Exploring the Impact of Delivery Performance on Customer Transaction Volume and Unit Price: Evidence from an Assembly Manufacturing Supply Chain

Production and Operations Management · 2017 · Volume 26 · Issue 5

Abstract

This study examines the effect of delivery performance on customer transactions. We propose that different delivery performance dimensions (on-time delivery rate, early delivery inaccuracy, late delivery inaccuracy, and delivery speed) have varying impacts on future customer transaction quantities and unit prices. We further explore the effect of customer types on the proposed relationships. Trade customers (resellers) and Original Equipment Manufacturer (OEM) customers generally have different operational needs for deliveries and therefore may value these metrics differently. Using instrumental variable regression, we analyze a proprietary transaction-level dataset. The information was compiled by a Fortune 500 manufacturer from its Heating, Ventilation and Air Conditioning (HVAC) control product supply chain, consisting of the manufacturer and its customers. The results indicate that measures of delivery performance affect customer transaction quantity and unit price differently. Furthermore, these impacts can differ significantly between trade customers and OEM customers. These findings provide fine-grained insights about tuning delivery capabilities to increase sales volume or boost price.

Keywords

delivery performance, customer segments, competitive advantage, purchase behavior, instrumental variable regression

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