How to Evaluate and Improve Delivery Time KPIs
May 19, 2023
On-time delivery (OTD) is essential to keep customers satisfied and retain your customer base. Businesses that have excellent delivery times train all members of staff on this, from customer service representatives to delivery drivers, and make data-driven decisions using OTD metrics.
Most successful businesses will also invest in software designed to enhance the delivery process, from route planning software to IVR phone systems for customer service lines.
To evaluate and improve your current delivery processes, your business should regularly measure key metrics such as lead time, cycle time, and delivery accuracy.
Ready to improve your performance? Then here’s everything you need to know about enhancing your delivery time KPIs.
What is on-time delivery?
OTD is a metric that measures the ability to deliver a product or service to a customer on the promised delivery date. It can also highlight issues such as supply chain disruption.
Its primary purpose is to show whether an organization is meeting its delivery goals or whether improvement is needed. It does this by measuring both carrier performance and overall customer satisfaction.
OTD is an essential performance metric for many industries, including manufacturing, transportation, logistics, and eCommerce.
Meeting delivery deadlines can have a significant impact on customer satisfaction, as well as a company's reputation and profitability.
Why is measuring on-time delivery essential?
Customers who experience on-time delivery are far more likely to purchase from a business again, making it a great indicator of customer retention.
On the other hand, if a business or organization notices it has a low OTD rate, it’s likely to face more customer complaints and calls and decreased profits due to reduced orders. For reference, below is a median rate of on-time deliveries based on an analysis of 1.5M deliveries in 2023.
1. Customer satisfaction
Meeting delivery expectations and deadlines is crucial to keep customers satisfied. If they can track the status of their delivery through your business domains and receive their product on time, they’re more likely to trust you and make repeat orders.
If a company consistently fails to deliver on time, however, this will damage its reputation and cause it to lose customers (especially if they leave negative reviews).
2. Operational efficiency
On-time delivery indicates supply chain efficiency and effectiveness. A business that consistently delivers on time demonstrates it has a well-run operation with effective logistics, production, and supply chain management.
If you run an online Etsy store, the Etsy Shopify integration can help you streamline your delivery processes.
3. Cost savings
On-time delivery can also help a company save money. That’s because, when you fail to deliver on time, you may face additional shipping or handling charges to get delayed orders out in a hurry.
Late delivery can also result in lost sales and missed opportunities due to customer dissatisfaction.
4. Competitive advantage
On-time delivery gives a business a competitive edge too, as it can differentiate itself from competitors and attract customers who trust in the products and services provided.
How to evaluate your current delivery times
If you’re interested in improving your delivery times, it’s essential to evaluate your current performance and gain insights into your supply chain management based on raw data. This will give you an accurate picture of the strengths and weaknesses of your delivery process, helping you improve future delivery timelines.
You can evaluate your current delivery times by taking the following steps.
Collect data on your current delivery times, including stats on the delivery of different products by measuring DIFOT (delivery in full, on time).
Analyze the data. Once you have collected the data, identify any patterns or trends, such as consistently meeting or missing delivery deadlines. You should also pinpoint any underlying issues in your supply chain that may be contributing to delays.
Compare against industry benchmarks to see how you measure up to your closest competitors. This will help you identify areas that need improvement.
Get feedback from customers by asking them about their experiences and expectations and whether you’ve met them in the past. This will help you understand customer needs and how you can improve their experience.
Identify areas for improvement based on your analysis and feedback from customers. This may involve adapting your logistics, production, or supply chain processes or investing in new technologies or resources.
Set goals and track progress for improving your delivery times. This will help you measure the effectiveness of any changes you make.
The six types of delivery time KPIs
There are many OTD KPIs that businesses can use to measure the effectiveness of their delivery processes and gain a better understanding of how to improve.
For instance, if you’re constantly wondering why your phone keeps dropping call lines when talking to drivers and customers, it might be time to review your current phone system.
Key KPIs to measure include.
1. On-time delivery rate
The most basic KPI, on-time delivery rate, measures the percentage of orders that are delivered on or before the promised delivery date. To calculate this metric, businesses can use the following formula.
On-time delivery rate = total number of orders delivered on time / total number of orders delivered x 100.
2. Lead time
Lead time measures the time it takes from when an order is placed to when it’s delivered to the customer.
3. Cycle time
Cycle time KPIs measure the time it takes to complete an order, such as production, packaging, or shipping.
4. Transit time
The transit time measures the time it takes for a product or shipment to move from one location to another, such as from a warehouse to a customer.
5. Delivery accuracy
Delivery accuracy measures the percentage of orders that are delivered without errors, such as missing items, incorrect quantities, or damaged products. To measure it, businesses can use the following formula.
Delivery accuracy = total number of orders delivered without errors / total number of orders delivered x 100
Alternatively, you could look at order analytics to see the share of partially delivered and overdelivered orders.
6. Time to resolve delivery issues
The time it takes to resolve delivery issues measures how long it takes to fix any problems arising during the process, such as delayed shipments or damaged products.
7 steps to improve your on-time delivery stats
If you’re ready to improve your delivery times, you’ve likely identified what factors are negatively impacting your OTD metrics.
Refining on-time delivery metrics requires a comprehensive approach involving multiple steps. Here are the main ways you can improve.
1. Set clear delivery expectations & goals
Be sure to set clear goals and communicate delivery expectations to customers, suppliers, and internal teams to help ensure timely delivery.
You can track your goals by using real-time performance metrics from your employees and displaying these on a scoreboard so everyone on your team knows how you’re doing.
2. Work on your supply chain
Review and optimize your current supply chain processes by identifying inefficiencies in the system that are contributing to delays, such as inventory management, transportation, and order fulfillment rates.
To help you improve your supply chain and automate sales processes, invest in an inventory management tool that notifies you when a product is out of stock and updates this across your sales channels.
3. Use technology to track and monitor deliveries
Utilize technology, like delivery tracking and route planning software, to monitor the status of deliveries and identify any potential issues that may arise. This allows for quick corrective action to be taken before a delivery is missed, helping you keep your customers satisfied.
4. Use smart packaging techniques
If you’re plagued with long packing times, your business will struggle to make timely deliveries. Work out how you can speed this up, whether this means organizing your warehouse so products are easier to find or automating parts of the process.
5. Implement contingency plans
Having a contingency plan will help you deal with unexpected events, such as weather, supplier, or equipment issues. This ensures deliveries will still be made on time, even when your delivery drivers encounter unexpected circumstances.
6. Train employees to be better
By training employees on the importance of on-time delivery and the updated processes you’ve put in place, you’ll make delivery times a priority across your business.
Train customer service representatives, delivery personnel, and anyone else involved in the delivery process on ways to improve and enhance your business offering.
7. Continually measure and analyze performance
Regularly measure and analyze on-time delivery metrics to identify areas for improvement. Use data-driven insights gathered from analyzing your OTD metrics and shipping reports to make informed decisions and implement changes that lead to improved performance.
Ready to improve your delivery times?
If you’re ready to improve your on-time delivery rates, KPIs are an effective way to evaluate your current processes and make data-driven improvements.
By measuring your delivery times, accuracy, and the time it takes to resolve issues, you can continually analyze your performance and take the necessary steps to enhance delivery efficiency.