ORDOrders & serviceStop 1 of 9
Order to delivery basics
Everything that happens between a customer's order and the delivery at their door, and the measures that show whether it worked.
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When a supermarket chain orders 500 cases of shampoo, a chain of steps starts. Together they’re called order to cash (O2C), the sell-side mirror of procure-to-pay:
- Order capture: the order arrives by EDI, a portal, a sales rep’s app or email, and is checked for price, pack sizes and delivery date.
- Credit check: is the customer within its credit limit?
- Availability check: can we promise the quantity and date? (That’s ATP.)
- Allocation: if stock is short, who gets it?
- Delivery creation and picking: the warehouse picks and packs the order.
- Goods issue and shipping: stock leaves the building; ownership and cost of goods sold are booked.
- Proof of delivery: the customer confirms receipt, quantities and condition.
- Billing and payment: invoice, collection, and clearing the customer’s account.
Things go wrong at every hand-off: a price mismatch blocks the order, a credit hold delays it, a picking error ships the wrong pack, a missed truck turns “on time” into “late”. That’s why companies measure the whole chain, not just the warehouse:
- Order cycle time: order received to order delivered.
- OTIF: share of orders delivered on time and in full.
- Perfect order rate: on time, complete, undamaged and with correct paperwork and invoice. Because it multiplies several conditions, it’s always lower than any single measure.
Words to use
- Order to cash (O2C)
- The end-to-end process from receiving a customer order to collecting payment.
- Perfect order rate
- Share of orders that are on time, complete, undamaged and correctly documented.
- Proof of delivery (POD)
- The customer’s confirmation that goods arrived, in what quantity and condition.
Where the time goes
| Step | Hours | Mostly |
|---|---|---|
| Order capture and checks | 1 | Work |
| Credit check, including holds | 3 | Waiting |
| Availability check and allocation | 1 | Work |
| Waiting for the picking wave | 6 | Waiting |
| Picking and packing | 2 | Work |
| Waiting for the truck | 8 | Waiting |
| Transit | 30 | Moving |
| Unloading and proof of delivery | 2 | Work |
Of the 21 hours before the truck leaves, only about 4 are work; the rest is waiting for a credit release, a picking wave or a truck. Cutting those waits usually shortens the cycle more than speeding up any single task.
OTIF and the perfect order
OTIF counts an order as a success only if it arrives on time and complete. The perfect order adds more conditions: undamaged, with correct documents and a correct invoice. Because every condition must hold, the rate is roughly the product of the individual rates:
Four measures that each look good (96% on time, 97% in full, 99% undamaged, 98% correct paperwork) give only about 90% perfect orders.
Backward scheduling
To deliver on the requested date, the system works backwards: requested delivery date, minus transit time, gives the goods-issue date; minus loading time gives the loading date; minus picking and packing time gives the date the stock must be available. If stock won’t be available by then, the system works forwards from the earliest availability date and proposes a new delivery date.
On time to what?
“On time” can be measured against the date the customer requested or the date the company promised. Measuring against the promised date flatters performance: if the company promises late dates, it can be “on time” while customers wait longer than they wanted. Track both, and treat the gap between requested and promised dates as a measure of its own.
Designing order management
- Order channels: EDI (electronic data interchange) messages from large customers, portals and apps for smaller ones, each validated automatically against prices, pack sizes and delivery rules.
- Credit management: automatic release for low-risk customers and small amounts, with holds reviewed quickly; a credit hold that sits overnight can cost the delivery date.
- Order prioritization: when resources are short, rules decide which orders are picked and shipped first.
- Backorders: clear rules for partial shipments, backorders and cancellations, agreed with customers in advance.
Differentiated service
Not every customer needs the same promise. Companies segment customers and set different delivery times, order cut-offs and minimum order sizes, priced into the commercial terms. A key retailer may get daily deliveries with tight windows; a small distributor, twice-weekly deliveries. Designing these promises deliberately, rather than serving everyone the same way, controls the cost to serve.
When customers measure you
Large retailers score suppliers on OTIF at their own warehouses, often within narrow delivery windows, and charge penalties for misses. That moves the definition of “on time” into the customer’s hands and makes accurate appointment booking, loading and transit as important as stock. Suppliers respond by measuring OTIF exactly as each key customer does, finding the causes of misses, and fixing the handful that dominate.
Interview kit
Practise it out loud
Answer each question yourself before opening the model answer.
Order to delivery, the core of order to cash, runs from order capture through credit and availability checks, allocation, picking and packing, goods issue and shipping, proof of delivery, then billing and payment. Each hand-off can fail, so I’d measure end to end with order cycle time, OTIF and the perfect order rate, and use reason codes on failed orders to find the weakest step.
OTIF is 95% but customers still complain. What might be wrong?
OTIF may be measured against our promised date rather than the customer’s requested date, or at line level rather than order level. Other failures don’t show in OTIF at all: damage, wrong paperwork, invoice errors. The perfect order rate and the customer’s own measurements give a truer picture.
Why is the perfect order rate always lower than OTIF?
Because it requires every condition at once: on time, in full, undamaged and with correct documentation. If each is 95%, the combined rate is roughly 0.95 × 0.95 × 0.95 × 0.95, about 81%.
Connected stops
Where this idea feeds in, or gets its inputs from.
Sources and further reading
- Chopra, S. & Meindl, P. Supply Chain Management: Strategy, Planning, and Operation. Pearson.
- Magal, S. R. & Word, J. (2012). Integrated Business Processes with ERP Systems. Wiley.
- Christopher, M. (2016). Logistics & Supply Chain Management (5th ed.). Pearson.