How to Increase Perfect Order Metrics: RFID, Speech

White paper
Using Technologies to Increase
Perfect Order Metrics Executive SummaryCompanies 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. Most of these metrics show distribution productivity and accuracy are improving over time, which keeps raising the bar for service levels. For example, from 2007 to 2008, companies reduced their average days on hand of finished goods inventory from 35 days to 28, reduced dock-to-dock cycle time by 2.5 hours, and reduced days of sales outstanding from 40 days to 35, all while maintaining 98 percent fill rates, according to the Annual 1Warehouse Benchmarking studies conducted by the Warehouse Education and Research Council (WERC) and DC Velocity.
Customers demand continuous improvement, and markets "Perfect Order" Definedreward it. In 2007 the 25 companies with the best supply chains (as measured by AMR Research) greatly outperformed the The Warehouse Education and Research Council (WERC) S&P 500, producing an average total return of 17.9 percent, put forth a widely-accepted definition of what constitutes 2compared to 3.5% for the S&P. Companies with perfect order a perfect order. WERC defines a perfect order as:rates (a popular metric that measures customer orders that arrive complete, on time, undamaged, and with an accurate . Completeinvoice) of 80 percent or higher are three times more profitable . Delivered on time than companies with perfect order rates of 60 percent, a . Damage free3separate AMR Research study found. Better perfect order . Correct Documentation and Pricing/Invoicingperformance also correlates strongly to higher corporate earnings per share (EPS) and return on assets (ROA), the Perfect Order Index is a popular performance same study found. Figure 1 below highlights these findings. metric that is calculated by multiplying each of the four perfect order components.
Fig. 1: Correlation Between Perfect Orders and Profit Margins, EPS and Return on Assets
40% 50% 60% 70% 80% 90% (Chart derived from AMR Research)
This white paper explains how each aspect of perfect order performance can be improved through enhancements to data collection processes and technologies. It does not focus on basic bar code-based shipping, receiving and inventory management applications, nor on warehouse management systems (WMS) or wireless-directed picking and putaway. Such systems are foundational to efficient, highly accurate warehouse and distribution operations. This white paper focuses on other technologies which will provide better execution and productivity to create a greater competitive advantage.
1 Comparison of Annual Warehouse Benchmarking study data presented in Spring 2007 and Spring 2008 editions of "WERC Watch" published by the Warehouse Education Research Council (WERC).2 "AMR Research's Supply Chain Top 25 Beats Market with 17.89% Return" AMR Research, January 10, 2008.3 "AMR Benchmark Analytics" AMR Research, 2003-2004. 2IntroductionEven if a company's fill rates, on-time delivery, damage-free shipment and accurate invoicing success rates are all very good -- say 95 percent -- its chances of providing a perfect order are not. Problems are prevalent even at these lofty levels of performance. A 95 percent success rate for each of the four perfect order components give companies only about a four out of five chance to complete a perfect order, as the following perfect order metric calculation developed by WERC shows:
. 95% fill rate (0.95) x 95% on-time deliveries x 95% damage-free shipments x 95% accurate invoices = 81.4% (which can be expressed as 0.954 = 81.4). . Companies that perform at 90 percent success levels for each component have less than a two out of three chance to make a perfect delivery (0.94 = 65.6).
To underscore this point, the following table highlights the findings of WERC's research into perfect order metrics at companies. It shows that 95 percent performance levels put companies at a competitive disadvantage, and that across-the-board success rates of at least 98 percent are required to gain an advantage.
Fig. 2: Select WERC Perfect Order Metric Data Warehouses are categorized from Major Opportunity to Best in Class. Perfect Order Metrics Major Disadvantage Typical Advantage Best in Class MedianOpportunity
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