Establishing delivery guarantee policies

Delivery reliability has emerged as a key competitive factor in a variety of service and manufacturing industries. Thus, many firms are adopting the use of delivery-time guarantees as part of their market positioning strategy. This research generalizes existing blanket delivery-time guarantee models on several fronts—by drawing on concepts from other fields and by relaxing simplifying assumptions—to provide a comprehensive and practical model. Some analytic results are provided, and numeric experimentation is conducted to provide further insight into the problem. The effects of service improvements, process improvements, and system congestion are analyzed. The results indicate that pricing policies are less critical than previously thought when the payment made for late delivery is included as part of the delivery-time guarantee policy.