6 November 2021 With the pandemic, e-commerce has seen impressive growth worldwide. To give you an idea, in April alone, online sales increased by 81% compared to the previous year. This demonstrates the great opportunity, as the protagonist of e-commerce is here to stay. However, there’s a caveat: to seize the opportunity to strengthen the business, it’s necessary to offer the best consumer experience. And when it comes to e-commerce, on-time delivery is crucial. How has your company evaluated this? We have already highlighted in this blog how important it is to have strategic performance indicators (KPIs), especially in logistics, as metrics help achieve objectivity in diagnosis and make the right decisions. With real and precise numbers, you will be able to assess whether your operation is efficient, if it is generating more costs than necessary, if your employees are productive, and most importantly, measure the level of service provided to your customers. In previous posts, we have covered important logistics indicators for efficient management: On Time In Full (OTIF), Order Fill Rate (OFR), and Order Cycle Time (OCT). Each of these helps the manager evaluate the quality and/or speed of order fulfillment, which has a direct impact on the company’s health. In this text, we will address another metric that must also be considered among the main KPIs of the intralogistics operation, especially in e-commerce: On-Time Delivery (OTD), or On-Time Delivery Rate. This indicator directly affects the customer experience, so it must be a priority in the business. What is OTD (On-Time Delivery)? On-Time Delivery is the indicator that measures the percentage of orders delivered within the time agreed upon with the customer. In general terms, it is used to analyze the time between order collection and shipment and the dispatch by the carrier. This is a highly relevant indicator for today’s companies, especially for those in the e-commerce sector, as the delivery period is increasingly considered by consumers in their purchasing decisions. A survey conducted by the website Reclame revealed that 18.6% of consumers abandon the cart when shopping online if delivery times do not meet their expectations. It may seem like a small commission, but losing nearly 20% of sales has a significant impact on a company’s profitability. For these reasons, we can say that delivery times are one of the key elements that allow companies to sustain their business and gain customer trust, which ultimately plays an important role in their financial earnings. Hence the need to constantly evaluate it through the OTD indicator. How to calculate OTD? The calculation of OTD is done through a simple formula. Just divide the number of on-time deliveries by the total number of deliveries made in the period. Then multiply the result by 100. OTD = Number of on-time deliveries ÷ Total number of deliveries made in the period X 100 For example, if your company made 80 deliveries in a day and only 65 of these arrived on time, the calculation would be: 65÷80= 0.81 × 100 = 81%. That is, your OTD is 81%. Ideally, the result is greater than 90%. Why is it important to calculate OTD? Customers expect you to meet the promised delivery date. That’s why it’s important to set the right expectations and strive to meet them. If your company does not meet the deadline, customers will find a supplier who can. Problems with on-time delivery not only damage your business or result in a loss of reputation but also affect other areas of the company. As we mentioned earlier, it’s possible that the customer will not purchase from a company that delivered the order with delays and without a plausible reason to justify it. In this sense, calculating OTD, as we highlighted above, is essential to measure the level of service you offer your customers. When the percentage is below ideal, the indicator shows that at some point in the intralogistics operation there are bottlenecks, inefficient or time-consuming processes that require further investigation. By identifying failures, you can make assertive decisions to remedy them and develop strategies so they do not recur, thus increasing the chances of raising the OTD percentage and, consequently, impacting customer satisfaction. This brings us back to the phrase of Irish physicist William Thomson: “What cannot be measured cannot be improved.” It is worth adding that the improvement plan must be reviewed periodically. Reasons for late deliveries You need to think about potential bottlenecks that can impact your OTD and have the right tools to identify such gaps. The WMS (Warehouse Management System) will provide you with real-time transaction data, alerting you to any discrepancies. It also offers KPIs that you can review periodically. The CRM (Customer Relationship Management) system helps track customer complaints. In general terms, bottlenecks can be related to the following aspects: Sales promising something the company cannot deliver Incorrect delivery times and inadequate safety stocks Order errors Supplier delays Inventory inaccuracies Input data errors Picking errors Incorrect standard operating procedures (“SOP”) Maintenance and equipment-related issues Ineffective quality control Product returns Storage and material handling errors Shipping errors Inaccuracies in shipping documentation Late delivery and pickup scheduling Traffic issues and delivery delays Customer order constantly changing without proper procedure This list shows us that the OTD percentage is a holistic measure of operational performance. It measures a company’s ability to manage its logistics predictably and efficiently. How to improve the OTD (On-Time Delivery) rate? A key factor in improving OTD is proper forecasting and inventory control. You need to ensure that your warehouse is always able to fulfill orders as they are placed, which means there are available stocks. For this, it is crucial to ensure high stock accuracy and always have ideal stock levels for each product. It is also important to have well-structured processes and an organized warehouse. Product addressing must follow storage rules and their rotation, so that pickers’ paths are as short as possible. It is also necessary to develop strategies to reduce movements in the DC and ensure that picking lines are always supplied at the right time. All this affects picking times, which can speed up deliveries. All these details must be considered by the manager, and to assist him, there is the WMS system, which has features that will automatically define the best position for each product; direct the replenishment of picking lines at the right time; parameterize all processes; track items to maintain high accuracy, among other advantages. Regarding transportation, it is crucial to organize delivery routes. Implementing delivery planning can also represent a great competitive advantage for the company. Another tip is to have good communication with suppliers and carriers, with the ability to track each delivery and make this information available to customers. It is also necessary to address communication with sellers. When the sales team makes promises on deadlines that are almost impossible to meet, it ends up creating a ripple effect on the operation. Therefore, it is necessary not only to establish good communication between sales and logistics and have a system that centralizes stock information (such as the WMS), but also to define clear policies and standard delivery times. Finally, it is worth emphasizing the importance of having full visibility of the operation. The manager must keep up with everything that is happening to ensure that orders are shipped on time. With WMS Visual Management, this is possible, as the system offers real-time data on all processes, allowing you to anticipate failures and make more assertive decisions. Additionally, since this information can be shared with employees, they have the ability to self-manage and avoid delays or correct errors, contributing to maintaining a high OTD rate. OTD (On-Time Delivery): One of the Key Indicators for E-commerce Deagor WMS per ecommerce può aiutarti!