On-Time Delivery (OTD) KPI Your Most Important Metric In Operations - Part 1

Posted by Xcel-Digital on February 11th, 2020

 - Part 1

At a Glance
  • On-time delivery (OTD) is a key metric to measure delivery performance and supply chain efficiency in your organization.
  • This article talks of a real-life transformation of OTD in a chemical company from 76% to 90%+.
  • Your ‘A’ customers contribute to more than 70% of your company’s revenue and meeting their sales order demand is critical for customer retention.
  • Improvement of OTD requires optimization of processes across multiple departments in the organization.
  • Prime reasons behind late product delivery - lack of real-time data-driven insights, planning, monitoring, and operational efficiency.
  • Technology and integrated tools play a pivotal role in the monitoring / increase of OTD.
  • The OTD percentage is a holistic measure of operational performance.

On-time Delivery - Industry Disruptors

Amazon has been a major disruptor in the industry and changed consumer perception by delivering shipments within the promised 2 days. The operational efficiencies required to run Amazon’s distribution centers is no joke. Other retail giants have now been forced to follow suit and meet the high standards set by Amazon. The expectation of on-time delivery is now more than ever before in traditional industries such as chemical, pharmaceutical and distribution.
Here are a few KPIs that are critical to measure delivery performance in Logistics and Supply Chain operations -
  • On-time Delivery (OTD) also referred to as On-time Performance (OTP), Shipped-on-Time (SOT) or Delivery on Time (DOT)
  • DIF – Delivery in Full
  • DIFOT – Delivery In Full on Time
  • Inventory Turns (days)
  • Costs as a percentage of sales
This article contains real-life experiences of a general manager and executive of a chemical company. We will discuss the key contributors to on-time delivery and how by starting with a low percentage of OTD you can achieve significant gains over time.

The realization

  • You are responsible for managing operations and see some glaring issues. However, you are not able to pinpoint the precise problem or where to even start. You request Key Performance Indicator data (“KPI”) from different departments.
  • As you begin your review, you notice a lack of focus - i.e., there are several KPIs, all being portrayed as having an equal value. One logistics KPI stands out: The On-time Delivery (“OTD”) percentage within the company is only 76%. Upon reflection, you realize efficiency can be enhanced by managing operations with this single measure.
  • In this blog, we will elaborate why OTD is so important. This single KPI can drive tangible value for your customer and totally change how customers perceive you. Our next blog in the same series expands on the problem/opportunity you inherited, the steps you can take to produce rapid positive results and finally the result achieved.

What is OTD?

OTD is a metric used to assess the ability of a business in fulfilling the shipment order within the period of promised delivery date.

Read more: https://xcelpros.com/on-time-delivery-in-operations-part-1/

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Joined: January 9th, 2020
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