Facility measures

Aug 01, 2005 9:30 PM  By

Evaluating your distribution center’s performance involves foolproof benchmarking, but that’s easier said than done. Luckily, the Mailing & Fulfillment Service Association (MFSA) can provide some guidance. The results of its recent benchmarking survey of third-party fulfillment companies, presented at the MFSA’s annual conference, identified “13 critical success factors” that DC managers should keep in mind when measuring the performance of a fulfillment operation. These factors include

  • fulfillment accuracy (internal), in which the management of the internal fulfillment processes prior to an order going out are expressed as a percentage of total orders shipped. Respondents reported a median score of 98.8% and an average of 97.6% for fulfillment accuracy.

  • fulfillment accuracy (external), which indicates the number of errors that customers report. On this measure, respondents scored a median of 99.4% and an average of 99.2%.

  • inventory accuracy, or the comparison of inventory system balances to actual balances by cycle counting. “Ingredients for success included [the] result of accurate receiving, accurate putaway, accurate picking, and accurate cycle counting,” Jim Rushing, president of R Fulfillment Solutions, a Socorro, NM-based fulfillment consulting firm, noted in PostScripts, the MFSA’s newsletter. Among the respondents, the median score was 98.9% for inventory accuracy; the average was 97.3%.

  • order preparation accuracy, indicating the percentage of orders prepared correctly before their arrival in the fulfillment center. For example, a specific brochure may need to be paired with a particular flier. Transmitted files make it difficult to detect errors, but experienced pickers can catch mistakes. Respondents scored a median of 97.2% and an average of 95.7% on this benchmark.

  • shipping accuracy, meaning the percentage of orders shipped error-free. “This can be determined by auditing packages vs. orders before they are picked up by the carriers,” Rushing said. “It also can be done after the fact by comparing returns and address corrections to orders.” The median score for shipping accuracy came in at 99.2% and the average at 98.9%.

  • Employee turnover, or measuring the number of permanent employees who have left (for whatever reason) against the number currently employed. Rushing recommended a quarterly turnover report based on exit interviews about why people have left. Respondents said they had a median employee turnover rate of 10.8% and an average of 13.1%.

  • Days of sales outstanding (DSO), which indicate the average number of days your customers take to pay you, or the time it takes to turn accounts receivable into cash. “Have a formal credit policy and follow it, trying to have all credit-worthy customers,” Rushing advised. “Track down those customers who have ‘skipped’ using return-service-requested endorsements on your invoice and statement envelopes, and establish a ‘polite’ follow-up program.” According to the fulfillment benchmarking survey, the median DSO for respondents was 44.5 days; the average was 45.0 days.