Don’t let OTD cause you to lose clients

As an Operations leader, you know that on-time delivery is critical for your manufacturing and distribution company. If your business isn’t consistently delivering on time, your organization’s reputation could be negatively impacted, resulting in lost orders and revenue. CSH’s Randy Slattery discusses some of the factors that can slow down your delivery time and provides tips to drive improvement in your operations.

Why is on-time delivery so important?

On-time delivery (OTD) is one of the primary distinguishing factors manufacturers use to differentiate their product offerings from competitors. It is the measurement that helps drive continuous improvement and helps you determine lead time requirements of your customers. OTD is also the main measurement that determines whether your supply chain processes are efficient.

Manufacturers may think that execution is the primary reason they can’t produce and get orders out the door on time. Instead, it’s often their system for managing orders that is causing the delays.

OTD haunts many manufacturers, not necessarily because your team isn’t performing up to par. Often OTD is troublesome because your suppliers aren’t getting parts to you as quickly as promised, or your projections to your suppliers vary too much month to month and the unpredictability is hard to manage. From systems issues including supplier management to execution, discovering the root cause of OTD delays is crucial to solving the issue and developing your standards of manufacturing excellence.

OTD analysis can reveal:

Lack of accurate or dependable systems to manage, monitor and measure the production process
Gaps in employee training and standard operating procedures causing delays, poor quality and cultural struggles as your teams feel unsuccessful
Intermittent failure to meet customer requirements due to problems in the supply chain
More fundamental gaps between the customers’ requirements and the setup of the supply chain to meet those requirements

Depending on where you are on the supply chain, the systems you have in place to produce your products quickly and efficiently are often misaligned, causing backups, downtime due to lack of parts, re-work delays and even worse, production errors or defects due to ill-equipped employees and lack of measurements and SOPs.

Delivery factors that cause OTD calculation issues:

There is no clear distinction how the number of units on time is calculated
OTD calculation reference points are not clear or defined
Some use the day they shipped the product rather than the actual day it is delivered to the customer to calculate OTD
Other organizations ship product early without customer approval and then try to use this to positively affect their OTD rate
Often, there is confusion about the delivery window

Typically, the root causes for these issues are undefined metrics, KPIs and measurement requirements. But the underlying root cause of OTD might not have anything to do with the list above. The underlying root cause to issues with OTD could be due to poor planning and systems and operational issues that need to be tackled.

We developed a list of possible “symptoms” to help you identify where you have shortcomings regarding on-time delivery.

Raw Material

We have lots of material, but not the right material in-house
We thought we had the needed quantity of material in-house, but are short
Our supplier told us we’d have the material sooner, but they didn’t deliver when they said they would

Equipment