How To Measure Your Performance? The Perfect Order Metric Is Here!
The purpose of logistics is to meet (or even better: to exceed) customers’ expectations. According to The Council of Logistics Management (1991), Logistics is “The process of planning, implementing, and controlling the efficient and effective forward and reverse flow and storage of goods, services, and related information from point of origin to point of consumption for the purpose of meeting customer requirements”.In order to achieve that, every effort of the team has to be aligned to achieve the so called “perfect order” or “perfect order fulfillment”.
The perfect order is a metric (maybe the most important one) used by logistic companies in order to measure performance. It represents the percentage of orders delivered:
- With the right product
- At the right customer
- To the right place
- At the right time (100% on-time delivery)
- In the right quantity (100% fill rate)
- In the right condition and packaging (100% “quality” related to fulfillment)
- With the right documentation (right invoice with the right quantities and prices)
If any of these requirements is not met, the order will be considered less than perfect!
By definition, a Perfect Order is achieved when a customer can contact your organization, place an order for a product in a timely manner, have the product available when they want it, at the price they are willing to pay, have it delivered when they want it without damage and be able to pay the invoice without any problems. These actions transcend every aspect of your organization.
The customer service, production, inventory management, distribution, and finance functions all must be working together to allow your organization to reach Perfect Order status each and every time.
What is the perfect order formula?
There is not a unique formula to measure the perfect order metric. Several parcels compose the formula. Each company may use the standard parcels. On the other hand, it is possible to add a certain calculation that, joining the others, better represents the achievement of customers’ expectations.
The standard parcels are:
(Percent of orders delivered on time) * (Percent of orders completed) * (Percent of orders damage free) * (Percent of orders with accurate documentation) * 100
Despite being the most important metric, companies aiming to achieve better results should routinely measure performance in each component of the formula.
In a survey conducted by the Mid-South Roundtable of the Council of Logistics Management, the average Perfect Order measurement reported was 92% and the median was 95%
(Beinstock and Randall 2004).
Regardless of your company’s potential, you should start by establishing a value that your company can achieve with low effort but at the same time being a good number (ie, 80% or above).
When that number is consistently achieved, then you should start to increase it. You should keep that way until you reach the magic number: 100%!
What are the main causes to fail a perfect order?
According to the American Productivity & Quality Center (APQC), factors that typically contribute the most to imperfect orders include:
- Lack of in-stock product availability
- Poor on-time delivery performance
- Inconsistent carrier transit times
- Deductions by customers from invoices
Consistently achieving Perfect Order performance requires excellence from all areas of the organization, but this is especially so in the planning, scheduling and execution of jobs and resources.
(Cox 2005, p. 74).