24 October 2021 Understanding the importance of the Order Cycle Time (OCT) indicator for evaluating intralogistics performance and the quality of service provided to the consumer. How much time passes between the customer’s order confirmation and the product delivery? You might be able to ship your orders on time. But are there areas for improvement? Indeed, the quality of the product you sell impacts customer satisfaction. But it is not a decisive factor. Your customer also wants the delivery to happen quickly, meaning it’s also important to prioritize service quality. Customers increasingly want convenience in shopping and speed in deliveries. Many stores have already adapted to meet this demand. Americanas, for example, already has modes like “Jet Delivery” (orders placed by 12:00 PM are delivered by 10:00 PM on the same day – *limited to specific products and regions) and “Quick Delivery” (shorter deadline than a conventional delivery). Like Americanas, many other companies have developed strategies to speed up deliveries and win over consumers. At first glance, it may seem concerning to see the big market players meeting ever shorter delivery times. But the truth is, you don’t have to stray from them. Your company can also achieve this agility. And the first step to take is to evaluate your current performance. In our recent posts, we have shown how important it is to have indicators for efficient warehouse management, as intralogistics is a fundamental part of the sales process. It is through metrics that the manager can measure and evaluate the performance of the main operational processes and identify areas for improvement. We have addressed two extremely important indicators: OTIF (On Time In Full) and OFR (Order Fill Rate) and showed how they are calculated, in addition to being strategic for achieving higher percentages. In this text, we will talk about OCT (Order Cycle Time), an indicator that aims to analyze exclusively the speed of order fulfillment. What is OCT (Order Cycle Time)? OCT or Order Cycle Time is a logistics indicator that measures the total time elapsed from when the customer confirms the order until its delivery to the recipient. This is an important metric for any company, but it has even greater relevance in e-commerce, where there is strong pressure for increasingly agile deliveries. If a customer has waited too long for an order, they are likely not motivated to purchase from that store again. And you don’t want that to happen to your business. That’s why OCT is a metric that cannot be overlooked. It is through this KPI that you can find out if it is good enough for your customer and find ways to improve. In the case of e-commerce, for example, the order cycle includes many stages, from when the customer’s order is confirmed until the product is delivered. They are: • The customer places an order on the online store; • Logistics receives the order; • A separation order is generated; • The warehouse team receives the assignment and starts the picking process; • The order is assembled, finalized, packed, and shipped; • The product is delivered to the customer. If your processes are efficient, the total order cycle time will be shorter, and if they are inefficient, longer. That’s why measuring OCT is so important because if the OCT is high (long order cycle), it negatively impacts the ability to attract and retain customers. How to calculate OCT (Order Cycle Time)? Calculating OCT is quite simple: just subtract the order entry date from the delivery date and divide it by the total number of orders shipped. OCT = delivery date – order date / total number of orders shipped The smaller the OCT, the better. The recommendation for a good analysis of OCT is to consider the variables that can interfere with the measurement. A benchmark recommended by experts is a period of less than 24 hours for customers close to your company or up to a limit of 350 km. However, it is worth noting that this benchmark must be adapted to the reality of its production and sales volumes. The important thing is to ensure that the promised delivery times are always met. If your OCT is high, there are ways to improve the efficiency of your operations and effectively reduce the total order cycle time. Although each industry and type of business has its specific strategies, some methods can be generally advantageous. Look: 1. Reduce mission times within the warehouse One of the simplest ways to reduce cycle time is to reduce the distance traveled to complete a task. The time your employee spends browsing your warehouse to choose an order, for example, could be channeled into other value-added activities, with a significant impact on your efficiency and productivity. How to reduce this time? Invest in a good warehouse layout and rely on a management system, such as WMS, which will define the best positions for each product (address suggestion), considering its rotation and storage rules and always aiming to reduce the distances traveled by the operator. Another WMS feature that aims to make the best use of resources (people, equipment, and area) is task grouping. After parameterization in the system, the WMS starts to indicate both the product address when it arrives at the warehouse and suggests the new positions the item will occupy when an address transfer is requested. All orders generated by the system (whether storage, replenishment, and movement) have the premise of making employee movements more agile, which has a direct impact on separation time. 2. Use the ideal picking mode for your business Performing the correct picking of products and their respective quantities, on time, for the correct customer and at the lowest possible cost is the main objective of a warehouse. Often picking represents more than 60% of the total cost of a warehouse. In most cases, it is more manual, with intensive use of labor, especially fraction picking, which would deserve a chapter of its own. Much of the process involves moving operators. Of course, the correct layout and proper use of storage facilities and equipment have a significant impact, but they are not enough. Implementing the ideal picking modes for your operation supported by a WMS makes a difference. Often the OCT can be high because the company is adopting a picking mode that is not the most suitable for its business. And the choice of the ideal model will depend on numerous factors (read more about choosing the ideal picking mode). Added to this is the fact that a warehouse can adopt more than one model. The important thing, in this case, is to use the type of separation that ensures maximum efficiency and agility. And again: it makes no sense to have an ideal picking at the beginning if the goods are not in the right place and quantity, resulting in the fewest possible movements and displacements. For this reason, it is important that warehouse rotation takes place based on picking so that the picking line never runs out of stock, which can cause delays. And in this regard, the WMS helps, leading to warehouse turnover always aiming at replenishing picking areas, but only when necessary. The processes follow a line that aims to reduce movements and speed up order fulfillment. In one of Deagor’s clients, Kanban was implemented, with the creation of tasks and calls for movements actively executed by the WMS, with the operator simply following the task created for them. In less than two months, this client had a significant reduction in the number of movements, i.e., the effort made, as well as an increase in replenishment efficiency. The total number of movement orders decreased by over 30%, and the quantity of replenished units increased by over 20%. All this led to greater speed in order processing. 3. Determine and understand the profiles of each order If you can understand the profiles of your orders, you can develop strategies that allow you to process and ship them more efficiently. Nowadays, it is quite common for a company to have different delivery modes (express, fast, or regular, for example). So how do you manage multiple requests from different profiles arriving simultaneously in the warehouse? With WMS, orders are organized according to their priority and even more: separation missions are generated automatically through the Active Call solution, choosing the ideal professionals to carry out each task. This ensures compliance with agreed deadlines, as well as greater work organization. 4. Implement technology that prevents stockouts One of the most damaging setbacks to intralogistics operations (and thus the total order cycle time) is when a requested item is out of stock (stockout). In the worst-case scenario, this can lead to a complete halt of your operation while waiting for a product, with a severe impact on overall efficiency and the ability to meet your customers’ expectations for timely and accurate delivery. To prevent this situation from occurring, rely on technologies that automatically track stock and ensure accuracy, meaning what is in physical stock is the same as what is in the system. Accuracy is key to avoiding stockouts. 5. Monitor your operation’s performance in real-time A simple and effective way to prevent delays is to have dashboards that provide information on the progress of each warehouse process. With the Visual Management solution, offered by the WMS system, you have graphs and tables that, updated in real-time, show the status of order fulfillment (whether they are delayed, in progress, or completed). If they are delayed, the data is displayed in red, allowing the manager to act in time so that this delay does not reach the customer. Additionally, the performance of each employee is also informed, which helps in seeking performance improvement. Time is everything When your company offers fast deliveries, it shows that you care about your customers. And the return will come through their positive reviews and loyalty. That’s why it’s necessary to use the Order Cycle Time (OCT) indicator in your operation and be aware of its values, always striving for lower rates, which means faster delivery. And remember: every minute you can save on the total order cycle time can be channeled into your team to complete other activities and thus generate more revenue for your business. Implementing the above recommendations can lead you to increased productivity and reduced cost per unit shipped. To learn about other logistics indicators, click on the links below: – OTIF – OFR How to measure the Order Cycle Time (OCT)? Deagor WMS per ecommerce può aiutarti!