Ever since the proliferation of eCommerce, online stores have strived towards meeting the impossible delivery expectations of the customers.
It not only improves customer satisfaction but gives an area of differentiation in times of intense competition.
But how do you exactly measure how well you are faring in terms of order processing?
With Order cycle time.
What is Order Cycle Time?
Order cycle time is a key performance indicator (KPI) that calculates the time taken to ship out an order from the time that it was placed.
Understand that order fulfilment cycle time doesn’t include the actual shipping time but just the order management process until the products are shipped. It is a part of the lead time which calculates the entire time until the product is delivered to the customer.
The idea is to reduce the order cycle time for faster order delivery. The shorter the order cycle time, the more responsive the company is towards customer purchases.
How to Calculate Order Cycle Time?
The formula for calculating order cycle time is the time the order was received minus the time the order was placed divided by the total number of orders shipped.
Order Cycle Time = (delivery date – order date) / total number of orders shipped.
The first step to calculating the formula is collecting the customer details, delivery date, order date, and the total number of orders shipped. You can easily fetch this data if you have an order management system that helps you collect the information faster.
Significance of Order Cycle Time
Order cycle time KPI gives a lot of insight into supply chain efficiency. Let’s take a look at why it’s a critical KPI to calculate.
1. Find Gaps in the Supply Chain
The order cycle time is a reflection of the order processing and the inner operations of the supply chain since it doesn’t take into account the actual shipping time. The number accurately represents how your order fulfilment process is doing.
If you have a longer order cycle time, it means there are a few discrepancies in your supply chain. It helps you identify what process is taking so long and how the chain can be optimised.
For example, you find out that a glitch in the order management system is delaying the order sent to warehouses for fulfilment. You can assess the situation and take action to fix the system for the seamless transfer of orders to warehouses and fulfilment centres.
2. Measuring Customer Satisfaction
The longer your order cycle time, the more negative impact it has on the customer satisfaction. Hence, you must ensure timely shipments and avoid fulfilment delays.
Besides, expedited deliveries are one of the core competency areas for today’s eCommerce businesses. It’s what sets you apart from competitors and what can make your customers happy. If you have a shorter order cycle time, you can seamlessly fulfil the orders, set them for delivery and even offer them as short delivery times as two days.
3. Measuring Readiness to Scale
The time taken to process the order is a good indicator of whether you’re ready to scale your business. If you can meet the KPI for a shorter order cycle time without affecting your overall performance, you’re likely to expand your operations.
It gives you an idea of how you should iterate your supply chain to make way for more orders, invest in additional technologies, revisit supplier relationships to facilitate more procurement, and hire extra people to manage the scaling business.
Measures of Improvement for Order Cycle Time
By now you would’ve figured out, ideally, all companies strive for a shorter order cycle time. But how do you achieve that? Listed below are some pointers you can consider to improve your order cycle time.
1. Configure Protocols and Limits
A lot of times, order cycles take long because people don’t know what to do in unexpected situations. This is where you set protocols to improve the processes. For example, have clear guidelines on limiting batch sizes, restocking product returns so they can be sorted and picked later, notifying suppliers for placing reorders, etc.
Basically, look for any process that you think may be tampering with the order cycle time and create a guide for it. Your staff needs to know what to do in every situation, right from delivery exceptions to following up when the order is stuck at a specific location.
2. Provide Employees with the Right Tools
Processing orders manually obviously takes a lot more time than automating it. It also helps with scaling and reducing the chances of errors. But in order for automation to do its work, your employees need to be equipped with top-notch technology to do their work and deliver the results. Train them on using the order management software and integrate the software with other crucial tools within the supply chain to get a consolidated view of the data.
3. Outsource Order Fulfilment
Pulling off the order fulfilment process is not an easy feat. If you want to achieve an optimised order cycle time, it’s best to leave it to the experts. You can outsource your order fulfilment to third-party logistics and they can ensure that your orders are picked, packed, and delivered to the customer on time through their micro-fulfilment centres.
Before choosing an order fulfilment provider, ensure that they are reliable, hold a good reputation, have sound logistics, and are technologically equipped.
Also, make sure whether they provide an order fulfilment software that integrates with your online store. This way, your orders are automatically forwarded to their fulfilment centre as soon as the customers place them on your website.
4. Continue Measuring Cycle Time
There are numerous variables that affect the order cycle time such as the introduction of new tools or an unexpected delivery exception. If you continuously monitor the situation, you can embrace these changes and determine the need to review your processes.
5. Improve Warehouse Flow
Order cycle time can easily identify areas of improvement once you find faults across the supply chain. You get to identify if the warehouse KPIs are met, if pickers can find items easily, if the fulfilment area is far from the pickup area, etc.
Once you identify these loopholes, you take measures to address them to improve the order cycle time. Your efficiency of production increases and even the customers will be happy with the faster deliveries.
Order cycle time gives insights into many other supply chain processes such as order fulfilment, order management, etc. It’s essential to keep the cycle time at a minimum to ensure customer satisfaction.
However, to do so, it’s ideal to outsource your order fulfilment process to a 3PL provider. You can contact us at PACK & SEND for the same, guide us about your requirements, and we’d be happy to help.
Image source: Techjockey