Measuring The Perfect Order
Last month I discussed the Perfect Order and the concept of this composite Key Performance Indicator, or KPI, that enables a performance measurement that spans across functional silos in your organization. The measurement requires multiplying the results of 3 individual metrics together to achieve a single KPI.
Although the composition may vary, the most common components of the Perfect Order are fill rate, on time delivery and accuracy. These data elements need to be measured at the line level to determine if the entire order was filled complete, on time and accurate. If you are wondering how you measure up, here’s some tips on how to measure.
Are you filling your customer orders complete? This is a percentage of how many stock lines on the order are filled 100% complete. The order line is considered to be 100% only when the quantity shipped equals the quantity ordered. Otherwise, we failed to meet our customer’s request and we get a goose egg for this line.
To keep it simple, if the order contains 10 stock lines and 2 of the lines have back-orders, then the fill rate for the order is 80%. This same formula can be used to measure all lines in a specified period of time. Add some rank to the products and you’ve got some work to do!
On time Delivery
A simple way to systematically measure if an order meets an “On-time” qualification is to compare the requested ship date on an order line to the actual ship date on the line. If the shipped date is after the requested date, then we failed.
The tricky part here is to introduce dates and be consistent in your definitions. In this case, we are saying the requested ship date is the date when we expect to ship the order, not necessarily when it arrives. However, as long as we remain consistent, we can use this data to measure improvement!
Accuracy is more than sending the correct product and quantity. In the customer’s eyes, if there is any discrepancy at all, then it’s NOT accurate. This includes pricing errors, shipping method errors, damages, shortages, etc. Accuracy can be measured as a ratio of all return and credit lines to all shipped lines in a specified period of time.
In order for this method to be reflective of true accuracy, you’re likely to have to make some changes. If you’re not capturing all errors as returns, then your numbers are probably looking good, but your customers may not agree! The concept is all orders that leave the building should be shipped, any issues with the order (pricing, product, qty,etc) need to be captured as a return or credit with a GOOD reason code that can help lead to root cause issues.
How do you measure up? There’s no better time than the present find out!
"Progress Demands Change"