The Purchase Order Lifecycle
First, what is the purchase order lifecycle? Chronologically speaking, it is the amount of time it takes a retailer to create and receive a purchase order. While the calculation appears simple, the ramifications are enormous from not only an operational perspective, but a financial one as well. The purchase order lifecycle isn’t just a calculation; it’s a book that tells the story and paints a picture of your supply chain’s performance. And contained within this book are individual chapters, individual steps along your supply chain path that reveal not only areas of excellence, but more importantly, areas of opportunity for the supply chain professional.
Every Purchase Order Tells a Story
Taken individually, each purchase order describes an event and a timeframe. Purchase order #123 took 23 days and we received 7 widgets. Taken collectively, the purchase orders create a consistent pattern of performance that can be leveraged to make future buying, operational and financial decisions. Vendor ABC was on-time 98.9% of the time and had a fill rate of 96% during our peak season. What merchant would not like to have that information to mitigate vendor risk? Understanding your vendors past results is key to predicting their future performance.
Understanding where your vendors are going to fail you can be just as important as when they will perform to your expectations. “So remember every picture tells a story don’t it” goes the closing line of Rod Stewart’s landmark 1971 song (I’m hopelessly stuck in the late 60’s early 70’s rock genre). But more relevant to the supply chain professional, the closing line might read “every purchase order tells a story don’t it”. While the value of measuring purchase orders in aggregate to create the PO lifecycle may be apparent, how and what data elements to capture may not.
Data Elements of the Purchase Order Lifecycle
What are the key elements of the purchase order lifecycle? The more appropriate question is, what data elements do you need? Avoid measuring performance based simply on the data that is readily available. Measure performance based on how measure success, failure, and improvement that supports organizational goals. Obviously, the more we can capture, the clearer our picture of our vendor’s overall performance becomes. Going back to our book analogy, if PO creation is the table of contents and receipts is the ending, the more chapters or PO milestones we have in between, the more vivid our story becomes. Common elements I see included in PO Lifecycle reports include PO create date, start date, stop date, ASN date, pick up date, ship date, arrival date, troubles (shipments) and audits, just to name a few. If retailers capture and aggregate this information, they can identify vendor performance patterns (and opportunities) such as average create to start, average create to stop, average create to ASN, average pick up to arrival and average arrival to first receipt. Once we see the vendor’s overall performance we can easily identify the areas of opportunity and reduce the overall PO Lifecycle.