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•Whitepaper: Benchmarking The Perfect Order: A Comprehensive Analysis Of The Perfect Order In The Retail Industry

Introduction
In today's competitive retail environment, the success of the retailer-supplier relationship is integral to improving margins for retailers. However, a recent study of the retail industry commissioned by the Retail Compliance Council reinforces what retailers have been saying for years – that suppliers are still not yet providing retailers with a reliable and consistent source of supply.

David Schneider, Director of Engineering and Logistics for Pep Boys, notes: "Many vendors simply do not realize how much this poor performance is hurting retailers." This study – the first of it's kind to analyze real retail shipment data of critical quantities – shows just how far suppliers need to go to perfect a perfect order to retailers.

What is a Perfect Order?
A perfect order is characterized as being on time, complete, damage free and having accurate documentation. While retailers often look for a variety of performance attributes – almost all retailers agree that these four are the most critical for suppliers to deliver on and almost all retailers have those four perfect order criteria in their routing guides.

Why the focus on the Perfect Order? Traditionally, many suppliers have focused on fill rate with regards to on time shipments as the primary measure of evaluating their fulfillment performance. This age old emphasis on fill rate still stands today as the primary metric warehouses and distribution centers use – ranking as the number one metric employed by member organizations of the Warehouse Education Research Council. However, retailers know fill rate/on time shipments offer only a snapshot of overall performance. Just because an order ships on time does not mean that the retailer receiving the shipment was satisfied. Most retailers have addressed this by creating comprehensive routing guides that outline a variety of "compliance" guidelines with regards to the orders they receive from suppliers.

Measuring the Perfect Order
What makes the perfect order concept unique is not the focus on the Top 4 Key Performance Indicators, but rather the fact that the metric highlights the total impact of an incorrect order. The approach is similar to the traditional approach manufacturers have used for years to measure First Pass Yield in a production factory where each production process is measured and total "yield" or fallout of the entire process is calculated as an index.

The perfect order index (POI) is established by multiplying each component of the perfect order to one another. For example, if a firm is experiencing a measure of 95% across all 4 metrics of the perfect order (on time, complete, damage free and accurate invoicing), the resulting perfect order index would be 81.4%. The traditional approach to looking at each KPI separately often lulls organizations into a false sense of good performance. For example, your order might have arrived on time 99% of the time – but if it was not a complete order the customer is still impacted. By focusing on a more holistic approach, a company can calculate the total effect of a supplier's logistics. An example is shown below where a supplier has achieved 95% performance in each of the key four perfect order attributes. The result – total performance falls to 81.4% If the measure had fallen to 90% for each component, the perfect order index would have dropped significantly to 65.6%.

The focus of the retailer-supplier relationship should be on all of the attributes of the perfect order; suppliers should work toward meeting retailer POI objectives and retailers should be committed to measuring all aspects of a perfect order to accurately assess end-customer satisfaction.

Click Here To Download:
•Whitepaper: Benchmarking The Perfect Order: A Comprehensive Analysis Of The Perfect Order In The Retail Industry