This week, we examined this question in our webinar, "Making the Perfect Order in a Complex World" (view the recording).
Interestingly, the question inspires many different answers and, depending on your business, the criteria for measuring the perfect order will most likely be unique. That being said, while the foundation for the perfect order doesn't change all that much for companies, the execution of it has evolved greatly for all supply chains.
What is the "Perfect Order"?
The legacy definition of the perfect order is truly focused on the end delivery of on-time, in-full and not damaged. It's focused on ensuring you meet the service levels agreed upon by your business and the customer when the order is placed. This definition focuses on the customer from a fulfillment perspective and doesn't emphasize nearly enough one of the most crucial elements: cost.
As supply chain complexity grows and customers continue to ask for faster and better service, reigning in cost becomes a serious issue for supply chain leaders. The fact is that delivering a higher percentage of OTIF orders is not the hard part. With infinite budget, that would be easy. However, we all know that the supply chain is consistently pushed to reduce the cost to serve every order. The question becomes less about how we can more consistently ensure OTIF orders but more so how we can consistently ensure OTIF orders at the lowest cost.
The perfect order within a cost constraint is incredibly hard to do with the streamlined speed, increased quantities and high degree of variability that exists with customer orders today.
What's affecting the Perfect Order?
The Perfect Order is being affected by many of the macro factors that are impacting the supply chain as a whole. These include:
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Growing Supply Chain Constraints: I will get into this more below but the key here is how do we take in more data inputs into our decision making from an end-to-end customer order perspective to choose the best order flow.
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Increasing Complexity: We've detailed supply chain complexity before on this blog but overall, we're seeing the growing list of customer requirements and impacts of business growth adding a ton of complexity to what we need to do to consistently fulfill orders. And this is not going away but is increasing by the day.
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Challenging Customer Requirements: If there was one big takeaway from CSCMP, it's that challenging requirements from customers are less the exception than the norm forcing us to transform our supply chains vs. just throwing more labor toward specific customers.
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Multi-party Visibility and Control: As companies look to better compete with the likes of Amazon and grow their geographic presence, reliance on third parties has grown considerably. However, as we integrate these third parties into our networks, supply chain visibility and control of them is often limited. The degree to which we are able to treat these investments and partners like our internal supply chain will determine success in the perfect order.
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Systems are still siloed: The systems that we have learned to rely on in our supply chain (ERP, WMS, TMS) have all been to optimize in internal siloes whether it's the four walls of a warehouse or transportation delivery. While valuable, when we talk about multiple external parties in our supply chain and visibility into the end-to-end customer order, these systems often fall short through no fault of their own since they were built to solve different internal problems.
All of these factors are causing frustration in the supply chain and are changing how we need to execute across the multiple parties that need to work together to deliver the perfect order for every customer.
Constraints must be evaluated together, not in a silo
Delivering the perfect order every time requires a view into the end-to-end supply chain that includes your internal and external parties and leverages them in the best and most cost effective way possible. The below are the common constraints that exist across the supply chain network that decision making can be made on to create the perfect order flow:
When asked, most organizations will say they have "good visibility" into their supply chain but oftentimes the decision making on this visibility is siloed and it affects the perfect order. Take for instance, your transportation decisions. In most cases, the TMS will take into account time and cost to determine the best transportation for a given order to be delivered OTIF, however, in many cases this is done after crucial decision making has already been made. Decisions on what inventory to pull from or the cycle times when the product will be available for pickup may mean that the transportation cost will be more expensive or in the worst case, be late even if we expedite. This is not the fault of the TMS, however, as it is just making decisions based on the information it has been provided at the time.
As omni-channel fulfillment becomes more important and our supplier networks are becoming more dynamic, our ability to make decisions on inventory, cost, time and capacity from an end-to-end customer order perspective can help us make better real-time decisions that drive more OTIF orders at less overall cost.
The Perfect Order through Orchestration
Your definition of the perfect order will grow as your organization's supply chain grows to support it. Fulfillment of OTIF at the most effective cost is the first milestone to hit with your supply chain and to do that consistently, supply chain orchestration with control tower exceptions management capabilities is critical.
Not every organization gets to supply chain orchestration quickly though and it's a journey of transformation that builds and provides value over time. As your organization gets more confident with your execution of OTIF orders, the definition of perfect orders will become less than just fulfillment and more on customer experience. But operational excellence needs to happen first to reach this business competitive advantage.
