Delivery Cycle Time
Delivery Cycle Time is the time company spends between receiving the sale order untill the goods is delivered to the customers. This is the internal business process that company needs to control to ensure customers receive goods on time. Delivering goods to customers before the due date is a huge advantage that will add value to the customers. They may need time to inspect and test goods before usage.
The management team needs to keep a close look at this measurement as it will impact the long-term relationship with the customers. It should be a management report to control the late orders during the month. Each order should be investigated to find the cause of the delay, and a proper solution must be identified to prevent future issues.
Management should allocate time to each department to minimize wasted time. It should be part of the department’s KPI (Key Performance Indicator) to motivate them.
Delivery Cycle Time Formula
|
Delivery Cycle Time = Wait Time + Throughput time Throughput Time = Process time + Move time + Inspection time + Queue time |
Throughput time: is the time spent to covert from raw material to finished goods
Wait Time: is the time between receipt of customers’ orders and the start of production
Delivery Cycle time Example
For example, the Company keeps track of all time spent since the day sales team received the order and goods are delivered. The detailed time spend are the following:
- There are 5 days gap between the sale order receives until the production start.
- The production requires 3 days to convert from raw material to finished goods
- Inspection time is 1 day
- Queue and move time is 1 day
Delivery Cycle time = 5 days + 3 days + 1 days + 1days = 10 days
Delivery Cycle Time includes the wait time which should be minimized as it is almost impossible to eliminate. The company should investigate the wait time which is 50% of the total delivery cycle time. It does not add any value to the customers.
Delivery Cycle Time Analysis
The more time company spend on completing the work, the higher cost they need to spend. So most of the company aim to minimize the time spend on each process.
The delivery cycle time is different from one company to another, and there is no specific time which considers as bad or good time spend. We have to analyze the actual situation in each industry and business. Management needs to set up a standard procedure to reduce the time in each production stage. After the optimization, we can benchmark our time with the industry average.
If our delivery cycle time is higher than the industry average, it means we are wasting our resource on our process. Our cost will be higher than the competitors, and it will hard for us to compete with them. The companies have to take a closer look into each component. Various reasons can cause an increase in cycle time.
Advantages of Delivery Cycle Time
| Advantages of Delivery Cycle Time | |
|---|---|
| Improve operational efficiency | High delivery cycle time will alert management to focus on operational efficiency. The company spends too much time on the process which is not provided to customers. |
| Reduce non-valued added activities | Only the non-value added activities are aimed to reduce. Some huge time spent is necessary for the product quality, so we should not reduce it. |
| Improve good relationship with supplier | Good relationship will help the company to receive products on time. |
| Identify idle time | Idle time is very costly for the company and it does not provide any value to the product. It will be good If we can identify and eliminate it. |
| Reduce long order time | Most of the time spend will be the order waiting time. We need to identify and take action before it is too late. |
Disadvantages of Delivery Cycle Time
Analyze the past data: Delivery cycle time uses historical data to analyze, so it may not reflect the current or future practice.
No specific guideline: There is no good or bad delivery cycle time. We need to compare to the industry average, which may be not a good benchmark.
Hard to compare: It is hard to compare the cycle time across the company in various industries. It is even hard for the same industry, which locates in different areas. The more time company spends on completing the work, the more costly they need to spend. So most of the company aim to minimize the time spend on each process.
How to improve Delivery Cycle Time
As we know, delivery cycle time is very important for the business as it provides many benefits to the company. There are several ways which can be used to reduce the delivery cycle time such as:
- One of the ways that companies can improve customer satisfaction is by reducing the amount of time that customers have to wait. This can be done in a number of ways, such as reducing the time it takes to process an order or ensuring that orders are received in a timely manner. By focusing on areas that prolong the waiting time, companies can make significant progress in improving customer satisfaction. In addition, companies should also consider ways to reduce waiting times in other areas, such as in the call center or when customers are trying to reach a live agent. By taking a comprehensive approach to reducing waiting times, companies can make a real difference in the level of customer satisfaction.
- Implementing a just-in-time policy can help to improve the efficiency of your company’s operations. In a just-in-time system, inventory is only ordered and produced as needed, which reduces the amount of time that it spends sitting in storage. This can free up valuable storage space, and it can also reduce the risk of inventory becoming outdated or damaged. In addition, a just-in-time system can help to improve communication between different departments within your company. By adopting a just-in-time policy, you can ensure that your company is able to run more smoothly and efficiently.
- Improve the internal process by increasing effectiveness and efficiency. It can reduce the time spent on the inspection time as the defective ratio is reduced to the minimum level. Effective internal control also is able to reduce the processing time and improve production.