The Perfect Order KPI: Is it the Best Metric Ever?

If you’re not already familiar with the perfect order rate as a supply chain KPI, you will be in around 10 minutes, which is the maximum amount of time you’re likely to spend reading this article.

Here at Benchmarking Success, we happen to believe that perfect order rate is the best KPI ever for tracking supply chain performance, and over the next few paragraphs, I’m going to explain why that is.

The Perfect Order Rate KPI Defined

The thing that perfect order rate really has going for it is its composite nature. Aggregated from a number of transactional metrics, perfect order rate offers a high-level, “at a glance” view of fulfilment performance.

In practice, the number of transactional metrics used can vary, but are typically those which allow you to see the percentage of sales or purchase orders that meet the following criteria:

• Delivered at the correct time
• Delivered with the exact same quantity of items as ordered
• Delivered without any lost or damaged items
• Delivered with the right packaging
• Accompanied by correct (and correctly completed) documentation

In this respect, perfect order rate can be likened to a similar KPI which you may have heard of, called “on time in full,” OTIF, or DIFOT. Indeed, the measurements used to calculate DIFOT are included in the perfect order rate KPI, along with other metrics which relate to the criteria described above.

What Goes into Perfect Order Rate?

Let’s try to get a bit more specific about the individual metrics that can be aggregated into the perfect order rate KPI. In essence, you can make the formula as comprehensive as you like, since the overall measurement simply requires multiplying the results of the individual metrics together.

As a minimum though, perfect order rate should comprise the following transactional metrics:

• On-time delivery (delivery within the time window agreed between supplier and customer)
• In-full delivery (delivery quantity and quality matches the order)
• Correct invoice (details on invoice should match the quantity, quality, and prices of items delivered)

Companies that measure perfect order rate typically include a few more metrics to build up a comprehensive picture of cross-functional performance. In some cases these extra metrics will be added to the perfect order rate formula, but in others they may make up a further level of detail, below the on-time, in-full, and correct invoice metrics.

For example, you might add “delivered without loss or damage” to the perfect order rate criteria, but on the other hand, since an order hasn’t been delivered in full if losses or damage occur, losses and damage might be recorded under the in-full delivery metric.

The same consideration must be given to other “in-full” metrics like warehouse picking or order-entry accuracy. Should these be captured under the in-full metric or added as extra perfect order rate criteria?

In making the decision, it’s important to remember that the more metrics are used to make up the perfect order rate result, the harder it will be to achieve a high percentage.

How to Calculate Perfect Order Rate

The calculation itself is straightforward, even if deciding what goes into it takes some thought. You multiply the percentage results of each component metric together.

So if your on-time delivery rate is 95%, your in-full delivery rate is 97%, and your correct invoice rate is 98%, your perfect order rate would be:

0.95 × 0.97 × 0.98 = 0.903, or 90.3%

This is where perfect order rate gets interesting for me. Notice how three individually strong results combine to produce a number that’s actually a bit disappointing? That’s the power of this KPI. It doesn’t let you hide behind good performance in one area while another area drags.

I worked with a distribution company a few years back who were quite pleased with themselves. Their on-time delivery was 94%, in-full was 96%, invoicing accuracy was 95%, and damage-free delivery was 97%. All decent numbers in isolation. But when we calculated their perfect order rate? It came out at just 83%. That was a wake-up call.

Perfect Order Rate vs Other Fulfilment KPIs

You might be wondering how perfect order rate compares to metrics like line fill rate or order fill rate. Honestly, they measure different things and serve different purposes.

Line fill rate tells you what percentage of individual order lines were fulfilled correctly. Order fill rate tells you what percentage of complete orders shipped without any issues. Both are useful, but they’re narrower in scope.

Perfect order rate goes further. It’s not just asking “did we ship what was ordered?” It’s asking “did we ship what was ordered, on time, undamaged, with the right documentation, and invoice the customer correctly?” That’s a much higher bar.

The thing is, your customers don’t experience your supply chain as a series of isolated metrics. They experience it as a whole. Perfect order rate reflects that reality in a way that single-dimension KPIs don’t.

Advantages and Benefits of Perfect Order Rate

As I mentioned at the beginning of this article, I really like the perfect order rate KPI. As a composite KPI, it enables performance measurement to cut across functional silos, while also allowing a multi-level view of results.

This KPI is ideal for use with analytics software, because a dashboard display can show the summary result, along with a drill-down option for detailed perfect order rate analysis.

Analysis of performance failures is also facilitated by the perfect order rate KPI structure. It’s easy to see failure patterns and trends, which can then be targeted as part of continuous improvement efforts.

Finally, because many success-factors are in play, perfect order rate tracking can help galvanise collaboration across the internal and external organisations collectively responsible for supply chain performance.

What’s a Good Perfect Order Rate?

This is probably the question I get asked most often. And honestly, it depends on your industry and the complexity of your supply chain.

For most operations, a perfect order rate above 90% is considered good. World-class supply chains typically achieve 95% or higher. But here’s the reality: because of how the calculation works, getting from 90% to 95% is much harder than it sounds. You need to improve multiple metrics simultaneously.

If your perfect order rate is sitting below 85%, you’ve got serious work to do. Somewhere in your operation, there are systemic issues that need addressing.

Using Perfect Order Rate in Supply Chain Benchmarking

Another benefit of the perfect order rate KPI is the ease with which it can be applied to supply chain benchmarking. This is mainly because such a large number of companies are using the metric.

That being said, they don’t all use it in the same way. As already discussed, the composition of the perfect order rate KPI varies from company to company, which may mean you need to tailor your own composition to align with a group of peer organisations, even if you do so only for the benchmarking exercise.

You can always revert to your own chosen composition for day-to-day performance monitoring.

A Near-Perfect Supply Chain KPI

As supply chain KPIs go, you won’t find a much better all-round measure of performance than perfect order rate. Of course it does have some limitations. For example, as comprehensive as it is, perfect order rate doesn’t lend itself to the inclusion of procurement into what could otherwise be a complete end-to-end supply chain performance measurement.

Nevertheless, if you’re looking for a KPI that promotes cross-functional alignment, and puts the most important elements of inbound and outbound supply chain performance in the spotlight, perfect order rate is probably the one to implement.

That’s not just my opinion either. Leading supply chain organisations the world over use perfect order rate as a primary measurement. So even if it’s not the best KPI ever, it’s certainly one that’s too valuable to be ignored.