Delivery time in supply chain management
Products and services are the result of the interplay of complex processes involving numerous participants along the value chain (supply chain). The values that are created along the supply chain have a number of key performance characteristics. For example, the shortest possible delivery times are an increasingly important requirement for the end customer in the supply chain and are therefore becoming a significant competitive factor. However, if this customer wish becomes a decisive factor in the purchasing decision, then time compression along the supply chain will become ever greater.
Delivery time and adherence to delivery dates
The promised delivery time is increasingly coming into conflict with another – no less important – performance target, namely adherence to delivery dates. On-time delivery is the degree of reliability of the promised delivery time. If the delivery time is shortened excessively, adherence to delivery dates inevitably comes into conflict with the delivery time, because the shortest possible delivery times and the highest possible adherence to delivery dates thus become conflicting performance targets for logistics and the supply chain.
Breathless supply chains
Supply chains without redundancies (e.g. buffer times, transition times, temporal decoupling of strongly scattering processes, buffer stocks) cannot be reliable because there is no time for “self-adjustment” (Bretzke) in the event of the slightest disruption. This makes most processes along the supply chain time-critical. The logistics system, the supply chain, can no longer breathe and can no longer recover. Every incident, every deviation, every small – even human – error now makes its way to the end customer and violates the promised performance values.
The cost of impatience
The cost of impatience, as I would like to call it, is the violation of the reliability of the delivery of the product or service, i.e. adherence to delivery dates. There is therefore an operationalizable and measurable conflict of objectives between delivery time and adherence to delivery dates. Using a simple practical case – didactically reduced from my consulting practice – this will be shown numerically:
Practical example with figures
The company in question is a supplier of aircraft parts and was contractually obliged to meet certain deadlines. In this specific case, the deadline compliance requirements for a critical major customer were at least 99% of the orders (single-item orders). The company’s average delivery time (from order acceptance to delivery to the customer) – for the aircraft parts in question – was still competitive at a maximum of 80 calendar days. In reality, however, the aircraft parts supplier only managed to meet deadlines by around 70% and the individual – sometimes complex – processes were already highly time-compressed. This raised the question for me as an external consultant: How many days are actually missing if we (have to) seriously promise 99% on-time delivery? By analyzing the conflicting – statistically calculable – situation, the corresponding statistical calculation shows that the company is actually missing approx. 13 calendar days. This means that if a serious promise of 99% adherence to delivery dates is made for the orders, a delivery time of approx. 93 calendar days would have to be specified. This puts the company in the tricky position of not being able to compete with a delivery time of 93 calendar days (80 13 calendar days) if it promises at least 99% adherence to delivery dates. However, if a delivery time of max. 80 calendar days is to be promised, then only approx. 70 % adherence to delivery dates can be agreed. – In practice, some tricks are used to deal with such conflicting objectives, e.g. prioritizing orders at the expense of other orders. Of course, other orders suffer as a result of this deferral.
The cost of impatience is therefore a necessary trade-off between (too short) delivery times and (too high) adherence to delivery dates. In actual practice, further process improvements along the supply and service chain will of course be sought in the long run. However, the basic conflict between delivery time and adherence to delivery dates remains in principle if time compression is (too) high.
You can find more information on adherence to delivery dates in the article“From punctuality to resilient adherence to delivery dates (ATP)“.