For manufacturers that involve make to order and extensive product customisation the idea of the perfect order becomes a more elusive yet critical goal.
When your product has numerous options, is highly complex and each one is configured to the customers individual requirements it can mean a complicated and time-consuming quotation and order process.
The perfect order has emerged as a key measure of supply chain performance, layering in analysis of both internal and external measures of how a business is operating. While the perfect order is definitely a critical metric that companies from all industries need to monitor and manage in order for their operations to stay balanced, the external factors that drive this key metric are often not analysed enough, and therefore major benefits to a company are not realised.
So what is the perfect order? The perfect order hinges on how well a company can anticipate and respond to demandmaking the connection between demand-sensing and response as transparent to the customer as possible.
The metric of a perfect order as a measure of performance needs to be balanced with a strong view of the entire customer-facing side of any distribution or manufacturing company. For distribution companies that rely on over a dozen inventory turns over a year for their distribution centres, the concept of the perfect order is an indicator of how smoothly the pick, pack and ship operations are running. For manufacturers that rely on both build-to-stock and product customisation strategies the perfect order seems harder to achieve, yet if it is fulfilled it brings the biggest rewards. For the perfect order metric to show a significant increases in performance there needs to be rigorous work done on the customer-facing strategies. Attacking the inefficiencies in how quotes get generated for both build-to-stock and customised products is just as critical as focusing on supply chain measures of performance and gives a true measure of perfect order performance.
Synchronizing all sales channels isnt optimal if the goal is getting to the perfect order. In fact, without fundamental integration of all channels, getting to the perfect order isnt possible. To make the perfect order a reality for distribution and manufacturing companies must focus on cleaning up cleaning up order capture, order fulfilment, channel management and even pricing inconsistencies in their many customer-facing systems.
This also includes the quote-to-order capture and order-to-cash systems since many manufacturers are using these sales strategies to increase factory capacity utilisation while entering adjacent markets for customised versions of their products.
To attain the perfect order a company must enter the process with the mindset of balancing performance versus the increased cost to attain high performance on the perfect order metric. Trading off the costs of increased responsiveness, while having to spend to integrate supply chain systems, with many different customer-facing systems is the heart of the perfect order.
With such a strong level of integration required between customer facing and supply chain systems, many companies dont fulfil the vision of a perfect order completely. This is due to the fact that once orders for customised products and services start being right the majority of the time, instead of all the time. This is a major problem with any perfect order strategyclosure around the expectations made to customers is based on tight integration of many disparate systems, each aimed at different need.
For the companies that attain the perfect order, the rewards can be as high as 15 per cent less inventory, 17 per cent stronger order fulfilment, 35 per cent shorter cash-to-cash cycle, significant reductions in days payable outsourcing (DPO) and days sales outstanding (DSO) and tenth of the stock-outs competitors experience, yielding a significant competitive advantage.
Ultimately, attaining the perfect order in a quote-to-order environment and sales configuration-dominated environment is possible, and ironically even more attainable than in pure make-to-stock manufacturing companies. The primary reason this is the case is that the business model for creating customised products and defining their ancillary services requires tight integration between multiple customer-facing channels, supply-chain partners, fulfilment systems and even service organisation.
The bottom line is that the perfect order is more about reaching a balance between customer-facing strategies and supply-chain visibility. The measures of quote-to-order and order-to-cash performance are critical benchmarks for achieving the overall goal of the perfect order.
Louis Columbus is Senior Business Development Manager, Cincom Solutions. Formerly a Senior Analyst at AMR Research, his career has included senior management positions with Gateway, Ingram Micro and a software start-up, where he served as vice president, marketing and business development. As a senior analyst at AMR Research, he focused on guided selling, sales and product configuration, order management and service lifecycle management. He has published fifteen books on a variety of technology areas including Microsoft operating systems, peripherals and the application service provider arena.