5 Ways to Improve Your Total Order Cycle Time
One of the most important key performance indicators (KPI) to order fulfillment operations is total order cycle time. In short, it is the average amount of time between an order being placed by a customer and when it is shipped (excluding shipping time). As such, it is a critical number for any order fulfillment, e-commerce, or supply-chain management operation. But how exactly is it calculated, why is it important, and how can an operation reduce their total order cycle time to make their business more competitive and profitable?
What is Total Order Cycle Time?
Total Order Cycle Time is a KPI that takes into account all of the steps and processes that your operations must go through to process an order. If your processes are efficient, then your total order cycle time will be shorter, and if they are inefficient it will be longer. Understanding your total order cycle time is extremely important, as longer order cycle times have been shown to negatively impact businesses’ ability to attract and retain customers.
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Reducing total order cycle time improves the customer experience while expanding profits by:
- Optimizing omni-channel fulfillment through pairing regularly scheduled retail shipments with customer pickup orders
- Allowing for later order cutoff times
- Decreasing the amount of inventory on hand, which helps with asset-to-cash conversion
How is Total Order Cycle Time Calculated?
Total order cycle time is typically calculated with the following equation or formula:
(The Time the Order was Received by Customer – the Time the Order was Placed)/Total Number of Orders Shipped
If your total order cycle time leaves something to be desired, you’re in luck: There are ways that you can improve the efficiency of your operations and effectively reduce your total order cycle time. Though the specifics of your industry and specific business strategy will inform your methods for improvement, here are 5 ways that many order fulfillment operations can improve their total order cycle time.
Ways to Reduce Total Order Cycle Time in Order Fulfillment and Supply Chain Logistics
1. Reduce travel time
One of the simplest ways that you can shorten your cycle time is to reduce the distance traveled to complete a task. Because time spent walking is time not spent on other, value-adding tasks, simply doing this can have a big impact on your efficiency and productivity. Travel is the largest component in order picking cycle time. If you can cut down on the distance traveled, you can significantly reduce the overall cycle time.
You can accomplish this by establishing more efficient paths and prioritizing early outs. Slotting SKUs based upon picking ability will also reduce idle time, making your workforce more efficient. If you have all of your SKU’s being picked from pallets and many are slow movers, you can save space and travel distance with carton flow rack or shelving. Either can face 6-30 SKUs in an eight-foot-wide bay. So in 8 feet of picking travel, you can pass 6-30 SKUs instead of just 2 stored on pallets.
2. Shift resources around the facility to the areas of the most activity.
It makes sense that resources should be placed where they are needed within your facility, but this is often overlooked. By grouping products near the areas with which they will be used, you can cut down on a lot of unnecessary travel time within your facility while also reducing the risk of accidents that can happen during transport.
Resource location can especially be a problem when smaller operations grow and add new processes or departments: As the business grows and new processes are implemented, the placement of resources must also be adjusted to reduce inefficiencies. Whenever a new process, product, or workflow is implemented, it is recommended that you evaluate the placement of your resources to correct issues before they become major headaches.
3. Throttle orders to areas that are underutilized and which have idle resources.
You wouldn’t wash your kitchen floor while someone is cooking dinner, right? Not only would it make both jobs more difficult and less efficient, but it also makes it much more likely that mistakes will happen, which you’ll then have to go back and correct. This same basic idea can easily be applied to your order fulfillment.
When you are processing your orders, your goal is to make the picking, packing, and shipping as easy as possible. So why would you dump group orders into an area that already has a significant amount of work happening in it? Doing so just increases the chances that orders will be incomplete, damaged, or otherwise mismanaged because you’ve got too much going on in too small of an area. (This can also contribute to workplace accidents, especially if you are moving bulk product by forklift.)
By throttling your orders to areas that are underutilized, you can increase the efficiency of all areas by keeping things simpler and more organized. Order management systems can help you identify the areas of your operations that are underutilized at any given time so that you can funnel your orders and resources to them efficiently and seamlessly. Another way to spread the workload across physical areas, and reduce bottlenecks, is to spread faster-moving products across the entire picking area. It should increase the efficiency of the entire picking operation. In order to gain these efficiencies, you need to know if your order profile is right for this type of strategy.
4. Determine and understand order profiles.
If you can understand your order profiles, then you can develop strategies that will allow you to more efficiently fill and ship them. Utilizing wave picking is one way to boost your efficiency, as it will allow you to create a workflow that will better route personnel and resources. By picking groups according to their common packaging characteristics or like products, you can reduce cut down picking travel time.
Of course, every business has its own unique aspects, and its own challenges, which should be evaluated when establishing a picking strategy. For example, if you have many lines in a typical order and a wide array of products (fast and slow movers), you should ask yourself if there is an opportunity to more efficiently route the orders or slot your products. These questions will be specific to your operations and challenges but can go a long way in making your processes more efficient and reducing your total order cycle time.
5. Implement technology that will prevent stock outs and prioritize replenishments before they occur.
One of the most detrimental setbacks to production (and thus your total order cycle time) is when you run out of stock. In the worst-case scenario, this can completely shut down your operations while you wait for a new shipment of the needed material or product—severely cutting into your overall efficiency and ability to meet your customers’ expectations of timely and accurate delivery.
You can avoid stock outs by implementing technologies that automatically track inventory and notify you when a reorder is necessary—before you actually run out. Warehouse control systems or warehouse management systems can prevent the loss of time and productivity that will occur if a forward picking location is empty before it can be restocked. They have configurable minimum and maximum inventory levels so replenishments are automatically scheduled before the picking location is empty.
Timing is Everything
Every minute that you can shave off of your total order cycle time is another minute that your personnel can be completing other tasks—and bringing in more revenue. Even better, getting this number as low as possible will allow you to ship more orders later in the day, which will make it easier to attract and retain customers. Implementing just one of the recommendations above can take you far on your path to increased productivity and lower cost per unit shipped.
