Understanding and filling customer needs collaboratively adds more value than designing processes and systems to beat the competition. Here's an example of how one company did it.
A common saying when it comes to performance measurement is, "You can't manage what you don't measure." But more importantly, the real challenge comes in determining what to measure and how to measure it.
Often manufacturers fail to adopt the right metrics for their businesses to track. However, the proper metrics can accurately reflect performance improvements or services provided across segments, and reinforce appropriate practices for continuous improvement. One such metric that measures the effectiveness of the supply chain is order fulfillment, which takes into account the cross-functional performance of an enterprise.
Manufacturers often design or adopt fulfillment metrics and targets that are neither indicative of their customer requirements, nor take into account the realistic capabilities of their processes and systems. For instance, while the sales group likes to promise the world to their customers, the supply chain group can't afford to give up the farm in trying to keep up with those promises. To avoid such problems it is critical, then, to understand and target what matters most to the customer, which is an important step toward understanding the end consumer.
Measuring Fulfillment Performance
In consumer packaged goods (CPG) manufacturing, the following are some of the ways order fulfillment is measured:
- Line Fill Rate percentage of lines on an order filled in full
- Order Fill Rate percentage of orders filled in full
- Perfect Order orders delivered on time, in full and in good condition
CPG companies also measure the duration of back order fill, order picking and assembly times, on-time deliveries, and quality of the delivery metrics that are often used locally for corrective actions across functions in a supply chain. One of the widely used methods to set fill targets is based on historical performances, as it can be quickly implemented. As an example, a Southern packaged food products manufacturing company with a perfect order record of 77 percent decided to push the performance by 2 percentage points the following year, as this jump was in line with the past improvements in fill rates.
The goal of CPG companies is to build lasting relationships with valuable customer segments by supporting them on events like in-store promotions in addition to filling regular orders on time and sustaining their brand fame. The targets for the line fill, order fill and perfect order are usually set internally by the manufacturer and do not take into account the customer preferences. Major retailers see value in proper positioning of premium brands, which require uninterrupted supply. Additionally, as retailers also have the option to source private brands, it becomes critical for traditional brand manufacturers to perform timely deliveries. Developing the right set of metrics and enabling supply chains to achieve superior fulfillment performance from the customer's perspective is key to meeting both the brand and sales expectations.
In addition to the above, CPG companies are striving to move toward "fill to demand" practice and cut inventory levels, while also investing in research and development to achieve product differentiation and increase market share. Thus, measuring actual fulfillment, as opposed to the perception of it, helps companies to properly understand customer satisfaction and get a real picture of how the company is delivering on brand expectations across segments.