Technologies Increase Perfect Order Metrics

Companies have developed metrics to evaluate the performance of the new ways of delivering the right goods to the right customers at the right time. Most of these metrics show that the productivity and accuracy of distribution are improving over time, which leads to better service.

According to the Annual Warehouse Benchmarking studies conducted by the Warehouse Education and Research Council (WERC) and DC Velocity, from 2007 to 2008, companies reduced their average days on hand of finished goods inventory from 35 to 28 days, reduced dock-to-dock cycle time by 2.5 hours, and reduced days of sales outstanding from 40 to 35 days, while maintaining at 98% fill rates.

In 2007, 25 companies with the best supply chains (as measured by AMR Research) outperformed the S&P 500, producing an average total return of 17.9%, compared to 3.5% for the S&P. An AMR Research study found companies with perfect order rates (a popular metric that measures customer orders that arrive complete, on time, undamaged and with an accurate invoice) of 80% or higher are three times more profi table than companies with perfect order rates of 60%. It reported that better perfect order performance correlates to higher corporate earnings per share (EPS) and return on assets (ROA).

Aspects of perfect order performance can be improved through enhancements to data collection processes and technologies. It does not focus on basic barcode-based shipping, receiving and inventory management applications, on warehouse management systems (WMS) or wireless-directed picking and put-away. While these systems are foundational to efficient, highly accurate warehouse and distribution operations, there are other technologies that can provide better execution and productivity to create a greater competitive advantage.

Perfect Order Delivery
The chances of delivering a perfect order eludes a company even if its fill rates, on-time delivery, damage-free shipment and accurate invoicing success rates are at 95%. Such success rates for these four order components would give companies four out of five chances to complete a perfect order, based on a perfect order metric calculation developed by WERC:
• 95% fill rate (0.95) x 95% on-time deliveries x 95% damage-free shipments x 95% accurate invoices = 81.4% (which can be expressed as 0.954 = 81.4).
• Companies that perform at 90% success levels for each component have less than two out of three chances to make a perfect delivery (0.94 = 65.6).

Typically, companies have used a combination of automated material handling equipment, mobile and wireless computers, and automatic identifi cation and data collection (AIDC) systems to improve their inventory accuracy rates to more than 95%. However, these accuracy and productivity levels are insufficient to meet perfect order goals or provide competitive differentiation.

According to findings from a research report by Aberdeen Consulting Group titled Warehouse Automation - What's Really Working For Pallet, Case, and Piece-pick Operations?: "Increasingly, barcode scanning, which was for years the 'gold standard' for pick accuracy, has a less compelling correlation to best-in-class accuracy of 99% and above. Barcodes still correlate to success in all three categories - pallet, case and piece picking. However, it is no longer a key differentiating technology that is only used by best-in-class companies."

Being ahead of the competition does not require major changes to existing systems. Simple enhancements to legacy data collection systems can provide the improvements needed to consistently achieve perfect order metric goals. Using barcodes with other mobile, wireless and AIDC technologies can improve order accuracy and on-time fulfillment. It can also improve invoice accuracy and reduce problems from damaged shipments.

Multiple Ways to Improve Performance
Companies that are focusing solely on the four components of a perfect order would deny themselves of further opportunities to improve their overall success rate. Higher perfect order rates require improving processes that occur before the items are aggregated into the order for shipment to customers.

Companies can consider making changes to their receiving operations as advised by the Aberdeen research: "To break through the 99% accuracy barrier, companies need to realize that accuracy starts with put-away, returns processing and replenishment - the right item must be placed in the bin location to ensure that it is correctly selected in the process."

Companies should reduce shipping errors by evaluating underlying inventory accuracy problems. The following points illustrate how aspects of perfect order performance can be improved through changes to supporting processes and technologies:

On-time Delivery
The most widely used measure of distribution performance; on-time delivery is also one of the easiest metrics to improve upon as raising productivity in the warehouse process will help to roll shipments out faster. Aberdeen's research states two areas that correlate to strong on-time delivery performance: "Automating put-away and returns processing is now the top predictor of excellence in on-time shipments. With faster order turnaround times, products often need to be picked as soon as they are received. A fast and accurate system for getting products to the right bin locations can be a key factor in getting orders out the door on time."

On-time performance can be improved with at the shipping dock - truck drivers spend as much as half of their on-duty time waiting at docks, according to a study by the Truckload Carriers Association (TCA) and Mercer Management Consulting. Processes and technologies that speed check-in, loading and checkout operations could improve ontime performance.

Systems developed to streamline warehouse receiving and inventory management operations can improve operations at the dock door. Shipment verification applications could be set up to automatically generate the documentation needed to release the shipment. Companies could use the data captured automatically to validate items in the shipment to build bills of lading and to provide input for appropriate EDI messages. Such applications require no manual paperwork and data entry, which helps trucks get off the dock faster.

Another way to streamline loading and shipping operations is to upgrade existing mobile computers to wireless models that support unified communication, which provides users with walkie-talkie or push-to-talk capabilities. Real-time connectivity helps personnel to resolve issues that could cause shipping delays quickly. En-route shipment tracking, using either global positioning system (GPS) or mobile computers with wide-area wireless connectivity, also helps to prevent delays and enables dynamic rerouting to optimize delivery routes and schedules.

Complete Orders
Complete orders depend largely on having items in stock, then storing, recording and picking them accurately. Goods that are not properly identified and recorded when they are received would result in inaccurate inventory and more errors in orders. Companies can have an advantage with enhancements that are easily integrated to legacy barcode systems for improved accuracy and productivity. These enhancements include barcode technology, changes to item labeling processes, speech input and radio frequency identifi cation (RFID).

Upgrading Barcode Technology
To improve accuracy, reduce the quantity of inbound materials that are to be recorded and processed manually. While most goods arrive at warehouses already labeled with a barcode, they are not always readable, leading to errorprone manual data entry. A simple upgrade in barcode scanning technology can reduce non-reads and misreads, and simultaneously improve accuracy and productivity. Options for upgrading scanning capability include imagers and next-generation laser scanners that are widely used in handheld computers and as separate handheld scanners.

Alternatively, mobile printers can be used to generate barcode ID labels for incoming materials upon reception. Having workers create and apply labels as goods are received reduces the chance of mislabeling, which often occurs when they pick up batches of labels from a central printer and proceed to the receiving or put-away area to apply the labels. Eliminating the shuffle between stationary label printers and the items to be labeled will therefore improve productivity.

Using Speech Systems
Combining barcode data entry with speech input can raise accuracy levels, especially for picking operations. Speech systems enable workers to keep their hands and eyes on the task at hand, rather than having to repeatedly switch from handling product to data entry. Aberdeen's study has found clear links between the use of speech technology, picking accuracy and bestin- class performance.

The report found voice-directed picking showed a strong correlation with ultra-high accuracy rates. Companies with best-in-class pick accuracy were 22% more likely to be using voice. It also found companies that ranked as best-in-class for labor cost reduction were 56% more likely to use speech-directed picking than other companies.

While speech systems have traditionally been known for their accuracy and efficiency, adoption has been limited as they are usually not easy to implement. However, this is changing with the emergence of open speech systems that are developed to integrate with legacy mobile computing and barcode systems.

One example is terminal emulation (TE)- based speech recognition technology, which eliminates the need for a separate speech server and a proprietary interface between the speech system and the application software. By using terminal emulation to format and process speech input/output, data flows from and into existing software applications as if it had been entered by barcode scanning and key entry. Unlike traditional speech recognition technology, TEbased speech recognition systems can work with warehouse management systems in real-time.

Serialized Global Trade Identification Numbers
Once accuracy is determined in item receiving, identification and picking, ensure the right items are included in the shipment using ways such as scanning individual barcode labels as items are packed, and integrating the operation so that the order management system or WMS would generate an alert if there are missing items or excess quantities. By using serialized global trade identification numbers (SGTINs), errors could be detected and prevented as each specific case can be recognized with its own unique serial number.

Applications can take advantage of individual IDs to avoid accidental and additional counting of the same case, and to ensure the right numbers of cases on the pallet. SGTINs can be encoded in barcodes or RFID tags. RFID is highly efficient for this operation as it can record goods automatically without labor.

While the process requires an RFID infrastructure, the adoption is growing. Largescale, early RFID adopters are usually deploying the technology at the receiving dock, where portals or forklift-mounted readers are used to accurately identify incoming goods quicker than it would take to scan the barcodes on each case and pallet.

Damage-free Delivery
While mobile computers, wireless communication and automated data collection may not prevent goods from being damaged in transit, they can document that goods have left the distribution center in optimal condition and were undamaged when they were signed for at delivery. Handheld computers with integrated imagers are increasingly being used as proof of- delivery applications so that drivers can document the condition of goods delivered.

Customers would typically sign for the delivery on the computer's touch screen and truck drivers would take a digital picture of the freight. The computer would automatically generate a time and date stamp and appends the image to the transaction record, where it would be available to the customer service department and other personnel after uploading (which can be done in real time over a wide area wireless network).

Accurate Invoicing and Documentation
Most of the processes and systems described so far also support accurate invoicing. When organizations scan each item in a shipment to ensure a complete order, data could be used to generate accurate invoice for the items shipped. Scanned data could also be used to automatically create advance shipment notices (ASNs), bills of lading and other documentation.

Producing invoices at the customer site when deliveries are made could improve accuracy. Companies could automate this process by having drivers review deliveries with the customer, record discrepancies or adjustments on the drivers' mobile computers, and having the customer sign for delivery on the computer screen. Drivers could then use a mobile printer to create an invoice on site. The up-to-date document should prevent customer disputes.

Conclusion Perfect order is growing in its importance as a metric for business performance. As the need to improve perfect orders rises, so does the need to upgrade legacy processes and systems.

Common, real-time barcode systems are no longer enough to provide the accuracy and efficiency to create a competitive advantage or to reach target metrics. Using legacy systems with complementary technologies such as enhanced scanning, digital imaging, mobile printing, speech input and RFID will enable new processes to achieving perfect order goals.