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The Perfect Metric? Take A Closer Look

perfectIn a business environment that’s ever-increasingly dependent on and driven by metrics, the perfect order seems like, well, a perfect metric. R. Wang of Constellation Research originally conceived and developed the perfect order as a as a tool for retailers to monitor supplier performance.

Wang’s perfect order checklist included 20 items, but what makes it especially useful is that it’s easy to understand and can be easily adapted to just about any retailer-supplier relationship. At a most basic level, the perfect order checklist answers four questions:

  • Is the order on time?
  • Is the order complete?
  • Is the order accurate?
  • Is the order undamaged?

A fifth question – Is the documentation, including invoice, accurate and complete? – is also a key component of the perfect order for most retailers.

Unfortunately, the search for (and, often, the requirement of) the perfect order can be costly for both retailers and suppliers. It takes lots of time and effort for retailers to monitor orders. Operational changes triggered by imperfect deliveries are often pricey.

For suppliers, being less-than-perfect can result in invoice deductions and, in extreme cases, contract cancellations.

But consider that (according to most research) most orders don’t pass all 20 perfect order criteria. And that, at the same time, most orders satisfy most consumers most of the time. Then think about what it is about orders that’s really most important. What do you really need to pay attention to, day in and day out?

Market presence
With markets changing more quickly than ever, and on a global scale, top suppliers are thinking a few steps ahead – investing in research and development that focuses on consumers. This is how suppliers survive, and thrive. They’re anticipating what retailers will want, producing what’s needed in advance of demand. Obviously, this is risky, but leading suppliers know it takes risk to succeed.

At the same time, risk-taking suppliers may not be producing perfect orders, because their priorities and energies are invested elsewhere. So instead of focusing on perfect orders, buyers are likely to get more bang for their buck by identifying (and rewarding) suppliers who outperform the market.

This is just one area in which the static criteria embodied by the perfect order may be outdated. The basics – getting EDI document formatting right and making accurate, timely delivers – will always be important. But other issues may be more important, and worth adding to your scorecard.

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