Influencing a Supplier Using Delivery Windows: Its Effect on the Variance of Flow Time and On‐Time Delivery

Abstract

A critical outcome that buyers seek is the timely delivery of the products they purchase from suppliers. Delivery windows have been proposed as a means to achieve this goal. This paper proposes a relatively simple model that shows that delivery windows do not always improve delivery timeliness. The effect of buyer‐specified delivery windows on the supplier's flow‐time variance, inventory, expected tardiness, and probability of on‐time delivery is analyzed. The analysis shows that although using delivery windows may result in the supplier's preferred action being a reduction in the variance of flow time, actual delivery timeliness may not improve. On‐time delivery performance is analyzed for linear and hyperbolic variance cost functions. The results indicate that when the cost of maintaining lower variances grows exponentially, variance reduction does not lead to more timely deliveries.