Order Fulfilment Cycle Time

Order Fulfilment Cycle Time

Delivering a great customer experience is one of the best ways for businesses to stand out in the crowded e-commerce market of today. One strategy for brands to provide a great customer experience is to optimize order management procedures in order to increase order fulfillment and raise order accuracy.

You may be wondering how I can accomplish this.

Improving order cycle time is a crucial element in the order management process optimization.

Understanding Order Fulfillment Cycle Time

The length of time between a customer authorizing a sales order and the customer receiving the product is known as the order fulfillment cycle time (OFCT). Both manufacturing and service industries can benefit from this improvement strategy.

OFCT (also referred to as customer order cycle time) is a crucial metric because it takes into account the effectiveness of end-to-end company operations, which opens up key improvement opportunities that are frequently overlooked in standard efficiency measures.

The procedures that must be followed from the time you receive a client order until the order is delivered in full are included in the order fulfillment life cycle, including: 

  • Whenever a customer makes a purchase from your online store;
  • You can go to your orders page or your email to access the order;
  • You order the necessary goods from the manufacturer;
  • After receiving the MO, your team begins the manufacturing process;
  • The order is put together, completed, and packaged; it is then delivered to the consumer.

The order fulfillment cycle can take days or even weeks when dealing with e-commerce. Sometimes factors outside of your control, such as international shipping, can have an impact on it. However, it’s crucial to maintain the lowest average OFCT possible.

Its Significance

Order cycle time, which also influences other KPIs like on-time shipment rate and order lead time, is a helpful indicator for assessing the effectiveness of your fulfillment process. The company is more responsive to consumer orders a shorter the order cycle time.

Considering scale-readiness

Your order cycle time is a useful measure of whether or not you’re prepared for the next step as you scale your firm. An effective supply chain that can handle additional orders without hurting your overall efficiency is necessary for scaling your organization. A quick order cycle time indicates that you’re probably prepared to grow your business.

Identifying supply chain problems

Knowing your company’s order cycle time might help you spot supply-chain problems that can be delaying your order fulfillment procedure. A prolonged order cycle time is a sign that your supply chain process needs to be reviewed to find any inefficiencies or extra stages that may be eliminated completely or streamlined.
For instance, a lengthier order cycle time can result from manual order receipt, which can be labor-consuming and error-prone.

Evaluating client satisfaction

Customer satisfaction may be positively or negatively impacted by your order cycle time. An extended order cycle time frequently causes fulfillment and delivery delays, which will increase the number of unhappy consumers. On the other side, if you have a quick order cycle time, you can offer 2-day shipping and provide a flawless fulfillment experience, both of which can raise customer happiness.

Order Fulfillment Cycle Time Formula

This accounts for the time it takes to place an order, as well as any further processes up until it is received, such as manufacturing, procurement, production, processing, and delivery. Customer satisfaction is significantly correlated with this performance measure. Why? Because customers tend to be more satisfied when they wait less time, in general. This indicates that the business does the best job of producing, processing, and delivering the goods to the client in a timely manner.

When source time refers to the period of time between when a customer sends you an order and when you have the raw materials on hand to begin processing it.

Production time is the duration needed to manufacture, complete, and package the order.

The amount of time it takes an order to travel from your door to the customers is known as the delivery time.


Order Fulfillment KPIs

Depending on the complexity and maturity of their operations, businesses can measure a variety of inventory and order fulfillment KPIs. Here are a few typical and practical metrics.

What is order fulfillment KPIs

  • percentage of deliveries delivered on time
  • Order cycle time overall
  • Temporary internal order cycle
  • Percentage of perfect orders
  • precision in picking orders
  • Return percentage
  • percentage of orders that were delivered undamaged
  • correctness of order documentation
  • ready to ship when promised
  • orders coming in received
  • Inventory precision
  • used average warehouse capacity
  • used at full warehouse capacity
  • Accuracy of inventory counts by location
  • Rate of cross-training
  • percentage of orders filled
  • orders processed hourly
  • Days of supply in inventory Average cost per order

Order Fulfillment Cycle Example

For instance, the entire order fulfillment cycle time would be 31 days if a consumer placed an online order for a non-slip bath mat on August 20 and received it on September 20.
Although this is instructive, does it actually let you know how you are doing on your shop floor?
This should be used to compute each element of the order fulfillment cycle so that you may strive to run your workshop as effectively as you can.

31 days

If the real-time takes longer than anticipated, you can investigate the situation in more depth. For small business operations, you could require a better inventory management system. Maybe people aren’t checking your online orders page early enough in the day.

There’s a chance that not everyone on your team is getting the orders clearly. Because your main MRP system hasn’t received your sales orders, you can even overlook e-commerce orders.

You must ascertain how consistently your company fills orders after you have figured out how to track this parameter.

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