In the world of supply chain and logistics management, perfection remains an elusive goal. Even when companies have been generally successful in reducing the number of imperfectly fulfilled orders, the high cost of the very small percentage of orders that aren’t filled completely, on time, damage-free and with all proper documentation and invoicing remains a vexing problem.
To some degree, the problem is mathematical. If a company scores an impressive 99 percent in all four categories measured by the standard Perfect Order Metric (POM) — complete, on time, damage-free, proper documentation with correct invoicing — the result would be a POM score of just 96 percent. That’s because scores are calculated by multiplying the scores in all four categories. In our example, that’s .99 x .99 x .99 x .99 = .96. So a company with these near-perfect scores in all POM categories still has considerable room for improvement.
Closing Performance Gaps
In reality, most companies don’t have anything close to scores like that. There are yawning gaps between actual POM scores and perfection, which translate into potentially huge sums of money wasted because of the cost of poor quality.
The math works this way: Let’s say Company X delivers 93 percent of its orders completely, meaning all the parts and pieces of each order are included. Of those orders, 95 percent are delivered on time, but just 87 percent are delivered damage-free, and only 85 percent are delivered with full documentation and correct invoices. The POM score for Company X comes out to a lamentable — and costly — 65.3 percent.
Thankfully, many companies have recognized the high cost of poor quality and have taken steps to improve their POM scores. But even most of those organizations need to find ways to further close the gap between whatever their reasonably good POM score is and perfection. For a vast majority, the price tag for making the smart investments in technology, property, equipment and people that are necessary to improve quality performance is fully justified by the big cost savings available by reducing of the costs of poor quality.
That, however, gives rise to a critical question: What technology, property, equipment and people should companies invest in to improve their quality performance? Merely acquiring new technology to replace a system that’s already effective probably isn’t the answer. Building a new distribution center won’t do the job either if it’s merely a bigger version of what’s already there or simply in another place that’s no more or less optimally located.
Leveraging the Right Experts to Identify Inefficiencies, Broken Processes
To decide how and where to invest money in quality improvements, most companies need help from experts who can perform in-depth analyses of current supply chain and logistical operations to discover where inefficiencies, error-prone processes, speed bumps and roadblocks may exist.
Is your inventory management, putaway, picking and invoicing technology less than state-of-the-art and therefore mistake-prone to some degree? Are your distribution centers located in the wrong place or organized less than optimally? Are your people deployed in the right areas, trained adequately and properly incentivized? Are your suppliers and vendors performing as well as they can? Increasingly, companies that have relatively good POM scores are discovering that they do a better job of improving their scores by focusing on the quality delivery of products coming into their distribution centers than by focusing on the quality delivery of goods shipped out of those distribution centers.
Whatever the case, few companies have the expertise and managerial time to do that kind of sophisticated analysis. And those who recognize that and bring in highly qualified supply chain and logistics advisors like Apptricity wind up making wise investments that lead to significant improvements in product delivery quality, reducing costs and improving profits as a result.