There are a lot of things that get measured by our pulp and paper customers to gauge the health of their business. There are some key metrics that show up in the most successful companies that epitomize Peter Drucker's quote, "What gets measured, gets managed." I believe that the best of those metrics have three elements to them.
Three Elements of a Great Measurement
- Everyone in your organization can easily understand it
- From the CEO to the newest person working in the broke pit, everyone should be able to understand what it means.
- Everyone in your organization understands how they can affect it
- Everyone in your organization should be able to feel like they can impact the measurement
- The measurement breaks down to actionable insights
- I love measurements that are the some of their parts, and that the parts provide different areas of the enterprise a view in how to improve the metric overall. A good example of this is OEE (Overall Equipment Effectiveness) = Availability x Performance x Quality.
Perfect Order Index Explained
The Perfect Order Index (POI) is a measurement that meets all three of the goals above. It is one of the best ways to measure how you are performing as a whole for your customers. The best definition I think is from the American Productivity and Quality Center (APQC) which is a great resource for manufacturing best-practices and measurements. Their definition of A Perfect Order is, "Flawlessly taking and fulfilling a customer order, which includes taking the order correctly, producing the right product of the right quality in the right quantity, delivering the product on time and sending an accurate invoice."
This really defines the entire life cycle of your customers experience with you, the entire Order to Invoice scenario.
So the POI calculation is: (Percent of orders delivered on time) * (Percent of orders complete) * (Percent of orders of the right quality/damage free) * (Percent of orders with accurate documentation) * 100.
Don't Just Measure the Parts
We see a lot of customers that measure isolated elements of POI. On-time Delivery is pretty common across most customers, OTIF (On-Time & In-Full) is also popular, and both very valuable. However, they only tell one part of your customers experience or potential frustration with you. If you ship everything on-time, but your claims for quality are through the roof, the customer may look for another vendor. The reason a lot of our customers tell us they could not measure it in the past is that they had elements of the needed data in 2 or 3 different solutions, defined differently in most of them. Integrated manufacturing execution and transportation systems like MAJIQ's Elixir solutions make it seamless to track the elements and easily measure their POI.
The Perfect Order Index (POI) is a great metric for viewing yourself through your customer's eyes. It is something that everyone in your organization can understand and can affect every day working in your organization.