In today’s highly competitive ecommerce market, one of the best ways for businesses to differentiate themselves from the competition is by providing exceptional customer experiences. There are many different ways brands can offer a positive customer experience – one of them is optimizing the order management process to enhance order fulfillment and improve order accuracy rates.
A key step to optimizing your order management process is by improving the order cycle time. In this post, we’ll take a closer look at what order cycle time is, why it’s important, and how to improve it for your business.
In today’s instant gratification economy, customers expect lightning fast service. They want to click “Buy” online and receive their shipment within days, if not hours. Slow order fulfillment results in abandoned shopping carts and lost business.
To keep customers happy, companies must optimize their supply chains for speed. A key metric in this effort is tracking customer order cycle time.
But what exactly does order cycle time mean? Why does it matter? And how can supply chain professionals calculate it and put it to use? This guide provides the answers.
What is Customer Order Cycle Time?
Customer order cycle time measures the total elapsed time from when an order is placed to when it is delivered. It encompasses the complete journey:
- Customer clicks “Purchase” on a website or submits a purchase order
- Order enters the fulfillment flow
- Inventory is allocated and picked
- Item is packaged and shipped
- Customer receives delivery
The order cycle spans procurement, production, fulfillment and distribution processes. It may involve handling by multiple facilities and transportation methods.
Order cycle time indicates supply chain velocity Short cycles enable fast response to demand Customers receive purchases quickly after ordering, Long cycle times lead to delays that frustrate buyers,
Why Track Order Cycle Time?
Monitoring order cycle time provides valuable benefits:
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Customer satisfaction – Faster cycles impress customers, improve loyalty and generate repeat business.
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Revenue growth – Quick fulfillment increases conversion rates and order volumes.
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Market competitiveness – Companies with fast order cycles gain advantage over slower rivals.
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Supply chain insights – Identifying delays helps target improvements.
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Productivity gains – Cycles reveal workflow inefficiencies to eliminate.
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Continuous improvement – Regular cycle time measurement shows gains over time.
Leading retailers like Amazon set the standard with same-day delivery. Customers now expect speedy fulfillment across industries. Order cycle time metrics are crucial for keeping up.
How to Calculate Order Cycle Time
While conceptually straightforward, accurately measuring order cycle time takes rigor. Follow these steps:
1. Record Order and Delivery Dates
For each order, log the initial purchase date and time along with the delivery date and time. Capture this data automatically via order systems if possible.
2. Calculate Elapsed Time
For each order, subtract the order date from the delivery date to get total elapsed time.
Cycle Time = Delivery Date – Order Date
Repeat this for all orders to determine individual cycle times.
3. Find the Average
Add up all the individual order cycle times, then divide by the total number of orders.
Average Cycle Time = Total of All Cycle Times / Number of Orders
This gives the average fulfillment speed across your entire customer base.
4. Filter by Segment (optional)
To refine analysis, calculate averages for customer segments (retail, wholesale, regions, etc.) and product categories.
5. Compare to Goals
Evaluate your average cycle time versus internal goals or external benchmarks. Identify areas that need improvement.
Repeat this process regularly (monthly, quarterly) to track progress over time. Automate data collection for efficiency.
Order Cycle Time Goals and Benchmarks
How short should your order cycles be? Targets depend on your industry, product mix and fulfillment model. Some typical benchmarks:
- Retail ecommerce – 2-5 days from order to doorstep
- Wholesale – 5-15 days from purchase order to delivery
- Food distribution – 1-3 days from restaurant order to shipment
- Manufacturing – 15-30 days from receipt of order to finished goods
- Furniture industry – 30-90 days from order to final delivery
ResearchOrderCycleTimes.com provides detailed cycle time data by industry. Use this to set competitive goals for your business.
Improving Order Cycle Times
Once you have baseline metrics, deploy focused efforts to reduce cycle times:
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Optimize workflows – Eliminate redundant steps and handoffs. Consolidate processes.
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Increase speed – Automate manual tasks. Accelerate pick/pack with technology.
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Strategic inventory – Stock more finished goods in closer proximity to customers.
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Faster transportation – Use air freight over ocean. Leverage regional distribution centers.
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Forecast demand – Anticipate orders and shift resources appropriately.
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Communication – Provide order status visibility and set expectations.
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Incentives – Motivate employees to speed up cycles. Celebrate wins.
Balancing cost vs. speed is key. Work closely with suppliers, 3PLs and carriers to align on cycle time objectives.
Order Cycle Time vs. Lead Time
Order cycle time differs slightly from a related metric – lead time. Understanding the distinction is helpful:
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Order cycle – Order receipt to delivery, from customer perspective
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Lead time – Order placement to order receipt, on supplier side
Lead time measures a supplier’s production and fulfillment speed. Order cycle incorporates lead time but also includes distribution to the buyer.
To calculate overall time from purchase to receipt, you need both order cycle time and lead time.
Limitations of Order Cycle Time
While invaluable, order cycle metrics have some limitations to consider:
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Measures speed but not other facets like quality or sustainability.
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Vulnerable to outliers like shipping delays outside the company’s control.
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Average times can mask variability experienced by segments of customers.
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Manual measurement with sparse sampling provides limited accuracy.
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Does not indicate causes behind long or short cycles. More analysis needed to identify root causes.
For a complete picture, order cycle time should be analyzed in context with other key performance indicators and operational data points.
The Bottom Line
Order cycle time metrics shine a spotlight on supply chain velocity. When armed with cycle time insights, companies can delight customers, seize competitive advantage and boost revenues through accelerated fulfillment. Mastering this key performance indicator is mission-critical in today’s hypercompetitive markets.
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Continue measuring cycle time
Order cycle time can fluctuate over time, especially with changes or disruptions in the supply chain. For example, an unexpected delivery exception can result in a much longer order cycle time than usual. Or you may notice a much shorter order cycle time after implementing an automated system to improve your warehouse receiving process.
Additionally, your warehouse staff having to deal with a large number of returns may also affect their ability to focus on fulfillment tasks because they’re too busy recording and sorting your ecommerce returns. Throughout your supply chain, there are many variables that can affect this order cycle time.
There are many variables throughout your supply chain that can affect this metric. It’s important to constantly monitor and reassess your order cycle time. This way, you determine whether you need to review your supply chain processes and make improvements that will speed up the process. It’s also a great way to figure out whether the improvements you’ve implemented are effective at speeding up your cycle time.
The easiest way to speed up your order cycle time is by leaving the fulfillment process to the experts. Outsourcing fulfillment to a third-party logistics partner is an effective way to make sure that orders are quickly received, picked, packed, and shipped out. Ideally, look for a tech-enabled 3PL that allows you to automate significant portions of the fulfillment process.
For example, the 3PL should have technology that seamlessly integrates with your online store. This way orders are automatically received in their warehouses and fulfillment centers as soon as they’re placed by customers.
By doing this, you automatically process orders which allows them to quickly move through the fulfillment pipeline so they’re shipped out to your customers in just a few hours. Moreover, automating the process will reduce the need for manual entry, which minimizes the risk of errors while improving order accuracy.
What is Order Fulfillment?
What is customer order cycle time?
The customer cycle order time gauges the effectiveness of your supply chain’s fulfillment system. An in-depth analysis of this KPI might highlight areas where order processing needs to be improved, allowing you to create plans to optimize fulfillment logistics. How To Measure Customer Order Cycle Time?
What is order cycle time in logistics?
The order cycle time in logistics is the time between order placement and delivery. This includes the time required for processing, preparing, sending, and shipping the order. Assuring customer satisfaction in logistics often depends on lowering order cycle time. It can be measured in various ways.
How do I measure customer order cycle time?
To measure customer order cycle time, you should first identify the average time customers place an order and receive the product. You can then calculate this average by tracking all orders placed on your website and their corresponding delivery dates.
How to calculate order cycle time?
It can be calculated using the order cycle time formula below: Order Cycle Time = (Delivery Date – Order Date) / Total Orders Shipped The elements in this equation are pretty self-explanatory. The delivery date refers to the day which the customer received the order, while the order date is the day when the order was placed.
