Performance Measures in Manufacturing - On-Time Delivery in the Supply Chain

By Victor Viser, Ph.D.

Of all the factors that influence a customer's desire to remain loyal to a manufacturer or job shop, the greatest of all is, perhaps, consistent on-time delivery of their orders. Throughout the supply chain, on-time delivery is vital to the continuation of the manufacturing effort--should one domino in the system go down, the rest are sure to follow in suit. However, today it is not enough to merely know you are on-time, but it is also important to know just how much you are on-time. Indeed, supplier performance has never been more crucial to manufacturing success than it is today. Factors such as outside processing, sourcing from suppliers in low-cost countries, extended supply chains due to globalization, unstable supply markets as well as a general supply risk, all conspire to impede on-time delivery.
To help ensure that you, as a link in the manufacturing supply chain, are doing everything in your power to produce on-time delivery, enterprise resource planning (ERP) software is developed to easily and instantly process several layers of production data for the improvement of performance. In a highly competitive marketplace such as that faced by manufacturers, supply chain optimization is a key operating benchmark of the truly flexible, adaptive company. In addition, with nearly 80% of the cost to manufacture flowing through the supply chain, a manufacturer or job shop cannot ignore the value of supply and they must constantly resolve any weaknesses in their own on-time delivery performance.
A key metric for a company looking to enhance their on-time delivery is the daily visibility and measurement of the several factors affecting performance. These include:

1. Material Lead Time: What is the history of vendor shipments to you? How much time must you allow to build in tolerances for parts and material delivery that may take longer than usual? Is the material subject to delays due to unstable supplies?
2. Process Time for Each Step: How does the job fit into the various jobs that surround it in the schedule? How long will the breakdowns and set-ups take to perform, and then how long will the processes take in actual production time?
3. Outside Processing: Are there any off-site processes that must be made in the production sequence, any outsourcing that must be completed before the job is finished? What is the delivery performance history of the outsourcing operation?
4. Shipping Transit Time to Customer: Are there any special packaging/pallet requirements that must be prepared for the shipment? How reliable is the shipper being used for the delivery and what is the standard transit time?

With this information input into an ERP software system, productive analyses can be made on a daily basis regarding on-time delivery performance. As a result, the enterprise can be adjusted to allow for any predictable (or even unexpected) delays in process, and in turn produce more consistently reliable promised delivery dates. Ultimately, by following stringent observation of both internal and external performance measurements, your own performance in as a link in the supply chain becomes a source of pride, rather than a source of excuses.

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