Ensuring on-time delivery (OTD) is one of the most critical aspects of a reliable supply chain. For manufacturers and procurement teams, tracking OTD metrics provides insights into supplier performance, production efficiency, and overall customer satisfaction. While many companies focus on basic OTD percentages, there are lesser-known but powerful metrics that can unstick the delivery process, improve customer experience, and give businesses a competitive edge.
In this article, we discuss the key metrics procurement organizations should prioritize to gain actionable insight into supply chain performance, drive continuous improvement, and deliver bottom-line business benefits.
What Are the Most Important OTD Metrics?
Supply chain disruptions are the leading risk to revenue growth. At SourceDay, we focus specifically on direct procurement risk management and consider anything that threatens OTD to be a risk. Our vision is to create perfectly synchronized direct materials supply chains by eliminating risks to on-time PO delivery, inventory optimization, and labor efficiencies. Based on more than a decade of serving customers across industries and managing millions of POs through our platform, we emphasize the following metrics as key performance indicators:
- On-Time Delivery (OTD) Percentage: This measures the proportion of orders received on or before the agreed-upon delivery date. High OTD percentages indicate reliable supplier performance.
- On-Time In-Full (OTIF) Percentage: This metric evaluates whether customer orders are delivered both on time and in the correct quantities. OTIF provides a comprehensive view of supplier reliability.
- Median Days Late: This calculates the median number of days by which late orders are delayed, offering insight into the severity of delivery delays, delivery route optimization, and route planning.
- Supplier Responsiveness: This assesses how promptly suppliers acknowledge and address purchase orders and changes, reflecting their engagement and reliability.
- Price Variance: This compares the final cost of completed purchase orders to the initial quoted prices, highlighting any discrepancies that could impact budgeting and cost management.
By analyzing these critical indicators, organizations from e-commerce to manufacturing can identify areas for improvement, enhance collaboration with suppliers, and ultimately streamline their supply chain management.
But how do you know if your suppliers are truly meeting expectations?
Are Your Suppliers Meeting Industry Benchmarks and Standards?
All of the performance indicators mentioned above are directly linked to supplier performance. But how do you know if your suppliers are delivering at the performance levels you need them to? Evaluating performance against industry benchmarks is a good place to start evaluating the fulfillment process.
Meeting or exceeding these benchmarks ensures smooth operations, customer satisfaction, and minimal disruptions. While industry standards may vary, here are a few key benchmarks across different industries:
Automotive Manufacturing
- Industry Benchmark: 95% or higher OTD rate
- Importance: Automotive manufacturers operate on tight production schedules, and a single late part can halt an entire assembly line. Ensuring high OTD rates minimizes production downtime, improves cost efficiency, and increases customer loyalty.
Electronics and High-Tech Manufacturing
- Industry Benchmark: 92-96% OTD rate
- Importance: In the electronics industry, rapid product cycles and just-in-time inventory models require precise OTD performance to prevent stockouts and excess inventory costs.
Consumer Goods Manufacturing
- Industry Benchmark: 90-95% OTD rate
- Importance: Retailers and distributors rely on high OTD rates to maintain inventory levels, meet demand, and avoid customer complaints. Late deliveries can lead to stockouts, lost sales, and reputational damage.
By benchmarking supplier performance against these industry standards, manufacturers can identify weaknesses, set realistic expectations, and work with suppliers to improve OTD rates. However, it’s important to note that while a 95% OTD rate is a common benchmark, specific industry challenges and supply chain complexities are factors, and companies should continuously monitor industry standards.
While most companies track standard OTD percentages, there are also some lesser-known metrics that can further enhance supplier performance:
- Supplier Responsiveness Rate: Measures how quickly suppliers acknowledge and confirm purchase orders.
- First-Pass Yield (FPY): Indicates how often a supplier delivers defect-free products on the first attempt.
- PO Acknowledgment Compliance: Tracks how often suppliers confirm orders within the required delivery window.
- Expedited Order Rate: Monitors how frequently suppliers need to expedite orders, indicating potential planning issues.
- Dock-to-Stock Time: Measures how quickly received shipments are processed and made available for production.
How to Hold Suppliers Accountable and Improve On-Time Delivery Performance
Improving OTD rates requires proactive supplier management and data-driven decision-making. Here are five best practices to enhance on-time delivery performance and supplier accountability:
Establish Clear Performance Expectations
Define and communicate key performance indicators (KPIs) such as OTD percentage, order management accuracy, and defect rates. Regularly review these on-time delivery KPIs with suppliers to ensure alignment.
A supplier scorecard can help track performance over time, providing a structured way to measure improvement. It should include:
- On-time delivery rate
- Total number of deliveries
- Pricing fluctuations
- Defect rate
- Responsiveness to order changes
- Compliance with contractual obligations
Leverage Predictive Analytics
Traditional OTD tracking is reactive, but predictive analytics offers a forward-looking approach complete with proactive notifications. SourceDay’s direct procurement software helps manufacturers analyze supplier performance trends and detect potential delays before they occur, allowing proactive adjustments. It also provides a modern approach to PO planning so teams can stop relying on time-consuming, risk-prone processes.
For example, SourceDay’s predictive analytics can:
- Identify suppliers with consistent delays, enabling corrective actions.
- Highlight potential disruptions due to supply chain bottlenecks.
- Provide recommendations for alternate suppliers or logistical solutions.
Automate Purchase Order (PO) Management
Manual processes increase the risk of errors and miscommunication. SourceDay automates PO workflows, ensuring that updates are communicated in real time and suppliers stay informed about changing requirements.
PO automation also helps with:
- Reducing administrative burden by eliminating manual follow-ups.
- Ensuring accurate order details by synchronizing real-time data with enterprise resource planning (ERP) systems.
- Minimizing miscommunications between buyers and suppliers.
Improve Supplier Collaboration
Strong partnership with suppliers leads to better business outcomes, and this is one of the pillars of the SourceDay tool. Implementing a centralized platform for real-time collaboration helps manufacturers and suppliers address potential delays and maintain transparency.
Key collaboration strategies include:
- Joint performance reviews to discuss improvement areas.
- Early warning systems for potential supply chain disruptions.
- Incentives for top-performing suppliers to encourage consistent performance.
Monitor Lead Time Trends
Regularly tracking lead times allows businesses to anticipate bottlenecks and negotiate better delivery terms with suppliers. Monitoring trends in supplier responsiveness can also highlight potential risks before they impact operations.
Manufacturers can leverage SourceDay’s analytics to:
- Compare actual vs. promised lead times.
- Identify systemic delays within supplier networks or management systems.
- Implement contingency plans for high-risk suppliers.
Consistent On-Time Delivery Service is Paramount
Tracking and optimizing on-time delivery metrics is essential for supply chain success. It enhances operational efficiency, reduces production delays, and improves customer satisfaction as well as retention.
The Bottom Line
With the right technology and best practices, manufacturers have the power to optimize supply chains and significantly improve OTD metrics. Investing in automation, predictive analytics, and supplier collaboration tools like SourceDay ensures sustained OTD performance and long-term business success.
FAQs: Common Questions About On-Time Delivery Metrics
What is on-time delivery?
On-time delivery (OTD) measures the percentage of orders delivered on or before the promised delivery date. A KPI is used to evaluate supplier reliability and overall supply chain efficiency.
What factors influence on-time delivery metrics?
Several factors impact OTD, including:
- Production Scheduling and Planning: Poor forecasting and inefficient production schedules lead to delays.
- Supplier Reliability: Inconsistent supplier performance affects delivery timelines and lowers customer expectations.
- Logistics and Transportation Management: Shipping delays, customs clearance, and transportation disruptions can hinder on-time delivery.
- Order Complexity: Large or customized orders may require longer lead times or variable timeframes.
- Inventory Management: Stock shortages or mismanaged inventory levels can be the root cause of customer issues in the order fulfillment process and poor delivery experiences.
How do you measure on-time delivery?
To measure OTD, calculate the percentage of purchase order lines received on or before the expected delivery date. This metric provides clear insights into a supplier’s ability to meet agreed-upon timelines, ensuring reliable supply chain performance. Tracking this metric over time allows businesses to identify trends, address inefficiencies, and improve supplier performance.
Why SourceDay?
SourceDay’s direct procurement software enhances OTD performance by streamlining supplier communication, automating PO management, and providing real-time analytics. With SourceDay, manufacturers can proactively address potential delays and maintain high OTD rates, ensuring a more resilient and optimized supply chain.
Investing in the right tools and processes can make the difference between a struggling supply chain and a well-oiled operation. SourceDay ensures that businesses stay ahead by optimizing OTD, improving supplier accountability, and leveraging the power of predictive analytics.
