On-time delivery (OTD for short) is a key performance indicator (KPI) used to measure a business' supply chain efficiency. It reveals whether your company is meeting its promised delivery times, helping you measure both customer satisfaction and driver/carrier performance.
Tracking OTD shows the effectiveness of your in-house fleets or third-party logistics (3PL) partners. Measuring this KPI also enables you to improve your customer satisfaction and return purchase rates—which is especially crucial these days, considering that companies are facing a number of new challenges in ensuring high on-time delivery rates and customer satisfaction.
For one thing, delivery volumes are increasing exponentially, making it more challenging for companies to deliver on their promised dates and times. And this tends to have a cascade effect, where every failed delivery also causes havoc across the driver's schedule for the day.
At the same time, missing or failed deliveries are real sources of frustration for customers. Many customers who have experienced poor delivery experiences will refuse to patronize the same brand—which makes it particularly imperative that you optimize for this KPI. And how should you make that happen? Start by focusing on your delivery planning software.
The Importance of On-Time Delivery
On-time delivery is one of the ways customers evaluate the delivery experience, making it a crucial element in customer experience overall. Low OTD rates result in a higher number of (expensive) customer service calls, customer complaints, and irate customers. Naturally, it also increases the operating costs for your business.
Ensuring on-time deliveries is especially crucial now that consumers have greater demands and competition is stiffer. Customers these days don't care about your inventory management issues, supply chain problems, or any other reasons for delays. All they care about is that orders arrive in the promised delivery windows on the right date.
One recent survey found that nearly half of customers today expect two-day delivery or even less when they order online. More than half also said they would refuse to patronize the same retailer if it failed to deliver on time three times. With social media and the internet, you can expect customers to raise their complaints online. 3PL carriers' inability to deliver on promised dates and times also put their client at risk of getting bashed online.
Simply put, on-time delivery is crucial in ensuring customer loyalty and achieving high customer retention rates. Which is precisely why your choice of route optimization tool matters so much.
Why Businesses Fail to Deliver on Time
There are several reasons for late deliveries or failure to deliver after a specific time and date:
Poor route optimization
Many businesses still use manual route planning, which relies heavily on planners' expertise, spreadsheets, and paper. Conventional planning is not only time-consuming but also inefficient, as human planners cannot account for all the variables affecting delivery times. This is true for many legacy routing solutions as well—when you can’t effectively take things like driver skill and customer preferences into account, it becomes harder and harder to create efficient routes that will actually result in on-time deliveries. Effective route optimization helps companies deliver as many orders as possible without risking late deliveries.
Absence of visibility
Many firms only track orders once they leave the warehouse—if then. Unfortunately, a lack of tracking can leave you blind to how time-consuming or inefficient the different stages of the order fulfillment process actually are. The lack of visibility on the fulfillment process, especially during transportation makes it impossible for decision-makers to know what exactly is causing the delays in deliveries. By the same token, a lack of real-time visibility makes it impossible to be proactive about managing potential delays on the day of delivery.
Poor inventory management
Customers can end up placing orders for goods that are not in stock if you fail to manage inventory efficiently. This will result in unavoidable delays and long lead times, which means your teams will be stuck handing more order cancellations and customer complaints.
How the Right Route Optimization Tool Helps
Okay, it’s no secret that a lot can go wrong on the last mile—but the challenges that impact on-time deliveries can increasingly be mitigated by modern logistics software. In fact, the a connected route optimization tool is key to improving on-time delivery rates. Here's how it helps:
Optimizing both dispatching and routing goes a long way in ensuring timely deliveries. AI-powered Route optimization can consider a laundry list of relevant factors in determining the best routes, thus allowing you to provide customers with accurate expected times of arrival (ETAs). This might include variable service time calculations for different order types, traffic predictions based on historical data, capacity limitations and driver speed factors, and more. By leveraging all of this granular information into routes that are realistic in addition to being efficient, you can boost your on-time rates by a huge amount.
Automation and visibility
Automation is key to efficient last mile deliveries. Likewise, knowing where the orders are at any given time enables you to spot potential problems before they spin out of control. Automating as many processes as possible and keeping track of packages in real-time eliminate human errors and speed up the order fulfillment process.
Many companies using multiple systems for different elements of the fulfillment process run into issues when they find that the different systems cannot connect to each other. The best route optimization software is one that can be integrated into your other current systems so that you can make the order fulfillment process more seamless.
Automated, real-time updates to customers
No order fulfillment process is perfect, which is why you should always expect things to go wrong once in a while. But the right routing software offers automated updates and notifications to customers throughout the process, keeping them apprised of the occasional delay. This way, customers will know what's happening to their order and won't be kept in the dark about their order status. Keeping customers informed in real-time will lessen their frustration over delayed deliveries, boosting customer satisfaction and decreasing churn.
In the end, the key to ensuring on-time delivery is to invest in advanced logistics route planning software that can help you automate processes, optimize routes, gain real-time visibility, and provide live updates to customers. If you can make that happen, you can increase both on-time delivery rates and customer satisfaction.