While practice makes perfect, companies that can achieve the Perfect Order Index metric can both capture a larger market share and hold on to their existing customers longer, according to a new white paper issued by the Warehouse Education and Research Council.
The document, entitled “Using Technologies to Increase Perfect Order Metrics“, seeks to help companies achieve perfection when it comes to order fulfillment. The WERC defines a perfect order as:
- Complete
- Delivered on time
- Damage free
- Correct documentation and pricing/invoicing
Striving for Perfection
“Companies are continually finding new ways to get the right goods to the right customers at the right time, and have developed many metrics to measure their performance in these areas,” the white paper’s authors wrote. “Most of these metrics show distribution productivityand accuracy are improving over time,which keeps raising the bar for service levels.”
By tracking the percentage of perfect orders, warehouses, manufacturers and distributors can meet the consumer demand for continuous improvement. And the reward for companies that achieve perfection, or at least approach it, is a larger market share and improved customer satisfaction.
“In 2007, the 25 companies with the best supply chains … greatly outperformed the S&P 500, producing an average total return of17.9 percent, compared to 3.5% for the S&P,” according to the report’s executive summary. “Companies with perfect order rates of 80 percent or higher are three times more profitable than companies with perfect order rates of 60 percent…. Better perfect order performance also correlates strongly to higher corporate earnings per share (EPS) and return on assets (ROA).”
Making Fulfillment Better
So how can companies achieve this type of perfect performance?
“Many companies have used a combination of automated material handling equipment, mobile and wireless computers and automatic identification and data collection (AIDC) systems to improve their inventory accuracy rates to more than 95 percent,” the white paper states. “Today, these accuracy and productivity levels often aren’t enough to meet perfect order goals, or to provide competitive differentiation.”
For example, bar code scanning was once considered to be the “gold standard” for pick accuracy. But today its use is so widespread that those companies that embrace new, differentiating technologies can outperform competitors who still rely on bar codes and other “Industry Norm” technology.
Doesn’t Require Huge Investment
Companies don’t necessarily have to make huge infrastructure investments in order to improve their Perfect Order Index. In some cases, simple upgrades to legacy data collection systems can provide the kick they need to outperform their competitors.
For example, existing bar code readers can be combined with mobile, wireless and AIDC technologies to significantly improve order accuracy and on-time fulfillment, according to the report.
“(They) can also play a surprising role in improving invoice accuracy and reducing problems from damaged shipments,” the white paper stated.
As more and more businesses adopt the Perfect Order Index as the measurement for business performance, customers can expect better service with more accuracy and companies can anticipate fewer complaints, larger market share, and improved customer satisfaction and retention.