What are the best metrics to evaluate supplier performance in on-time delivery? (2024)

The first step to evaluate supplier performance in OTD is to define what it means for your business. OTD is the percentage of orders that are delivered by the agreed-upon date, or within a specified tolerance window. However, you need to decide how to calculate the date, the window, and the order. For example, you can use the date of order placement, confirmation, or shipment as the start date, and the date of receipt, invoice, or payment as the end date. You can also use a fixed or variable window, such as 3 days before or after the due date, or a percentage of the lead time. Additionally, you need to determine whether to measure OTD by line item, order, or shipment.

The second metric to evaluate supplier performance in OTD is the variance or accuracy of their delivery dates. OTD variance is the difference between the actual and expected delivery dates, expressed in days or percentage. OTD accuracy is the inverse of OTD variance, expressed in percentage. These metrics help you assess how consistent and reliable your suppliers are, and how much buffer time you need to plan for your inventory and production. For example, if a supplier has a high OTD variance, it means they often deliver too early or too late, which can cause overstocking or stockouts. If a supplier has a low OTD accuracy, it means they rarely meet the agreed-upon dates, which can affect your customer service and reputation.

The third metric to evaluate supplier performance in OTD is the trend or improvement of their delivery performance over time. OTD trend is the change in OTD percentage over a period of time, such as month, quarter, or year. OTD improvement is the percentage of orders that have a better OTD than the previous period. These metrics help you monitor how your suppliers are adapting to your demand fluctuations, quality standards, and feedback. For example, if a supplier has a positive OTD trend, it means they are improving their delivery performance and becoming more responsive and efficient. If a supplier has a high OTD improvement, it means they are addressing the root causes of their delivery issues and implementing corrective actions.

The fourth metric to evaluate supplier performance in OTD is the benchmarking or ranking of their delivery performance against other suppliers or industry standards. OTD benchmarking is the comparison of your supplier's OTD percentage with the average or best-in-class OTD percentage of similar suppliers or industries. OTD ranking is the order of your suppliers based on their OTD percentage. These metrics help you identify how your suppliers are performing relative to their peers or competitors, and how they can improve their delivery capabilities. For example, if a supplier has a lower OTD benchmarking than the industry average, it means they are lagging behind their market expectations and need to improve their delivery processes and systems. If a supplier has a low OTD ranking, it means they are among the worst performers in your supplier base and need to be evaluated for potential replacement or termination.

The fifth metric to evaluate supplier performance in OTD is the impact or cost of their delivery performance on your business. OTD impact is the effect of your supplier's OTD percentage on your key performance indicators, such as customer satisfaction, inventory turnover, and production efficiency. OTD cost is the amount of money you lose or spend due to your supplier's OTD percentage, such as penalties, discounts, expedited shipping, or excess inventory. These metrics help you quantify how your suppliers are affecting your bottom line and your strategic goals, and how you can optimize your vendor management. For example, if a supplier has a high OTD impact, it means they are contributing to your customer loyalty, operational excellence, and competitive advantage. If a supplier has a low OTD cost, it means they are minimizing your risks, expenses, and waste.

The sixth metric to evaluate supplier performance in OTD is the reporting or communication of their delivery performance to you and your stakeholders. OTD reporting is the frequency, format, and content of the delivery data and information that your supplier provides to you, such as order status, shipment tracking, and delivery confirmation. OTD communication is the quality, clarity, and timeliness of the delivery feedback and updates that your supplier gives to you, such as delivery issues, delays, or exceptions. These metrics help you ensure that your supplier is transparent, accountable, and collaborative in their delivery performance, and that you can make informed and timely decisions and actions. For example, if a supplier has a high OTD reporting, it means they are providing you with accurate, complete, and relevant delivery data and information. If a supplier has a high OTD communication, it means they are notifying you of any delivery problems or changes as soon as possible and working with you to resolve them.

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

Vendor Management

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