OTD in Manufacturing & Strategies to Improve On-Time Delivery

On-time delivery (OTD) in manufacturing isn’t just about getting orders out on schedule. It’s a complex interplay of overcoming production bottlenecks, supply chain disruptions, and unpredictable demand. Despite their best efforts, many manufacturers struggle to meet OTD targets due to scheduling, maintenance, and production planning inefficiencies. Low OTD means increased costs and lost customers, so tackling those challenges is essential. This article will highlight these difficulties and break down strategies such as real-time production monitoring and dynamic scheduling to help you improve your OTD.

What is On-Time Delivery (OTD) in Manufacturing?

At the most basic level, OTD in manufacturing refers to the percentage of orders delivered on or before the promised delivery date. However, it’s about more than just speed. Your OTD manufacturing metrics also reflect the effectiveness of your production planning, resource allocation, and supply chain efficiency.

OTD is a key metric in manufacturing, but it is sometimes confused with similar values. On-time and in-full (OTIF) is sometimes used interchangeably with OTD, but there are key differences. OTD in manufacturing focuses on timeliness alone, even if shipment orders aren’t fully complete. OTIF measures orders that are both on time and complete.

Why OTD in Manufacturing is Crucial for Your Operational Success

So, why is on-time delivery in manufacturing so important? It might seem like falling behind on orders isn’t the end of the world. However, poor OTD can seriously impact your business in these ways:

• Customer Retention: Your customers won’t be happy if your team consistently delivers late. They may become dissatisfied and look elsewhere.
• Business Reputation: It’s not just current customers you need to worry about. News that your business has a reputation for poor OTD can quickly spread, which could make signing new customers difficult.
• Increased Cost: Low OTD in manufacturing can incur costs such as rush shipping, overtime labor, or penalties set by individual contracts with your customers.
• Industry Competition: If your competitors offer products of similar quality and cost, then the deciding factor for buyers could be OTD delivery.

Your team can’t afford to overlook OTD. Monitor this critical metric closely if you want to be known as a business that meets delivery deadlines consistently.

How to Calculate On-Time Delivery

You can calculate your on-time delivery rate by dividing the orders delivered on time by the total number of orders shipped and multiplying this figure by 100 to obtain the percentage.

OTD = (Orders Delivered on Time/Total Orders Shipped) x 100

For example, your team might process 10,000 orders in a month. Let’s say 8,000 were delivered on time, while the remaining 2,000 were either late or undelivered. Applying the formula, we can calculate an OTD of 80%.

80% = (8,000/10,000) x 100

This calculation is simple enough, but the challenge comes when you want to evaluate OTD for a range of products or across different periods. An effective production monitoring solution can help your team monitor and improve OTD in real time.

Factors Affecting OTD Performance

OTD depends on many factors, with various aspects of production contributing to whether deliveries are on-time or late. Many of these are largely outside your control. For instance, supply chain disruptions can grind production to a halt, or you might experience difficulties with third-party shipping and logistics providers.

However, many factors are within your control. For example:

• Production bottlenecks due to machine failures and inefficient workflows can lead to poor OTD.
• Inaccurate production planning and demand forecasting can impede your ability to deliver orders on time.

Both these issues can be addressed through process optimization, leading to improved OTD.

The Critical Link: How Production Efficiency Improves Your OTD

OTD and production efficiency are closely linked. An optimized manufacturing process will naturally have higher OTD rates. The critical factors affecting production efficiency, such as cycle time, machine utilization, and inventory management, impact OTD by dictating production capacity and lead time.

Improving operational efficiency by leveraging manufacturing intelligence will also boost your OTD. Automated monitoring can identify and eliminate bottlenecks before they impact deliveries, predictive maintenance can reduce unexpected downtime, and real-time visibility lets your team make quick adjustments to meet OTD targets.

Achieving Better On-Time Delivery in Manufacturing

Wondering how to improve on-time delivery in manufacturing? You can take advantage of a wide range of strategies, including:

• Adopt the latest smart manufacturing technologies to optimize workflows through enhanced automation.
• Strengthen your supply chain and choose reliable vendors to avoid material shortages.
• Reduce unexpected downtime by monitoring machine health and applying predictive maintenance.
• Implement dynamic production scheduling to adjust workflows based on demand to avoid inventory shortages or excess.
• Employ real-time production monitoring to trigger alerts for bottlenecks and other production delays.

Every manufacturing environment is unique, so understanding your team’s specific challenges and applying the appropriate strategies is key to improving OTD.

Key Metrics Driving OTD Success in Manufacturing

While many factors are at play, your team can focus on a few KPIs to boost OTD. Overall equipment effectiveness (OEE) is among the most important, providing clear insight into machine performance and availability. Quality is another area to monitor closely, with metrics such as first pass yield (FPY) strongly influencing OTD.

Production cycle time measures the time to manufacture a unit from start to finish and is a strong indicator for OTD. The same is true for lead time, which is the average time from an order coming in to a customer finally receiving it.

Benefits of Achieving High OTD Rates

Achieving high OTD rates unlocks a variety of advantages for your team. You’ll have satisfied customers who will stick with you, increasing your revenue. Your operational costs will be lower because you won’t have to deal with rush shipping, overtime, and penalties.

Establishing your company’s reputation for on-time delivery leads to increased revenue and growth. You’ll enjoy more repeat business, becoming more competitive in your industry, and securing additional contracts.

Aligning Production Scheduling with OTD Goals

Production scheduling is directly tied to OTD. Effective scheduling avoids delays and allows you to get more orders out on time. MachineMetrics’ Production Scheduling Intelligence provides the data-driven scheduling solution your team needs to improve OTD.

By leveraging real-time production data, MachineMetrics makes it easy for your team to adjust production schedules dynamically. Intuitive data visualizations let your team monitor scheduled OTD targets and predicted completion dates in real time. You’ll know about any delays immediately so your team can take action to maintain OTD.

However, improving scheduling on the shop floor isn’t enough. There must be a direct alignment between business systems, such as your ERP, and the shop floor’s real-time activity. The work order or invoice determines the target delivery date, which is managed through your ERP. If production progress isn’t tracked withn that context, then late deliveries are only discovered after the fact when it’s too late to take corrective action. Manufacturers need a system where ERP work orders sync with live shop floor data, ensuring that production status, due dates, and potential bottlenecks are always visible.

How to Set Realistic OTD Goals

Like any other metric, OTD is only useful to your team if you can set goals and monitor your progress toward them. However, this raises the question of how to set those goals. Tracking your historical performance is an important starting point, providing insight into current performance and highlighting opportunities for improvement.

You’ll also want to keep in mind that OTD benchmarks can vary across different manufacturing segments. The nature of your operations will determine what good or poor performance looks like. Comparing your operations against competitors can help you establish a realistic benchmark for where your OTD performance should be.

Common Challenges in Maintaining OTD in Manufacturing

Achieving high OTD is vital for your company’s long-term success. However, it isn’t always easy. Watch out for these common OTD challenges:

• Unreliable suppliers lead to late raw material shipments that disrupt your production flow.
• Equipment breakdowns cause unplanned downtime and reduced machine availability, which delays order production.
• Poor inventory management can leave your team unable to keep up with current orders and future demand.
• Quality control issues lead to defects and rework that add further potential disruptions to orders.

Putting your team’s best foot forward when it comes to OTD in manufacturing requires a robust solution that tackles multiple challenges. With MachineMetrics, you can access the tools you need to streamline production, maintenance, scheduling, and more.

MachineMetrics: Real-Time Data for OTD Optimization

OTD in manufacturing can make or break your business, but applying the right strategies and tools positions your team to improve OTD continuously. MachineMetrics is here to help with a Production Intelligence Platform that elevates your monitoring, scheduling, and optimization to achieve the highest OTD rate. Book a demo today to talk with our team and see MachineMetrics in action.