Order Management and Supply Chain Network Design

Index vs Metric vs Measure

Index combines metrics into a single indicator, metric involves a calculation or combination of measurements, measure requires no calculations

Order Management

Influencing order through customer relationship management (CRM) and executing the order through OTC (order to cash) and replenishment cycles

Product Availability Metrics

Internal metrics: item fill rate, line fill rate; External metrics: order fill rate, perfect order

Role of Distribution (warehousing) Operations in SCM

Inventory management, customer service, balancing supply and demand, production support, omni channel fulfillment, transport economies

Full Collaboration

Involving all parties

Postsale logistics support (PLS)

Management of product returns from the customer to the supplier, and delivery/installation of spare parts

4 basic steps of CRM process

Segment the customer base by profitability, identify the product/service package for each customer segment, develop and execute the best processes, measure performance and continuously improve

Execution and Control

Shipment preparation, freight documentation, in-transit visibility, transportation metrics, service quality monitoring

Facility Considerations

Size, interior layout, product location

Vertical Collaboration

Up and down the supply chain (supplier, manufacturer, distributor, retail store)

Air Carriers

Used to ship small quantities of high-value, low-weight goods

Distribution Technology

Warehouse management systems (WMS), automatic identification (Auto ID) tools, warehouse execution systems (WES), warehouse control systems (WCS)

Elements of Successful Collaboration

Well understood goals and objectives, trust and commitment, organizational compatibility and communication, equitable sharing of gains and losses, benefits greater than going it alone, dedication to continuous improvement, strategic plan

FIFO

First in first out inventory model to pick later date package

Metrics for LOR

Flexibility/Adaptability of Process, Customization of Product/Service

Metrics for LSI

Forecast accuracy, inventory accuracy, data integrity, EDI compliance

Key Distribution Tradeoffs

Functional Tradeoffs: balance customer service/costs; Facility-Level Tradeoffs: space vs equipment, equipment vs people, people vs space

GIGO

Garbage in garbage out - the quality of the output is determined by the quality of the input

Geographic and Site-Specific Locational Determinants

Global/national/regional factors, site-specific factors

Water Carriers

Globally dominate all other modes internationally, compete with railroads for long-distance movement of low-value, high density, bulk cargoes

Sales objective

Customer service and profit

Horizontal Collaboration

Between suppliers

Stockout issues

Buyer waits until product is available, buyer back-orders the product, seller loses current revenue, seller loses a buyer and future revenue

Replenishment cycles

Acquisition of additional inventory

Customer Relationship Management (CRM)

Aligning the supplier's resources with its customers to increase customer satisfaction and supplier profits

Omni Channel

Alignment with go-to-market strategy, integrated fulfillment, store fulfillment, flow through fulfillment, direct store delivery, pool distribution, dedicated fulfillment

Marketing Objective

Allocate resources to the marketing mix to maximize long-term profitability of the firm

Drivers of Supply Chain Network Redesign

Changes in global trade patterns, changes in customer service requirements, shifts in customer and/or supply market locations, changes in corporate ownership/merger and acquisition activity, cost pressures, competitive capabilities, corporate organizational change

How to improve Return on Assets

Channel structure management, inventory management, order management, transportation management

3PL Trends

Continued expansion of 3PL and global reach, broadening of services offered

Role of Transportation in SCM

Critical links between organizations in a supply chain network, permitting goods to flow between their facilities, influences supply chain design, strategy development, and total cost management

Supply Chain Network Design Process

Define the process, perform a supply chain audit, examine network alternatives, conduct a facility location analysis, make decisions regarding network and facility location, develop an implementation plan

Logistics Operations Responsiveness (LOR)

Examines how well seller can respond to buyer's need. Response can take 2 forms: customization of service offerings and quick response to sudden changes in buyer's demand pattern

Customer Wait Time (CWT)

Includes order cycle time and maintenance, often overlooked

Key Distribution Challenges

Labor availability issues, demand variation, increasing customer requirements, distribution planning and strategy

LIFO

Last in first out inventory model

Logistics Objective

Minimize total costs, given customer service objective. Total costs = transportation + warehousing + order processing/information + lot quantity + inventory carrying

Carrier Selection

Modal selection, carrier selection based on freight rates, geographic coverage, and product protection

Pipelines

Most economical form of transport with the lowest cost per ton of any mode

Motor Carriers (Semi)

Most widely used mode of transportation in the US domestic supply chain, good for shipping to adjacent countries

Intermodal

Multiple modes of transportation

Network Design Model

Objective and need for decision support tools, optimization models, simulation models, heuristic models

Product service package

Option 1: Offer the same thing for each customer; Option 2: Vary the service offering for each customer segment

Distribution Execution

Order picking best practices, support functions (inventory control, safety/maintenance/sanitation, security, performance analysis, information technology), distribution metrics

Phase 2: Execute the Order

Order receipt (electronic vs manual), order fulfillment (inventory policy, number/location of warehouses), order shipments (transport mode choice)

Phase 1: Influence and Order

Organization attempts to change the manner by which its customers place orders

Current Trends Governing Site Selection

Positioning of inventory, greater use of delivery to customer from manufacturer, growing use of cross-docking facilities, emphasis on access to major airports/ocean ports, use of 3rd party logistics

Logistics System Information (LSI)

Pretransaction information for planning, transaction information for execution, posttransaction information for evaluation

Railroads

Primarily used for long distance movement of low value goods

Distribution Facility Functionality

Primary Functions: Accumulation, Sortation, Allocation, Assortment; Value-Adding Roles: Assembly, Kitting, Product Postponement, Sequencing

Decision to Outsource Transportation

Private fleet vs external service providers (3PL)

Performance Categories

Process Measures: time, quality, cost, other/supporting measures; Finance Connection: inventory management and capital, lead times and inventory cost, order processing time and order to cash cycle, profit and return on assets

Characteristics of Good Performance Measures

Quantitative, easy to understand, encourages appropriate behavior, visible, defined and mutually understood, encompasses outputs and inputs, measures only what is important, multidimensional, uses economies of effort, facilitates trust

OTC (Order to Cash)

Refers to outbound to customer, time it takes for order to come in until money hits the bank account, from supplier's perspective

Places to fail for service orders

Refused orders, rectified orders, orders rehandled

Successful Development of a Supply Chain Metrics Program

Team effort, involves customers and suppliers, tiered structure, metric owners, top management support

Elements of Customer Service

Time, dependability, communications, convenience

Range of relationship types

Transactional, Collaborative, Strategic

Types of 3PL Providers

Transportation based, contract based, freight forwarding based, financial based, information based, corporate subsidiaries based

5 Modes of Transportation

Truck, Rail, Water, Air, Pipeline