Perfect Order Fulfillment
Perfect Order Fulfillment is the term used to describe the perfect level of fulfillment in the delivery service. The degree of fulfillment describes the customer requirements for the delivery itself. In order to achieve a high degree of fulfillment, the following key figures are collected: adherence to delivery dates, delivery reliability, delivery quality and delivery flexibility.
The goal of Perfect Order Fulfillment is applied in business logistics. It involves combining all the above-mentioned and evaluated key figures in order to assess the degree of fulfillment or the logistical segment of the supply chain as a whole, for example as a percentage.
Perfect Order Fulfillment stands for the performance of a provider of logistical and, in some cases, manufacturing services, quantified by the quality perceived by the client.
Perfect Order Fulfillment: measuring the relevant key figures
In order to ensure that key figures are quantified in an informative way, companies must evaluate the processes involved in Perfect Order Fulfillment and filter out the necessary information from them. Possible sources for a high-quality survey are, for example:
- Postings of payment transactions
- Entries from a human resources management system (payroll accounting, personnel deployment planning, time management)
- Information from a production data acquisition system (order progress, order status, times, quantities)
- General customer data from the ERP or CRM (finance, supplies, sales, marketing, master data)
- Data records of stock levels from a warehouse management system
- Tracking information from the CEP service provider/delivery (DHL, Hermes)
- Comments in the online shop
- Customer e-mail correspondence
- Social media
Example: If customers complain that e-commerce deliveries are regularly late, the quality manager responsible should check the tracking information from the CEP service provider. In connection with the customer’s incoming payments and information about the order itself (e.g. incoming order), it is already possible to draw detailed conclusions about the late delivery.
Degree of fulfillment of the delivery service
The following key figures determine the degree of fulfillment of the delivery service:
- Delivery time, service time: The time elapsed between the order being placed (scheduling, ordering) and the handover (delivery) to the customer.
- Delivery reliability: This includes adherence to deadlines and delivery reliability, delivery capacity and thus the probability of how accurate the supplier’s delivery date commitment (notification) is.
- Delivery condition, delivery quality: Condition of the delivery – this includes not only the condition of the article and product, but also the type and quantity of the goods (see also inventory management).
- Delivery flexibility: Customer friendliness, fulfillment of customer requests, personal customer contact, offering different services (payment options, delivery type).
Order fulfillment along the production, logistics and sales chain
The perfect fulfillment rate can also be measured depending on the service providers involved in production, logistics and sales. This is the case, for example, in the production of the iPhone. Apple usually orders large quantities of the required batteries from LG or another supplier, while the displays come from Sharp, Samsung and LG, among others. If the individual parts are not available in the required quantity in China, smartphone production is likely to come to a halt. As a result, promised deliveries to the points of sale, and thus to the end customer, are canceled or postponed.
Reasons for bottlenecks in order fulfillment
- Planning and coordination errors on the part of the client
- Production volume too large for supplier
- Defective production processes
- Defective order
- High demand
Insufficient delivery service
If a component of the delivery service is given as a so-called performance promise, but not implemented in practice, this is referred to as a lack of delivery service. Exceeding delivery times for trading partners or manufacturing customers leads to high costs and production downtimes – the consequences are recourse claims and migration to competitors.
Outsourcing of services
The degree of fulfillment of the delivery service today also depends on the assignment (outsourcing) of company services. In the case of outsourcing, the company hands over internal services (production, warehousing, delivery) to external companies or service providers. This eliminates the need for future investments for the outsourcing company, for example in a larger distribution center. At the same time, it increases the focus on the core business. However, outsourcing requires additional control processes. If, for example, a CEP service provider does not meet the agreed delivery times, the customer will not report his claims for compensation to the CEP service provider, but to the commissioned partner.
Summary
Perfect order fulfillment has become a serious competitive factor in today’s market. In addition to low costs, the quality of the goods/services, delivery reliability, delivery flexibility and the degree to which individual customer requirements are met are important key figures for the customer. Perfect order fulfillment ultimately makes the customer’s next purchase decision easier.
Further information on order fulfillment can be found in the article “Last-mile logistics in e-commerce – challenges and solutions”.
Image rights: Dennis Skley / CC BY-ND 2.0