Many distributors are looking for ways to increase client satisfaction while also managing costs associated with their supply chain. One of the best ways that a distributor can accomplish the two is by working toward making sure all orders are “Perfect Orders”, and measuring what the perfect order rate is. So what is a perfect order and how does actively measuring this metric payoff for the company?
First, we will start with the description of what it means to have a perfect order. The Supply Chain Council defines perfect order as an order:
- Delivered to the right place
- With the right product
- At the right time
- In the right condition
- In the right package
- In the right quantity
- With the right documentation
- To the right customer
- With the correct invoice
By missing even one of these nine conditions, a perfect order has not been obtained.
So how does this impact the company financially? It begins with client satisfaction: when client expectations are met, clients are less likely to look for a replacement supplier. The other financial implication has to do with the reducing the cost of processing transactions. Every step within the order process has a cost associated with it. By completing an imperfect order the company is adding additional steps to the sales transaction which can take away from the profit margin on the sale. These additional costs can come in the form of any of the following:
- Processing a return transaction
- Issuing a credit memo
- Additional shipping and handling costs for getting a product back or sending a replacement
- The cost to fill an additional order
- The cost of a damaged product
- Collection costs for orders no completed with the appropriate paperwork
By measuring the perfect order rate, the company will get an idea of where they stand as a company, and can utilize this measurement to build a program for future improvements and refer back for benchmarking. This process may also identify areas where the company can improve processes or strengthen procedures. Continued measurement should result in cost savings and happier customers!