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