Metric of the Month: Percentage of Supplier Orders Delivered on Time

Suppliers that are chronically late can shut down production lines and cost a tremendous amount due to downtime

March 2016 Percentsge of Supplier Orders Received by Original Request Date 56ec5c9c49b97

The American Productivity and Quality Center (APQC) defines the percentage of supplier orders delivered on time as the percentage of supplier orders delivered to the business site by the original request date. Although this measurement may seem simple and straightforward, complexity comes from suppliers that are chronically late, and have the potential to shut down production lines and cost the organization a tremendous amount of money in downtime. In contrast, a supplier that has a high on-time delivery rate can allow an organization to reduce its inventory carrying costs by keeping less safety stock on hand.

APQC research shows that top performers found some internal method of coping with late deliveries from suppliers or are using other methods to compact the cycle time on the front end. It also indicates that there is a tremendous amount of gain to be recognized from improvement in this area, for both top and bottom performers.

APQC’s data indicates a sizable gap between top- and bottom-performing organizations with regard to the percentage of supplier orders received on time. With the potential impact that late supplier deliveries can have on an organization’s ability to meet its commitments to customers, the ability to maintain a high level of supplier on-time delivery is of crucial importance. Organizations can assess the performance of their current suppliers to determine which ones need improvement. For suppliers of strategic importance to the business, organizations can establish mentoring plans to help the suppliers meet performance requirements. An organization’s relationship and collaborative practices with its suppliers can be key to ensure best-in-class on-time performance.

The data above originated from APQC’s Open Standards Benchmarking in procurement, which contains metrics related to procurement performance as collected from participating organizations. These metrics can help your organization see where it stands in relation to its peers and identify potential areas for improvement.