Time for Both Sides of the Aisle to Revisit and Prioritize the Perfect Order Index
From the Desk of Kim Zablocky
On-time, in-full, damage-free, full and accurate documentation. That’s what the Perfect Order looks like. That’s how an order should be shipped.
Although we’ve been discussing the Perfect Order for more than 15 years, inaccuracy in order fulfillment has held steady at 3-4 percent. It’s time for retailers and merchandise suppliers to refocus on the elusive Perfect Order. Perfect Order Index metrics should be used to identify and address errors, update technology, reduce costs, and ensure merchandise gets to store shelves and into the hands of customers as quickly as possible.
The lack of visibility and analytics processes keeps suppliers from being nimble enough to wrap their heads around the constant onslaught of change management. The fact is, most companies lack the flexibility to accommodate change. Many build their supply chains to support one or two major accounts, leaving others to be more challenging than they should be.
Unfortunately, too many suppliers make the determination that it’s better to take the chargeback rather than make the necessary investments to fix the cause of the chargeback. In other words, the decision is driven by cost rather than the Perfect Order Index.
This could prove to be a costly miscalculation. At some point, suppliers that take this approach might drive the retailer to increase the cost of the deduction, or in some cases stop getting orders all together. Retailers don’t have the time or resources to repeatedly deal with shipping errors, and they certainly aren’t willing to sacrifice sales and profits because of disruptions in their supply chain.
Best-in-class suppliers apply best practices to consistently achieve higher performance, lower operating costs and higher margins. They also draw from the knowledge of cross-functional teams. By unifying the competencies of the various departments that touch an order, these departments can learn from each other so they can better construct each order.
Let’s review each of the four Perfect Order attributes against what our research has shown to be supplier best practices, which will support suppliers in maximizing the Perfect Order Index.
1) Orders should arrive to retailers on-time.
Suppliers should maintain open lines of communication with retailer customers to keep them updated on order status and collaborate to establish metrics and requirements.
Utilize carriers that track shipments, offer electronic proof of delivery, and have the ability to integrate tracking information into their system. Track delivery performance at the order level.
Manage the flow of orders in the warehouse using an integrated warehouse management system.
Optimize warehouse layouts to minimize travel time and non-value steps.
Work with retailer customers to establish what constitutes on-time performance so retailers can measure and report it.
2) Orders should be complete.
Implement receiving and storage processes that guarantee product is correct and placed where it belongs so that it can be used for orders.
Use cross docking to expedite received product to open orders.
Use system-stored customer data to manage partial and short-ship rules, as well as back-order processing.
Ensure that the ASN triangulates to the purchase order and matches shipment contents.
3) Orders should be delivered damage free.
Document and fully understand retailer packing and shipping requirements, which must be followed during order processing.
Implement processes for verifying that all products are free of damage, and that internal transport of product does not cause damage.
Utilize carriers that have solid records for undamaged shipments and have processes in place to measure and report carrier performance.
4) Orders should have accurate documentation.
Store retailer data is in a single database.
Use system-generated, customer-specific labels and documents to ensure orders are shipped with correct documents.
Send accurate, system-generated ASNs to customers.
Retailers Need to Step Up, Too
Suppliers aren’t the only ones guilty of choosing to accept chargebacks rather than solving problems. Retailers must do what’s necessary on their end to achieve the Perfect Order rather than simply issuing chargebacks to recover costs. Here are six basic steps retailers should take to improve the Perfect Order Index.
• Improve order management receiving and acknowledgement processes
• Improve speed to market
• Improve inventory visibility for E-Com sales
• Improve inventory flow
• Reduce the number of defects per million
• Improve cycle times
In addition, retailers that expect On-Time In Full OTIF requirements from their suppliers, must also in turn be willing to create and share a viable forecast.
The Perfect Order Must Be a Shared Goal
Some retailers and suppliers may question whether the Perfect Order is achievable in an age of highly complex, frequently changing retailer requirements. Even if you believe perfection in every order, every time isn’t realistic, the Perfect Order should always be the goal – a shared goal among trading partners.
We need to take a fresh look at the Perfect Order Index form both sides of the aisle. Suppliers need to tighten their ships to improve the four key components of the Perfect Order. Retailers must use those components to hold suppliers accountable, but also collaborate with suppliers to improve order accuracy instead of viewing cost recovery through chargebacks as a solution to the problem.
Talk about the Perfect Order with your trading partners. Discuss what the Perfect Order looks like and what needs to be done to achieve it. Make it a priority because of what the Perfect Order means for your organization – higher profits and margins, lower costs, faster time to market, and happier customers.