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How do you measure order processing cycle time?

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Order processing cycle time (OPCT) is a key metric for logistics management that measures how long it takes to fulfill a customer order from the moment it is received to the moment it is shipped. Reducing OPCT can improve customer satisfaction, inventory turnover, and cash flow. However, measuring OPCT can be challenging, as it involves tracking multiple stages and activities across different departments and systems. In this article, you will learn how to measure OPCT and what factors can affect it.

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Abid Bukhari

Procurement Manager at Johnson Matthey
Yasir Latif

Procurment Senior Manager at Saudi Radwa Food Co. Ltd.

1 Define OPCT stages

To measure OPCT, the first step is to define the stages that make up the order processing cycle. These stages may differ depending on the business model, industry, and order complexity, but generally include the order receipt, entry, processing, and fulfillment. Order receipt is when the order is received from the customer through any channel (online, phone, email, etc.). Order entry is when the order is entered into the OMS and validated for accuracy and completeness. Order processing is when the order is processed by the OMS and sent to the WMS for picking, packing, and shipping. Finally, order fulfillment is when the order is picked, packed, and shipped from the warehouse to the customer.

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Abid Bukhari

Procurement Manager at Johnson Matthey
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Order processing cycle time is measured by tracking the duration from when an order is received to when it's fulfilled and delivered to the customer. Key metrics include order entry time, processing time, and delivery time. This encompasses activities like order validation, inventory allocation, picking and packing, shipping, and delivery confirmation. Analyzing these steps helps identify bottlenecks and inefficiencies, enabling improvements to streamline the process and enhance customer satisfaction.

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Yasir Latif

Procurment Senior Manager at Saudi Radwa Food Co. Ltd.
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To measure order processing cycle time effectively: 1. Define Start Point: Identify when the order enters the system. 2. Track Steps: Record time for verification, payment, inventory, picking, packing, and shipping. 3. Calculate Total Time: Add up step durations for total cycle time. 4. Analyze & Improve: Identify bottlenecks and streamline processes. 5. Set Targets: Establish benchmarks for efficiency and continuous improvement. Measuring and optimizing order processing cycle time enhances efficiency, improves customer satisfaction, and strengthens competitiveness.

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FEBIN MB

Business Analyst | Executive MBA in Logistics
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1. Order Entry: This stage starts when a customer places an order. It involves capturing order details like product selection, quantity, shipping address, and payment information. 2. Order Processing: Verification: Checking inventory availability, confirming customer information, and processing any applicable discounts or promotions. Order Picking: Warehouse personnel locate and collect the ordered items based on the order details. Packing: The collected items are prepared for shipment, ensuring proper packaging and labeling. 3. Order Fulfillment: Shipping: The order is handed over to the chosen carrier for delivery. Delivery: The carrier delivers the order to the customer's specified address.

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Antonio Marcos Fraga

Pesquisador na FAPEMAT | Projeto em Rastreabilidade Bovina
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Independentemente da métrica utilizada, é importante monitorar regularmente o tempo do ciclo de processamento de pedidos para identificar áreas de melhoria e garantir que os processos sejam executados de maneira eficiente e eficaz. Isso pode envolver a implementa??o de sistemas de automa??o, reengenharia de processos ou outras iniciativas para otimizar o fluxo de trabalho.

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Herickson Torres

Consultor de Fichas Técnicas | Gest?o de Restaurantes Ajudo empresas a desenvolverem processos culinários mais eficientes por meio da padroniza??o de fichas técnicas e controle de custos.
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Para medir o tempo do ciclo de processamento de pedidos, identifico pontos de entrada e saída, rastreio cada etapa do processo e busco feedback da equipe para melhorias.

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2 Collect OPCT data

The second step to measure OPCT is to collect the data for each stage of the order processing cycle. This can be done in a variety of ways, such as recording start and end dates and times manually or using barcodes, scanners, RFID tags, or other devices. Additionally, surveys can be conducted to gain feedback from customers or employees on how long they waited or worked on each stage. Reports can also be generated from the OMS, WMS, or other systems that track the status and duration of each stage. Collecting this data will help measure OPCT accurately.

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3 Calculate OPCT metrics

Measuring OPCT involves calculating metrics that reflect the performance and efficiency of the order processing cycle. This includes the average OPCT, which is the time it takes to complete the cycle for all orders in a given period, as well as the median OPCT, which is the middle value of the OPCT distribution. Variation in OPCT values can also be measured, as well as OPCT by order type and channel. For instance, you can measure the OPCT for standard, expedited, customized orders and those received online, via phone or email. By doing so, you can gain valuable insights into your order processing performance.

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FEBIN MB

Business Analyst | Executive MBA in Logistics
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Individual Stage Times: Calculate the processing time for each stage by subtracting the previous timestamp from the current timestamp. For instance: Order Processing Time: Order Verification Completed - Order Placed Picking Time: Picking Completed - Order Verification Completed Packing Time: Packing Completed - Picking Completed Shipping Time: Shipped - Packing Completed Delivery Time: Delivered - Shipped Total OPCT: Calculate the total time taken to fulfill the order by subtracting the order placed timestamp from the delivered timestamp: Total OPCT = Delivered - Order Placed

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4 Analyze OPCT results

The fourth step to measure OPCT is to analyze the results and identify the factors that influence the OPCT. These factors include order volume, complexity, accuracy, visibility, and integration. Order volume refers to the number of orders received and processed in a given period. Order complexity is the level of customization, personalization, or special requirements of the orders. Order accuracy is the rate of errors, mistakes, or discrepancies in the orders or their fulfillment. Order visibility is the degree of transparency and communication between the customer and the order processing team. Finally, order integration is the level of coordination and synchronization between the OMS, WMS, and other systems involved in the order processing cycle.

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5 Improve OPCT performance

The fifth step to measure OPCT is to use the results and insights to improve the performance and efficiency of the order processing cycle. Streamlining order processing workflows by eliminating unnecessary steps, automating repetitive tasks, and optimizing the sequence and timing of activities is one way to do this. Additionally, enhancing order processing systems by upgrading, integrating, or replacing them with more advanced, reliable, and user-friendly features and functions can help. Training order processing staff in the skills, knowledge, and tools they need to perform their roles effectively and efficiently is also essential. Finally, monitoring order processing performance by establishing, tracking, and reviewing the OPCT metrics and goals on a regular basis will enable you to adjust strategies and actions accordingly.

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FEBIN MB

Business Analyst | Executive MBA in Logistics
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Optimizing Each Stage: Order Entry: Implement a user-friendly interface for easy order placement. Order Processing: Integrate systems to ensure smooth data flow between order management, inventory management, and accounting software. Implement efficient inventory management . Picking and Packing Utilize barcode scanners and mobile computers to streamline picking and packing processes. Shipping: Negotiate competitive rates with reliable carriers. Technology and Automation: Invest in Order Management Systems (OMS) and Utilize Warehouse Management Systems (WMS) Additional Strategies: Outsource fulfillment: Consider outsourcing to third-party logistics providers (3PLs) if your order volume is high or resources are limited.

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6 Learn from OPCT best practices

The sixth step to measure OPCT is to learn from the best practices and benchmarks of other companies or industries that have achieved high levels of OPCT performance and customer satisfaction. For instance, you can read or watch case studies on successful OPCT improvement initiatives, review the latest research and literature on OPCT trends, or join or create forums and communities of practice to share and exchange OPCT insights. Doing so can provide valuable resources to help you reach your goals.

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7 Here’s what else to consider

This is a space to share examples, stories, or insights that don’t fit into any of the previous sections. What else would you like to add?

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How do you measure order processing cycle time?

1

2

3

4

5

6

7

1 Define OPCT stages

2 Collect OPCT data

3 Calculate OPCT metrics

4 Analyze OPCT results

5 Improve OPCT performance

6 Learn from OPCT best practices

7 Here’s what else to consider

Logistics Management

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How do you measure order processing cycle time?

1

2

3

4

5

6

7

1 Define OPCT stages

2 Collect OPCT data

3 Calculate OPCT metrics

4 Analyze OPCT results

5 Improve OPCT performance

6 Learn from OPCT best practices

7 Here’s what else to consider

Logistics Management

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