Managing on time performance (inbound or outbound) is a struggle for every retailer. Whenever there's a delivery failure, somebody asks the inevitable question: “How do we prevent this from happening again?”
Sometimes the cause is known to be out of your control – a freak snowstorm leaves trucks stranded or a temporary congestion issue at a facility. For these types of unpredictable reasons, it's simply not possible to achieve 100% on-time delivery all the time.
But what about cases where a supplying location is chronically at 80%? What if it's dozens of locations with this problem (which is not uncommon in retail)?
What we've seen is that, faced with this problem, many retailers have developed the bad habit of arbitrarily increasing their planning lead times. In many cases, they will even develop processes that will analyze the demonstrated order-to-delivery times on historical orders and transfers, then automatically update the planning systems with increased lead times in an effort to boost on time delivery performance.
What often happens is that on time performance does improve (for a time), which tends to validate the process. Then results start to slip again, triggering another wave of analysis or an increase in the frequency of the automated logic to ‘stay on top of things'.
The problem with this approach is that it assumes two things:
- That lead times are something that ‘just happens' over which nobody has any control.
- Where on time delivery performance is failing, it must be because people aren't being given enough time to do perform their tasks.
The actual order-to-delivery cycle time in a supply chain is the result of processes. These processes must be routine, repeatable and, most importantly, designed to achieve the goal you're measuring them against.
The routine and repeatable part likely isn't the issue in most cases. The amount of time it takes to pick an order or drive a fixed distance doesn't have a lot of variation (especially when lead times are rounded to the nearest day). Once you know what those standard times are, there really shouldn't be any need to change them very frequently (unless the processes that generate the results change significantly).
Yes, there are rare, infrequent events that will cause lateness, but that should account for an on-time performance measure in the 80s.
More likely than not, the culprit is that the processes are not designed to achieve on time performance. For example, if there is a prioritization scheme in place that schedules picking and shipping based on any other criteria than the due date, the process is not designed for on time performance.
For example, it's commonplace for retailer DCs to prioritize promotional shipments to stores with a shipping date of next week ahead of regular shipments that are due to be shipped today.
Suppliers may or may not be prioritizing shipments based on the size of the customer or the negotiated price.
In any of those cases the issue is that the ship date is not being respected, so no amount of additional lead time will solve the problem long term. All an increased lead time will do is lengthen the amount of time between the order date and the scheduled ship date, thereby decreasing the ability to adapt and react to changes. Not to mention the increase in safety stock requirements to cover a longer frozen window.
Like anything in the supply chain, the key to solving chronic issues with on time delivery is to find the root cause of the problem and take the necessary steps to address them. To the extent that the processes are within your organization's control, that can be relatively straightforward (assuming the intestinal fortitude exists to prioritize all shipments based on a due date, promotional or not).
If the issue is with a supplier, there needs to be a common understanding of how their underlying processes work and what conditions are necessary to deliver consistently on time. This goes beyond using a scorecard to try to ‘shame them into submission'. By adopting flowcasting and sharing a time-phased schedule of their requirements, retailers can provide very valuable preparatory information to their suppliers that will give them visibility to shipping requirements weeks and months before the purchase order is ever cut.
Don't fall into the bad habit of setting your lead times based on a data mining exercise. Look at them with a critical eye, identify where chronic failures are occurring and attack the root cause.