You don't need us to tell you that how you deliver products to your customers is just as important as how you produce them. Today, swift and reliable delivery is table stakes for maintaining customer health and lifetime value. What’s more, on-time delivery means fewer penalties and optimized working capital — the sooner you deliver, the sooner you can invoice your customers.
However, while there are dozens of order management metrics to track and analyze, knowing which are the best leading indicators of OTD is an entirely different matter. From our experience helping hundreds of enterprises optimize their processes, we’ve discovered and developed dozens of KPIs that shed new light on order management effectiveness — read on to learn about three that every organization should be tracking.
Let’s start with a big question: How do you know how successful your order management transformation has actually been in terms of streamlining your processes? Global manufacturing leader Siemens decided it was time to find an answer. When they launched their order management transformation, they had an abundance of metrics, but none that were simple enough to roll out globally but powerful enough to capture nuance of process optimization. Until they came up with the Digital Fit Rate.
In many cases, a low Digital Fit Rate increases the likelihood of OTD by eliminating unnecessary steps and manual tasks to make the whole process faster and reduce errors. To calculate it, divide the number of manual activities on all orders by the total number of orders. Dr. Lars Reinkemeyer, Global Process Mining Lead at Siemens, explains it this way: “If you have ten orders and five manual touches, the Digital Fit Rate is 0.5. If you have ten orders and fifty manual touches, it’s 5.”
Siemens relies on Celonis to chart their progress on this metric across their global teams — all in all they’ve cut 10 million manual order touches per year. For more, read the Post from Gia-Thi Nguyen, Head of Operational Excellence at Siemens, to learn about the birth of the Digital Fit Rate and how it played an essential role in their order management transformation.
We all know the feeling: Repeating the same steps multiple times just to complete a simple task is tedious and frustrating. The Rework Rate is a measure of how often the same activities get repeated in the same process, and a high Rework Rate is almost always unfavorable to delivery performance. Rework is by definition unnecessary, so if you can eliminate rework in your order management processes, you can process orders faster and deliver on-time more reliably.
You can calculate the Rework Rate in a variety of ways. One is to count the number of activities on an order and divide it by the number of distinct activities on that order. In process excellence systems like Celonis, this can be calculated at scale and tracked in real-time directly from your ERP data. If the number is greater than one, then your orders have rework, and you can then implement predictions and recommended actions to get your process back on track.
For Order Management, Credit Checks are a necessary evil. They prevent you from selling to customers who don’t pay. But they are also a common root cause of late delivery, as orders can end up stuck in a finance approval queue and the resulting blocks in your ERP are often removed manually. The longer the hold, the greater the risk that the order will not be delivered on-time. The first step in removing this friction point, is getting visibility into these delays and understanding how they impact on time delivery.
Credit Check Delays is a simple KPI that helps you understand just that. To track it, simply calculate the time between order receipt and credit check approval and divide that by the total number of orders with credit checks. Watch this webinar to learn how Chemours evaluated their credit checks to increase their ability to deliver on-time and meet customer expectations.
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Want to learn more strategies for improving delivery performance and tips for implementing improvements? Join us for a webinar on February 25 at 11am EST for "5 Ways to Maximize On-time Delivery" And, if you want to get started today calculating process metrics like digital fit, rework, and credit checks, check out Celonis Snap — the world’s only free process mining solution.