KPIs #7 A Focus on Delivery Performance

Process Effectiveness measures provide oversight of whether we are satisfying our customer’s demands. They monitor our ability to deliver products or services that satisfy their Quality and Delivery requirements.

In today’s newsletter we will be investigating the measurement of Delivery Performance. We will explore what this means, and the considerations you should make when deciding on the specific measurements you should use, appropriate to your situation.

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Delivery Performance

Dependant on the nature of our business activity, there are two different types of Delivery performance requirement. We will either be in a position where every order we receive has a specific due date, or date and time, or, we may have a response target in place, based on the time taken to turn round an order received. For example, an IT help desk might have a target of resolving all client problems within an hour, or a hospital have a target for patients to have their operations completed within 3 months of referral.

These time related demands might be contractual, they could be entirely based on custom and practice, or public expectations, and may or may not have an associated tolerance level or allowance included.

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Delivery Performance Measures

As with the Quality performance discussed last time, we should establish a standard against which we will then consistently measure our deliveries. Where possible we should include our customers in validating that this standard aligns to their expectations. For example, we might have a situation where our restaurant receives negative feedback on service waiting times. Although there may be no specified service time on our menu, we may recognise that we are not meeting the expectations of some of our customers. Based on this feedback we might adopt a target time for order service, say of 30 minutes, against which we could monitor our performance.

We would typically monitor our delivery performance in terms of ‘Delivery Schedule Achievement’ (DSA). This is quite a clever metric, since it is measured in terms of, and sometimes referred to as ‘On-Time In-Full’ (OTIF) delivery performance. This is already hinting at two distinct elements to delivery performance and delivery failures. A delivery may fail to meet the due date requirement, arriving late. Alternatively, a delivery might instead be rushed through, to satisfy a due date, but the order be incomplete, with a shortfall against order quantity or contents.

The measurement of Delivery performance also differs from that of Quality in that it is measured at the order line-item level, rather than individual component. For example, an office stationary order might include one line item for 12 reems of A4 paper. The order might arrive on the specified due date, but only 8 reems of paper are in the delivery. This would be recorded as a single failure. In quality measurement, we would be interested in how many of those 8 reems received were in good condition and measure the number that failed to reach the standard agreed.

The formula used for the delivery performance calculation might look like this…..

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The DSA performance, or OTIF performance, is generally recorded as a percentage.

Performance is monitored digitally (pass or fail) against each order line item. For example, If we had 40 order line items that were due for delivery this week, 30 arrived on time but 10 of these had an order quantity shortfall, the measured Delivery Schedule Achievement performance would be 50%.

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Where to Measure

Where the data is collected regarding our ongoing Delivery performance will depend greatly on how automated our management processes are. Many manufacturing companies will use an electronic enterprise planning system. These systems plan and coordinate all of the sequential processing steps across the business and will be able to easily deliver data on whether the production activities were completed in line with requirements and also whether each individual order was despatched to the customer on time and in full. The same will be true of many call centre type activities, and these days many other processes will be managed through a computerized workflow, again providing the capability for automatic generation of delivery performance data.

Where the daily work demands are managed manually, we might need to introduce a daily Checksheet or ongoing delivery log where we can record the date and time of each order completion and whether each was on-time and in-full.?

Again, like with the quality measure, it is recommended that our performance results are compared with those of our customers, and if there is a difference of opinion that this is investigated and resolved. If we are measuring our delivery performance within the processing department, we need to ensure that we have left an appropriate allowance of time for the product to reach the customer. I have seen all too many cases where completed orders did not leave the suppliers site as expected, languishing in packing or despatch areas, or where items were delivered to the customer on time but then spent days in a queue waiting to be booked in at the customer’s goods received area, eventually being recorded as a late delivery.

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What is it all for?

The real value in adopting a sound suite of performance measurement is in the potential business impact from any performance improvements achieved. One of the main reasons for the collection of performance data is its value in quantifying and understanding the reasons for poor performance, the use of detailed data to identify the root causes, and then management of continuous improvement of performance in a scientific and objective manner. This is particularly true or delivery performance, since it often represents a significant order winning criteria.

We would often measure delivery performance hand in hand with the measurement of our process Lead-time. Obviously, our ability to satisfy a particular due date for our product or service is very much tied to the time it takes us to process that delivery requirement. We will explore the measurement of lead time in more detail in our next Newsletter.

The continuous improvement of our delivery schedule achievement, followed by the continuous improvement of our offered lead time, are both likely to make us increasingly attractive to our potential customers.

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Summary

Delivery Performance represents a critical areas of Business performance measurement. Delivery Schedule Achievement is one of the key Effectiveness measures essential to performance oversight, being a criteria impacting directly on the customer and their opinion of us.

To consistently evaluate our delivery performance, we will need to define clear due dates, or response time agreements for every product or service we deliver to our customers. This provides the benchmark against which each delivery will be judged as acceptable (on-time in-full) or not. We will typically measure our overall performance in percentile terms, reflecting the proportion of our deliverables that fail to meet the acceptance standard, and then be able to also monitor whether any failures were due to lateness or incompleteness of the orders.

The overall purpose of our measurement of delivery schedule achievement is to provide knowledge of how we are performing, and why, along with the ability to manage an ongoing improvement in our performance and competitiveness to our customers.

The Greybeard Academy is made up of highly experienced, hands-on experts in business performance improvement who have ‘seen it, done it and achieved it’ many times in the past. This means that our advice and support is effective and efficient, saving time and costly mistakes.

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Karl Smith (M.D.)

The Greybeard Academy