JTPP: Perfect Order Index Becoming Major Component of Vendor Scorecards
a special arrangement, presented here for discussion is an excerpt of a
current article from The Journal of Trading Partner Practices (JTPP),
the official online publication of the Vendor Compliance Federation (VCF),
the Trade Promotion Management Associates (TPMA), and the Federation of
Credit and Financial Professionals (FCFP).
to a survey conducted by the Vendor Compliance Federation’s Perfect Order
Index Community of Practice (CoP), vendors said nearly half of their retail
customers (43 percent) use all four components of the Perfect Order Index
(POI) in the majority of their vendor scorecards. The results provided
strong validation of this index’s ability to portray a holistic view of
a trading partner’s supply chain capabilities.
Perfect Order Index is composed of four critical elements focusing on a
supplier’s ability to ship on-time, complete, damage free, and with correct
the more than 300 respondents, nearly 65 percent were manufacturers; 15
percent were retailers, with the balance comprised of service providers
and other organizations. The May 2009 survey was underwritten by Compliance
asked which of the Perfect Order metric(s) their organizations use to measure
themselves and their trading partners, the majority (90 percent) said they
measure on-time performance. This was followed by complete (83 percent),
accurate documentation (58 percent) and damage free (52 percent).
survey also revealed that nearly 50 percent of respondents report the components
of the POI separately, while less than 10 percent report all of them as
a single index, the way the POI is designed to be tracked. This indicates
that a large number of companies are tracking individual metrics, but are
not gaining a holistic view of their supply chain capabilities. If one
of the four POI metrics is scoring low, it might not attract as much attention
if it is being tracked as an individual unit. But, this lagging metric
will get noticed by companies using the POI as a single measure, because
it will drag the overall score down.
one promising development, a vast majority of the respondents said that
the definitions of the four POI components are well aligned between trading
partners. This is crucial, because if a retailer’s definition of on-time,
for example, is when the product reaches the stores, but a vendor’s definition
is when the product reaches the distribution center there will be discrepancies
over POI scores. It should be noted that a significant number, while
a minority of the respondents, are not well aligned with their trading
partners on the definitions of the POI components, which creates an obvious
barrier to the implementation and overall value of the POI.
Discussion Questions: What
do you think of the benefits of using the Perfect Order Index (POI) for
vendors and retailers? Are
you surprised that nearly 50 percent of respondents
report the components of the POI separately, while less than 10 percent
report all of them as a single index?
- Perfect Order Index Becoming Major
Component of Vendor Scorecards – Journal of Trading Partner