Metric of the Month: Perfect Order Performance

Break down the factors that go into a perfect order to determine if individual activities can be made more efficient

April 2016 Perfect Order Performance 570bf7e5a5209

Improvement in performance is driven, in large part, by implementing improved processes. The process begins with determining which key performance indicators (KPIs) are most important to the business model, analyzing the relationship between those measures and using that analysis to help drive process improvement when needed. One KPI organizations often look at is perfect order performance or what some organizations refer to as perfect order index (POI). The American Productivity and Quality Center (APQC) defines perfect order performance as flawlessly taking and fulfilling a customer order, and includes taking the order correctly, allocating inventory immediately, delivering the product on time and sending an accurate invoice.

Perfect order performance is calculated as follows:

(Percent of orders delivered on time) * (Percent of orders complete) * (Percent of orders damage free) * (Percent of orders with accurate documentation) * 100.

APQC’s data shows that, at the median, organizations have a perfect order index of 90 percent. In other words, 10 percent of all orders being shipped have some form of failure. A failure rate this high may be an eye-opener for many organizations, especially for those that use functional metrics such as on-time shipments and line/unit fill rate as a proxy for customer satisfaction.

APQC’s data shows that there is room for organizations to improve with regard to perfect order index. Because this measure spans multiple logistics activities, organizations can break down the factors that go into a perfect order to determine if individual activities can be made more efficient. Improving the ability to take orders correctly, allocate inventory quickly, deliver products on time and send accurate invoices can lead to better perfect order performance.

The data above originated from APQC’s Open Standards Benchmarking in logistics, which contains metrics related to logistics performance as collected from participating organizations. These metrics can help your organization see where it stands in relation to its peers and identify potential areas for improvement.