Are you confident in your on-time delivery (OTD) rate? Think twice. Most companies mismeasure OTD, losing customers and revenue as a result. Drawing from my years of experience analyzing thousands of shipping operations, I’ve identified the top seven measurement mistakes that companies can make when determining their on-time delivery performance. More importantly, well-informed shippers can avoid these mistakes. In this article, I’ll share these insights, along with practical examples and resources to help you improve your customers’ on-time delivery experience.

1. Why It’s Important To Use Key Performance Indicators (KPI) To Measure On-Time Delivery Performance.

The Best On-Time Delivery KPIs To Make Your Customers Delighted

Ecommerce customer loyalty lives or dies by on-time delivery. Without a doubt, I’ve found that the most effective way to improve this performance is through rigorous measuring On-Time Delivery (OTD) metrics. By quantifying the exact percentage of orders that meet their promised dates, you gain a clear view of your operational health. Also, OTD Key Performance Indicators (KPI) are essential because they pinpoint the exact bottlenecks you need to resolve to ensure consistent, long-term delivery success.

For a more detailed explanation of KPIs related to on-time performance, see my article, The Best On-Time Delivery KPIs To Make Your Customers Delighted.

“… OTD Key Performance Indicators (KPI) are essential because they pinpoint the exact bottlenecks you need to resolve to ensure consistent, long-term delivery success.”

2. The Consequences Of Not Measuring On-Time Performance Correctly.

The Horrific Delivery Exception: Exploit Shipment Data To Eliminate, Make Your Customer Experience Better

If you do not correctly measure your on-time delivery performance, you can cripple your company, especially if you are in the ecommerce business. Indeed, without accurate data and proper analysis, companies can’t identify shipping problems, leading to ongoing delivery issues, wasted resources, and damaged customer relationships. When decision-makers either lack or have a distorted view of their shipment delivery performance, they can’t diagnose, nor fix problems that cause shipping exceptions. As a result, delivery failures often turn one-time customers into vocal critics who share their negative experiences and never return.

For a more detailed discussion on shipment exceptions, see my article, The Horrific Delivery Exception: Exploit Shipment Data To Eliminate, Make Your Customer Experience Better.

“When decision-makers either lack or have a distorted view of their shipment delivery performance, they can’t diagnose, nor fix problems that cause shipping exceptions.”

3. Seven Common Mistakes When Measuring Your On-Time Delivery Performance.

In my experience, the reason most businesses struggle with measuring on-time delivery (OTD) isn’t a lack of intent—it’s a lack of visibility. More specifically, they are flying blind because of fragmented shipping data and limited shipment analytics expertise. To bridge this gap, they must recognize the challenges and adopt a proactive approach to accurately measure their OTD performance. Ultimately, you cannot deliver a superior customer experience until you master the art of measuring your service performance correctly. To help you navigate this, I’ve identified the seven most common mistakes I see businesses make when calculating OTD.

a. Relying On Shipping Data That Is Inaccurate, Incomplete, Or Lacks Detailed Status Scans.

When using faulty or summary shipment status data, businesses lose visibility into actual delivery performance. This results in your operations underestimating or overestimating delivery efficiency. Below are examples of shipping data that is either inaccurate, incomplete, or lacks detailed shipment status scans.

• Weather Exception Scan Not Provided. In this case, a package is late because of bad weather, but the delivery carrier does not provide a weather exception scan. This results in two issues. First, the customer does not get a timely alert that their package may be delayed. Second, when the shipper does a root cause analysis on the late package, they can only conclude that the carrier’s delivery network was at fault, not that it was a weather issue.
• Final Delivery Status, but No Detailed Delivery Scan. In this example, vital information is missing to verify that a shipment was actually delivered or not. What’s more, without detailed information, the shipper can’t identify areas for improvement or calculate whether the shipment was late or not.
• Misclassified Oversized Packages: When a shipper provides inaccurate data, the carrier cannot necessarily meet standard commitment times. As a result, a “late” delivery is often unfairly blamed on the carrier. In fact, because of this inaccurate information, these types of late deliveries can continue indefinitely – not because of the carrier, but because of a systemic warehouse error.

“When using faulty or summary shipment status data, businesses lose visibility into actual delivery performance.”

b. Measuring On-Time Delivery Against The Wrong Promised Date.

Measuring against an incorrect promised date can lead businesses to believe they are doing better or worse than they actually are. As a result, it is a challenge for shippers to optimize costs and service levels. Worse, they think they are doing well on on-time performance, but their customers are disappointed.

For example, an order fulfillment operation may internally measure all their orders against a 3-day click-to-delivery standard. However, the shipping operation promises customers next-day delivery. This results in customer dissatisfaction even though the order fulfillment operation is meeting their three day standard. In this case, promised delivery dates need to be calculated, and communicated, considering both the time to process, pick, and pack an order as well as the carrier’s transit times. For more information on determining Promised Date, click here.

“promised delivery dates need to be calculated, and communicated, considering both the time to process, pick, and pack an order as well as the carrier’s transit times.”

c. Incorrectly Measuring On-Time Delivery.

Yes, many businesses do not know how to accurately measure their on-time performance or have varying standards within the company. So first, they must establish standard KPI metrics and definitions. Specifically in developing a program for measuring OTD, consider all relevant, accurate data needed. This includes order processing time standards, transit time, and recording accurate ship / delivery dates. Also, measure service performance based on the promised date provided to the customer.

For example, many different departments within an organization can use different criteria or definitions for what constitutes “on time” or use different promised delivery dates. Also, many shippers mistake the carrier’s estimated delivery date as the promised date. Overall, these inconsistencies lead to inaccurate and misleading OTD measurements. Worse, this lack of clarity in measuring OTD inevitably leads to missed deliveries and unhappy customers. For more advice on measuring on-time performance, see my article, Measuring Ecommerce On-Time Delivery: Instructive Advice To Best Avoid Pointless Mistakes.

“… for measuring OTD, consider all relevant, accurate data needed. This includes order processing time standards, transit time, and recording accurate ship / delivery dates. … the promised date provided to the customer.”

d. Over-Optimizing On-Time Delivery KPIs: Need to Balance Costs and Other Factors.

Package Delivery – See How To Stop Surging Costs And Make Your Customers Happy

As with any business, there is a need for cost controls while at the same time pleasing the customers. So, it’s critical to balance operational costs and other outcome-based factors against maintaining a high on-time delivery rate. This requires detailed planning and accurate information. For example, don’t ship and pay for an expensive overnight 8 a.m. express package if the business you are shipping to is not open till 10 a.m. In fact in this particular example, the shipper could have reduced costs significantly, paying for a lower cost, afternoon delivery service. And at the same time, the package would have been on-time. For more tips on balancing package shipping costs and keeping delivery customers happy, click here.

In fact, singularly over-optimizing for a single KPI such as On-Time Delivery is a form of Goodhart’s Law. This adage states, “When a measure becomes a target, it ceases to be a good measure”. Without a doubt, management needs to tie KPIs to specific outcomes such as profit or a specific deliverable. Also, it is best to focus on multiple indicators (ex. Balance Scorecard), and not over-optimize against one metric such as OTD.

“… it’s critical to balance operational costs and other outcome-based factors against maintaining a high on-time delivery rate.”

e. Skew Measurements To Make The Operations Look Good.

Without a doubt, over inflating on-time delivery results is not good for business. This happens when a shipping operation manipulates data or ignores negative trends to make their operation appear more successful than it actually is. For example, if a shipping operation intentionally excludes certain delayed shipments from the measurement calculations to inflate the on-time delivery rate, it misrepresents its real performance. In this case, stakeholders are incentivized to artificially inflate a metric to look better. The result is unintended consequences. This metric manipulation is also another form of Goodhart’s Law – the “Cobra Effect” (see diagram – Cobra Effect).

“… a shipping operation manipulates data or ignores negative trends to make their operation appear more successful than it actually is.”

f. Too Focused On Collecting Carrier Service Refunds Versus Improving Performance.

This mistake occurs when businesses prioritize collecting carriers’ service performance refunds for late deliveries rather than focusing on improving their own on-time performance. Not surprisingly, there is an entire 3rd party shipment audit industry catering to collecting refunds from carriers. As a result, some of the most experienced shipping experts in the industry focus primarily on finding fault with the carrier. Instead, it would be better if they would focus on improving the entire shipping operations. From my experience, most late shipments are not caused by the carrier. In fact, many delivery delays are caused by order fulfillment issues, bad addresses, business closed, and other delivery delays not caused by the carrier.

Moreover, this is another variation of Goodhart’s Law, “When a measure becomes a target, it ceases to be a good measure.” In this case, the OTD metric is being used primarily to collect refunds from the carrier, and secondary, to improve on-time performance and customer satisfaction. Obviously, other metrics are needed to focus attention on all aspects of shipping such as order fulfillment operations.

“… the OTD metric is being used primarily to collect refunds from the carrier, and secondary, to improve on-time performance … other metrics are needed to focus attention on all aspects of shipping such as order fulfillment operations.”

g. Blindly Measuring Service Performance Without Root Cause Analysis and Systemic Fixes.

The Truth About Diagnostic Analytics: A Forgotten Way To Better Business Performance

This mistake happens when businesses measure performance without individual employees understanding the purpose or relevance of the metrics. For example, a manager instructs employees to track on-time delivery, but they do not provide context or explain how it aligns with business goals. This often leads to meaningless measurements that do not drive improvement. Worst, because these employees do not understand the significance of on-time performance, they are not proactive in minimizing shipping errors. Indeed, measuring OTD is a wasted exercise if the staff does not conduct root cause analysis and follow-up with corrective actions. For more on diagnostic analytics, click here.

“measuring OTD is a wasted exercise if the staff does not conduct root cause analysis and follow-up with corrective actions.”

More References.

For more information and viewpoints on measuring on time delivery performance, see the following:

• Samir Saci’s article, Logistic Performance Management Using Data Analytics
• Descartes’ Analytics For Improving Carrier and Supplier Performance
• VisualSouth’s How to Measure the On-Time Delivery KPI
• Stacey Barr’s How To Meaningfully Measure On Time Delivery Of Anything
• SC Tech Insights’ Measuring Ecommerce On-Time Delivery: Instructive advice to Best Avoid Pointless Mistakes.

Measuring Ecommerce On-Time Delivery: Instructive Advice To Best Avoid Pointless Mistakes

Need help with an innovative solution to make your supply chain analytics actionable? I’m Randy McClure, and I’ve spent many years solving data analytics and visibility problems. As a supply chain tech advisor, I’ve implemented hundreds of successful projects across all transportation modes, working with the data of thousands of shippers, carriers, and 3rd party logistics (3PL) providers. I specialize in launching new analytics-based strategies, proof-of-concepts and operational pilot projects using emerging technologies and methodologies. If you’re ready to supercharge your analytics or if you are a solution provider, let’s talk. To reach me, click here to access my contact form or you can find me on LinkedIn.

For more from SC Tech Insights, see more articles on shipping.