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How to Measure Order Fulfilment Cycle and other Metrics Formulation Calculations
Yesterday we have been defining the Order Fulfilment Cycle and discussed on the points to be take notice on. Perhaps you would wonder how should a fulfilment cycle being measure?
The best way to measure the average fulfilment cycle is by looking at the total time it took for the order to be delivered to the address after the initial order was placed which can be worked out using this formula:
If you would like to calculate the cycle time taking into account the source, make and delivery you will need to use the proportional to formula which compares the order fulfilment cycle time against the source cycle time which looks like this:
Order Fulfilment Cycle Time Proportional to Source Cycle Time + Make Cycle Time + Delivery Cycle Time
In fact, in order to measure the efficiency and effectiveness of a business, there are a lot of factors which has to be considered. As the cycle time is so important you will need to keep a close eye on it and work out ways that it can be improved.
We have put together some important metrics that we feel maybe helpful to you and your business:
·Internal Metrics – use when measuring the performance of the system or the internal components of the logistics systems ( production plants, warehouses, transportation equipment)
·External Metrics – reflects the expectations of the organisation by external entities (customers, stock markets, government, 3rd party agencies)
·Inventory turnover ratio – use to evaluate the speed of goods movement through a company. It is determines the number of times inventory is turned over during the year. The higher the ratio the better.
·Transit Time Variability (TTV) – a non financial metrics that captures the variation in transit time and indicates the reliability of transportation function. The less the TTV index, means it helps customers plan the work more efficiently.
·Percentage of Demand Met – this helps indicate operational capabilities of a company. A low % usually implies poor forecast, insufficient capacity, low inventory levels, poor quality and unreliable production & distribution systems.
·Defectives – it is not a fixable have to scrapped bringing down the production rate
Defectives = unit cost of production increases - cost of repair + labour + materials
·Percentage of Good Parts – this measure the reliability of the supply in terms of the quality of the delivered parts. If the % is below 100, it might leads to a shortage of parts and additional cost on reverse logistics, i.e. increase the return of goods.
·Percentage Of Rejects – measure the goods rejections rate.
·Average Active Maintenance Time – measures the mean to repair or to perform a corrective maintenance.
·Earnings per share & Financial Leverage – measures the monetary terms of the company performances.