Getting Started with ACES in Fulfillment Operations

Making the Rubber Meet the Road

Beyond the Perect Order

Every company with ulillment operations aces the same challenge-satisyingcustomer demand and doing it in a manner that creates a positive, i not superior,customer experience. At the very same time, you must do it without exorbitant expenditureson transportation, inventory or order handling. Now, more than ever, it is imperative that youmeasure your ulillment operations the way your customers see them to know how you aredoing and more importantly, where you need to improve. The ACES metrics model is designed to help you accomplish just that – creating a superiorservice model. ACES goes ar beyond perect order metrics. And our experience shows thatwhen you shit ocus to better customer experience, you will ind that drives down costs andimproves quality, as well. The Roadmap to ACES - ACES Principles To get started on the road to ACES in ulillment operations you must irst understandsome ACES principles. This will help you understand the targets and rame your approach.ACES works because it considers the ulillment process in three dimensions: Costs,Customer Wait Time (CwT), and Quality. Costs, CwT and Quality issues are the negativeorces o the ulillment process and must be constantly measured, evaluated, and attacked.Attacking Costs, CwT, and Quality issues is in the best interest o the customer and thereoresupports repeat business which is in the best interest o company.

•CustomerWaitTime–CwTbeginsattheinstantwhenanorderisplaced,whetherit’s

a mouse click an online customer makes conirming his order or the click a call centeragent makes to complete it. It ends when your shipment is received by the customer.

•Costs-Fulfillmentcostsmeasuretheefficiencyoftransportationdeliverymethods,order

handling and inventory. Determining costs usually involves standard budgetary reporting.Optimizing inventory and transportation costs, however, oten involves modelingtradeos between inventory and transportation delivery service options andnegotiating with suppliers.

•Quality-Qualityissuesarethoseevents,processfailures,promisefailures,and/or

process interruptions which keep the customer rom being totally satisied. This includesreturns and exchanges, damages (regardless o ault), and late orders (etc.)

The ACES Implementation Roadmap

Step1:ModelYourOrderFlowinthe3Dimensions: Thisexercisecanbeaneyeopener.Youdon’tneedatonofdata,butitisimportanttomodel

the actual low o the order liecycle across all o its steps and business unctions. Remember,ulillment includes all activities rom the moment the customer places an order until the customeris satisied....it is imperative that youmeasure your ulfllmentoperations the way yourcustomers see them toknow how you are doingand more importantly,where you need toimprove

C o p y r i g h t © 2 0 0 9 , J a g g e d P e a k , I n c . A l l R i g h t s R e s e r v e d .

Be sure to include:– Order Capture– Order Processing (IT, Batching, Document production)– Order Management (Exception handling, etc)– Inventory (Availability and carrying costs)

–OrderFill(Pick,PackandShip)–Deliveryand/orTransportation

– Make good, exchanges, returns, post delivery issue handling and resolutionStep 2: Establish Base Line Measures or Each DimensionCustomer (wait) Time (CwT) is the consistent standard or measuring, modeling, and managing

timeconsumedinthefulfillmentprocess(orprocesses)fromthecustomer’sperspective.This

is important because once CwT is a primary ocus or your organization, it aligns your companywith the customer - rom the pickers and packers, to operations managers, to the strategists,

maybeevenmarketingandtheseniorexecutives.–Formostoperationsandcertainlyasa

starting point, measure to the whole day (keep it simple). However, adopt the unit o measureappropriate to the customer.

WhenyouareexaminingCwTelementsdon’tforgettolookat:•OrderCapture-Fileprep,batching•IT-Systemmaintenance•Admin-Creditorcreditcardclearance,exceptionmanagement(backorders,incorrect

addresses, raud)

•Inventory-Shortpicks,stockintransit•Operations–Pick,pack,andshipproductioncycles,lastordercut-offtime,

on-time ill rate

•Hand-offtoCarrier-AllordersafterXXp.m.don’tship

Costs, on the other hand are a unction o process design, asset base, and headcount amongmany other elements. It is important to recognize all costs that are part o the ulillment activity.Be sure to include:

•Totalcostofinventory;costofholdinginventory•Payroll•Actualfreightcosts–especiallypremiumandexpeditedshipments•Warehouseoverhead•Orderhandlingoverhead–includingallocatedITcosts,andmanualorderhandling•Costofdamagescrapandrework

Lastly, quality must be examined by process step and unctional area. You are looking to indwhere process laws, poor processes, inadequate inormation or tools are preventing an orderrom lowing though uninterrupted and in perect orm. Clearly, each stumble may increaseCustomer Wait Time and backorders may actually double ulillment processing cost.Clearly, each stumble mayincrease Customer Wait Time and backorders mayactually double ulillmentprocessing cost.