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Late Shipments – More Damage Than Just Customer Relationships

Recently I wrote a blog post that suggested that if you were going to measure one thing it should be shipped on time. I have found that many companies not only don’t measure this important factor, but they don’t have any idea what the measure would be if they did. Late shipments cause lost profits in three ways.

First and foremost, late shipments can be very damaging to the customer. Many companies subscribe to Just-In-Time methods of inventory control, which require predictable lead times. If you ship late, it can disrupt their production or worse, their customer relationships. The results can be lost customers, lost sales and depressed profits.

Another negative impact is the need to expedite shipments to get late orders to the customer quickly. This often requires using expedited freight services and airfreight, which can amplify freight costs, directly impacting the bottom-line.

Finally, in an attempt to reduce late shipments, many companies build up inventory levels, adding to the costs of holding inventory. More warehouse space is needed, handling and counting costs go up, and worst case, some of that inventory might eventually become obsolete.

Late shipments can be very costly to a company. Companies can become more profitable and have happier customers by paying attention to this vital element.

© 2012 – Rick Pay – All Rights Reserved

 


2 thoughts on “Late Shipments – More Damage Than Just Customer Relationships

  1. Hi Rick,
    It’s true, many companies don’t measure shipped on time so do not know their overall performance in this area of customer service. The impact can be just as you described.
    I would suggest that the on time shipment measurement and analysis gives company mgmt an excellent view of their internal processes. The view takes you from order receipt to order ship.
    However the term should not be confused with on time delivery. Measuring on time delivery will yield important info for mgmt decisionmaking first in the logistics, sales, and customer service areas then deeper into the organization.
    My experience has been that many people within a company use the term on time shipment to mean on time delivery. It’s best to clarify the meanings so you don’t talk at cross purposes.

    • I agree! On time delivery brings in the post shipment actives of logistics. In my experience, most small to mid-size companies have agreements with their logistics providers for time to ship and they add that to the lead time for the product to set internal due dates for shipment. Again, in my experience, the great majority of the problems are internal rather than external. The one great exception to that is international shipments where customs issues come in to play.

      Thanks for your comment!

      Rick

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