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Seven Steps to Delivering Perfect Orders

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Like you, your customers want to do business with someone who can reliably deliver what they want, when they want it and how they want it. Your success depends on
your ability to do this well, and to do it profitably. However, this isn’t always an easy feat; given that the business processes that go into delivering perfect orders cut
across many functions within a company.

This means that there are lots of places where orders can go wrong – starting with inaccurate replenishment and stocking strategies through to order entry mistakes or problems with delivery schedules.

The complicated nature of the construction materials supply chain – with its product diversity, unpredictable supply and multiple stocking points – doesn’t make it easier. But whether you are a broad line distributor or specialist electrical or plumbing wholesaler, improving your ability to deliver perfect orders isn’t just important, it’s vital. This paper explores why you should focus on the perfect order, how to measure it, and your route to reliably supplying your customers with what they want, when they want it.


The perfect order – why so important?

Improving your ability to deliver the perfect order has clear benefits, the most obvious of which is increased customer satisfaction: a happy customer is a loyal customer. And
in the current economy, retaining your most profitable customers – and making the most out of your relationship with them – has become more important than ever. However, the gains you make through consistently meeting, or even exceeding, your customers’ expectations go beyond having a list of happy customers.

It can also translate into increased sales, increased market share and ultimately top-line revenue growth. Benchmarking studies conducted by Debra Hofman, of AMR Research, show a link between improved perfect order performance and overall corporate results. She found that a three percent improvement in the perfect order score correlates with a one percent increase in profit margin while a two percent jump in the perfect order score shows a ten-cent increase in earnings per share.

While it’s hard to establish a direct correlation, Hofman notes, “a company has to be good at a lot of things in order to be good at the perfect order. If they score high, chances are they’re doing many things well.” Companies with high perfect order rates also tend to carry fewer inventories, have shorter order to cash cycles, and suffer less from stock outs. At Procter and Gamble the “perfect order” concept has driven major organizational change.

The company began to measure their perfect order rate in 1992 and since then, they have seen substantial gains in the form of reduced supply chain costs and increased market share. Ralph W. Drayer, former Vice President of Customer Service/Logistics at Procter and Gamble, comments “I can honestly say that it (the focus on the perfect order metric) changed everything at P&G. We really started focusing on the customer versus internal measures, built a much more reliable and cost efficient supply chain and created a platform for much deeper collaboration with key customers.”

And yet despite the very obvious benefits of getting the order right, many companies consistently fail to do so. If you look at it from the other angle, then not getting the order right has some very real implications in the form of unpaid invoices, lost sales, and in the worst case – lost customers. The unnecessary costs that companies incur when they ship wrong.

Seven Steps to Delivering Perfect Orders orders include the expense of handling returns and shipping replacement product, the cost of resolving refunds and offering price deductions, not to mention the labor costs that go into putting a wrong order right – both at the warehouse and in the back office. As part of their perfect order initiative, Proctor and Gamble estimated that each incorrect order shipped cost the company an average of $200.  And if you supply the major retail chains, or if delayed delivery of your products is holding up work on major construction projects, then you could also be looking at penalties for late deliveries or stock outs. With margins as tight as they are in the construction materials supply sector, is there really room for this?

Download below the full white paper.

Last modified on Tuesday, 28 August 2012 13:40

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