On-Time Delivery KPI: How to Measure and Improve this Metric?

On-time delivery KPI is the metric used for measuring a company’s supply chain efficiency. The purpose of it is to determine if the organization is meeting the timely delivery goals or not. 

This KPI is crucial for measuring both customer satisfaction and carrier performance. There might be several reasons that can affect the dispatch of shipment and delivery time. 

It eventually impacts negatively on the brand’s reputation and triggers frustration and distress in customers. The overall business might take a toll if your company fails to fulfill the delivery on the promised delivery date for even a single order. 

So, the delivery businesses need to understand the importance of on-time delivery and assess the KPI metric to rectify the problematic areas and improve the process. 

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What is On-Time Delivery?

On-time delivery (OTD) is one of the most sure-shot ways to meet customers’ satisfaction. Delivery businesses and eCommerce companies mostly measure it using a key performance indicator (KPI) metric. They use this metric to evaluate their potential of fulfilling orders within the specified delivery date. 

Why is on-time delivery important for your business?

On-time delivery metrics are important for delivery businesses because it helps in customer retention. By delivering the packages on time, you attain customer satisfaction and earn their trust in your brand. Eventually, they will come back to buy more. There will be fewer customer complaints due to late deliveries

If the on-time delivery rates drop, the customer service calls will increase, and so will the subsequent operating costs. Moreover, the customers might just choose not to order from you again. 

Apart from this factor, the on-time delivery metric is also ideal for helping you determine the bottlenecks in your business operations. You will be able to identify the areas degrading your potential to deliver on time. 

Tracking and Measuring On-Time Delivery Metrics

The easy way of calculating or tracking and measuring the on-time delivery KPI is to have the total number of deliveries made by the company and the number of delayed deliveries. 

The formula for measuring the on-time delivery KPI is:

100 – [(No. of late deliveries * 100) / Total no. of deliveries] = % of on-time deliveries

For instance, if you have a total count of deliveries as 1000 in a month, inclusive of 25 late deliveries, then by applying the formula, the on-time delivery KPI for you will be 97.5%. 

Different Types of On-Time Delivery KPIs

1. General on-time delivery KPI

The general on-time delivery rate metric provides the percentage of deliveries made per the promised delivery dates. 

2. Average on-time delivery KPI

Calculating this metric will give you a long-term average metric for your on-time delivery rate. 

Suppose you want to calculate the average on-time delivery rate for a year, then you must add the monthly metrics and divide them by the total number of considered months. E.g., if you are calculating the average for a year, divide the sum by 12. 

3. Delivery time KPI

The KPI measures the time taken to deliver the packages to customers. This metric will help you understand what obstructs the drivers between the pick-up and delivery locations. 

4. Order preparing KPI

Order preparation KPI gives an insight into the rate of deliveries you dispatch on time. If you break down the metric to measure it in terms of packaging time, labeling time, and loading time, you can eventually improve the overall order preparation KPI. 

5. Time to destination KPI

This KPI metric measures the time drivers take to find the correct destination for delivering the package and collecting the proof of delivery. 

Such a metric will help you realize if the drivers need more interaction time with the customers and how it affects other deliveries in the planned route. 

6. Time to base KPI

Such a metric determines the time the drivers need to complete the deliveries and return to the base or fulfillment center. It will help you get information on the driver’s availability after completing all deliveries for the initial route. 

7. Customer satisfaction KPI

Measuring this important KPI will help ensure that your customers are happy with your order fulfillment techniques. Companies must collect customer data and respond to poor KPIs to improve order fulfillment operations. 

8. Driver performance KPI

The delivery efficiency of a company depends on the performance of delivery riders and drivers. You need to collect the driver performance metric to determine the efficiency of each of your employees. 

You can always get route optimization software for genuine traffic and route problems to ensure faster deliveries through the shortest distance possible. You can train the inefficient employees to work accordingly and improve their performance metrics. 

Reasons that Causes On-Time Delivery Rates to Drop 

Now that you know all the common delivery performance metrics, you must have realized that on-time delivery is the sole motive for acquiring this data. So, what contributes to dropping down the on-time delivery metrics

Here are the reasons that possibly deteriorate the delivery performance:

1. Poor inventory management

Inefficient inventory management can result in customers placing out-of-stock orders. As a result, the lead times will increase, and the delays will be unavoidable. As a result, the customer complaints will increase, and so will the cancellation rates. 

2. Delay from the manufacturer’s part

In most cases, where the manufacturer directly ships the orders, the delays occur when the products are not ready from their end. 

The manufacturers might not have prepared the lot by the specified time, which will inevitably delay the delivery time for customers who have placed the order. 

3. Technical payment issues

Sometimes, there might be a delay caused by the customer or bank’s end at the purchasing part. It is mostly because the payment goes to hold due to some technical issues at the bank or a problem from the customer’s end. 

In such cases, the estimated delivery date will eventually change if the payment confirmation takes a few hours or a day. 

4. Lack of optimized Routes

The delivery businesses that are not aware of how to optimize routes for their drivers are often late in fulfilling the orders. An unplanned route will increase the miles that your drivers cover for delivering the packages to the customer. In this way, the estimated delivery time takes a hit. 

Hence, the order cannot be delivered by the requested delivery date. As a result, customer retention gets affected, even though they are informed about the problem. 

5. Delivery using pen & paper

The on-time delivery metrics will go down if the company is still using pen & paper resources for preparing route plans and managing the delivery operations. In this fast-moving competitive industry, one needs to switch to digitization and automation in order to keep up with the competition. 

Pen & paper method of planning routes, assigning fleets, maintaining driver and customer records is time-consuming and will impact on the order fulfillment time. 

Steps to Improve the On-Time Delivery Metrics

By now, you must have identified what is negatively impacting the on-time delivery metrics for your business. Here are the steps for you to improve your on-time KPI score and help your business make more timely deliveries, and earn customer loyalty:

1. Set a timely delivery goal

Most companies should have internal goals to benchmark what customers expect and how they can fulfill them. You should take real-time updates on the performance of your employees every day and maintain them on a scorecard. Offer incentives and bonuses to employees who meet the goals. 

2. Work on proper inventory management

You can get an inventory management tool to get notified when a product is out of stock and update the same across the sales channels. A resource planning software could help you achieve supply chain efficiency and inventory management. 

3. Schedule timely order pickups

You must stop scheduling deliveries for single packages unless it is a food delivery business. You cannot just work with a model where the delivery driver would pick one package for delivery at a time. Try batch pick-ups, cluster pick-ups, or zone pick-ups of the orders or parcels. Hence, this will decrease the overall fulfillment time of the orders.  

4. Smart packaging ideology

The more you pack the items, the longer it will take to get the orders delivered. For multiple orders from the same customer, you can try packing them in a single box, unless they are meant to be packed separately due to their fragileness. Use only the protective wraps needed, and don’t overdo it. 

5. Link your business with route planning software

A route planning software has intuitive features to automatically plan the delivery routes for your multiple stops. Hence, shorter delivery routes in a synchronized manner will help you meet the estimated delivery times for all of them. 

Deliver on time with Upper Route Planner

Upper Route Planner eliminates the manual dependencies of logistics companies for planning out the routes. Instead, automation is being proposed within the software to plan the routes and send instant updates to the customers about the shipment. 

Apart from that, you can also optimize the routes after they are created to pinpoint the priority deliveries. Upper will reroute the path most feasible to meet the estimated delivery dates. With the shorter routes, your on-time delivery metric will gradually improve. 

You can also seek API integration with Upper Route Planner to link your eCommerce business platform or any other management software. It will help you uniformly handle most of your business operations. 

To learn more about Upper, prefer the 7 days FREE trial and get used to its features. A hands-on experience will help you decide how impactful it would be for your fulfillment process and delivery business. 

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You must use a proper route optimization tool to get shorter and more accurate routes to the customer addresses. Apart from that, the other fulfillment processes should be organized and executed within the company on time, such as manufacturing, labeling, packaging, and loading.

If the order batch is dispatched on time, then the planned route can help deliver them within the promised time.

Key Performance Indicator (KPI) for delivery businesses is important as it helps them realize the loopholes in their operations. Such metrics can easily improve those bottlenecks and stabilize the business performance.

Delivery metrics are the percentage of success and failure of different business operations. Common delivery metrics include on-time delivery, driver performance, time to destination, time to base, and order fulfillment.

Summing Up

You are now aware of what the on-time delivery metric is and how it can help your business grow. Every late delivery your company makes is hampering your business impression, and you will eventually lose customers. 

One customer with a bad experience will spread negative word of mouth to avoid preferring your services. Hence, your sales rate and profitability might take a hit. Therefore, it is time you improve your operational efficiency and overcome the factors causing the delivery delays

Upper Route Planner can help you meet the delivery goals by scheduling the shortest routes with an available scope of optimization. Take a demo of our software and get a detailed understanding of its features. And then, you will always be on time for fulfilling the orders of your customers. 

Author Bio
Rakesh Patel
Rakesh Patel

Rakesh Patel, author of two defining books on reverse geotagging, is a trusted authority in routing and logistics. His innovative solutions at Upper Route Planner have simplified logistics for businesses across the board. A thought leader in the field, Rakesh's insights are shaping the future of modern-day logistics, making him your go-to expert for all things route optimization. Read more.