On-Time Delivery: How To Get It Right

The on-time delivery rate is a key metric in supply chain management for two excellent reasons:

1. It’s a major factor in customer satisfaction.
2. It’s a clear indicator of how tight and efficient your last mile delivery operations are. 

In this article we’ll explain exactly what on-time delivery (OTD) is, how to calculate it, and what to do to improve this important KPI in your delivery business. We’ll also look at some other key metrics for delivery services. 

What is on-time delivery?

On-time delivery is a measurement of efficiency in the supply chain. It’s an important KPI for delivery and logistics companies, and for courier services. 

To calculate your on-time delivery rate, you’ll need to know how many deliveries were late or missed in any given time period. Subtract that from the total number of planned deliveries to get the raw on-time delivery number, then divide by the total to get the percentage:

Note that the calculation includes missed deliveries as well as late deliveries. That’s because a too-early delivery is just as bad as a late delivery. If I’m expecting a package between 10am and 12pm, I might not be home to receive it at 9am if the driver is early — resulting in a missed delivery that might have to be rescheduled for the next day. 

This is why the on-time delivery rate is such a good way to highlight inefficiencies and problems in delivery operations. A business that’s not forecasting accurate ETAs might be over-estimating their travel time, resulting in deliveries that are too early; or they might be under-estimating traffic, resulting in late deliveries. Either way, a low on-time delivery score is an effective warning that there’s a problem.

The definition of “on time” is not the same for every business

The critical thing is that the definition of “on time” depends on the timeline that was promised.

• If you’re a restaurant or meal delivery service promising delivery within 15 minutes, then even one minute over the deadline counts as late. 
• If you promised same-day or next-day delivery within a 30-minute window, anything from one to 15 minutes might count as late.  If the customer is waiting from 12:15 to 12:30 for a delivery promised within that time window, then 12:31 will feel late to them.
• If your promise was “Tuesday”, then it’s not late until the driver’s shift is over. 

Every business needs to set its own timeframes and targets to define exactly what “on-time delivery service” means in their operations, and what makes the difference between on-time and missed or late deliveries. These timeframes should be clearly communicated to customers. 

Some useful questions that shippers can ask themselves include:

• What kind of customer experience do we want to create?
• How does the delivery experience contribute to that overall customer experience?
• What resources do we have? For example, if you’re managing last mile deliveries in-house you have control over some aspects of the customer experience that you can’t control if you’re using third-party logistics solutions. 
• What delivery timeframes can we realistically promise?
• How do we set and manage customer expectations around delivery times?

On-time delivery is not the same as fast delivery

It’s important to remember that being on time is not the same as being fast!  You can have a fantastic on-time delivery score even if you’re shipping overseas and delivery takes weeks — it all depends on making realistic promises, and then doing as you promised. 

Think of it this way: According to Statista, 47% of US customers are willing to wait 3-5 days for a delivery — and only 5% expect next-day delivery! Many are willing to wait even longer. People value predictability and control more than they value speed.  

What’s a good on-time delivery benchmark to aim for? 

According to MetricHQ, an on-time delivery rate of 95% or above is a good average benchmark in most cases. 

Again, tailor your benchmark to your business: A 95% might be a good rate for a business that offers two-hour delivery time windows. But if your timeframes are measured in terms of days, you may want to aim for a higher rate.

Why does on time delivery matter?

Customers want businesses to fulfill their promises, and delivering on time is a big part of it. The good news is that speed alone is not the only thing customers care about. Sure, if you’re delivering pizza to a hungry customer then they want it while it’s still hot — but other things matter too. According to Statista:

• 86% of US customers will accept slower delivery to improve sustainability.
• 42% will change their shopping behavior if a product is delivered later than they were promised at the time of purchase.

On-time delivery also says a lot about how well your business operates. If you have a high OTD rate, it means your business is efficient and has a strong supply chain. But if your rate is low, that may indicate problems with your order processing, delivery management or fulfillment process. 

Delivery bottlenecks are a common problem in businesses that are growing fast. For example, Routific customer Greenhouse Juice sells fresh-pressed organic fruit juices. As demand for their product grew, Greenhouse found themselves having to scale rapidly from a couple of dozen deliveries a day to hundreds every week — and every order has to be delivered fresh, at the highest quality. Without route optimization and delivery management software, Greenhouse wouldn’t even be able to schedule their deliveries in time, never mind actually get them to the customer.

How to improve your on-time delivery rate

You'll need to look at several parts of your business and order management to improve your on-time delivery. Here are some key things to work on:

1. Manage orders and inventory efficiently

Managing customer orders and inventory is important to keep your on time delivery rate high. You should always have the right products ready when they're needed. This means predicting how much of each product you'll need for each ship date, and using software like an ERP system to keep track of your inventory in real time. Avoid running out of stock or having too much. You’ll also need to manage your lead times.

2. Optimize your warehouse

Your warehousing can affect your ability to deliver products on time. Some basic things to check:

• Make sure products are placed where they are quick and easy to find.
• Package products well to prevent damage and returns. 
• Load deliveries efficiently and in the right order so the driver spends as little time as possible at each stop.

3. Use delivery planning and route optimization software 

Route optimization means figuring out the most efficient route for a set of deliveries, saving on fuel and maintenance costs. A route optimization algorithm should also predict accurate ETAs, considering real-time conditions like traffic, road closures, and the priority of different orders. This ensures that you always deliver on the promised delivery date.

💡 Delivery management software like Routific makes it easy to optimize multiple routes with accurate ETAs. Try it free for 7 days!

4. Use live tracking tools to manage customer expectations

Once a delivery is out on the road, provide an up-to-date ETA with a live tracking link so customers can see their driver approaching in real time. Decent route planning software should offer the ability to send customer notifications.

What happens if I can’t deliver on time?

You can do everything right, and still not meet your on-time delivery metrics. Car crashes, natural disasters, a supplier unexpectedly out of stock, a driver off sick — sometimes bad luck happens and you won’t be able to deliver on time. 

When this happens, communication is your best friend. Let your customers know as soon as possible that you’re having problems, and give them an updated ETA. Routific and other delivery management software includes customer notification options so you can easily alert everyone who is affected. Customers are more likely to be forgiving if you have a good track record of reliability, and keep them in the loop.

More key delivery metrics 

To improve, you first need to figure out where you are. Knowing and tracking key performance indicators (KPIs) is important for improving on time delivery. These metrics can tell you how well your delivery service is doing. We’ve already covered the OTD rate, so here are some other important delivery metrics:

Deliveries per hour

This is an easy one to calculate, and an important contributor to the profitability of any delivery business. The more deliveries you can make per hour, or the higher your route density, the lower your cost per delivery. Your exact number will depend on your location — it’s much easier to have dense routes in the middle of a big city than in a semi-rural area. But in general, these are typical benchmarks:

• Anything less than three deliveries per hour is poor performance. 
• Three to six deliveries per hour is a healthy average. 
• If you can manage seven or more deliveries per hour, your performance is very good. 

Couriers like UPS or FedEX, who handle massive volumes, can achieve up to 12 deliveries per hour, but this is very rare for a small or medium business.

The best way to increase your deliveries per hour is to use route optimization software.

Average dwell time

How long your drivers spend at each stop to complete the delivery can have a dramatic impact on your deliveries per hour. Here’s how to calculate your average dwell time, or stop duration per delivery:

There are several ways to reduce your average dwell time:

• High-quality address information: Accurate geocoding (the process of converting an address to an exact latitude and longitude) can prevent a lot of wasted time looking for the right address.
• Driver familiarity: The more familiar a driver is with an area, the more they will know about the best places to park, how to access apartment buildings, and so on. Assigning your drivers to regular territories can increase your delivery efficiency.
• Delivery notes: Include information like apartment buzzer codes and customer delivery instructions in notes to your drivers to help them turn deliveries around fast. 

💡 Routific’s delivery management software allows you to assign driver territories and include notes that drivers can easily access on our mobile app.

Delivery Cycle Time

This is the time from the moment someone places an order to the moment it’s delivered, and is a good measure of how efficient your order fulfillment process is overall.   It includes the time it takes to prepare the order, pack it up, and send it off. Here's how you calculate it:

A low delivery cycle time helps you keep packing costs low and allows you to respond quickly to new queries.

Conclusion

Delivering on time is really important for any business that delivers goods. It affects how happy customers are, what people think of your brand, and how much money the business makes. To make your deliveries more timely, you need to understand and keep track of key delivery measurements, use data to solve problems, and add the right tools and technology at the right time.

Remember, improving on-time deliveries is ongoing, and continuous improvement is hard work. You must commit to checking how you're doing, finding problems, and using effective solutions. If you work hard using the tools described above, you can improve your delivery metrics further than you think.