Title: Order Fulfillment,
1Chapter 15
- Order Fulfillment,
- Logistics, and
- Supply Chain Management
2Order Fulfillment Problems
- How much do I need?
- Delivery time and cost
- Fierce competition
- Where are my goods? Track and Trace
- One shipment or many, for an order
- When will it arrive?
- Variability, uncertainty
- Late delivery
- Delays costs low satisfaction
- In-land and overseas delivery
3Order Fulfillment Overview
- Introduction
- Taking orders may be the easiest part
- Factors responsible for delays in deliveries
- Inability to accurately forecast demand
- Ineffective supply chains
- Pull type manufacturing
- Customized products
4Figure 15-1Push vs. Pull Supply Chains
5Major Concepts
- Order fulfillment Deliver right order on time
- Front office operations
- Order taking
- Advertisement
- CRM
- Back office operations
- Accounting Packaging
- Finance Logistics
- Inventory
6Major Concepts (cont.)
- Definitions of logistics
- Managing the flow of goods, information and money
along the supply chain - Aspect of military science dealing with
procurement, maintenance, and transportation - Management of details of an operation
- All activities involved in management of product
movement - Right product
- Right place
- Right time
7Figure 15-2Order Fulfillment and Logistics
Systems
8The Steps of Order Fulfillment
- 1. Payment Clearance
- 2. In-stock availability
- 3. Packaging, shipment
- 4. Insuring
- 5. Production
- (planning, execution)
- 6. Plant services
- 7. Purchasing, warehousing
- 8. Customer contacts
- 9. Returns
- (Reverse logistics)
- 10. Demand forecast
- 11. Accounting, billing
- 12. Reverse logistics
9Shipping a Tropical Fish
- 1. Placing order, payment
- 2. Transfer order to Petstore.com, check stock
- 3. Use a wholesaler to get the fish
- 4. Supplier finds fish, ships to wholesalers
- 5. Wholesalers rush to Petstore
- 6. Petstore uses FedEx to ship to customer with
copy of credit card payment - Discussion What is the contribution of EC?
10Supply Chain Management
- Definition
- Flow of material, information, money, etc. from
raw material suppliers through factories to
customers - It includes
- organizations, procedures, people
- SCM
- Integration of the business processes along the
chain, Planning, Organizing, control of many
activities - Activities
- Purchasing, delivery, packaging, checking,
warehousing, etc.
11Figure 15-3An Automotive Supply Chain
Source Modified from Handfield and Nichols
(1999), p. 3.
12Benefits of SCM
- Reduce uncertainty along the chain
- Proper inventory levels in the chain
- Minimize delays
- Eliminate rush (unplanned) activities
- Provide superb customer service
- Major contributor of success (ever survival)
13Global Supply Chain
- Can be very long
- Possible cross-border problems
- Customs clearance, tax, different regulations
- Need information technology support of
- Communication
- Collaboration
- Possible delays due to customs, tax,
translations, politics
14Typical Problems Along the Supply Chain
- Delays in production, distribution, etc.
- Expensive Inventories
- Lack of partners coordination
- Uncertainties in deliveries
- Poor demand forecast
- Interference with production
- Poor quality
15More Difficulties
- Virtual companies do not have logistics
infrastructures - One company is a member of several supply chain
- Conventional warehouses are too expensive
- Need automatic warehouses with robots as pickers
16The Bullwhip Effect
propagation
17Bullwhip Effect andInformation Sharing
- Flow of information to and from all participating
entities - Information sharing between retailers and their
suppliers - Bullwhip effect refers to erratic shifts in
orders up and down supply chain - Distorted information leads to
- Inefficiencies Ineffective shipments
- Excessive inventories Poor customer service
- Missed production schedules
18The Bullwhip Effect
- Slight changes in actual demand create problems
- Partners build just in case inventories
- Lack of trust among partners
- Stockpiling results in huge cost
- The manufacturers cannot plan production
- Cannot order material from suppliers
19Avoiding the Stingof the Bullwhip
- How to do it?
- Information sharing is a must and is facilitated
by EDI, extranets, and groupware technologies - Trust and agreements in regard to
- Ordering and inventory decisions
- Placing supply chain ahead of individual entities
within the corporation - Sharing information could save 30 Billion/year
just in the grocery industry
20Preliminary Activities
- Understand the supply chain (flow charts)
- Study internal and external parts
- Performance measurement are a must (Benchmarking)
- Multidimension performance analysis
- A BPR may be needed
- Peoples relationships are a must
21Areas of Opportunities
- Manufacturing processes
- Warehousing operation
- Packaging and delivery
- Material inspection/receiving
- Inbound and outbound transportation
- Reverse logistics (return)
- In-plant material handling
- Vendor management program
- Customer order processing
22Areas of Opportunities (cont.)
- Use of teams and empowerment of employees
- Automation of processes
- Use of software for facilitating all the above
- Inventory management and control
- Invoicing, auditing and other accounting
activities - Collaboration procedures with partners
- Employee training and deployments
- Labor scheduling
23Using Inventories
- The classical MAGIC
- Insurance against stock out
- Can be in several places
- Can be excessive
- Can be insufficient
24Using Inventories
- Using inventories to solve supply chain
shortages - Building inventories as insurance against
uncertaintyproducts and parts flow smoothly - Very difficult to correctly determine inventory
levels for each product and part - Customized finished products can only stock
components - Excessive levels are costly to store
- Insufficient levels cannot protect against high
demand or slow delivery times
25Using Inventories (cont.)
- Example Littlewoods Stores UK
- Retail clothing industry is very competitive
- Littlewoods instituted an IT-supported initiative
to support supply chain efficiency specifically,
to deal with the overstocking problem
26Littlewoods Stores (cont.)
- Use a Web-Based performance reporting system that
analyzes daily - Marketing and financial data
- Merchandising
- Space planning
- Purchasing data
27Littlewoods Stores (cont.)
- Using data warehouse, DSS and other end-user
oriented software system has helped - Reduce backup inventory expenses
- Increased the ability to strategically price
merchandise differently in different stores - Reduced the need for stock liquidations
- Cut marketing distribution costs significantly
- Increased the number of Web-based users
28Proper SCM
- Proper SCM and inventory management requires
coordination of all activities and links in the
supply chain to - Ensure that goods move smoothly and on time from
suppliers to customers - Keep inventories low
- Keep costs down
29Proper SCM (cont.)
- Coordination is needed because
- Supply chain partners depend on each other
- Partners dont always work together toward the
same goal - To properly control uncertainties it is necessary
to - Understand the causes/problems
- Determine how uncertainties will affect other
activities up and down the supply chain - Formulate ways to eliminate or reduce
uncertainties
30Proper SCM (cont.)
- Information flow is a key communications between
business partners should be - Effective
- Efficient
- Support is needed to ensure this communication
and is enabled by - IT support
- EC support
31EC Solutions Along the Supply Chain
- Automate order taking (e-procurement)
- Use EDI/Internet
- Web-based ordering intelligent agents
- Electronic payments
- Inventory reduction (made-to-order pull process)
- Improved inventory management
- Decreased administrative costs
32EC Solutions Along the Supply Chain (cont.)
- Collaborative commerce among members of the
supply chain - Shortens cycle time
- Minimizes delays and work interruptions
- Lower inventories
- Lower administrative costs
- Digitization of productsinstant order
fulfillment - Back-office interface
- Shortens cycle time
- Eliminates errors
33Innovative Solutions toOrder Fulfillment Problem
- Examples of solutions to order fulfillment
- Real-time video (Webcam)
- Move inventory 70 times/year
- FAO Schwartz demonstrates famous store in New
York - MailBoxes Etc. and Innotrac Corp.
- Comprehensive system
- Software connects e-tailers and order management
systems
34Innovative Solutions toOrder Fulfillment Problem
(cont.)
- Role of 7-Eleven convenience stores
- Can be used as a collection point for returns
- Can be used as a pick-up place
- Can be used as a place for order placing
- Can pay in cash/card to the store
- Returns are a problem up to 30
35Innovative Solutions toOrder Fulfillment Problem
(cont.)
- Relysoftware.com helps find
- Forwardersintermediaries that prepare goods
for shipping for companies - Relysoftware.com also helps
- Forwarders find the best prices on air carriers
- Carriers fill up empty cargo space by bidding it
up
36Same Day, Even Same Hour Delivery
- Role of FedEx and similar shippers
- From a delivery to all-logistics
- Many services (see Box 13.4)
- Complete inventory control
- Packaging, warehousing, reordering, etc.
- Tracking services to customers
37Same Day, Even Same Hour Delivery (cont.)
- Supermarket deliveries
- Transport of fresh food to people who are in
homes only at specific hours - Distribution systems are critical
- Fresh food may be spoiled
38Figure 15-4Proposed Order Fulfillment for
Groceryworks
Source Steinert-Threlkeld (January 31, 2000).
Originally published in Interactive Week,
www.xplane.com
39Automated Warehouses
- B2C order fulfillmentsend small quantities to a
large number of individuals - Step 1 retailers contract Fingerhut to stock
products and deliver Web orders - Step 2 merchandise stored SKU warehouse
- Step 3 orders arrive
- Step 4 computer program consolidates orders from
all vendors into pick waves
40Automated Warehouses (cont.)
- Step 5 picked items moved by conveyors to
packing area computer configures size and type
of packing types special packing instructions - Step 6 conveyer takes packages to scanning
station (weighed) - Step 7 scan destination moved by conveyer to
waiting trucks - Step 8 full trucks depart for Post Offices
41Handling Returns
- Necessary for maintaining customer trust and
loyalty - Return item to place it was purchased
- Separate logistics of returns from logistics of
delivery - Allow customer to physically drop returned items
at collection stations - Completely outsource returns
42Outsourcing Logistics (3PL)The UPS Strategy
- UPS provides broad EC services
- Electronic tracking of packages
- Electronic supply chain services for corporate
customers by industry including - Portal page with industry-related information
- Statistics
- Calculators for computing shipping fees
- Help customers manage electronic supply chains
43The UPS Strategy (cont.)
- UPS provides broad EC services
- Improved inventory management, warehousing, and
delivery - Integration with shipping management system
- Notify customers by e-mail of
- Delivery status
- Expected time of arrival of incoming packages
44The UPS Strategy (cont.)
- Representative tools
- 7 transportation and delivery applications
- Track packages
- Analyze shipping history
- Calculate exact time-in-transit
- Downloadable tools
- Proof of delivery
- Optimal routing features
- Delivery of digital documents
- Wireless access to UPS system
45Supply Chain Components
- Upstream like placing orders
- Suppliers, their suppliers (several tiers)
- From raw material to the company
- Internal all internal processes that add value,
conversion to find products - Production scheduling
- Costing
- Inventory control
46Supply Chain Components (cont.)
- Downstream all activities in distribution and
delivery to end customers - Sales
- Customer billing
- Delivery scheduling
47Software Support
48Integration-Benefits
- Automation of segments useful, but integration
brings
- Tangible benefits
- Inventory reduction
- Personnel reduction
- Productivity improvement
- Order management improvement
- Financial cycle improvements
- Intangible benefits
- Information visibility
- New/improved processes
- Customer responsiveness
- Standardization
- Flexibility
- Globalization
- Business performance
49Integration Along the Supply Chain
- Need to streamline operations
- New business models
- New organizational relationships (virtual
companies) - Examples Warner Lambert and Wal-Mart (Box 15.6)
50Areas of Integration
- Order taking - production inventory levels
- Payment info in B2B - Visa, MasterCard, etc.
- Low inventory levels - automatic ordering
- Order to manufacturing - generate a list of
needed resources their availability - Changes in an order - transmit to suppliers and
their suppliers - Tracking systems - available to customers
51Evolution of Software Integration
- Completely Independent of each other
- MRP Material Requirements Planning
- Inventory
- Production
- MRPIIManufacturing Requirements Planning
- more integrated
- MRPFinanceLabor
52Evolution of Software Integration (cont.)
- Completely Independent of each other
- ERPEnterprise Resources Planning
- All functional areas
- Extended ERP includes
- Suppliers
- Customers
53From SAP to mySAP.com
- SAP Traditional ERP Automate and Integrate
transactions - MySAP.com Web-based comprehensive system
- Workplace - a personalized, role-based interface
- Marketplace - one stop destination for business
professionals to collaborate - Business Scenarios - products for the Internet
and intranet - Application-hosing - hosting Web applications for
SMEs
54ERP Benefits
- ERP Integrating business processes and
activities in real time - Solves many supply chain problems
- Necessary for medium to large corporations
- Helpful also for some SMEs
55ERP Implementation
- Need to interface with EC order taking system
- Manages all routine transactions in the
enterprise - Recently extended to suppliers and customers
56Developing ERP Systems
- Do-it-yourself, from scratch (only few will)
- Use Integrated packages such as R/3 from SAP
- Best of Bread approach, using integrating
software - Rent in from ASP service
57Post-ERP (2nd Generation)
- 1st generation - transaction processing
orientation - 2nd generation
- Including decision-making capabilities
- EC requires decision support
- EC requires business intelligence
- SCM software Production Planning, Manpower
utilization, Profitability models, market
analysis - Integration of SCM capabilities
- APS function advanced planning and scheduling
- Other added functionalities CRM, KM
58ASP and ERP Outsourcing
- Why ASP or lease?
- Leasing information systems application
- Back to the days of time-sharing
- A risk prevention strategy
- Very popular with ERP (expensive, cumbersome)
59Managerial Issues
- Planning for order fulfillment is a critical
task, especially for virtual EC vendors - Dealing with returns can be a complex issue
- Partnerships and alliances can improve logistics
and alleviate supply chain problems - Many software products are available to improve
SCM and logistics - EC must be tightly connected with back-office
operations
60Managerial Issues (cont.)
- It is necessary to integrate it with EC
front-office operations - Importance of creation of logistics system for EC
and how to use EC applications to improve the
supply chain - Software integration may require considerable
time and money