Order Fulfillment in the Supply Chain

Order Fulfillment as competitive Advantage

Order Fulfillment in the Supply Chain

Order Fulfillment in simple terms means the ability to satisfy customer demand in time with best customer experience.  In short, the demand and supply should balance each other. A conservative plan has risk of potential loss of sale extending to loss of confidence and trust from the customer which will make the business spiral downwards. On the contrary a liberal plan might result into overstocked locations; higher cost of unused inventory will eat into the business margins and make the business unviable.

Timely order fulfilment, balancing the supply and demand coupled with continuous growth and high customer satisfaction is not a perfect science and that’s why it needs a continuous data insights and corrective actions to keep the key supply chain KPIs in control.

Science of Order Fulfillment, although not often perfect can be described using following 3 tenets which influence the decision-making during operations.

Tenets of Order Fulfillment
  • Factors influencing the design of the fulfilment engine – These are extremely important for design of the order fulfillment engine and corrective actions.
  • Components of the Fulfillment engine – Different components and their considerations that need to be considered for efficient design.
  • Continuous monitoring and timely corrective action – Data insights provided around key Order fulfillment KPIs with a drill down to enable timely corrective actions.

Factors influencing the design of the fulfillment engine

Type of Products

  • Commodity products which customers buy on the fly, based line of sight availability and will easily switch to another if not available
  • Fast moving goods are like commodity products but requirement is very frequent and hence they are bought again and again
  • Semi specialized products need more involvement in buying process, are high on the price and provide some room on customer wait time. But if wait is long then customer can still switch to an alternate.
  • Specialized products – Technically complex and with complex ordering process as well
  • Products with short life cycle will go out of date need close stock monitoring
  • Specialized physical attributes – Too small, too heavy, too delicate, In other forms such gas, liquid, semi solid, limited shelf life
  • Price bracket – cheap

Type of Customers

  • Customers belonging to varied class with limited brand loyalty, looking out for something new, exploring more and more ideas and making impulsive or on the fly decision
  • Customers with some brand loyalty but will not wait for too long and eventually switch
  • Dedicated customer relationships (could be in B2B format) where sale is based on product quality, relationship, and pricing
  • Customers with no choice because of the product monopoly of the product.

Type of Fulfillment

  • Fulfillment through available front-end stock, by line of sight (actual or virtual)
  • Fulfillment through back-end stock after receiving the order with a short lead time
  • Fulfillment involves complex order taking and requires kitting or configuration before fulfillment
  • Product is manufactured as per order and requested design from ready semi-finished parts

Type of Organisation

  • Manufacturer making and selling its own products
  • Manufacturer selling its own products but making through subcontractors
  • Stock aggregator and distributor processing products from multiple sources
  • Dealer dedicated to a parent organization
  • Distributor arm of a parent manufacturing organization
  • Retailer with geographically distributed retail stores.

Components of the Fulfillment Engine

Ordering Channels

  • Combination of retailers, dealers, distributes, direct fulfillment web channels, front end B2B partners etc. Express mechanism to spot decides on pricing, discounts etc.
  • Traditional ERP order collection mechanism with some front-end arm to collect the orders online.
  • Traditional ERP order collection mechanism where actual orders coming in via email, fax, document interface, EDI etc.
  • No specific order collection mechanism where order is spread across multiple spces and design documents.

Predictive Forecasting

  • Near accurate predictive forecasting tools and technologies in case of uncertain customer sales behaviour
  • Simple forecasting tools for Order to ship kind of environment
  • No forecasting for make to order environment

Warehousing and Distribution

  • Centralized warehouses with one-to-many push relationships. Warehouse -> Distributors -> Dealers -> Retailers. Stock can a pull from reverse direction and supply will be a push in forward direction. Direct channels can exist between warehouse and B2b Customer or Online shipments. Ownership of the stock to be decided based on how much business pressure can exerted on the partners.
  • No FG warehouse, all stock either at distributors and dealers or at contract manufacturers.  FG stock stays for a very short time.
  • Decentralized FG warehouses with less dependence on retail and distributors, major sales come through direct sales channels. Cross fulfillment opportunities can exist.

Picking Mechanism

  • For high volume short cycle picking, pick to order, pick to alley and consolidate to order, picking and prioritization algorithms.
  • Addition further mechanism around drop ship, opportunistic and planned cross docking and direct shipments.
  • Standard noncomplex picking.

Shipping and Transportation

  • Own- or third-party service provider
  • Modes of transportation – Road, rail, air, sea and in combination – Designing shipping networks
  • Shipment tracking and OTIF measurement

Continuous Monitoring & Timely Corrective Action

  • Despite the best design and efficient operations, demand supply can go out of balance so a tool providing data insights with clear exception and early warning system will enable external intervention.

InspireXT have a ready methodology that can be used with a baseline of given influence factors and design components which can create a recommendation for your supply chain. With our data driven, KPI centric drill down methodology for further sensitive analysis our Supply Chain Maturity Assessment Framework provides continuous monitoring and deviations exceptions for corrective action.

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