Logistics and KPIs: A Despatch Case

This article concentrates on despatch, a logistical operation that directly affects commercial performance. A description of the despatch process is followed by a discussion of development of a key performance indicator (KPI).

What is Despatch?

Despatch is a crucial commercial function because order delay incurs financial penalties in the form of compensation to retailers, and, on occasion, to private customers. As soon as an order is placed, the buyer is informed of the delivery window, which can be same day, 24 hours, 72 hours, or date unspecified (backorder). Orders therefore have to be processed and despatched in an efficient manner and delivered according to the timeframe promised to the customer at time of purchase, since speedy delivery might be the differentiating factor that motivated the purchase. When despatching to retail customers and/or business clients, failure to ensure delivery according to the conditions of the service level agreement will likely breach contractual obligations and this has ramifications for future business.

The Despatch Process

The activities that constitute despatch mirror those of the goods reception/goods inward area of the distribution centre, and are primarily physical and secondarily informational (3, 5, 8, and 9). They are as follows:

1. Room is made available for packaging, loading into containers or gaylord packages, or onto pallets, where they are wrapped for loading/transit.

2. Goods are assembled in the loading/assembly area, typically between floor markings that approximate the position of the delivery vehicle. This template facilitates efficient loading and coordination of vehicle, load, and loaders.

3. Each item is recorded on the consignment note and other despatch documentation. This information is later scanned into the computer.

4. Outer cartons are checked for condition. Cartons are normally not opened, but if there is visible damage to the outer carton, an inspection of the product will be performed. This is a basic quality control method that can save time and money. Few things are more easily avoided than despatch of damaged goods.

5. Any discrepancies and indications of condition/quality degradation are noted. An item swap is performed if there is an undamaged substitute available. Any item that is defaced or damaged to the point of redundancy is substituted. If no substitute is available, the sales department is informed and an expedited order placed for a substitute. The customer is informed of the delay and its causes, and provided with a revised delivery window. 

6. The loading area is checked for safety and suitability to the loading operation.

7. The vehicle is loaded.

8. The security locks are set while the driver is present and observing.

9. The driver’s signature is requested. Dispatch documentation is signed by the driver and a representative of the dispatch section.

10. A record is made of the security lock combination and/or seal details (e.g. a replica of the barcode on the documentation that is accompanying the driver), or an RFID code (when the item is RFID tagged). The vehicle then departs.

Issues Impacting Despatch Efficiency and Speed

• Are items correctly stored, i.e. stored in the right conditions and in the right location?
• Are items located and retrieved without delay?
• Are items processed for despatch according to standard procedures?
• Are replacements ordered (automatically or manually)?
• Is all the relevant documentation checked, signed, filed, and input correctly?
• Are items placed for collection in the right place and at the right time?
• Are items checked for signs of damage?
• Are items delivered to the right customer?
• Are items delivered to the customer at the right time?
• Are items delivered in the right condition?
• Are items delivered in the right quantities?
• Are all items packaged correctly?
• Are the throughput speeds/rates acceptable? If throughput is too fast, coordination and synchronization errors can occur: items awaiting despatch become a storage/security problem. If throughput is too slow, the possibility of error resulting from last minute haste increases, as does the possibility of omission of items from multiple-item orders.

KPIs

• On-Time, In-Full (OTIF)
• Reliability

Job performance can be evaluated using theoretically possible or historically achieved optimal performance values. Such benchmarking measures are often referred to as Key Performance Indicators, or KPIs. Of critical concern to the despatch phase of the distribution system is delivery, specifically efficiency and speed of deliveries.

As a KPI, an OTIF rate of 95% was deemed acceptable. This measure proved attainable and maintained conscientiousness: at least 95% of orders were despatched and received on time and in full. The failure rate was thus ≤5/100.   If addressed, the impacting issues listed above ensure that order failures do not occur at the point of despatch. Furthermore, the compound effect of systematically addressing those issues is efficiency: time is utilized maximally and quality of service is maintained or even increased; unnecessary replication of activities is prevented and costs incurred by processing returns are minimized. If activities 1 to 10 are performed in a time-efficient manner, and in accordance with training procedures and general good sense, all orders should be despatched OTIF. Bad loading accounts for the majority of the 5% of orders whose failure can be traced to the despatch phase. Typically, in transit are vulnerable to excessive movement around the vehicle’s interior. This causes damage to cartons and contents. The possibility of this occurring can be reduced by following and, eventually, improving standard loading procedures.