Delivery Reliability

An old saying is `it doesn't matter what the lead time is, so long as the supplier sticks to it'. But how many suppliers actually measure their customer service level? Not enough! This is because it's not demanded by accountants, and usually it shows them falling down. We make up any number of excuses for our failure if we do measure customer service- "Sales quoted an unfair delivery period/that product should not be in the range/the product range is too wide/we're overloaded". Perhaps one solution is to get the customer to measure the service he gets himself, so that the providers of the service do not subjectively bias the measurement.

For instance, there was a plan at British airports to give $10 compensation to anyone who had to wait more than 10 minutes in a queue.

How many companies would commit to giving a discount if they delivered late?

Another point of view is to take an assembly plant as an example. If product was promised on a specific date, the assembly line will have planned to use that product. If the product does not arrive there is a problem, and the line might well stop. Reliability of supply is critical if we want to keep our customers.

Another important issue is that many of the larger manufacturing companies are going for single sourcing (one supplier per part) and also targeting to reduce the number of suppliers. If you want to keep your customers you need to be "the best" so you are chosen as the supplier who gets the business.

Delivery Speed

Quality and responsiveness to customers can be more easily marketed than price reduction. We fly to save time; we pay more for express freight.

Shorter lead times can reduce customer inventory and attract increased business to the manufacturer.

In the food industry, it was said that by offering smaller, more frequent deliveries, it would give retailers faster turnover and higher cash flow.

Don't forget that the time between receiving the customer order and receiving his cash is critical to our business. So delivery speed pays off.

There are various implications of delivery speed.

The dealer network puts the product close to the customer, reducing the lead time to the customer. This impacts on inventory policy and distribution requirements planning. On the other hand inventory is not much in fashion and for some products, such as spares, overnight delivery is a better alternative. It certainly makes more economic sense to keep high value inventory centrally and distribute it at the last minute to where it is needed.

Some industries work on the principle of the order book. This is very comfortable, and may be necessary for very complex products. In some cases, making the customer wait for his product can have the same effect as making him pay more - he thinks more of the product. The order book, or extended delivery quote, may be a way for the manufacturer to be able to manufacture to order instead of to a forecast. Unfortunately it often introduces considerable confusion, as customers double up and cancel orders and all sorts of artificial situations are created for the manufacturing plant.

In summary we can say that the shortest possible lead-time, and on time deliveries, are what the customer really wants and can be used as a marketing point to increase market share.

All we need to do is get organised, remove as many of the wasteful activities as possible and challenge the traditional thinking in the company!

February 2000