Collaboration is the foundation of the perfect order

The Perfect Order is something to which sophisticated supply chain organizations aspire. At its most basic, the Perfect Order is the right product, delivered to the right customer in the right place at the right time in the right quantity, condition and packaging, with the right documentation.
Leading companies focus attention on the Perfect Order because its business impact can be significant. For instance, a 10-percentage-point improvement in Perfect Order rating correlates to 50 cents greater earnings per share.
Furthermore, a 3-percentage-point increase in perfect order rating correlates with 1 percent of additional profit margin — which, in the case of a $1 billion company boosting margin from 10 to 11 percent, means $10 million more on the bottom line. Overall, 5 percentage points in the Perfect Order rating correlates with 2.5 percent better return on assets. On $1 billion in assets, that translates to $25 million.
Not a simple task
Achieving the Perfect Order, however, is no simple task. It requires near perfection by a company and its supply chain partners across the business, beginning with forecast accuracy and supply planning, through order management, distribution and ultimately to receipt by the customer. This, in turn, requires extensive and tight collaboration — among internal functions, but more importantly, with external supply chain partners.
Many factors contribute to successful collaboration among supply chain partners. Ten are particularly important and form the foundation of a tight, mutually beneficial relationship:

  1. Commitment from the leaders of the collaborating organizations (to guarantee resources, funding and company buy-in).
  2. Desire to turn win-lose situations into win-win opportunities.
  3. Acknowledgement that collaboration will take a lot of time and effort.
  4. Open sharing of data, strategies and vision, which develops trust.
  5. Embedding of collaboration as a core element of both parties’ operating strategy.
  6. Development and use of key performance metrics that jointly measure success.
  7. Sharing of the savings from the process- and cost-improvement efforts they pursue.
  8. Commitment to collaborate for the long term.
  9. Ongoing self-assessment — “What’s it like to do business with me?”
  10. Debrief process incorporated into every interaction.

Successful alignment
A formal sales and operations planning (S&OP) process is one way leading companies promote greater collaboration and, hence, better performance on the Perfect Order metric. S&OP is especially helpful in aligning an organization’s vision and corporate objectives, linking strategic plans with execution, rationalizing financial objectives and business strategy, and boosting forecast accuracy and plant efficiency.
While the Perfect Order is certainly not the only measure of business performance, it’s arguably one of the most powerful.

Achieving the Perfect Order is next to impossible without tight collaboration across the entire supply chain. Internal functions and external partners need to be continually focused on working together toward flawless execution and a shared commitment to getting customers exactly what they want.