We can define the delivery time as the time spent between an order placement and order delivery. The cycle of time from the moment a confirmed order is placed and the moment by it is delivered to the customer. The delivery cycle time can be for products or services.
Understanding the Delivery Cycle Time
The delivery cycle time is calculated in different ways. For manufacturing companies, it will include the order wait time, raw material processing, manufacturing, shipment, and confirmation times. The retailers or wholesale suppliers will see a shorter delivery cycle time from order confirmation to the shipment and delivery note only.
The delivery time can also be used in the service industry on the same principles. For example, hospitality or financial service companies can measure the delivery time for the customer order confirmation through the order delivery time.
How To Calculate Delivery Cycle Time?
For simplicity, the delivery cycle time for a manufacturing concern can be calculated as:
Delivery cycle time = Order Wait Time + Order Manufacturing Time
The Order wait time added separately denotes the time-lapse between receiving one order and the next one. For continuous production and regular order, the order wait time may be minimal or may not exist. The order manufacturing time will include raw material processing, product quality testing, packaging, and shipment times respectively.
Important: In lean manufacturing and the total quality management (TQM) approaches, the wait time is the idle time for any activity. For clarification, we take the wait time as the order wait time and not the process waste time.
Let us assume that a company Green Star produces a few dairy products. It receives an order from its customers regularly. The company can calculate its delivery time as below.
Order Wait Time = 05 Days (assuming the time taken from one delivered order to the next order received)
Product manufacturing time includes:
- Raw Material Processing 3 days
- Quality testing and inspections 0.5 days
- Moving and packaging time 0.5 days
- Queue time in finished goods stocks 2 days
- Idle time (labor + material) 0.2 day
- Order shipment and delivery 0.3 days
Total Manufacturing time = 6.5 days
Delivery Cycle time = 11.5 Days
Interpretation and Analysis
Apparently, the shorter the delivery cycle time, the better it is for any company. Service and product industries alike would want to achieve the shortest possible delivery time. Retailers and suppliers can skip the bulk of the order production time. Their largest portion of It would include the wait time plus the transportation time. However, for larger manufacturing companies, the calculation will not be that simplified.
Let us discuss our example of Green Star Company. Is the product delivery time of 11.3 days good enough? The answer cannot be determined unless we know the order quantity, manufacturing facilities, production capacity, and industry standards.
However, once we know the industry standards in the same industry, we can draw a parallel. It offers an outlook of the company’s operational efficiency. The time taken at each step determines the efficiency of resources applied at each production level. For example, in our working example if the company has better manufacturing facilities it can reduce the raw material processing time.
Similarly, if the company could reduce the queue it can reduce the total delivery time cycle. In other words, the operational efficiency of the company from supply chain management, production and operations, inventory management, and transportation all play an important role in shortening it.
Benefits of the Delivery Cycle Time
The delivery time when examined in detail can reveal the company’s operational efficiency. It can help a company differentiate between the value-added and non-value adding activities. The company can determine the causes of excessive delays from the supply chain to the operational capacity. Similarly, it can reveal for a company the controllable factors it should take on to improve the total delivery cycle time.
- The company can assess its operational efficiency
- It can help identify the idle time and waste activities
- The delivery cycle time can reveal long order wait time
- It can reveal long waiting times for finished goods in the stocks
- It also reveals the company relations with its suppliers (order time) and its customers
Limitations of the Delivery Cycle Time
Although it provides a useful measure for company management, it does not reveal anything new. Inventory management, operational efficiency, and supplier relations are well-covered topics for any management.
- It offers a post-production analysis than a forward-looking forecast
- It does not reveal the results explicitly unless compared with other performance metrics or industry standards
- Last but not least, it may provide different measures for similar companies in the same industry
The delivery cycle time provides useful analytical information for manufacturing companies. The company can assess its overall operational efficiency and manufacturing capacity. However, it reveals little on the actual causes of the longer delivery cycle time itself.