RFID and The Perfect Order

When measuring the efficiency of a supply chain, there is no better indicator of fulfillment man holes and planning stop signs than that holy grail of metrics - "The Perfect Order". It is an elusive goal to most of us and is subjected to the vagaries of the economics weather and the "perfect" matching of supply to demand.

Imperfect Tendencies - Missing the Mark

What is a “Perfect Order”?

• On Time
• Complete
• Damage Free
• Correct Invoice

Research shows we are missing the mark

• 84% -WERC/DC Velocity
• 80% -AMR study
• 23% -Retail Compliance Council

Source: WERC 2006

Now we have a new bridge to achieving this Perfect Order, gossip abounds of RFID, and how by embracing it one can better one's supply chain. Of course there are different disciplines contributing to making the order perfect, accurate forecasting, optimal planning to those forecasts and of course execution systems that can fulfill demand, match supplies and coordinate tasks. Of course, some of the inefficiencies are just poor business processes and outdated practices or sofware.

RFID would in essence make the job of locating, tracking those elusive supplies much easier and by transference make the matching process more efficient and streamlined. Before we go into how that can be done, we need to understand what a perfect order is. There is a perfect order to a customer and a seller, operationally of course to a seller, this means the least cost - inventory acquisition and holding, labor and space, order processing and so on, we ignore pricing and other non supply chain factors for perfection outside for now. To a customer, perfect order in our world is measured by correct item shipped, in time, without any damages.

Figure 1a: Measurement Metrics and suggested RFID solutions

Figure 1b: Measurement Metrics and suggested RFID solutions

Figure 1c: Measurement Metrics and suggested RFID solutions

Figure 1d: Measurement Metrics and suggested RFID solutions

Metrics for Comparison - Level 2 and 3 Metrics

From the benchmarks it is clear that the two major contributors to an imperfect order are "% on-time delivery" and "% complete". With sample averages for "% on time delivery" at 51.7% and "% complete" 47.7%, there is significant opportunity for improvement. It is, necessary for us to drill down to level 2 and 3 processes to be able to identify what can be improved and more importantly, what can be tracked for improvement. As industry standards for metrics gain wider adoption, companies can benchmark against industry specific best-practices, this also enables companies the opportunity to implement continuous improvement using similar scales.

Adopting Cycle Time metrics for Intra Facility Activities

While the above metrics and the facilitating RFID capabilities that benefit companies are useful, it is leveraging RFID and associated transactions and processes at the most granular levels that interest this professional. To actually adopt and measure for the purposes of continuous improvement, tracking and measured should be done at the task level.

Fig 2a: Fulfill and Deliver Cycle Time Metrics

Taking Intra-Facility operations as an example, we can again leverage and derive SCOR standards to track, measure and benchmark activities. Since Cycle Time KPI's at are the most granular level, these are the best indicators of actual efficiency improvements. This approach can be adopted during pilots to quantify possible benefits if approval is required for actual adoption.

Of course the schematic above is only a partial representation of what can be measured and what needs to be tracked. In conclusion: in order to improve order fulfillment, companies must go down to this level (II, III and lower) to track down potential improvements with regard to labor efficiency, inventory accuracy and tactical optimization.