Although a number of industry
organizations have adopted the POI
as their standard for measuring performance, the index also has its critics. Some have challenged the formula’s “multiplier” effect, arguing
that it inflates the significance of a
single failure. A score of 0 on just
one of the metrics (say, the order is
delivered an hour late) drops the
overall POI score down to 0, effectively canceling out the supplier’s
achievements in the other three
areas.
But we argue multiplying is the
purest way to look at an order from
your customer’s—not the shipper’s or the
supplier’s—perspective. If the order doesn’t meet all of the customer’s expectations, the supplier has failed. Period. You
don’t get partial credit when you fail the
customer.
For example, what if Santa left
Rudolph at home and encountered thick
fog in Northern Indiana, delaying the
order’s arrival until after lunch on
Christmas day? Regardless of whether
Santa got everything else right, Ralphie
would be an unhappy customer. That
disappointment would be reflected in
the order’s POI. Santa would get a 0 for
on-time delivery, netting him an overall
POI score of 0.
The customer-focused measure
In Ralphie’s case, it all works out in the
end. Santa meets his customer’s expectations on all counts, fulfilling both
Ralphie’s order and his dreams. But not all
customers are so lucky. WERC’s most
recent survey of warehousing and distribution professionals found that respondents only shipped perfect orders 87.5
percent of the time.
Part of the problem may be that not all
suppliers are as attuned to their customers’ expectations as Santa is. While
some companies have worked hard to
define their customers’ fulfillment
requirements, others are still dragging
their feet.
If you haven’t developed your own
definition of your customer’s perfect
order, we recommend you default to the
WERC definition. It’s hard to argue with
the premise that most customers want
what they ordered, when they wanted it,
how they wanted it, with an accurate
invoice.
If you think this definition is too strict,
we urge you to think of Ralphie.
Achieving the perfect order is not out of
reach. Just ask Santa.
Kate Vitasek is the founder of Supply Chain Visions Ltd. and
a regular blogger for DC VELOCIT Y. You can read her blogs on
the topic “You might have a bad warehouse if ….” at
http://blogs.dcvelocity.com/bad_warehouse/. Joseph
Tillman is a senior researcher and consultant for Supply
Chain Visions.
