Benchmarking metrics are becoming an effective way to improve efficiencies while providing superior levels of service to clients. At the recent Mailing & Fulfillment Service Association (MFSA) Fulfillment Conference, held in concert with NAPL, the results of the latest Fulfillment Benchmarking Survey were reviewed. This survey was completed in April 2005.
The very first MFSA Benchmarking Survey was the result of MFSA's Fulfillment Conference in 2001. During two roundtable discussions, it was suggested that the association look at how a fulfillment company could benchmark. A document entitled "Fulfillment Benchmarking Guidelines: Operational Critical Success Factors" was produced and then became the foundation of the very first MFSA Benchmarking Survey.
Thirteen critical success factors were surveyed for the most recent benchmarking survey. Below is a list of the factors, the definition of that factor, their importance and the survey results.
1. Fulfillment Accuracy (Internal)
The management of the internal fulfillment processes prior to an order going out, expressed as a percentage of total orders shipped. This includes the accuracy and timeliness of receiving, inventory, order preparation, picking/packing, shipping and order turn times.
IMPORTANCE: We are attempting to assure that every order goes out correctly with the fewest opportunities for the client to be negatively impacted.
Survey results: Median 98.8% Average 97.64%
2. Receiving Cycle Time
The elapsed time to move material through the receiving process until it is available for use.
IMPORTANCE: The sooner materials are available the sooner they can be used in fulfilling orders; prompt resolution of issues such as damage or shortages; prompt notification of receipt to clients; and prompt release of backorders.
Survey results: Median 7.1 hours Average 11.9 hours
3. Receiving Accuracy
The percentage of items received correctly. Ingredients for success noted were having a receiving policy and issuing it to your clients, never assuming the packing list is correct and employing a detail-oriented person with good math skills doing the work.
IMPORTANCE: Validation of packing list accuracy or lack thereof; enabling the client to pay for what is received, not necessarily what was ordered; holding suppliers accountable; most importantly, it is the starting point of solid inventory accuracy.
Survey results: Median 98.9% Average 97.39%
4. Inventory Accuracy
The comparison of inventory system balances to actual balances by cycle counting. Location audits are also helpful. This activity is at the heart of all fulfillment transactions. Ingredients for success included result of accurate receiving, accurate putaway, accurate picking and accurate cycle counting. It is also the result of good management of inventory "side door" activities like providing samples for sales folks, pulling materials for mailings, special distributions and kitting. These activities, when handled correctly, often result in manually prepared inventory transactions. Manual transactions are error prone.
IMPORTANCE: New Web-based software technologies allow clients a 24/7 view of their inventory; the avoidance of unexpected and embarrassing stock outages; lack of inventory accuracy is the main reason for a client to look for fulfillment elsewhere.
Survey results: Median 98.9% Average 97.3%
5. Order Preparation Accuracy
The percentage of orders prepared correctly before arrival in the fulfillment center. If we key the order, we must verify its accuracy. Transmitted orders or files make it difficult to detect errors. However, experienced pickers can catch pairings. Example: A specific brochure that is always accompanied by a specific flyer. An automated shipping system can catch erroneous city, state and ZIP combinations. We can also look at returns vs. orders for errors.
IMPORTANCE: If not prepared correctly, orders will not be fulfilled correctly.
Survey results: Median 97.2% Average 95.69%
6. Order Picking Accuracy
The percentage of orders picked with correct items and quantities ordered. Accuracy is usually verified by the packer.
IMPORTANCE: Properly filled orders; errors will negatively impact inventory accuracy.
Survey Results: Median 99.2% Average 98.5%
Comments on Packing Accuracy (Not Part of the Survey): Packers need adequate space to do their jobs and must pack only one order to completion at a time in order to avoid mislabeling (crossing hands). They must verify picking accuracy. They must also properly package the order by adding filler as needed for firmness, bubble wrapping fragile items, keeping the package weight at or below 30 pounds (or the weight maximum specified by the client). There should also be no rattles, and the taping must be adequate/secure. It is recommended that the shipping crew be empowered to reject any packages that rattle, are not firm or are too heavy or are poorly taped.
IMPORTANCE: An improperly packed order may not make it to its destination as it may be damaged in transit.
7. Shipping Accuracy
The percentage of orders shipped error-free. This can be determined by auditing packages vs. orders before they are picked up by the carriers. It can also be done after the fact by comparing returns and address corrections to orders. All orders shipped manually must be verified as keyed · correctly. Example: You do not want to send an order for Long Beach, Mississippi to Long Beach, California.
IMPORTANCE: Need to assure proper service levels are used to meet need by dates; packages are labeled correctly; addresses are complete and correct.
Survey results: Median 99.2% Average 98.85%
8. Order Turn Times
The elapsed time from receipt of an order to its shipment. A computer-generated report is usually needed to measure this.
IMPORTANCE: To assure we are meeting our contractual commitments with clients.
Survey results Median Average
Same day 56.8% 50.3%
Next Day 23.4% 30.5%
Beyond Next Day 10.0% 19.2%
9. Fulfillment Accuracy (External)
The number of errors reported by the customer(s). We hate to hear about these, but if we don't get feedback, we need to ask for it. Partners In Excellence (quarterly meetings with clients) will surface findings. Reporting of errors by the corrective actions process is appropriate.
IMPORTANCE: We need to know how the customer perceives our service so we can make corrections in order to retain our customers and keep our customers satisfied.
Survey results: Median 99.4% Average 99.2%
10. Employee Turnover (Voluntary and Otherwise)
The number of permanent employees that have left (for whatever reason) vs. the number currently employed. How do you manage it? A quarterly turnover report which is the product of exit interviews used to tabulate the reasons why people have left. Findings will be many. Some examples may be: Bad hires, people not qualified, perhaps too slow or too error prone. Lack of quality supervision. Non-competitive pay and/or benefits. Problems with drugs.
IMPORTANCE: The hiring process is expensive. The training process is also expensive. Excessive turnover can negatively impact morale. New people are more likely to make mistakes and have accidents.
Survey results: Median 10.8% Average 13.1%
11. Total Revenue Per Square Foot
Total company revenue divided by total facility space, which includes offices, warehousing, administration, telemarketing, etc.
IMPORTANCE: Tool for monitoring growth/space utilization.
Survey results: Median RPSF $34.17
Average RPSF $74.11
12. Total Revenue Per Employee
Total company revenue divided by average full-time employees, including all personnel. Or total hours paid divided by 40.
IMPORTANCE: A tool to monitor growth and efficiency. It can be used as a justification for adding automation to your mailing operation.
Survey results: Median RPE $58,252
Average RPE $74,718
13. Days Sales Outstanding (DSO)
The average number of days your customers take to pay you. Or the time it takes to turn your receivables into cash. Calculated by dividing accounts receivable by average sales per day.
How do you reduce or minimize it? Have a formal credit policy and follow it, trying to have all credit-worthy customers. 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. Finally, use collections as a last resort.
IMPORTANCE: A great warning sign if it starts to go up and particularly useful in a tough economy when some customers may be running out of money. Measures effectiveness of managing your receivables. An above average DSO can wreak havoc on sales and credit and costs you money. A potential buyer may look elsewhere.
Survey Results: Median DSO 44.5 days
Average DSO 45 days. (National average per IOMA in August 2000 was 43.2 days.)
Finally, some Guidelines for Measurement Success were put forth including:
1. Collect and analyze key stats on a regular basis, i.e. keep the data fresh.
2. Develop and maintain relationships with other similar companies so you can share data and methods and participate in MFSA sponsored surveys.
3. Audit your system and raise the bar where realistic to reflect operational and systems improvements.
4. Share with your staff!
Jim Rushing is President of R Fulfillment Solutions, specializing in operational review, analysis and redesign, improving efficiency and profits. Contact him by phone at 505-838-4314 or e-mail rfulfillmentsolutions@yahoo.com.
