Good news: Perfection isn’t necessarily a requirement for top-level competency and success.

First of all, “perfect” is a virtually impossible standard. Even one mistake — regardless of how many orders or units are handled — immediately puts perfection beyond reach.

How much help does that provide for you as an effective benchmark of performance?

One reason the goal of perfection persists is because research from several years ago that said boosting perfect order fulfillment by 3% paid off with a 1% hike in profit margins.

But in subsequent years, a more well-rounded definition of what constitutes perfection has evolved among supply chain operators.

One metric that’s picked up some steam is the “Perfect Order Index.”

Perfect Order Index is compiled by multiplying:

• the percent of orders that were on-time
• by the number of orders that were complete
• by the percent documented correctly.

Beware: POI stats can be pretty brutal at first blush. Even solid supply chain operations are likely to see numbers below 50%.

One critical aspect of benchmarking supply chain performance is setting the parameters.

What constitutes success? Is it when a shipment leaves your docks on time? Or is it if that shipment arrives at the customer’s facility when it’s supposed to?

Many factors — some out of your hands — can control “on-time” performance. For instance, what if the shipment leaves your facility on time, but the independent carrier has problems?

Your best bet is to take it back to basics, at least when starting to devise your method of measuring supply chain performance.

The four basic criteria supply chain benchmarking universally encompass:

• on-time
• complete
• damage-free
• correctly “documented”

Another benchmark that’s been successful for many businesses is calculating “on-time, in-full” performance.

It is what it sounds like: How many of your orders were on-time, (either leaving your building or arriving at your customer’s facility). Then, how many of those orders were in-full — complete shipment, no damages, no rejects.

Heads up: You’ll need a pile of documents to accurately calculate this:

• invoices
• shipping manifests
• bar coding system
• how cartons are labeled
• RFID tagging, and
• even advance shipping paperwork.

Many people might agree with that. But the statement’s not necessarily true if you really want to measure your inventory efficiency.

The difference is in the way you measure inventory accuracy.

The standard benchmark is Financial Accuracy. Essentially, that is a measure of how well what you have on the shelves matches up with what you’re supposed to have on your shelves.

To simplify: If you’re supposed to have 100 widgets and you count 99 widgets, you have to account for that missing widget.

That’s why Financial Accuracy is described as a net dollar difference of adjustments after inventory.

On the other hand, there’s Operational Accuracy.

That’s a measure of whether you’re able to meet your Customer Service and Distribution goals and promises.

When an order is submitted based on what is shown as your inventory availability, you need to be able to deliver the goods. You’ve made a commitment to a customer, and you better follow through.

If you end up back-ordering that item, you’ve compromised your operational accuracy — and possibly cost your company a customer.

Part of inventory availability is being able to find the right item, in the proper quantity, where it’s supposed to be.

The best way to distinguish between Financial Accuracy and Operational Accuracy is still counting what you have.

But Operational Accuracy is based on your first count. There’s no tracking down missing items, reconciling deficiencies, trying to balance what’s not here with what’s over there.

If the count doesn’t match your records, that’s a big zero in Operational Accuracy.

When you’re pulling orders for customers, you don’t have time to run around and rectify shortfalls or miscounted items.

It has to be right, the first time — if you’re going to achieve true Operational Accuracy.

Even if you’re pretty sure it is, how could you prove that to someone else in your company?

The best way to do that, of course, is to measure it. After all, if you can measure something, you can improve it.

But in order to measure aspects of your performance, you need to determine what’s worth measuring and what your targets should be.

Experts suggest focusing on these five aspects of Accounts Payable:

• time it takes to process each invoice
• the percentage of invoices paid on time
• time on the job spent managing disputes, reconciling discrepancies and processing exceptions
• number of invoices processed by each A/P staffer in a given period of time, and
• percent of your invoices that qualify for early pay discounts

Decide on a fair time period to measure “average” performance and establish normal performance benchmarks.

One major influence on A/P performance is how much technology has been integrated into your system. Obviously, the more automated A/P operations are, the smoother and faster they should run.

Still, the Aberdeen Group offers guidelines as a suggestion.

Aberdeen breaks down A/P performance into three categories: best in class — the top 20%, industry average — the middle 50%, and laggards — the bottom 30%.

• Best in class:  $4.60 to process an invoice, taking an average of 4.4 days
• Industry average: $12.20 to process an invoice, taking an average of 14.4 days, and
• Laggards: $55 to process an invoice, taking an average of 34.4 days