Make Your On Time Delivery Business More Profitable in 5 Easy Steps
You have an existing on time delivery business. How do you turn it into a profitable business? In this article, we'll show you five ways to increase profits.
- Optimize your delivery process to make it smoother and faster.
- Offer extra services to make your business stand apart.
- Give your customers great service, so they’ll want to buy again.
The increased demand for home delivery makes running an on time delivery business a good decision.
Food delivery is one such growth market—the global food delivery service industry generated $82 billion in gross revenue in 2018, and Forbes predicts that number will grow to $200 billion by 2025.
Demand for retail delivery as varied as box stores to Amazon to local sellers; same-day delivery of items like flowers and prescriptions, and grocery delivery, to name a few.
With plenty of choices for delivery services and high expectations from customers that packages arrive when they’re supposed to, it’s not always easy to be successful.
Here’s how to make your on time delivery business more profitable in five easy steps.
What is on time delivery?
On-time delivery can be defined with fancy business words, like a KPI or “key performance indicator” that measures your “supply chain efficiency.”
Here’s another formal definition courtesy of xcelpros:
“OTD is a metric used to assess the ability of a business in fulfilling the order within the promised delivery date.”
But the basic definition of on time delivery is that you delivered your package when you said you would. You’ve met the promised delivery time, leading to customer satisfaction.
To drill a little deeper, on time delivery service usually refers to a range of dates rather than a particular date.
As a measurement, you may select an on time delivery KPI as delivery between particular dates, for instance, X days before and X days after a specified date.
Late delivery would be more than a few days days after the set due date.
It is true that on time delivery metrics are key to delivery operations, whether a big box store with an in-house fleet or an individual driver working for the local florist.
If you’re the driver delivering on behalf of a business or you run an on time delivery service, your OTD is how the businesses and customers you serve will measure your performance.
Why is on time delivery important?
TLDR; getting your goods delivered on time is critical to success. Let's give this a more thorough examination.
For one thing, the boom in popularity of online shopping has meant customer expectations continue to increase regarding delivery.
On time delivery: latest stats
- 66% of Americans would stop ordering from a company following a late delivery.
- 51% of Americans blamed the delivering company the most for a late delivery.
- Half of shoppers in the US are willing to wait for a maximum of five days
Perhaps unsurprisingly, when it comes to perishable foods the expectation is larger; Statistica found 36% of want their groceries delivered on the same day.
And that’s not all.
We found similar trends in our recent dive into the importance of on-time delivery.
Recently, Circuit surveyed over 1,000 Americans to find out which companies consumers trusted most, as well as how they reacted when a delivery went awry.
Shockingly, 66% of Americans would stop ordering from a company following a late delivery. But expectations may vary depending on the type of order and age of the customer.
Our research found that expectations for on time deliveries led many Americans to experience discontent with companies who didn’t deliver on their promise of speed.
Notably, delayed deliveries had an emotional impact on earlier generations, which can be valuable information to bear in mind if your target demographic includes Baby Boomers.
Still, the biggest expectation for everyone is that you deliver when you said you would.
In fact, some consumers have such high expectations that they would stop using a company simply over a delivery delay.
With these Increasing consumer demands for the immediacy of delivery, the efficiency of on-time delivery is far more important.
On the flip side, our research also found nearly three-quarters of Americans were willing to reorder from a company that delivered in a timely manner.
So it’s no surprise companies that deliver well are thriving.
If you don’t, you will lose the customer. If you’re delivering for someone else, they will lose the customer, which jeopardizes their relationship with you.
Let’s add fuel more to the fire: note these other survey statistics:
- 69% of respondents are “much less likely” or “less likely” to shop with a retailer in the future if an item they bought is not delivered within two days of the date promised.
- 16% of respondents will abandon shopping with a retailer altogether if they get an incorrect delivery just one time
- 14% will abandon the retailer if they get a late delivery just one time.
still wondering why is on time delivery important, the answer is that a late delivery creates a big hit on customer satisfaction, brand reputation, and your bottom line.
A late delivery impacts customer satisfaction, brand reputation, and your bottom line
Some estimates place the cost to find a new customer at five times as much than keeping an existing one.
Late delivery: other problems to consider
There are other fallouts, including increased customer support costs, as customers are contacting your support team trying to find their packages.
Suppose you offer free services to make up for the delays — you could end up with financial losses.
For instance, customers may claim refunds, or you might have to cover their sending costs, meaning more money out of your pocket.
Late deliveries create the potential for negative online reviews, which damages the brand, as customers take their complaints to social media.
Delays also impact costs in other ways.
Waylaid drivers cost more for gasoline, and one late order caused by a delay will affect every other delivery time that day, and potentially the next day.
The only way to fix a late delivery is to find the cause, and solve the problem.
Causes of late delivery
As you can imagine, there are a lot of factors that go into successful ontime delivery. As a result, there are a lot of factors that can make a delivery late.
Some are out of your control, like bad weather or a sudden traffic accident.
But many others are within your control, so it’s worth taking steps to avoid these common causes of late delivery:
1. Inventory management
The customer orders an item that isn’t in stock, or can’t reach the customer’s address in the promised timeframe.
Without on time warehouse tracking, for instance, inventory may not be available in time to meet delivery deadlines. If the order is late to ship, then the delivery will also be late.
2. Improper sending documentation
The customer may make a mistake in giving address information; the online form might not capture the correct information; or, the sending order is prepared with a mistake. That causes delays in delivery.
3. Border issues
If inventory has to cross borders, it may need special documentation, customs or duty fees, or face other delays.
4. Lack of qualified drivers
It’s vital to have an effective process for hiring and training delivery drivers to guarantee your on time deliveries are always a success.
That’s why we recently spoke to Lisa Davis-Isaacs, As a Delivery Manager at Evri, who trains and develops 100s of delivery drivers.
She breaks down her training approach into four key areas:
- Customer service training
- Software training
- Process and professionalism training
- Health and safety training
Here’s Lisa’s checklist to set new drivers up for success, covering everything you need to know.
5. Inefficient driver routes
Once your drivers are trained,you must give them the tools to succeed. That means proper guidance on their routes.
Having trouble finding an address, getting lost, or taking longer than necessary by having ineffective route planning are all costs to your business that can be avoided.
6. Improper order tracking
If you over-promise a delivery date and can’t meet it, you lose customer confidence. You need to find where every package is, and give that information to the customer.
Collecting electronic proof of delivery is also important, so customers can’t question whether your package actually made it to their door.
7. Vehicle breakdown
Whether you own your fleet or your drivers have their own vehicles, it’s important to follow a regular maintenance schedule.
This can help avoid unknown breakdowns. But problems can still happen, so it’s important to have a way to find the closest available driver who can take over.
A proper tracking and route planning system like our software, Circuit for Teams, will give you that capacity.
That’s what can go wrong with on-time delivery. Here’s what to do right to have success.
5 steps to make your on time delivery business profitable
To recap, when you ask customers what makes a high-quality delivery experience, their answers should not be a surprise:
- Delivering on time, every time.
- Delivering the right packages to the right place.
- Getting customer communication right.
- Being careful with packages.
So here are five steps to make your on time delivery business profitable.
#1. Improve customer service
Poor customer service costs businesses more than $75 billion a year.
When it comes to delivery, customer service means clarity in communication as customers wait for their package.
In other words, an “explanation of the delivery service on the website, communication while their package is in-transit, and a confirmation that their package has been safely delivered (wherever that may be).”
On time delivery tracking is vital to customer service, whether you’re giving a one time delivery service or you have a regular customer on board.
One way to improve communication with customers is through delivery notifications.
By incorporating delivery software like Circuit for Teams, you can send customers delivery notifications so they know where their package is on its delivery route.
Internal communication is also important, and supports good customer service.
Keeping everyone in the loop means the entire supply-chain workflow is more transparent and faster. Giving your team incentives can also add some motivation for better service.
#2. Reduce delivery inefficiencies
Even experienced drivers can’t know every route in their city or region.
The cornerstone of a successful delivery business is the route, and route optimization offer speed and efficiency.
Our software, Circuit for Teams, uses real-time traffic data to chart out the fastest routes for your delivery drivers.
This reduces the time they spend on the road and gets them to their delivery addresses on time.
Here are some of the advantages you’ll have working with Circuit for Teams:
- You can add a list of drivers and deliveries in a simple spreadsheet, and Circuit will find you the fastest route for multiple drivers.
- Circuit can save your drivers hours spent on the road stuck in traffic.
- You can add special instructions, comments, or notes to packages.
- Circuits lets you track your deliveries in real time.
- You’ll have the option to notify customers with delivery updates and let them know if there are any issues or sending delays.
You can also add efficiency with flexible driver coverage. Some companies, for instance, will work with a partner who can supply drivers when needed.
This “dedicated” outsourced fleet can help an organization meet their needs and potentially grow without adding an in-house fleet. In some instances, an outsourced fleet can be more cost effective when covering seasonal demand.
#3. Automate processes
For your business to grow, processes should be automated — where you can speed up your entire delivery process by automating as many steps as possible.
It will also give visibility the entire way, as you will know where your drivers are at all times. That also makes it easier to identify issues before they become bigger problems.
Here are the benefits of automation:
- Speed up the entire process.
- Resources will be connected, allowing for visibility.
- On time delivery rates will improve.
There’s also benefit to connecting your systems, from order management to transportation and logistics management, to your driver apps and customer service interface.
#4. Offer additional services
Not everyone wants to pay for faster delivery.
In one study, more than 50% of online shoppers said that high sending fees and home delivery that takes longer than two days would likely prevent them from buying online.
But others are willing to pay; 61% say they’re willing to pay more for same day delivery.
61% say they’re willing to pay more for same day delivery
The lesson here is that a combination of services offered is a good thing.
Some customers would wait a little longer to save some money, while others would pay more to get it quick.
Still others may prefer pickup at a central location, another option that cuts down on delivery costs by sending packages to one spot, allowing customers to pick up their goods when it’s convenient to them.
#5. Manage inventory better
Calculating the right inventory management is a big part of your business success.
You need to make sure the inventory levels are just right so there’s enough product to meet consumer demand.
If you don’t have what your customers want, you won’t deliver it on time! At the same time, you don’t want to overstock products, or you’ll be taking up warehouse space that could be used for something else.
Inventory turnover ratio is how you strike the right balance between having too much versus too little product.
Inventory turnover ratio is a financial indicator that shows how frequently a company uses and replaces inventory within a set time period.
Calculating and monitoring this metric doesn’t have to be complicated, and it will help you make the right decisions about purchasing, pricing, and marketing inventory.
How to measure OTD
Improving on time delivery (OTD) involves tracking your delivery performance and making improvements to its processes.
To do this effectively OTD is the metric to track, and is calculated as:
OTD (%) = (Number of on-time deliveries) / (total number of deliveries) x 100
Or, the number of customer orders arriving on or before the promised delivery date versus the total number of order lines, and expressed as a percentage.
You can calculate OTD for several periods, including the month, quarter, or year. It may sound complicated, so let’s break that down with an example:
Suppose your drivers complete ten late deliveries in a month from 500 total deliveries. Your company’s OTD would be 490 divided by 500 for an OTD metric of 98%.
OTD vs. OTIF
While OTD measures whether the delivery is late, you may want to consider “on-time in-full” or OTIF if you sell a high volume of many products within specific time windows.
Think of delivery companies, retail suppliers (like Walmart), and micro-fulfillment businesses that need to keep strict control over their supplychains.
While it’s similar to OTIF, OTD is less specific — it doesn’t consider whether the delivery was full versus partial, just if it was delivered. Here’s more on how to measure OTIF.
However, if you want to improve the customer experience by delivering early, OTD is the best option for your business.
More on time delivery metrics
For on-time delivery, there are other metrics you may want to consider tracking, including those that measure how to improve on time delivery in manufacturing:
- Delivery in Full
- Delivery In Full on Time
- Inventory Turns in Days
- Costs as a Percentage of Sales
Monitoring these metrics will help you understand the reasons for late delivery, and take steps to improve processes and make further improvements.
On time delivery: wrapping up
The rising demand for home delivery presents a profitable opportunity for businesses that can meet the high expectations of customers.
However, success in the delivery industry means meeting the challenge of offering on-time deliveries while facing fierce competition.
To make an on time delivery business more profitable, it is essential to implement strategies such as:
- Optimizing delivery routes;
- investing in technology;
- giving excellent customer service;
- reducing inefficiencies; and
- correctly measuring success and fixing failures.
By following these five steps, your businesses can gain a competitive edge and take advantage of the growing demand for delivery services.