What is the value of delivering on time?

Abstract

PurposeDelivery punctuality is essential in supply chain management, yet the cost of untimely delivery is usually assumed to be given or based on intuition and not quantified by facts.Design/methodology/approachThe authors used a data set containing detailed transaction data for a nine-year period on orders and deliveries of sport goods. The methodology is based on applying a polynomial distributed lag model to longitudinal data on supply chain transactions.FindingsThe results indicate that small delivery delays up to two weeks decrease the sales by maximum 10% during a period of 3–4 weeks. Longer delays, up to 45 days, have a larger negative effect on sales, which can also last longer. For this case company, the estimated lost sales due to late deliveries (=5 days) were 5.1% of the delivery value. The longer delays got, the large the cost was: delays at least 45 days long were the most costly causing almost 40% of the estimated lost sales.Practical implicationsThis study offers a methodology for quantifying lost sales due to delivery delays and estimating how long the poor delivery performance affects retailers' order behaviour.Originality/valueThe results give a quantitative decision-making tool for supply chain managers to estimate the profitability of investments in the supply chain performance, especially on improving punctuality.