What Are On Time Deliveries and Why Do They Matter?

Curious what on time delivery is, why it’s so important, and most importantly, how to improve it? This post is for you.

On time deliveries are a crucial metric for ecommerce businesses. An on time delivery occurs when a customer’s order is delivered by the expected delivery date that was communicated to the customer. Tracking on time delivery rates allows companies to measure how efficiently they are fulfilling and shipping orders to meet customer expectations.

In today’s world of instant gratification and ultra-fast shipping, on time deliveries matter more than ever. Customers expect and demand faster fulfillment and shipping. Late deliveries can damage customer satisfaction, loyalty and ultimately sales. That’s why it’s so important for modern ecommerce businesses to focus on achieving high on time delivery rates.

What Exactly is An On Time Delivery?

An on time delivery is defined as an order that is fulfilled and shipped by the delivery date that was promised or estimated to the customer.

For example:

A customer places an order on Monday with an estimated delivery date of Friday.
The order ships out from the warehouse on Wednesday.
The customer receives their order on Friday as expected.

This would be counted as an on time delivery since it arrived by the estimated delivery date.

On the other hand, if the order arrived on Saturday instead of Friday as promised, it would be considered a late delivery and hurt the on time delivery rate.

On time delivery is typically calculated as a percentage. The on time delivery rate is the number of on time deliveries divided by the total number of deliveries completed in a given period

For example, if a business shipped 1000 orders last month and 950 of them arrived by the estimated delivery date, their on time delivery rate would be 95% for that month.

Why On Time Deliveries Are So Important

Achieving a high on time delivery rate is critical for several reasons:

It directly impacts customer satisfaction and loyalty – When customers receive their orders on time as expected, they have a positive delivery experience. This leads to higher satisfaction and brand loyalty. Late deliveries cause frustration, hurting satisfaction.
It affects future buying decisions and sales – 91% of customers say they would shop again with a retailer who delivers orders on time. Conversely, 21% will not reorder after just one late delivery. On time deliveries lead to repeat purchases and sales growth.
It reflects on your brand reputation – An ability to consistently deliver on time shows you are reliable, effective and customer-focused. Customers associate on time delivery with brand quality.
It minimizes costs associated with delays – Late shipments lead to more customer inquiries, complaints, returns and loss of revenue. Getting orders out on time minimizes these costs.
It gives you a competitive edge – With consumers basing more purchases on delivery speed and reliability, on time shipping gives businesses an advantage over the competition.

Simply put, on time delivery is strongly correlated with customer loyalty, brand reputation and bottom line revenue. Ecommerce businesses must make it a top priority.

How To Measure On Time Delivery Rates

Calculating your on time delivery rate is straightforward:

On Time Delivery Rate = (Number of on time deliveries / Total number of deliveries) x 100

The key is properly tracking and recording what shipments qualify as “on time” vs. “late”.

On time deliveries are those that arrive by the delivery date originally quoted or estimated to the customer when they placed their order.
Late deliveries are those that arrive after the quoted delivery date. Even if it only arrives 1 day late, it is considered late.

The on time delivery rate can be calculated for different date ranges:

Daily on time rate – The rate for that particular day
Weekly on time rate – The rate for the past 7 days
Monthly on time rate – The rate for the past 30 days

It can also be calculated for specific products, delivery zones or customer cohorts to identify any issues.

Advanced ecommerce platforms and shipping software will automatically track and calculate on time rates for you. But if operating manually, be sure you have processes in place to accurately track on time vs. late deliveries.

How To Improve Your On Time Delivery Rate

Once you have a baseline on time delivery rate calculated, here are some tips to help improve it:

Set realistic goals – Don’t try to go from 50% to 99% overnight. Set incremental goals like improving your rate 1-2% per month.
Identify causes of delays – Look for patterns in late deliveries. Is it certain products, delivery routes or times of day? Find where the problems originate.
Refine order handling procedures – Review processes in your warehouse for receiving, picking, packing and shipping orders. Streamline them to remove bottlenecks.
Optimize inventory management – Use historical data to create better inventory forecasts. This prevents stockouts and backorders that delay shipments.
Improve delivery accuracy – Ensure warehouse pickers are trained on properly identifying and packing the right items. Double check shipments before sending out.
Utilize shipping software – Tools like ShipStation automate shipping workflows and help choose the fastest carrier and service per order.
Leverage delivery windows – Provide morning/afternoon delivery windows to customers where possible. This gives you more leeway to meet the on time guarantee.
Communicate delays quickly – If an order will be late, notify the customer ASAP. They appreciate transparency. Offer expedited shipping or discounts to compensate.
Consider 3PL partnership – Third party logistics providers like ShipBob offer high on time delivery rates using advanced fulfillment technology and processes.

The goal should be continuous, incremental improvement over time. Even boosting on time deliveries by 2-3% each month can add up to big gains.

Common Reasons On Time Delivery Rates Drop

There are a variety of internal and external factors that can cause on time delivery rates to suddenly dip, including:

Inventory stockouts – A hot selling product being out of stock will lead to backorders and delays until inventory is replenished.
Warehouse bottlenecks – Insufficient staffing, outdated equipment or poor workflows slowing down order processing and handling.
Shipping carrier issues – Carrier pick up delays, weather disruptions, delivery delays and tracking failures.
Poor demand forecasting – Inaccurate sales forecasts lead to improper inventory levels and an inability to meet demand.
Special promotions – Big upticks in sales volume due to promotions can overwhelm operations and lead to fulfillment delays.
Seasonal peaks – Holiday sales spikes and other seasonal peaks stress operations and make consistently meeting delivery dates difficult.
Supply chain disruptions – External disruptions like materials shortages, transportation delays, natural disasters etc.

Proactively addressing these risk factors and having contingency plans helps minimize the impact when they do occur.

How To Track On Time Delivery Performance

Ongoing tracking should be in place to monitor on time delivery metrics daily and weekly. Here are some tips on how to track:

By delivery zone – Identify if delays correlate to certain destinations or delivery routes. Urban vs. rural for example.
By product category – Some products may be more susceptible to delays due to size, inventory velocity etc.
By fulfillment location – If operating multiple warehouses, compare on time rates between locations.
By carrier – See if certain shipping carriers used have much higher delay rates than others.
By delivery days – Weekday vs. weekends may have very different results based on warehouse operations.
By delivery time – Morning deliveries may consistently hit targets better than evening.

Advanced data analysis will uncover insights not noticeable when looking only at aggregate metrics. The more granular you can get with on time delivery data, the better.

How On Time Delivery Tracking Works

There are two main approaches to tracking on time deliveries:

Manual Tracking

Inbound orders are recorded and the promised delivery date for each is noted.
Upon shipping, the carrier tracking number is linked to the order record.
Once delivered, orders are checked against the initial delivery date promise.
On time vs. late deliveries are manually tagged in the records.
At the end of each period, the total on time deliveries are divided by total orders to calculate the rate.

Manual tracking can work for very small volumes but becomes highly tedious and error prone otherwise. It also prevents more advanced analysis of the data.

Automated Tracking

Ecommerce platforms and shipping software automate the tracking process:

When an order is placed, the delivery date is automatically logged.
Shipping confirmation with carrier tracking info is automatically captured.
Upon delivery, the software checks the actual delivery date against what was originally promised.
Deliveries are automatically tagged as on time or late based on this logic.
Reports are generated showing on time delivery rates for any time period.

Automated tracking is far more efficient and reliable for higher order volumes. It also enables drilling down into reasons behind delays using advanced reporting.

Best Practices For Improving On Time Delivery Rates

Follow these best practices to

what are on time deliveries

What causes a business to deliver after the promised delivery date or time?

There are a few primary reasons for late delivery (aka delivering after the specific date specified). If these issues are prioritized and addressed, the OTD rates will rise.

If your teams do not have inventory management under control, customers can place orders for products that simply aren’t in stock. This creates long lead times and unavoidable delays which will most likely cause customer complaints and in other circumstances, cancelations.

Different types of OTD KPIs

There is a wide range of KPIs that can be used to measure on time delivery.

Let’s start with the most basic one: general on time delivery rate. To calculate this, you need the total number of deliveries as well as the number of deliveries that were late. Once you have these numbers, just divide. If you had 1000 deliveries this month and 17 were late, your OTD metric is 98%. On the other hand, if 100 were late, your OTD metric is 90%.

From here we can break down the different KPIs into smaller sections in an effort to figure out why deliveries aren’t arriving by promised delivery dates. For example time-based KPIs. In order to understand why promised delivery dates are missed, you can divide the last mile into multiple steps, each with its own time-based KPI.

Some of these metrics may be:

Time in fulfillment or distribution center
Time to deliver
Time on site
Time back to base

The issue here is that many companies don’t measure these things separately but rather group them together as part of the delivery process (or in some cases, they may not measure some of them at all!). Diving into these numbers can be an important factor in the effort to improve on time delivery rates, reduce lead times, and stick with shipping dates to keep customers happy and coming back in the future.

Even the little things can add up when it comes to on time delivery. For example, driver breaks and time spent parking. Do you know how long your drivers are on break for? Do you know how long it takes them to park? How long do they spend on-site for each delivery? These small factors greatly influence transit times.

How to Measure the On-Time Delivery KPI

What is on time delivery?

On time delivery, or OTD, is the metric used to measure supply chain efficiency. This KPI shows whether or not an organization is meeting its goals in regards to promised delivery times, and is critical for both measuring carrier performance and maintaining customer satisfaction.

What is an example of on-time delivery?

The on time delivery formula looks like this: So, for example, if you have 1000 total deliveries and 25 late deliveries in a month, your online-delivery rate is 97.5%. What types of on-time delivery KPIs can you measure?

What are on-time deliveries?

On-time deliveries comprise a key performance indicator (KPI) that ecommerce businesses use to track their delivery performance. Understanding this metric can help companies determine whether they can complete customer orders by a particular delivery date.

What is general on-time delivery?

General on-time delivery is the basic measure of how many orders are delivered on time. This metric can be measured as a percentage of deliveries that occur on time versus total orders delivered. It provides an overall view of a company’s delivery performance.