On Time Delivery – Benefits and Drawbacks

What is on time delivery?

Just as the name suggests, simply speaking, on-time delivery is the ability of any business to meet the customers’ requirements and deliver the products or services to the customer on time. Perhaps time is one of the most important issues customers are concerned about. Those businesses that do not value time in their manufacturing and order taking process do not tend to succeed. This is a fact, because customers want every order to be delivered according to their time and this is what businesses have to make sure that they achieve.

Throughout the entire process of supply chain management, consistent on time-delivery is vital and in fact very important for the success of any business. The SC department makes sure that the products are delivered on time to their clients and respective customers. This can be done by minimizing the supply chain bottlenecks in between the customer and the business by directly selling the product at distribution centers, retail outlets, and company outlets. Businesses need consistent supply of raw material from regular and loyal suppliers in order to manufacture and deliver goods on time to the customers. If any lag takes place in between this process, the production and delivery of the products would get late resulting in late delivery to the customers.

Thanks to the advancement in technology, many software are now used to efficiently manage the entire production and supply chain process. Every firm involved in manufacturing sector should be looking for various factors on daily basis in their supply chain process in order to ensure on time delivery to clients and customers. Material lead time is the average lead time it takes for suppliers to deliver the raw materials for manufacturing. A historical analysis of this time can be taken to know the fluctuations in timings and correct them whenever possible. As a result suppliers are contacted or new suppliers are arranged to minimize that time. Many companies have introduced the concept of just-in-time to lower their costs of inventories and increase the manufacturing and earning potential of the business. This is the Japanese concept where raw materials are arrived at manufacturing plants just in time before the manufacturing actually takes place. It saves a lot on time, space and costs of ordering raw materials.

Although this is a good approach to save on finances it is certainly not the best one when supply chain process involves getting raw materials via outsourcing to low cost countries where supply often lags well behind time. This disturbs the entire production process as well as the marketing efforts of the company and results in late delivery of products and finished goods. Late delivery of finished goods frustrate clients and disrupt business activities.

Supply chain management is a crucial and important aspect of every business involved in manufacturing industry. In order to successfully dominate the market, companies make sure to minimize any bottlenecks in between them and their loyal clients. To do this, SC department makes sure that the raw materials are arrived in time and used for converting into finished products. This helps and ensures right delivery of products to the customers at the right time with the right quality.

No company would want to deliver products to their customers later than the promised time period. This is done in order to create a long term relationship with client for continuity in businesses. However, if not followed correctly, businesses could face with worst ever results:

1. Loss of customer confidence – When businesses deliver products late, it brings their clients into skepticism and doubts regarding the serious deadline issues faced by the company. Once in a blue moon if late delivery takes place, customers might not get affected by it. However continuous late deliveries of products might result in serious circumstances for the company and the first one being loss of customer confidence. The customers and clients lose confidence in the business that fails to deliver their products on time.

2. Loss of relationships – One of the most serious costs that any business has to pay for late delivery of its products is loss of relationships. Those clients who are new would instantly cut their relationship with the current businesses and move on to develop relationships with new ones.

3. Loss of profits – When customers would not pay for late delivery of products, businesses would eventually lose and continue to suffer in terms of its profitability and revenue. A time might come that business might just get bankrupt.

4. Delays in cash flows – Cash flows in and out of the business but continuous cash flow outs lead to a serious and alarming situation taking place within the company. This could bring business process in a severe credit crunch and financial crisis.

5. Inefficiency – The company is not using its resources efficiently. This in turn leads to high costs of production when it comes to a full stop. The business has to incur for the production cost and employees’ salaries and wages.

6. Loss of reputation – The so called “brand image of the product” would be completely destroyed by customer if products consistently fail to reach him/her on time. This results in bad reputation of the company where it has to get actively engaged in reputation management techniques in order to announce press releases to cover up bad aspects of their management.