A late order costs a supplier three things: liquidated damages (LD) under the contract, the premium you pay to rush goods by air or express to claw back the date, and the chargebacks and other costs the customer passes on. On this calculator's defaults, a ₹50 lakh order delivered two weeks late costs about ₹4.00 lakh, or 8.0% of the order, and the LD penalty is the smallest of the three parts.
How the calculator works
The calculator takes six inputs:
- Order value (₹). The value the penalty is charged on. Many contracts charge LD only on the delayed portion of a supply; if yours does, enter that portion, not the whole order.
- Weeks late. How late the goods arrive against the contractual date. Many contracts count "a week or part thereof", so 8 days late counts as 2 weeks.
- LD penalty per week (%). The rate in your purchase order or contract.
- LD cap (%). The maximum LD the contract allows, as a share of the order.
- Air-freight premium to recover the date (₹). The extra you pay over your normal freight to rush part of the shipment.
- Chargebacks and other costs (₹). Deductions the customer makes for missed slots, short supply or relabelling, plus your own extra costs: overtime, expediting, extra trips.
The formulas:
LD % = the smaller of (LD per week × weeks late) and the LD cap
Liquidated damages = order value × LD %
Total = liquidated damages + air-freight premium + chargebacks and other
Share of order = total ÷ order value
The calculator adds the three costs together because a late order often incurs all three: you rush part of it by air, deliver the rest late, and still get a deduction. If air freight fully saves the date, set weeks late to zero and enter only the premium.
Worked example (India)
An auto-component supplier ships a ₹50 lakh order two weeks late. All values are assumptions for illustration; they are the calculator's defaults.
| Input | Value | Basis |
|---|---|---|
| Order value | ₹50,00,000 | assumption |
| Weeks late | 2 | assumption |
| LD per week | 0.5% | assumption; the rate in the public-sector terms below |
| LD cap | 5% | assumption |
| Air-freight premium | ₹3,00,000 | assumption |
| Chargebacks and other | ₹50,000 | assumption |
| LD % | 1.0% | the smaller of 0.5% × 2 and 5% |
| Liquidated damages | ₹0.50 lakh | ₹50,00,000 × 1.0% |
| Air-freight premium | ₹3.00 lakh | input |
| Chargebacks and other | ₹0.50 lakh | input |
| Total | ₹4.00 lakh | 8.0% of the order |
Two things stand out. First, the LD clause, which everyone reads closely when signing, is only an eighth of the bill; the air freight is six times bigger. Second, compare the total to the order's margin. If you assume this order earns a 10% margin, ₹5 lakh, two weeks of lateness takes 80% of it.
How the LD part grows with delay, holding the other inputs:
| Weeks late | LD % | Liquidated damages | Total with ₹3.5 lakh other costs |
|---|---|---|---|
| 1 | 0.5% | ₹0.25 lakh | ₹3.75 lakh |
| 2 | 1.0% | ₹0.50 lakh | ₹4.00 lakh |
| 6 | 3.0% | ₹1.50 lakh | ₹5.00 lakh |
| 10 or more | 5.0% (cap) | ₹2.50 lakh | ₹6.00 lakh |
Once the cap is reached, LD stops growing, but the commercial damage doesn't: a buyer who has waited ten weeks is already looking for another supplier.
What typical numbers look like
- 0.5% a week, capped at 10%, appears in Indian public-sector purchase terms. The Security Paper Mill, Narmadapuram (SPMCIL) deducts "0.5 per cent of the delivered price of the delayed goods and/or services for each week of delay or part thereof… subject to a maximum deduction of the 10%". A tender of the Sree Chitra Tirunal Institute (SCTIMST) uses "0.5% per week of delay or part thereof… subject to a maximum of 10% of the contract price" and adds that the purchaser may terminate once the maximum is reached. If you sell to government or PSU buyers, raise the cap input to 10%.
- Private OEM and export contracts vary. We found no credible public benchmark for LD rates, caps or chargebacks in Indian private supply contracts. Read your own purchase orders and supplier manuals.
- Air-freight premium. No reliable public figure exists for what share of a late order Indian suppliers rush by air. Use your forwarder's quote.
What this number does not tell you
- Whether the penalty can be enforced as written. Under section 74 of the Indian Contract Act, 1872, where a contract names a sum to be paid on breach, the party complaining is entitled to "reasonable compensation not exceeding the amount so named", whether or not actual loss is proved. How that applies to your clause is a question for your lawyer. This calculator is not legal advice; it assumes the buyer deducts the full contractual LD.
- The cost of the customer's trust. Repeated lateness shows up in vendor ratings, smaller future schedules and lost RFQs. No formula captures that, and it is usually the biggest cost of all.
- Your own internal cost. Overtime, expediting, line changeovers to squeeze in the late order and the orders it displaced all cost money. Add the ones you can price to "other costs".
- Why the order was late. The number says what lateness cost, not where the days went. In most plants they go to one constraint: a machine, a setup or a wait for material (why shipments slip).
- What a camera can and cannot see. A camera can show whether the bottleneck machine ran, how long it stood and where work-in-progress piled up, so you see the slip days before the dispatch date. It cannot read your contract, your schedule or the customer's patience.
Related guides
- Why Your Shipments Slip — and How to See the Bottleneck in Time
- An OEM RFQ Lands: Can Your Shop Actually Take the Volume?
- Order capacity check calculator
- The Daily Shift Report an Owner Actually Reads
- Third shift payback calculator (₹)
FAQ
How do you calculate liquidated damages for late delivery? Multiply the LD rate per week by the weeks late, cap the result at the contract's maximum, and apply it to the order value (or the delayed portion, if that is what your contract says). At 0.5% a week, two weeks late on ₹50 lakh is 1.0%, or ₹50,000.
What is the usual LD rate in Indian contracts? The public-sector terms we checked (SPMCIL and SCTIMST) use 0.5% per week or part of a week, capped at 10%. Private contracts vary widely, so read your own purchase order.
Is a liquidated damages clause always enforceable in India? Section 74 of the Indian Contract Act lets the aggrieved party recover reasonable compensation up to the named amount, whether or not actual loss is proved. Whether a particular clause holds up depends on the facts; ask a lawyer.
Is air freight worth paying to avoid a late delivery? Compare the premium with the LD and chargebacks you avoid, plus the value of keeping the customer. In the example, ₹3 lakh of air freight is far more than two weeks of LD, so it pays only if it protects the account or avoids larger chargebacks.
How do I stop orders going late? Find the constraint that sets your output and protect its hours: keep it fed, staffed and set up quickly. Seeing daily where that machine stood is usually the earliest warning a shipment will slip.
Mama can draw a camera plan for the constraint machine that sets your dispatch dates. Leave an email or phone in the form below.