The perfect order rate is a KPI used by companies to measure how well orders are being fulfilled and shipped. It is calculated by dividing the number of orders shipped without incident divided by the number of total orders shipped during the same time period. The company must first define what constitutes an incident. Most companies include as incidents: damaged goods, inaccurate orders, and late shipments. An order containing any of these incidents would not be counted toward the orders shipped without incident.
Organizations should expect their perfect order rate to be as close to 100% as possible. Having a high perfect order rate indicates that the shipping department has a high level of effectiveness, which in turn will result in a higher level of customer satisfaction. However, all organizations must keep in mind that there is always a cost to perfection. Although a 100% attainment would be ideal, there is always a cost associated in order to achieve it. Orders may need to be checked and rechecked an abnormally large number of times in order to meet this objective. Some industries, such as pharmaceutical or chemical companies, might be required to maintain a higher perfect order rate due to regulations imposed on them. Management should strive for the highest perfect order rate in their industry where the effort is warranted and at maximum efficiency.
By analyzing the perfect order rate trend, the organization can determine if shipment results are improving or declining. By drilling down into the causes of the decline, the company can develop processes in order to stop the decline and improve the shipping results.
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