How to measure Due Date Performance so you CAN improve it!

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Due date performance (DDP, also called On-time Delivery) is a common metric used both internally and by vendors to monitor the performance of job shops, fabricators, MRO, and machine shops.  Whether DDP is a Key Performance Indicator (KPI), Balanced Scorecard metric, or part of your vendor performance, it is an important measure that many shops strive to improve.  And that’s why we include it in our Dashboards  for our Velocity Scheduling System and Job Shop Pricing Programs.

How is Due Date Performance (DDP) measured? 

Most commonly DDP is the percent of jobs that were shipped on-time during any given shipping period.  For example, if you shipped 10 jobs today and 4 of them were shipped after their promised shipped date, then your DDP was 60% for that day.

If your vendors are measuring you, they might measure the percent of jobs that arrived on-time during a given period.  For example, you shipped a customer 10 jobs in a month and 4 of them arrived after their promised date, then your DDP was 60% for that month.

Whether you’re using shipped or arrived, depends on what you’re promising.  Check out your P.O. terms to find out.

Due Date Performance Graph - How to measure DDP

Why is Due Date Performance Difficult to Improve?

It can be difficult to know how to improve DDP for 2 reasons:

  1. DDP is an effect. It’s the result of your capacity, sales volume, productivity, bottlenecks, mix of work, and your schedule.  To improve an effect, you must improve the cause(s).  It can be difficult to know where to start.  What is having the biggest impact on your DDP?  Is it your less than optimal productivity?  Your capacity?  Mix of work?  Your schedule?
  2. DDP is a lagging indicator. So, for you to get improvement in your DDP, you must first improve what’s causing your poor DDP.  Let’s say you start implementing Velocity Scheduling System (VSS) to “ship more with the same resources”, which is another way of saying – to improve productivity.  As a result, very quickly you start to ship 15% more.  Will your DDP improve?  Yes, BUT:
    • If you have oversold your capacity beyond the improvement in productivity you’ve gained, your DDP might improve, but not to 100%. Typically, with VSS you get an initial jump in productivity, then more gains in productivity as you progress.  Further DDP improvement should then follow.  Unless ….
    • You’re running jobs out of order. If you’re running jobs out of order your productivity gains may have little to no effect on your DDP.
      • If you are running jobs that are not yet needed – you are running out of order. For example, this can occur when we are trying to gang jobs for material utilization, batch jobs for a heat treat or paint process, pull orders ahead to run more than is currently needed to save setups, make extra because we know our customers will eventually take them, and/or you don’t take into account the due date, internal process time and outside process time when deciding which jobs to run in which order.  When we run out of order, we are using capacity today for jobs that should not have been started.  Then we don’t have enough capacity to run what is needed and due – we’re WASTING our capacity.   We have a saying (pattern interrupt) – where there is inventory, there is capacity!
      • If every machine/department is not working on the highest priority work – you are running out of order. This can happen even when jobs were released in the right order, but there’s so much WIP on the floor and we soooo want to stay busy, we work on what we see.  So, another saying (pattern interrupt) is – Efficiency is EVIL!

Improving Your Due Date Performance

Knowing that we were 60% on time last month doesn’t help us to know where to improve.  Exactly what you should measure and do, will be specific for YOUR shop.  But here’s an approach that might help.

Backlog Days Late

  1. Get a list of your entire open backlog.
  2. Sort on due date.
  3. Add a column, “Backlog Days Late”.
  4. Calculate the Backlog Days Late by calculating the number of days (or business days) between the due date and today. For the jobs that are not yet late, this would be 0.
  5. Total the column “Backlog Days Late”.

If you are doing the right things to improve DDP, you will see your backlog days late reduce typically before you see the DDP percent increase.

Ah ha moment:  If you’re not seeing Backlog Days Late improve, your improvements may not be working or be big enough to actually improve DDP.

Improving Due Date Performance

Days Shipped Early <- Measure this to see if your WASTING capacity!

  1. Get a list of your jobs that shipped over the last 6 months (or any time period you like).
  2. Add a column, “Days Shipped Early”.
  3. Calculate the Days Shipped Early by calculating the number of days (or business days) between the due date and the shipped date. If a job shipped on its due date, the number will be zero.  If it shipped early, it will be a positive number.  If it shipped late, it will be a negative number.
  4. Count how many jobs shipped early.
  5. Total the number of days those job shipped early.

If you have a lot of jobs shipping early by a fair amount of days, you are likely running out of order.   You are wasting capacity on jobs that are not yet due and running out of capacity for the jobs that are due.  Make sure you’re working on the right jobs in the right order to improve your DDP!

Ah ha moment:  If you are shipping both late and early – there is an opportunity to improve DDP!  Do this exercise NOW and see if you have an opportunity! Let me know what you find!

Why is due date performance difficult to improve?

Throughput Dollar Days

This third metric will help you decide what to work on if everything can’t be on time.  The traditional DDP measure equally weights a $1000 job that is 1 day late with a $100,000 job that is 7 days late.  They both impact your DDP the same.  But do they impact YOUR bottom-line the same?

  1. Get a list of your entire open backlog.
  2. Sort on due date.
  3. Add a column, “Backlog Days Late”.
  4. Calculate the Backlog Days Late by calculating the number of days (or business days) between the due date and today. For the jobs that are not yet late, this would be 0.
  5. Add a column, Job Throughput. If you can’t get the information or calculate Throughput for some reason substitute sales and use Job Sales.
  6. Calculate the Job Throughput by taking the selling price of the job and subtracting the Truly Variable Costs (also called Totally Variable Costs, TVCs). TVCs typically include raw material, outside processing, freight in/out, and sales commission.  Do NOT subtract labor or any other allocated costs!  For more information on calculating Throughput visit:  https://www.scienceofbusiness.com/throughput-accounting/#TIOE.
  7. Add a column, Throughput Dollar Days or TDD (or Sales Dollar Days, SDD if you don’t have Throughput information).
  8. Calculate TDD by multiplying the Backlog Days Late by the Throughput Dollars.
  9. Now sort on TDD.

The jobs that generate the most Throughput, contribute the most to your profits, so it might make sense to work on the highest TDD jobs if you can’t be on time with everything.

In our example the TDD for the $1000 job that is 1 day late is $1000 dollar days.  And the $100,000 that is 7 days late has a TDD of $700,000 dollar days.  So, why would we give them equal weight?  It’s clear that the $700,000 dollar days should be worked on first. (There are exceptions with important customers and other things – that’s why Velocity Scheduling System must be customized for your shop.)

Ah ha moment:  Jobs are not equal and should NOT be treated as equal when it comes to measuring DDP.

Throughput Dollar Days

These 3 metrics are part of the Velocity Scheduling System and Job Shop Pricing Dashboards and can give you some insight into improving your Due Date Performance.  Calculate these for yourself and let me know what you find!  Leave a comment below or email me at info at ScienceofBusiness.com.

Best Wishes

Dr Lisa

P.S. One final Ah ha momentWhile measuring the right things is a step in the right direction for improving DDP, the biggest impact on DDP is typically from productivity improvements because it can often be improved 10, 20, 30+%.  

If you would like to know how much productivity improvement might be possible for you, sign up for a free 1-hour strategy session.   We’ll go deep and discuss your shop and unique situation to determine if your shop is a good fit.

This article is copyrighted by Science of Business, Inc.  All rights reserved worldwide.

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