an important factor in the effort to improve on time delivery rates, reduce lead times, and stick with shipping dates to keep customers happy and coming back in the future. 

Even the little things can add up when it comes to on time delivery. For example, driver breaks and time spent parking. Do you know how long your drivers are on break for? Do you know how long it takes them to park? How long do they spend on-site for each delivery? These small factors greatly influence transit times. 

5 Steps to guarantee high on time delivery service rates

A high on time delivery rate is an important factor in guaranteeing customer satisfaction. Today, intelligent technology can help your business improve this important KPI.

Here are our top 5 steps to improving your OTD rate and creating a great customer experience.

Step 1. Visibility and automation

The last mile delivery process needs to be visible and automated for it to succeed at scale. If you know where your orders are at all times, you can identify issues before they become bigger problems. The same goes for automation. The entire process can be sped up by beginning to automate as many steps along the way as possible. The more steps that are automated and the more resources that are connected for visibility, the higher your OTD rates will be in the end. 

Machine learning can help any business understand what’s going on behind the scenes and why deliveries are late, leading to higher visibility. By using machine learning you‘ll be able to take the information you receive to make smart decisions that lead to improved OTD metrics

Step 2: Optimize, optimize, optimize

Now is the time to start optimizing your dispatching and routing with OTD in mind. This includes optimizing for both same-day and scheduled orders.  For example, for on demand delivery, you can use dispatch software that automatically selects a fleet or driver based on whoever is closest. This is work that a human simply can’t do at the same level of accuracy and most importantly, speed, as software can. For scheduled deliveries, logistics companies can use intelligent route optimization software that takes all relevant factors into consideration when planning time and distance to each location. This helps to guarantee that packages arrive by the promised delivery date each and every time.

Step 3: Connect your systems

You’re probably using many systems along the supply chain. Now’s the time to connect them. This includes your OMS (order management system), TMS (transportation management system), logistics management software, driver apps, and customer experience interface. This is part of the process of making sure that the entire process is as transparent as possible. 

Step 4: Manage expectations

Things can and will go wrong along the fulfillment process no matter how hard you try. When you use smart tech, customers will be updated the second that there is a delivery exception resulting in a delay. Even if the original delivery date has been delayed, the customer will know exactly what’s going on and won’t be kept in suspense. By keeping customers and clients informed, they may be understanding and not get upset. 

Step 5: Have flexible coverage

Make sure you always have backup options. Whether it’s bringing in more drivers when necessary or more vehicles, you need to make sure that on time delivery service is happening, no matter what the situation.

Increase your on time delivery rate with an open, connected platform

The best way to ensure on time deliveries is by connecting your resources, systems, orders, and drivers to ensure complete visibility and control over the entire process.

Bringg’s modular platform automates and optimizes your last mile logistics and fulfillment processes, improving speed and providing the visibility and analytics to help you make actionable decisions that improve on time delivery rates and customer satisfaction. Learn more about optimizing your dispatch and routing and read about efficient fleet and driver management here

About Author

Zahava Dalin-Kaptzan

Zahava

About Author

Zahava Dalin-Kaptzan

Zahava is a marketing manager at Bringg, with a unique take on delivery and retail trends. She has extensive experience in analyzing disruptive technology and its impact on both markets and enterprises.

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