NEW 'PERFECT ORDER' CRITERIA PROPOSED

Julie Gallagher

SAN FRANCISCO -- Retailers and manufacturers interested in implementing the "perfect order" now have a new list of criteria to follow.

Among the new features, or metrics, that would reflect perfection in ordering are synchronized data and fully stocked store shelves.

The new list of perfect order metrics was outlined at Food Marketing Institute's Distribution Conference, which took place March 13-16 at the Omni Hotel here.

Dee Biggs, director, demand fulfillment services, Welch's, Concord, Mass., delivered details of the revised list to retailer and manufacturer attendees, who were encouraged to begin monitoring the new measures on Jan. 1, 2006.

"The term 'perfect order' is a little misleading, since there has probably never been a perfect order," said Biggs. "Still, we can grasp the concept and use collaboration to do a better job [of creating a more efficient supply chain]."

Biggs, along with Marianne Timmons, Wegmans; Bob Mooney, Meijer; Leona Meikle, Land O' Lakes; and Joe Wisdo, Pfizer, are members of the team assigned in 2003 to revise and update perfect order metrics.

The original perfect order metrics were established seven years ago by a joint industry team from FMI and Grocery Manufacturers of America, both based in Washington.

The metrics apply to the supply chain as a whole, though more responsibility is given to suppliers.

The original metrics included: orders shipped complete; on-time delivery; accurate and timely invoice; and damage-free. The revised list is comprised of: shelf-level service; cases shipped vs. ordered; on-time delivery; data synchronization; degree of damage, days of supply; and order cycle time.

The new shelf-level service metric is considered the most important by the team responsible for the list's revision. "It's hard to measure, but everyone needs to begin the process of truly monitoring the impact of out-of-stocks," said Biggs.

Although many retailers currently measure stock voids, the method is not accurate when it comes to defining true out-of-stocks, he said. The goal of the metric is to create a fill rate for each stockkeeping unit at the store. For example, if demand is 20 units per day and 20 units were sold, a 100% service level has been reached.

At the suggestion of Wegmans' Timmons, data synchronization also made it onto the revised list, said Biggs. "If for example a retailer/ wholesaler buys 100 items and [the data] for 70 are fully synchronized, the metric is 70%," explained Biggs. "The goal is to strive for 100% synchronization."

The days of supply measure is another new addition to the list. It focuses on identifying levels of inventory at various points in the supply chain, including the retailer warehouse and the store, said Biggs. It can be expressed as days of supply, dollar inventory and case inventory.

Order cycle time is another key metric that's been added to the list. It's defined as the length of time between a manufacturer receiving an order and the actual delivery of the order to the customer's warehouse. Cycle time is a key metric for most retailers, according to Biggs, because reduced cycle times aid in driving down inventory investment.

New metrics have replaced measures that originally resided on the list.

The measure for orders shipped complete, for instance, will be replaced by cases shipped vs. cases ordered, according to Biggs. The new metric will be used to calculate fill rates, as opposed to the original metric, which calculated order accuracy in all-or-nothing terms.

Some original metrics will remain on the list, but have undergone revision. On-time delivery, for example, was originally defined as plus or minus 30 minutes from the scheduled time of delivery. The new metric defines on-time delivery as taking place anytime between an hour before and up to the actual delivery time.

According to Biggs, a company doesn't have to accept each metric. Rather, it's recommended that it accepts the measures that are most important to it.