I have worked with a significant number of clients over the last year or two that are laboring under the generally false assumption that each customer is the same as every other customer and each order is the same as every other order.
This is almost never the case.
While certainly every customer is important in a general sense, and every order is significant, there can be meaningful differences between customers—especially classes or groups of customers—and this should typically result in some customer orders being handled differently from other customer orders.
In today’s economy, it seems that most of my clients have jumped to the conclusion that, in order to stay competitive, they must ship every product on every order “tomorrow,” or—at least—“as soon as possible.”
When I have asked the management teams as these clients’ offices: “Do you know the deliver tolerance levels of the various market segments you serve?” I am usually met with blank stares.
These clients do not know their customers’ tolerances for product delivery because they have never asked.
As a result, they cannot possibly know whether they are meeting or exceeding their customers’ needs and “tolerances.”
Worse! By not knowing their customers’ tolerance for product deliveries, they are forcing themselves into the situation where every order must be a “priority.” Moreover, when every order is a priority, there is no priority at all. Many times, there remains only a general chaos and frantic efforts to make sense out of nonsense.
Many order management applications found in ERP systems facilitate your company’s ability to come to terms with your customers’ delivery tolerances. Additionally, when leveraged, these capabilities can help you better understand how to meet your customers’ actual requirements while setting clear priorities within your own organization and supply chain.
We have taken the accompanying figure from Sage 500 ERP, but most order management systems within the ERP context offer something similar.
Sadly, the state of the data in the screen-shot here is the way I find at the vast majority of my clients when I first meet them and get them started on a process of ongoing improvement (POOGI). Here we see four dates:
- Order date – the date the order is taken from the customer
- Requested date – the date the customer would like to have the product (by line item) delivered
- Scheduled ship date – the date the order needs to ship in order to meet the “Promised date” (but, it cannot be earlier than “today,” since the order cannot be shipped any earlier than today)
- Promised date – the date we promised to have the product in the customer’s hands (by line item)
Of course, the order date is fixed by events. Nothing can be done to change that.
However, I tell my clients, “If you want to begin to understand your customers’ tolerances for various products or product lines, you simply need to ask.” Instead of assuming an ASAP scenario, take a moment to ask your customers, at the time they are placing their orders, “When would you like to have this product—or, these products—delivered?”
The answer to that simple question should go into the “Requested date.”
Requested versus Promised dates
Now, there may be times that the customer requests delivery on a specific date and you know that you simply cannot meet that requested date. That is where the Promised date comes into play.
Your customer may want 500 units of item X1027 delivered by Friday, 3 April. However, having checked, your customer service person might politely reply, “I’m sorry. We cannot deliver 500 of the X1027 by April 3. However, we can have them in your hands by April 8. Is that okay?”
If the customer agrees that April 8 is an acceptable date for delivery and want to continue with the order for the 500 units of X1027, then the Requested date becomes 4/3/XX, and the Promised date becomes 4/8/XX.
If this is done consistently, patterns will begin to emerge almost without fail. You will discover that some customers—or, some types of customers—may have one tolerance, while other customers have a different tolerance. These might even be further subdivided by product families. In the end, you will likely end up with something like this:
Sales Prod Line A
Sales Prod Line B
All Other Products
Your customer service personnel should become very familiar with your newly discovered “customer tolerance” market segmentation by customer type (and product line, if required). As much as possible, new customers should be “shepherded” into the appropriate group for consistency and to properly set expectation.
Real data for performance metrics and your POOGI
With real and realistic dates in your order history for Requested dates, Promised dates and Scheduled Ship dates, you are then prepared to see how your enterprise is performing. You will be much better situated to understand and measure your performance and improvement over time for
- Being able to “promise” to the customers’ “requested” date
- Being able to meet your “promised” dates
- Being able to ship on-time according to your “scheduled ship” dates
With meaningless dates in your order management system, however, there is no way to understand your performance or what needs to improve. Start by gathering meaningful dates by which to compare your actual performance.
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