How to Improve the On-Time Delivery KPI (6 Tips)

Shoppers often expect delivery of their goods within hours or days. Their tolerance for late or canceled deliveries from brands is typically low. Unanticipated circumstances, such as the global pandemic, have made it more difficult for businesses to meet their delivery goals. Ensuring accurate calculation, careful monitoring, and ongoing improvement of your on-time delivery KPI is essential to meet customer expectations.

This article explains what on-time delivery is, why it’s a crucial KPI to track, and how to measure and improve your OTD for your business.

What is on-time delivery?

On-time delivery (OTD) is a KPI that measures a company’s delivery time performance in a given timeframe. You can calculate your OTD rate by dividing your total number of deliveries by the number of deliveries that arrived when indicated at checkout.

On-time delivery indicates whether your business fulfills its promises. Performance criteria vary from company to company, so the ratio can look different depending on the factors used to calculate them.

For example, a company that offers delivery windows may consider a delivery late if it arrives past the time indicated at checkout. However, most businesses claim a delivery is on time if it comes by the date shown at checkout, regardless of the arrival time.

Some OTD rate calculations may not flag issues in the order fulfillment process. For instance, if a customer's order is split into multiple shipments and at least one shipment is delivered late, some companies will mark the entire order as late, while others may consider each item a separate delivery.

A business may also consider a delivery late if the customer does not receive the total volume ordered by the date indicated at checkout. For example, if a customer buys five chairs but one arrives after the delivery window, the entire order is presumed late.

Bear in mind that the OTD rate, while significant, paints only part of the picture. An order that ships late but arrives on time due to expedited shipping may still be a red flag, as the company had to pay extra to meet the delivery date.

Why is on-time delivery important?

Late deliveries affect not only customer satisfaction but also your entire business.

Effect on brand reputation

Late deliveries often trigger customer complaints, frustrating and inconveniencing customers and hurting their impression of your brand. Customers may lose faith in your brand’s ability to deliver on its promises.

• ​41% of consumers blame the retailer for delayed deliveries, regardless of the actual cause.
• ​12% of customers who receive deliveries late will leave negative online reviews, and 9% will air their frustrations on social media.

However, customers who receive their purchase as expected are more likely to remain loyal to your brand. This trust leads to customer retention, a boost in reputation, and more referrals through word-of-mouth advertising. 77% of consumers who have had a positive experience with a brand will refer that brand to others.

Effect on business operations

Late deliveries can have cost implications for your business. Fixing delivery delays and appeasing customer demands can be expensive:

• ​35% of customers expect free redelivery (often with expedited shipping)
• ​29% expect a discount
• ​25% expect a refund

Maintaining a high OTD rate helps you avoid these costs. A low OTD rate also flags a problem somewhere between order placement and fulfillment that needs to be addressed. Troubleshooting on-time delivery issues can improve quality assurance, increase efficiency, smooth out supply chain issues, and streamline last mile delivery.

How to improve on-time delivery

Some factors contributing to late deliveries are unforeseeable and uncontrollable, such as global pandemics, war, labor shortages, weather events, natural disasters, and overwhelming demand. However, companies can control many organizational factors and take actions to manage unforeseen situations.

Optimize last-mile visibility

Use last-mile visibility software to view the real-time progress of each order from the moment it leaves the store or warehouse to the moment the customer receives it. If a delivery issue arises, you can pinpoint where it happened from a single, comprehensive dashboard.

Last-mile visibility facilitates communication and collaboration among all relevant parties, including:

• ​Customer service representatives
• ​Dispatchers
• ​Drivers
• ​Suppliers and manufacturers
• ​Retailers and distributors

Increased end-to-end visibility can double the likelihood of avoiding disruptions from supply chain issues. Visibility software also helps you promptly address fleet bottlenecks, such as:

• ​Personnel factors: driver staffing, training, tardiness, no-shows, and performance issues
• ​Vehicle maintenance: repairs, gas, weather-proofing, and routine maintenance
• ​Environmental factors: harsh weather, natural disasters, road issues, and accidents
• ​Route issues: traffic, construction, and road closures

Create realistic shipping and delivery goals

Customers expect fast shipping and delivery, especially since giants like Amazon and eBay set high standards. However, late fulfillment of fast delivery is more damaging than on-time, standard delivery. Solid supply chain and inventory management will help you more accurately forecast shipping dates and better understand when customers can expect their deliveries.

• ​45% of online shoppers look for retailers who include estimated delivery times.
• ​22% abandon their carts if the retailer doesn’t provide this.

Providing estimated shipping and delivery dates on product pages helps customers make informed decisions.

Institute proactive post-purchase communication

66% of shoppers want status updates and tracking info on their deliveries. These updates, typically via email or text alerts, keep customers informed on their orders.

For example, Instacart sends text alerts and allows direct communication with the shopper, providing updates at every stage of the order. Features include:

• ​Order received
• ​Shopper assigned
• ​Shopping started
• ​Item replacements or refunds
• ​Checkout completed
• ​Shopper en route
• ​Order arrival

Interactive maps and delivery confirmation photos further enhance the experience.

Maintain flexibility

Consumers want flexibility and options regarding order fulfillment. 52% of shoppers consider multiple delivery options a significant factor in choosing where to shop. Many retailers now offer in-store pickup, curbside pickup, same-day delivery, and free 2-day shipping.

Offering fulfillment options increases operational efficiency, reduces costs, helps manage inventory, and improves on-time delivery. It also gives customers the flexibility to receive their purchase on the most convenient date and time.

• ​74% of shoppers are choosing standard delivery during the holiday season, but interest in same-day or next-day delivery is increasing.

Enhance inventory management

Delivery delays can result from demand outpacing supply. Retailers must restock shelves, update website inventories, and reorder from suppliers. Managing inventory, especially during peak seasons, includes syncing data between your website and warehouse or store in real time.

• ​55% of shoppers want to browse online and check local in-store availability.
• ​18% will shop elsewhere if their in-store and online experiences don’t align.

Up-to-the-minute inventory monitoring helps restock the correct volumes of items at the appropriate times and with quality assurance.

Leverage technology

Advanced software and technology help retailers deliver the best omnichannel experience. Benefits include:

• ​Connecting all systems and syncing data in real time
• ​Incorporating automation and AI for repetitive and predictable tasks
• ​Improving communication between departments and with customers
• ​Lowering operating costs
• ​Increasing quality, security, and efficiency

Early adopters of AI solutions have seen improvements in logistics costs by 15%, inventory levels by 35%, and service levels by 65%. Automation has improved time efficiency and reduced costs by 11–30% for most IT and engineering professionals.

Conclusion

Maintaining a high on-time delivery rate helps keep costs low and ensures smooth operations. It also builds trust and loyalty with existing customers, leading to referrals and business growth. While some factors contributing to shipping delays are uncontrollable, many are within your control and can help you improve your on-time delivery.