Order Accuracy

What is Order Accuracy?

Order accuracy refers to the degree to which an order’s contents match the original order request from the customer. Your order accuracy rate measures how often your business correctly fulfills customer orders. It accounts for various aspects like the correct items, quantities, and specifications as requested by the customer.

There are a few ways you can measure order accuracy:

• Percentage of accurate orders — The most straightforward method, where you’ll divide the number of accurately fulfilled orders by the total number of orders received, then multiply it by 100 to get a percentage.
• Line item accuracy — The accuracy at the level of individual items within orders, which involves checking whether each item in an order is correct, in the right quantity, and meets the specified requirements.
• Quantities — The accuracy of quantities ordered and delivered, ensuring that customers receive the correct number of items they requested.
• Specifications — This accounts for any specific requirements or characteristics of an order, such as size, color, or customization.
• Error rate — The inverse of order accuracy, measuring the percentage of orders that have errors. It can be broken down into types of errors, such as picking, packing, or shipping errors, allowing for a more targeted approach to improvement.
• Customer feedback and returns — A qualitative measure that provides insights into how customers perceive the accuracy of their orders and highlights specific issues not captured by quantitative methods.

You can use these methods individually, but most companies use a combination of them to get a comprehensive view of their order fulfillment performance. Businesses often tailor these metrics to suit their specific operational structures and customer needs.

Synonyms

• Order accuracy rate
• Order processing accuracy

Importance of Order Accuracy

High order accuracy is crucial for customer satisfaction, as it ensures that customers receive exactly what they ordered. It is a common key performance indicator (KPI) for businesses, especially in sectors like retail, manufacturing, and logistics, where fulfilling orders correctly and efficiently is critical to maintaining customer trust and loyalty.

Let’s examine the most critical benefits of order accuracy:

Cost Reduction

Failing to fulfill orders accurately leads to lots of additional costs, like processing returns and exchanges, restocking inventory, and incurring shipping and material expenses again. Plus, returned items aren’t always fit for resale, leading to lost revenue and higher inventory costs. All in all, the average return costs a business around 66% of the item’s total price.

Eliminate Waste

There are several ways order accuracy helps reduce the amount of non-value-added time, labor, and materials required to complete an order.

• Reduces overproduction and inventory waste. Accurate orders ensure that only the required products are produced and held in inventory, reducing the waste associated with overproduction and excess stock.
• Minimizes defects and rework. When orders are accurately filled, the likelihood of defects decreases. This reduction in errors means less time and resources are spent on reworking or replacing defective products.
• Decreases transport and motion waste. Correct orders mean fewer returns and less need for additional shipping and handling to rectify mistakes, thereby reducing unnecessary transport and motion.

Operational Efficiency

Accurate order processing facilitates an efficient workflow. It reduces delays caused by sorting out inaccuracies and waiting for additional products to complete incorrect orders. With high order accuracy, you can ensure a smoother and faster process from receiving an order to delivering it.

Customer Satisfaction

Order accuracy is closely tied to customer satisfaction. Sinc 83% of B2B buyers prefer ordering through digital platforms, your ability to facilitate customer loyalty long-term depends entirely on your ability to:

• offer self-service options for ordering
• receive and fulfill those orders as soon as possible, without errors
• provide prompt and accurate responses to inquiries and complaints

Plus, with social media and online reviews enabling customers to share their experiences with others, consistently wrong orders will damage your reputation. According to research from G2, 90% of buyers are likelier to make a buying decision after reading a product review. And if yours mention inaccurate order fulfillment or slow error resolution, it’ll be a major deterrent for potential customers.

Determine Opportunities for Improvement

By collecting customer feedback and tracking order accuracy metrics, you can pinpoint specific ways to improve. For instance, if the error rate is high in a particular product category, it may indicate issues with inventory management or supplier accuracy. Or, if multiple customers complain about incorrect item specifications, you’ll want to look at your quality control processes.

Impact on Order-to-Cash

Optimizing your order-to-cash cycle for speed and frictionlessness is critical to driving efficient cash flow (and, as mentioned, long-term loyalty). Accurate orders ensure that invoicing and payment collection go smoothly. If your order accuracy rate is low, it’s likely to lead to:

• longer cycle times
• an inefficient sales process
• delayed payments (or no payment at all)
• higher costs for collecting invoices

These issues can have a significant impact on your ability to maintain healthy cash flow and profitability. Even if you do collect on an invoice, there’s still a chance you’ll have to issue refunds or credit notes later on due to order inaccuracies. So, you can’t efficiently or reliably convert orders into operating revenue if you’re constantly amending processing errors.

Challenges in Order Accuracy

Most of today’s challenges when it comes to processing orders accurately directly relate to one of three things:

• Human error in handling orders
• Poor inventory management practices
• Manual processes (like order entry) that are prone to mistakes

Today, the following are the five biggest challenges in order accuracy:

Lack of Adequate Technology

Not using advanced technology, such as barcode scanning systems and warehouse management systems (WMS), can increase the likelihood of errors. And sales tools like configure, price, quote (CPQ) software facilitate the transfer of accurate orders from sales to fulfillment which eliminate the potential for miscommunication during the handoff.

In terms of actual item availability, B2B manufacturers and ecommerce businesses also need to use these tools to give customers the best possible buying experience. There’s nothing more frustrating than placing an order only to find out your desired product is out of stock. So, for the customer, failure to use the right software creates some of the worst kinds of order inaccuracy.

It’s worth mentioning a tool can perform a specific function while still contributing to accuracy problems. If there are issues with data integrity between systems or with integration to other platforms in the tech stack, your order accuracy will still suffer.

Order Complexity

One reason CPQ software is so popular with B2B companies is that B2B orders are naturally complex. For most B2B sales, you have to consider a wide range of factors like custom pricing models, bulk and volume discounts, payment terms, shipping options, and delivery dates.

If you don’t centralize all of these conditions in one place for sales reps (and customers) to quickly access and accurately reflect when creating an order, it’s easy to make errors. Manual data entry only compounds the problem.

Fragmented Sales Channels

More sales channels mean more opportunities for orders to get mishandled. Customers who can buy from you in multiple ways — whether by contacting a sales rep, using an ecommerce platform, or sending an email — will experience order inaccuracies if these sales channels don’t reflect the same information.

But multichannel selling is the norm these days. Most businesses have at least a single ecommerce platform or use online marketplaces (like Amazon) to reach new customers (in addition to digital marketing and outbound sales). The challenge, then, becomes maintaining consistency across all these various channels and sharing data between them.

Manual Order Processing

Manual order processing, like any manual process, is prone to human error. Plus, if you have a high volume of orders or are growing quickly, it’s not scalable. So, what happens when your business scales? Instead of decreasing errors as you get better at processing orders (known as the “learning curve”), accuracy rates drop.

It’s worth noting that this manual process isn’t just related to order entry. Your company’s inability to automatically update orders can also result in data re-entry, which can create inaccurate orders at other steps of the fulfillment process or during returns and exchanges.

Inadequate Packaging and Labeling

Incorrect or unclear labeling on products and improper packaging can result in the wrong items being shipped or products being damaged in transit, both of which negatively impact order accuracy​.

When this happens, companies need to spend extra time resolving the issue and incurring additional costs. Plus, it leads to a negative customer experience that can hurt their trust in your brand.

Suboptimal Route Planning for Deliveries

Even if your entire order is accurate, labeled correctly, and packaged well, errors can still occur during the delivery process. Manual route planning can lead to logistical issues, which delay deliveries and affect the accuracy with which you estimate them.

If your customers can’t reasonably estimate the lead time on your products, it’ll be impossible for them to plan their supply chain operations around your delivery dates. As a result, they’ll eventually be forced to find a new vendor to become more reliable (and profitable) to their customers.

Factors Impacting Order Accuracy

Within your business, your ability to deliver accurate quotes (even for the most complex products), turn them into purchase orders or invoices, pass that info on to the fulfillment team without rekeying data, and shipping and delivering the correct items is what order accuracy is all about. Anything that gets in the way of any of those factors will negatively impact order accuracy.

Factors that positively impact order accuracy include:

• Proper inventory management procedures
• Automating tasks like picking and packing
• Implementing systematic quality checks throughout the order fulfillment process
• Accurate and detailed documentation, including order forms or packing manuals
• Adequate employee training on streamlined processes

The most common factors negatively impacting your order accuracy include:

• Processing a large number of orders your system can’t keep up with
• Inability to turn an accurate quote into an accurate order document
• Human mistakes during picking, packing, and shipping processes
• Inaccurate inventory tracking and outdated availability info
• A lack of proper communication between departments
• Not utilizing advanced technology systems like warehouse management systems (WMS)

KPIs Related to Order Accuracy

Order Fulfillment Costs

A lot of the activities you can carry out to reduce fulfillment costs are directly related to improving order accuracy. You’ll find that, a lot of the time, there’s a correlation between higher order accuracy and lower average fulfillment costs.

• High order accuracy means that customers receive what they ordered, reducing the need for returns or replacements. Returns not only involve the cost of shipping the product back but also the costs associated with processing them, inspecting the returned product, restocking it (if possible), and possibly shipping out a new item.
• High accuracy rates generally indicate a streamlined and efficient fulfillment process, which can reduce labor costs and operational expenses related to order processing in the long run.

Dealing with inaccuracies often requires additional administrative work, such as customer service handling complaints, issuing refunds, and coordinating with logistics for return shipments. So, by improving your order accuracy rate, you can cut fulfillment costs and vice versa.

Order Fill Rate

Your order fill rate measures the percentage of customer orders that are shipped on time and in full, without running out of inventory to fill them. While it’s more of a measure of order fulfillment and supply chain efficiency, it indirectly reflects on order accuracy, as incorrect orders often lead to delays or partial shipments.

Order Cycle Time

Order cycle time refers to the amount of time it takes for a customer’s order to be placed, processed, fulfilled, and delivered. This KPI includes all the steps involved in fulfilling a customer’s order, including picking and packing, shipping, and delivery times.

If your order accuracy is low, you’ll often find that it takes longer to process orders due to errors that need to be resolved before the shipment can be sent out. By improving your order accuracy rate, you’re likely to see a decrease in your order cycle time as well.

Return Rate

Your return rate is the percentage of orders that are returned by customers due to incorrect or damaged products. In a perfect world, nobody would ever need to return an order (though, of course, this isn’t possible). So, a low return rate indicates that your order accuracy is high.

Order Picking Accuracy

A huge chunk of the responsibility when it comes to order accuracy lies in the picking process. It’s possible to:

• Pick one wrong component in a complex or configurable product
• Pack the wrong product altogether
• Address it to the wrong customer
• Fail to scan the product before sending it out

Sure, sales and delivery teams are also responsible for the accuracy of an order. But the bulk of the work is done by the warehouse team members who pick, pack, and ship the orders. Hence, measuring their accuracy rate (either per order or per item) can provide insight into where your business needs to improve.

Time to Correct Errors

The average time it takes to resolve order discrepancies speaks to the efficiency of your company’s process in correcting order inaccuracies. It’s important because even with high accuracy rates, quickly resolving inaccuracies is crucial for maintaining customer satisfaction.

Best Practices to Ensure Order Accuracy

In general, improving order accuracy involves optimizing inventory management, enhancing the accuracy of their order picking and packing process, and implementing robust quality control measures. Technology, such as automated inventory systems and data analytics, can also play a significant role in achieving high order accuracy.

Here are our best practices for ensuring accurate orders as often as possible:

• Use ERP, CPQ, and WMS software that integrate with each other to seamlessly carry data throughout order fulfillment and returns processes.
• Automate manual processes like data entry to reduce the likelihood of human errors.
• Conduct quality checks at critical junctures in the order fulfillment process — for example, when quotes turn into purchase orders, when orders are picked from the warehouse, and when they’re packed for shipping.
• Implement barcode scanning technology to minimize incorrect picks and reduce the likelihood of errors during data entry.
• Prioritize communication and feedback with customers, suppliers, and internal departments to ensure everyone is on the same page regarding product availability, order changes, and returns.
• Train and invest in your employees. Make sure they understand their role in maintaining order accuracy and are trained in using the technology and processes that contribute to it.
• Regularly review and analyze your order accuracy data to identify trends in errors and areas for improvement.

How to Improve Order Accuracy with CPQ Software

CPQ plays a pivotal role in enhancing order accuracy, particularly in complex sales environments where custom configurations, pricing, and quotations are involved.

Product Rules and Configurations

Quoting tools utilize a set of predefined product rules (i.e., you or an admin sets them) that govern how products can be configured. That way, only valid and compatible product combinations are selected each time a customer or sales rep configures a product.

Guided Selling

Sales representatives or customers are guided through the product selection process when they use CPQ. Guided selling works through a series of if-then workflows and product rules. When someone chooses one configuration option, the subsequent ones are dynamically updated, and options that don’t work together are automatically filtered out.

Integration with Ordering and Fulfillment Systems

The right CPQ software will integrate seamlessly with your order management and fulfillment systems. This integration ensures that the details from the sales quote and contract/invoice/PO are accurately transferred to the order processing system.

Real-Time Inventory Updates

Through integration with your ERP and WMS, CPQ software can provide real-time inventory visibility. That way, sales reps and customers know your current stock levels and product availability, thereby avoiding orders that cannot be fulfilled due to stock shortages.

Pricing Rules and Discounting Management

Pricing rules tailor the pricing for each customer depending on their buyer group or individual characteristics. Discounting management ensures a consistent discounting strategy across all your sales channels.

Automated Approval Workflows

For special customers who don’t fit the standard pricing/discount structure, CPQ software includes automated approval workflows for quotes that meet certain criteria (like high discount levels or custom configurations). These workflows ensure that all necessary approvals are obtained before an order is finalized, further reducing the risk of errors.

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