On-time delivery: advantages and disadvantages
What is on-time delivery?
Just as the name suggests, simply speaking, on-time delivery is the ability of any company to meet the requirements of the customers and deliver the products or services to the customer on time. Perhaps time is one of the most important issues that customers are concerned about. Those companies that do not value time in their manufacturing and order-taking processes are not usually successful. This is a given, because customers want every order to be delivered according to their time and this is what companies need to make sure to achieve.
Throughout the entire supply chain management process, consistency in delivery time is vital and indeed very important to the success of any business. SC department makes sure that the products are delivered on time to their clients and respective customers. This can be achieved by minimizing supply chain bottlenecks between the customer and the company through direct sales of the product at distribution centers, retail outlets and company outlets. Businesses need a constant supply of raw materials from regular and loyal suppliers to manufacture and deliver products to customers on time. If there is any delay between this process, the production and delivery of the products will be delayed, resulting in late delivery to customers.
Thanks to the advancement in technology, many software are now used to efficiently manage the entire production and supply chain process. All companies involved in the manufacturing sector must look for various factors on a daily basis in their supply chain process to ensure on-time delivery to customers. Material lead time is the average lead time it takes for suppliers to deliver raw materials for manufacturing. A historical analysis of this time can be carried out to know the fluctuations in the times and correct them whenever possible. As a result, vendors are contacted or new vendors are arranged to minimize that time. Many companies have introduced the just-in-time concept to reduce their inventory costs and increase the manufacturing and profit potential of the business. This is the Japanese concept where raw materials arrive at manufacturing plants just in time before manufacturing takes place. It saves a lot of time, space and cost of ordering raw materials.
While this is a good approach to save on finances, it’s certainly not the best when the supply chain process involves sourcing raw materials through outsourcing to low-cost countries where supply is often long delayed. This disrupts the entire production process as well as the company’s marketing efforts and results in late delivery of products and finished goods. Late delivery of finished goods frustrates customers and disrupts business activities.
Supply chain management is a crucial and important aspect of all companies involved in the manufacturing industry. In order to successfully dominate the market, companies make sure to minimize bottlenecks between themselves and their loyal customers. To do this, the SC department makes sure that raw materials arrive on time and are used to make them into finished products. This helps and ensures the correct delivery of products to customers at the right time with the right quality.
No company would want to deliver products to their customers later than the promised time period. This is done in order to create a long-term relationship with the client for business continuity. However, if not followed correctly, companies could face the worst results in their history:
1. Loss of customer confidence: When companies deliver products late, their customers are skeptical and doubtful about the serious deadline problems the company is facing. From time to time, if a delivery delay occurs, customers may not be affected by it. However, continuous late deliveries of products can lead to serious circumstances for the company and, first of all, the loss of customer confidence. Clients lose confidence in the business that fails to deliver their products on time.
2. Loss of relationships: One of the most serious costs that any company must pay for the late delivery of its products is the loss of relationships. Those customers who are new would instantly cut their relationship with current businesses and go on to develop relationships with new ones.
3. Lost Profit – When customers would not pay for late delivery of products, companies would eventually lose out and continue to suffer in terms of profitability and revenue. There may come a time when the business simply goes bankrupt.
4. Cash Flow Delays: Cash flows in and out of the business but continuous cash outflows lead to a serious and alarming situation taking place within the company. This could lead the business process to a severe credit crunch and financial crisis.
5. Inefficiency – The company is not using its resources efficiently. This, in turn, leads to high production costs when stopped completely. The company has to incur the cost of production and the wages and salaries of the employees.
6. Loss of reputation: the client would completely destroy the so-called “brand image of the product” if the products do not arrive on time. This results in a bad reputation for the company, where you have to actively engage in reputation management techniques to advertise press releases to cover up negative aspects of your management.
