Order cycle time

How order cycle time is worked out

Add up the elapsed time for every order in the period and divide by the number of orders. The arithmetic is trivial. The two decisions that matter are where you start the clock and where you stop it.

Three starting points are in common use: the moment the order lands in your system, the moment it is released to the warehouse, and the moment payment clears. Only the first one measures what the customer experiences. The second measures the warehouse alone, which is useful internally and flattering externally, so be clear about which one a report is showing. For the stop, handover to the carrier measures your operation and delivery measures your promise.

Then decide what to do with backorders. An order waiting four days for stock is still an order the customer is waiting on. Leaving those out makes the figure look excellent and tells you nothing.

There is no good number

A wholesaler with a four o'clock cut-off and next-day delivery is working to a completely different clock from a spare-parts operation that promises two hours to a machine standing idle. The number that matters is not somebody else's: it is the gap between what you promise and what you do.

Read it next to the lead time your suppliers give you. A fast cycle time in the warehouse cannot rescue an order for an item that will not arrive for three weeks.

In practice

A warehouse ships 1,000 orders in a week. The average order cycle time is 5.2 hours, which reads well against a same-day promise.

Now sort those thousand orders by elapsed time. The middle order took 4.1 hours. The slowest fifty took between 19 and 31 hours, because they contained an item that had to come from the frozen zone and the frozen pick runs once a day at eleven. The average said 5.2; the fifty customers who waited a day and a half are the ones who called. One number describes the operation, the other describes the complaints, and only the second one tells you where to look. The figures here are an illustration.

What moves the figure

• Cut-off times and wave planning. An order arriving ten minutes after a wave is released waits for the next one. More, shorter waves cut the average and cost a little efficiency.
• Availability. A line that is not on the shelf stops the whole order unless you are willing to split the shipment. This is where fill rate enters the picture.
• Checks before release. Payment authorisation, fraud screening and credit holds happen before the warehouse sees the order, and they are frequently the largest single block of time in the whole figure.
• Zones that run on their own schedule. Frozen, hazardous or high-value items picked once or twice a day set the floor for any order that touches them.
• Capacity at the busy hour. The warehouse that keeps up over a day can still queue badly between two and four in the afternoon.
• Carrier collection windows. An order finished at 16:05 for a 16:00 collection does not ship until tomorrow, however fast the picking was.