One of the primary drivers for many businesses own performance is that of its supply chain. Of the two primary drivers for this one is the quality of the product delivered (right first time) and second being the on-time delivery performance of its vendors.
The importance of on-time delivery must not be ignored. Late supplier delivery can drive cost, the customer delivery performance of the customer to name but two factors. It’s so important that in many cases it can drive the removal of supplier approval (i.e. they will stop being used) and in some cases https://www.cips.org/supply-management/news/2017/december/us-grocers-fine-suppliers-for-late-deliveries/ they can be fined for late delivery (within the bounds of thier commercial arrangement).
How do I calculate on-time delivery?
On time delivery is typically calculated by measuring the actual delivery date against the requested delivery date (usually defined at the placement of purchase order). Some companies operate days early/days late tolerance (for many this is zero days late but some days early can be allowed). Any tolerance applied typically varies from company to company and industry to industry.
As we discussed above, the metric of vendor delivery schedule adherence is of crucial importance to most companies as it drives it’s success to its own customers. Late delivery can directly impact build schedules, customer delivery schedules and ultimately the success of the buying organization.
What drives poor delivery performance?
There is a multitude of things that can impact delivery performance. Matters such as change, schedule reasonableness at the outset, other customer pressure, resources etc an all have a part to play. However, given the importance of the metric what steps can you take to optimize your ability to achieve a desirable delivery performance.
Below we list 10 steps that can be implemented to help improve your vendors delivery schedule adherence.
Step 1 – Ensure you measure, review and share performance data.
Without an adequate measure in place, it’s impossible to know for sure whether your supplier is performing on not. The first step in any delivery improvement plan is to have an adequate method of measurement where the results are shared collaboratively between the buying and selling organization. A target should be set and a monthly review of performance should be established with a focus on understanding the root cause of any gaps in performance coupled with the required improvement actions and follow up.
Step 2 – Remind your supplier of their commitments (common collaborative reviews)
Many firms have large complicated order books spread accross a myriad of suppliers. The buying organization should share the order book regularly with the supplier with the target of reviewing the delivery schedule and understanding potential gaps (and what can be done about them). A transparent collaborative review facilitates a better understanding of risks and priorities and allows issues to be dealt with early. Many seemingly simple things can go wrong with order book management, purchase orders can go astray or priorities can be misunderstood. A regular routine review can assist both sides in understanding the task ahead of them. While there can be a tendency to use these sessions to “beat the supplier up”this rarely delivers improvement, a team-based approach is often better placed.
Step 3 – Understand key constraints and have improvement plans in place
Bottlenecks and constraints exist in every business. Understanding how these might impact delivery performance and introducing appropriate mitigation is vital if performance targets are to be met. For example, this might be as simple as understanding the resource constraints around Quality Assurance and how too many deliveries in a specific time frame might be impacted by this. Understanding the issues early enough should be enough to help reduce the impact on delivery performance. Build a list of the key constraints that could impact performance (on both sides) and develop mitigation plans.
Step 4 – Do not set unreasonable targets
I’m continually surprised by companies that have poor delivery performance results from its supply chain but by the same count set unreasonable expectations around lead time. The resulting poor performance typically comes as a surprise and disappointment. For example, if something takes 100 days to manufacture it’s not surprising that a Purchase Order requiring a 10 day lead-time will fail. Leadtimes should be at first realistic and achievable if you have any chance of achieving a decent level of delivery performance.
Of course, these targets are not just about the buying organization. REalistic assessments of the suppliers capacity, resources and bottlenecks must be carried out. Another clear task is to understand any issues other customers of the supplier may introduce, especially where elements of the order i.e. the order value may disincentivize the supplier to perform. Without a doubt, the supplier must do their part and this begins with understanding the art of the possible.
Step 5 – Be careful about introducing change
Another issue that continues to amaze me is where buyers inundate the supplier with constant change and then act surprised when the vendor fails to hit an original (pre-change) promise date. When introducing any change it’s important that the buyer understands the impact on the delivery profile. One of the common things I see in industry is design change when an order has been placed. Impact reviews are then not undertaken yet the supplier is held accountable when the date is missed.
Step 6 – Ensure adherence to schedule is a key metric for SBR’s
Management level team members should be knowledgeable of delivery performance in order to drive any performance improvement actions that may be required. Having the metric is one thing but driving improvement is another and invariably this is difficult without the right senior support. Supplier reviews are an ideal discussion point to focus on performance and appropriate seniors from buyers/vendors should be reviewing regularly.
Step 7 – Ensure regular payments
Again, I’m left surprised by the quantity of buying organizations that expect fantastic performance when the payment profile is poor. Poor payments invariably impact existing deliveries.
Again, I’m left surprised by the quantity of buying organizations that expect fantastic performance when the payment profile is poor. Poor payments invariably impact existing deliveries.
Step 8 – Focus on manufacturing milestones
Where the requirement is for complex long lead-time items understanding key milestones during the manufacturing process can provide credibility of the ability to hit performance targets. Buyers should collaborate with their vendor based colleagues to understand the key milestones on a purchase item and agree on regular reviews to assess progress, once again highlighting risk areas and driving any necessary improvement actions.
Step 9 – Early notification of delays through alerts
Both organizations should look to develop tools/methods that provide suitable alerts where delivery performance could be affected. Often the ability to react early can save the day. While this can be complex to establish the results can be substantial. Various options exist here in terms of technology that can interact with MRP systems to drive real-time information for tracking purposes.
Step 10 – Focus on Quality Assurance
Another key issue that affects many companies performance is how the quality assurance function is integrated and accounted for. For some vendors this “buy off” happens at source, for some this happens on receipt of the item in the respective goods in department for others this may be sequential during the manufacturing process. Failure to correctly account for this (and subsequent delays due to issues) can impact delivery performance heavily. Constructing an appropriate (and mutually agreed) process early on can provide further benefit.
So there are our 10 ideas for driving delivery performance. Have your own ideas? be sure to share them in our comments section below.