If you could use only one KPI to guide your fulfillment operations, what would you choose – and why?
Here at Amware, we don’t even have to think twice, because we’ve recently begun using and sharing a metric that’s about as close to perfect as you can get.
Meet “the perfect order.”
Like the name suggests, it’s an ideal way to measure outstanding fulfillment performance – with one very interesting twist. (Hint: It’s not actually about getting things 100% right 100% of the time.)
We recently sat down with Amware’s Vice President of Operations, Robert Toner, to learn more.
So what exactly is the “perfect order” fulfillment metric?
The perfect order metric (also known as the POM) is an aggregated view of the most important fulfillment KPIs that a company tracks. It gives businesses a quick and effective way to measure their overall fulfillment performance, in addition to their individual metrics.
At its most basic, it’s an acknowledgment that even though some fulfillment KPIs might be a bigger priority for companies than others, they all have to be working really well in order to ensure sustained success.
What fulfillment KPIs are part of this combined perfect order metric?
It all depends on the company and which KPIs it considers to be especially important.
For example, if Company A decides its highest priorities are on-time shipping, packaging accuracy, and damage-free shipping, those become the basic ingredients for its POM.
By contrast, if Company B decides it needs to pay especially close attention to on-time receiving, inventory accuracy and inserting correct product literature, then those are the essential pieces that will be used to calculate its POM.
How is the perfect order fulfillment metric actually calculated for each company?
You multiply a company’s individual KPI metrics together and then multiply that figure by 100.
So if Company A has set its KPI levels at 99%, 98% and 99.2% respectively, then its standard would wind up being 99% x 98% x 99.2% x 100, or 96.2%.
Meanwhile if Company B has set its KPI levels at 95%, 99.1% and 98.7%, its number would be 92.9%.
What happens after that?
Once the POM has been set, it’s simply a matter of comparing that with a company’s actual performance data and reporting on that variance.
When it comes to tools like this, it always helps to have a real-life example. Tell us how Amware is calculating this KPI for its clients.
Right now, the categories we’re using are on-time receiving, inventory accuracy, on-time shipping and order accuracy (which actually includes picking the right SKU, in the right quantity, using the right packing materials/inserts, and ensuring the product is damage-free).
The goals we’re using vary from client to client, because we use each company’s specific contractual KPI numbers to set and calculate their POM. But we’ve also established a POM for ourselves, and in most cases the numbers we’re using to populate it are more aggressive than the ones our clients have set for us.
Is the data gathering fast and system-generated?
We gather these numbers from the KPI reports we’re already generating off our warehouse management system. Many of these reports are very automated. We then bring these numbers into our Scorecard database spreadsheets and use them to make our calculations.
We send the metrics we use for our POM to clients every day. We also include it in the summary reports that we provide to clients weekly, monthly and quarterly.
Can a company add more KPIs to its calculation?
Absolutely. In fact, we definitely plan to do that with our own POM.
However, it’s best to keep things simple when you first start to use this metric, because you want to make sure you have enough time and bandwidth to capture and report on every KPI you’re using to populate it.
Okay. We have to ask: Why throw another KPI like the perfect order fulfillment metric into the mix when there are so many KPIs that most shippers have to monitor already?
First, it enables companies to see how they’re doing at a glance, so that even if they don’t have time to drill down and look at every single KPI on their scorecard, they still can get a good feel for how an operation is doing and what their end customer is experiencing. We’re cut-to-the-chase people at Amware, so we happen to think that’s a really good thing.
The second is that it serves as firm reminder that it’s the sum of a fulfillment program that really matters. No matter how well an operation performs in one area, that doesn’t mean it can relax its standards in another, because any consistent lapse in one key area will eventually have a negative effect on all of the others.
For example, if a facility is knocking it out of the ballpark in terms of getting orders shipped out on time, but many shipments wind up being broken or containing the wrong items, the end result is still a lot of disgruntled customers. Ditto with a facility that seems to be able to get everything about a delivery right – except the timely shipping date.
Simply put, the big picture really matters. And there’s no better way to convey it than the perfect order fulfillment metric.