I previously wrote a blog titled 21 Production KPI Examples to Improve Manufacturing Performance, and many people were interested in learning more about how to measure and improve on-time delivery, one of the specific KPIs I mentioned. I am often asked how to improve on time delivery in manufacturing companies. The on time delivery KPI time as one of their most important Key Performance Indicators as it is directly related to customer satisfaction and repeat orders. So, let’s dig a little deeper into this topic.
Here is one definition of on-time delivery:
On-Time Delivery – Keeps customers happy by meeting promised commitments, ship dates, and delivery dates. This often called OTD for shorthand.
Set a goal for 100% on-time weekly delivery.
Many other leading indicators help drive this one. So, let’s look at some of the other KPIs that can help you achieve 100% on-time delivery and other steps you can take to ensure you achieve it.
Create a mindset and make it a priority to deliver on time while instilling this in the culture. If everyone on the team believes it is unacceptable to ship late, they will remove barriers, solve problems and commit to getting the product out the door on time. I have several clients who have built this into their culture and they refuse to be late on a shipment. It can't be culturally acceptable to consistently miss requested delivery dates.
Put a KPI in place to measure On-Time Delivery and make it visible to everyone in the organization. Keep in mind that this KPI must measure whether it arrives on time to the customer, not when it ships from your production facility. This will make sure that you keep the entire supply chain involved, not just the manufacturing process. The customer doesn't care when you ship it, they care when they get it, especially if they are also in lean manufacturing.
Maintain accurate raw material inventories. Ensure your purchasing and receiving processes are robust and performing flawlessly. Perform cycle counts on key inventory items to ensure they are they are
Create and maintain realistic production schedules. Know what your line capacities are and load the factory accordingly. Share this information with sales so that you can balance the workload and run the plant efficiently. Having Capacity and Line Utilization KPIs can help keep this front and center and support your on-time delivery efforts. And, do not pull orders out of production once they go in. This just creates chaos, poor morale and delayed shipments.
Make quality a priority and part of your culture. Nothing throws off on-time delivery more than poor quality products that require rework and reruns. Establish KPI dashboards to track quality levels: for example, First Pass Yield, Rework, Scrap and Customer Returns. Driving the right performance and results on these KPIs will go along way to keeping your production schedule on time. It doesn't matter if the product arrives on time if the product is defective, so don't count rejected deliveries in this metric to measure.
Monitor your efficiency levels. I like to use Overall Equipment Effectiveness. This measures the overall effectiveness of a piece of production equipment or the entire line. Availability x Performance x Quality. This is a great KPI to ensure you are running the plant effectively allowing you to trust your schedules and promised delivery dates. A streamlined production process allows you to effectively predict your on time delivery performance in near real time.
Collaborate and build strong relationships with your suppliers. Develop a scoring system for your suppliers and track this as a KPI. It may take into consideration such factors as pricing attributes, quality specification adherence, response time, lead times and willingness to stock inventory to meet your needs. Customer service is the key differentiator that you can offer.
Maintain a happy and well-trained workforce. One thing I consistently hear is that it is very difficult to find good people to join the manufacturing ranks. That makes it a necessity to have the right hiring process in place to hire the right people. You also want to onboard and train properly while making sure the environment promotes a happy and connected workforce. People are more likely to stay if they enjoy coming to work and are friends with their coworkers. Put KPIs in place to measure Training Hours and Retention of new hires after 90 days, 6 months and a year. And of course, monitor overall Turnover.
Celebrate your success by verbally and publicly rewarding your people for maintaining 100% on-time delivery to your customers. It doesn’t hurt to give physical rewards as well, whether they be company bling or small monetary tokens. For key personnel, an On-Time Delivery KPI should be part of their Job Scorecard.
Making on-time delivery a priority in you annual planning sessions and in your execution ready quarterly plans can set you apart in the market and will go a long way to retaining those valuable customers you worked so very hard to obtain.
Good luck and let me and our readers know some of the other things you are doing improve your delivery of the customer order. - Alan
Rhythm Systems KPI Resource Center
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