What is the value of delivering on time?

Tapio Niemi, Ari-Pekka Hameri, Petro Kolesnyk and Patrik Appelqvist

Journal of Advances in Management Research, 2020, vol. 17, issue 4, 473-503

Abstract: Purpose - Delivery punctuality is essential in supply chain management, yet the cost of untimely delivery is usually assumed to be given or based on intuition and not quantified by facts. Design/methodology/approach - The authors used a data set containing detailed transaction data for a nine-year period on orders and deliveries of sport goods. The methodology is based on applying a polynomial distributed lag model to longitudinal data on supply chain transactions. Findings - The results indicate that small delivery delays up to two weeks decrease the sales by maximum 10% during a period of 3–4 weeks. Longer delays, up to 45 days, have a larger negative effect on sales, which can also last longer. For this case company, the estimated lost sales due to late deliveries (=5 days) were 5.1% of the delivery value. The longer delays got, the large the cost was: delays at least 45 days long were the most costly causing almost 40% of the estimated lost sales. Practical implications - This study offers a methodology for quantifying lost sales due to delivery delays and estimating how long the poor delivery performance affects retailers' order behaviour. Originality/value - The results give a quantitative decision-making tool for supply chain managers to estimate the profitability of investments in the supply chain performance, especially on improving punctuality.

Keywords: Supply chain management; Delivery punctuality; Cost of late delivery; Polynomial; distributed lag models (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eme:jamrpp:jamr-12-2019-0218

DOI: 10.1108/JAMR-12-2019-0218

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