Achieving the Perfect Order
Right-time action is based on real-time data.

September 1, 2004
by Doug Percy, President and CEO Blue Agave Software

The perfect order is what you get when everything in your supply chain goes exactly right. It's the ability to deliver to the customer an order that is complete, accurate, on time, and in perfect condition. Consistently achieving the perfect order requires excellence across the processes of your extended supply chain-from forecasting and planning to execution on order fulfillment and delivery.

Manufacturers used to overcome supply chain deficiencies by requiring longer order lead times and carrying more inventory. Today, however, they enjoy neither of these luxuries. Leading retailers are mandating shorter order lead times-most manufacturers have just 72 hours to turn an order around once it's placed. Further, retailers have slashed the amount of in-network inventory they're willing to carry. Nor, with tight margins, can manufacturers afford to have working capital tied up in inventory.

In the face of these challenges, supply chain performance becomes more important than ever before. And perfect order performance is the most accurate indicator of how healthy your supply chain is.

The conditions that prevent a perfect order-stockouts, late orders, manufacturing delays, or inaccurate shipments-are issues that often develop over time but go undetected until it's too late to avoid their negative effects. But with the right information at the right time, manufacturers gain visibility ahead of the critical 72-hour order execution window. With that visibility comes the time to consider alternative responses to unplanned events-and to deliver more perfect orders.

By following a few specific steps, you can put yourself in the best position to consistently achieve the perfect order.

A strong forecast that leverages the best information gives you a critical foundation for execution. As updated information about orders, production shifts, supply, or demand comes in, however, you must be able to respond if you're going to maintain optimal performance.

Leading retailers provide detailed, near-real-time sales and inventory information to their suppliers through portals like Wal-Mart's RetailLink or through other means like electronic data interchange (EDI) transactions. AMR Research has described this information as the purest demand signal available today and its use as the first step in becoming a demand-driven organization. By fully understanding store- and distribution-center-level demand and inventory, you can get a jump on issues when demand varies from plan.

Customer demand isn't the only variable at play. Many internal changes can affect your ability to meet order commitments. For example, a six-hour delay in a production schedule could affect order fulfillment activity slated for five days later. You must be able to understand the external impact of changes in internal business conditions, and you must be able to respond accordingly.

By continuously evaluating all available information against plans on a consistent, real-time basis, you can preempt problems and take actions to keep service levels and margins intact. Often, serious problems can be avoided with cost-effective solutions-reallocating inventory to avoid a stockout, for example-but only with the advanced warning that real-time information can provide.

Today's supply chain leaves little room for error. But if you consistently take steps that will help you achieve more perfect orders, you can expect your company to benefit from improvements in every one of the Big Three: margins, service levels, and revenue. FS