Order Fulfillment

Satisfying Customer Orders

Steven Brown
 Logistics defined
O OK……what do we mean by “logistics”?

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Logistics Activities

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 Order Management
O Setting Logistics customer service goals
O Backorders
O Availability
O Order Lead Time
O Reliability

O Can these metrics be applied from this

position back along the supply chain?

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Transportation Management
O The importance of intermodal
transportation
O Freight rates
O Carrier selection
O Routing and Scheduling
O Monitoring performance

O Looking at the overall supply chain, how

does the purchasing function influence
transportation efficiency?
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 Warehouse Management
O What’s the difference between a warehouse and
a distribution center?
O Important considerations:
O WMS
O Automation
O Warehouse planning
O Final assembly
O Reverse logistics

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 What is Order Fulfillment?
It is not just about filling orders!

Order fulfillment is about designing a process and a

network that permits a firm to meet customer requests
while maximizing profit.

© Supply Chain Management Institute. Source: Supply Chain Management: Processes, Partnerships, Performance.
 Strategic Sub-Processes
Order Fulfillment Processes Interfaces Operational Sub-processes

Customer Relationship
Review Marketing Management Communicate and
Strategy, Supply Chain Generate Order
Structure & Customer
Service Goals Supplier Relationship
Management Enter Order

Customer Service
Define Requirements Management Process Order
for Order Fulfillment

Demand Management Handle Documentation

Evaluate Logistics
Network
Manufacturing Flow
Fill Order
Management

Define Plan for

Order Fulfillment Product Development & Deliver Order
Commercialization

Develop Framework Perform Post Delivery

of Metrics Returns Management 8
& Measure Performance

Source: Douglas M. Lambert, Editor, Supply Chain Management: Processes, Partnerships, Performance, Fourth Edition, Ponte Vedra Beach, FL: Supply Chain Management Institute, 2014, p. 109.
 Order Fulfillment
O Order cycle time considers both:
O Inventory
O Processes
O Drop shipping
O 3PLs

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Planning the Logistics Network
O How many distribution centers are needed
and where?
O Do I “make” or “buy”?
O What are the right inventory policies to
balance customer service and cost?
O What are the right transportation services
to balance customer service and cost?
O What material handling equipment should
be used?
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Supply Chain Designer Software SITES

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Supply Chain Designer Software SOLUTION

All Product
Flows

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Developing a Logistics Strategy
O “A strong marketing strategy will win
customers the first time but a good logistics
strategy will keep those customers for the
long term.”

O Logistics strategies, of course, must

support the overall strategy or value
proposition of the company.

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Developing a Logistics Strategy
O Process-oriented strategy
O Information-oriented strategy
O A mix of the two

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 How Order Fulfillment Affects EVA ®

Sales
Obtain repeat business
Increase sales volume
Gross Increase share of market and/or customer
Margin
– Retain and strengthen relationships with profitable
CGS
Profit from
customers
Operations

Increase orders shipped complete

Net Profit – Reduce damage and tracing
– Total Reduce services provided to less profitable customers
Expenses Reduce handling costs
Taxes
Economic Reduce general overhead/ mgmt. / admin. costs
Value Reduce outbound freight
Added
Optimize physical network/facilities
= Leverage new and/or alternative dist. channels
Reduce errors, claims and customer returns
Reduce order cycle time
Reduce HR costs/improve effectiveness
– Current
Inventory

Assets Reduce finished goods inventory

Capital Charge Reduce obsolete inventory
Cost of Total
+
Other
Capital Assets
+ Current
Fixed

Assets
% Assets Reduce accounts receivable through faster payment
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Improve asset utilization and rationalization

Source: Douglas M. Lambert, Editor, Supply Chain Management: Processes, Partnerships, Performance, Fourth Edition, Ponte Vedra Beach, FL: Supply Chain Management Institute, 2014, p. 115.
Typical Order Fulfillment Metrics
O Order-to-cash cycle (and cash-to-cash).

O Number of touches.

O On-time delivery.

O Order fill rate.

O Order completeness.

O Perfect orders.
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© Supply Chain Management Institute.

 Developing a Logistics Strategy
O The strategic planning process should begin with:
O Who are our customers?
O What service do our customers expect?
O What are our customer service goals?
O What are our current capabilities?

O “…..few logistics professionals have direct contact

with the customer.”

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 Current and Future Concerns

O US infrastructure
O US port capacity
O Increased use of 3PLs
O Legal security of e-logistics contracts
O Physical security of goods en route

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