KPI of the Day – Logistics: % Perfect order delivery rate
Definition
Measures the percentage of perfect orders delivered, from the total number of orders. The criteria for perfect orders can be set by each company.
Purpose
To indicate the quality and efficiency level of distribution services to clients.
Recommendations
An example of perfect orders can be the orders that are: delivered in full, to the customer commitment date, in perfect condition and with accurate documentation.
By measuring % Perfect order delivery rate, the distribution service can ensure that the system is efficient in carrying out on-time and complete deliveries of the products and services, as the customer required. This KPI may be influenced by factors that cannot be controlled by the distribution service, such as weather or accidents.
Ensuring perfect order deliveries can be challenging, yet achievable. Perfect in terms of order deliveries refers to the actual order being delivered to the right location, with the right products, in the right quantity, at the right time, in the right condition, with the right documentation, to the right customer, with the correct invoice.
Companies which best perform in term of order deliveries are the ones which carry less inventory, experience shorter cash-to-cash cycle times, and have fewer stocks. Imperfect orders involve extra costs for shipping, replacing the product, low revenue because of loss of customers and sales. The higher the perfect order delivery rate is, the higher the efficiency will be and the customer satisfaction also increases.
As such, the value of this indicator can be improved by taking into consideration the following:
- Accurate order according to customer expectations;
- Automated order processing with confirmed delivery dates and times;
- Well-documented, detail-oriented processes and procedures;
- An order checklist to prioritize on order deliveries.
There are factors like the weather or accidents that can influence this KPI, and cannot be controlled by the distribution service. Having visibility across the supply chain is key when trying to achieve high % Perfect order delivery rates.
A low rate of perfect order delivery can have negative impact on your business, as clients might consider that their requirements and needs are not satisfied accordingly. High values for this KPI can lead to customer loyalty.
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Tags: KPI, Logistics performance
