Delivery is a decision!
If you manufacture a product, produce software, or provide a service, make sure you understand how delivery provides value to your customer and how to create competitive advantage for your business. This article is part one of a three-part strategy series: Manufacturing as a Competitive Advantage.
When working with businesses to build strategy and metrics, one easy and constant metric used is delivery. Simple enough, “Did I deliver the product on time?” The problem begins at too many companies when we start talking about what delivery means. It seems obvious, and yet I hear people debate with passion measuring delivery to a “promise” or a “commit date.” Delivery is simple. If we are being honest with ourselves, this debate really comes down managing the metric and distracts from the important discussion of how to improve. How does this delivery discussion typically work? A customer requests a delivery date, the team reviews it, promises the customer a date (hopefully, ‘on’ but sometimes ‘after’ the customer-requested date). If we hit the promise date, we declare victory and a successful on-time delivery. Too often the customer gets lost in this discussion. Another sad fact is that despite measuring delivery this way we still don’t hit 100%. This means we miss some measurable percentage of the time, even when we pick the date. I have witnessed businesses alert the customer to a delay, change the promise date and still claim on-time delivery. Surely this customer isn’t happy, but we did manage the metric to hit our internal target. There are more ways invented every year to measure this very simple number. The array of methods, often, loses focus on the customer and the actions needed to improve performance. Sound familiar?
We measure and discuss delivery constantly, and as a result I think we lose sight of why delivery really matters as a metric. Let’s take a deeper look into three reasons I believe are important. 1) The Customer, 2) Sales and 3) Productivity. Let’s break each of these down a little.
First, delivery matters to the customer. As with all strategy, we begin with the customer. As businesses, our customers are trying to manage their resources and run efficiently, just as we are. Working around supplier deliveries and chasing late shipments can be a drain on time, productivity, and hinder service to the customer. In short, poor delivery hurts our customer’s business. A few points to remember about customers:
- Customers are more loyal to reliable, responsive suppliers.
- Customers will look to reliable suppliers as partners first when they expand and grow.
- Customers will pay a premium for reliability of supply and responsiveness. (Remember, you are making them more profitable, and that has value!)
Second, delivery matters to the sales team. On-time delivery helps keep sales focused on selling. I have been involved in too many customer meetings for a new opportunity, or to launch a new product only to see that meeting completely derailed with a discussion on poor delivery. You may have the best product or innovation to discuss, but when the customer says, “That’s great, but are you actually going to get it here when I need it?” That sales meeting is over! The poor sales person is now completely focused on a problem vs. the opportunity. To better understand if delivery is hurting your top line and sales team effectiveness, I suggest you take a quick and simple survey of your sales team and assess just three things: 1) lost sales due to delivery 2) the amount of time spent managing customer issues and 3) the time each day consumed chasing information about late shipments. You might uncover some real opportunity and a significant hidden cost in your business.
An effective and well managed productivity improvement plan can and will deliver hard savings to your bottom line.
Third, delivery matters to your bottom line. Changing your approach to delivery improvement will lead to productivity improvement. Every year in making the annual plan, we review proposed projects and list several intended to improve delivery. Many times, it is essentially the same list from a prior year updated with new completion dates. To most businesses, this is known as “rolling to the right.” Too often we don’t understand how to accurately value delivery improvement. The only reason these projects remain active and get focus is because leadership expects it. I believe this comes from the lack of integrated business and manufacturing strategies. We have a target delivery goal, 95% for example, and we are required have actions listed to achieve that goal. For years I have watched businesses throw good money after bad chasing delivery improvement, and 3 years later they are lucky if they improved the delivery metric at all.
“Deliver at all cost - then optimize cost”
The cost of achieving 100% on-time delivery certainly can be estimated. Additionally, the costs of poor delivery can be captured, and can be staggering. These can include inventory, sales team time, customer service dealing with angry customers, operations scrambling to problem solve, and let us not forget lost customers. My experience has shown that shifting to a “Deliver at all cost - then optimize cost” approach will create a small short-term cost to the business, but ultimately long-term value. Cost added to deliver on-time is typically taken out quickly once you have a clear strategy and the discipline to re-deploy delivery improvement resources to productivity initiatives. An effective and well managed productivity improvement plan can and will deliver hard savings to your bottom line.
If you continually talk about delivery, have frustrated customers and sales teams, it may be time to ask yourself a different question. What would it really cost to deliver on time every time?” Look at delivery a new way, understand what this is costing your customer and your business and make the decision to deliver, 100% no misses, period. Delivery to your customers is not a metric. It is not a project, and 90% is not good enough. Delivery is a decision.
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