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. Deliver 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 delay, and a proper solution must be identified to prevent future issues.
Management should allocate the time to each department to minimize the 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 + Through put time
Throughput Time = Process time + Move time + Inspection time + Queue time
Throughput time: is the time spend to covert from raw material to finished goods
Wait Time: is the time between receipt of customers’ order and the start of production
Delivery Cycle time Example
For example, the Company keeps track of all time spend 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 the operational efficiency. The company spend 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 spends are necessary to 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 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 industry. It even hard for the same industry, which locates in a different areas. The more time company spend 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.