Order Fulfillment And Forward

MD850: E-Service OperationsMD850: E-Service Operations

Order Fulfillment and Forward Supply Chain Processes

AgendaAgenda

Background Order Fulfillment in e-Services Supply Chains

Supply Chain Components Supply Chain Problems Supply Chain Design Extending SCM Concepts to E-Services Supply Chain Modeling & Evaluation Supply Chain Technology

SCM Perspective on Li & Fung Case

BackgroundBackground

Competition is changing Old: “Firm vs. Firm” New: “Supply Chain vs. Supply Chain”


Supply Chain Concept of a “supply chain” is relatively new Prior to 1996, very few management or engineering

schools had courses on supply chain management (SCM) Previous “stumbling blocks” that impeded SC integration

high transaction costs between partners poor information availability challenges of managing complex interfaces between

functional organizations


Scope of Supply Chain Topics Customer Facing & Internal

Customer Value and SCM Web-centric product design Forecasting and inventory management in B2C Order fulfillment and returns management in B2C


Scope of Supply Chain Topics Supplier Facing

Coordinated product design and supply chain design Integration of supply chain planning and procurement Logistics network configuration Order fulfillment and returns management in B2B Distribution strategies Strategic alliances Models for B2B exchanges Auctions & analysis of auction properties


Scope of Supply Chain Topics IT Related

Information technology for SCM Decision Support Systems (DSS) for SCM Web services: frameworks and technologies

Microsoft’s .NET technology Sun’s J2EE technology Open Source technologies

Order Fulfillment in e-ServicesOrder Fulfillment in e-Services


Goals of customer care applications are simple What do online shoppers want? (BCG)

Free delivery – 95% Free returns if I am unhappy with product – 91% Guaranteed delivery time – 75% Quicker delivery – 69% Site has a store located near me – 46%

“Proper fulfillment is whatever serves the customer best while preserving adequate profit margins to continue in business at a high level of customer satisfaction”


Designing and implementing customer care applications can be another matter Central problems

Enterprise information and customer information must be integrated into a unified whole

New kinds of customer behavioral information must be captured and processed

Customers and employees must share a common knowledge base All organizational functions must have access to a consistent

picture of the customer relationship


E-Fulfillment Processes (Bayles, 2001) Notification Process

Acknowledgement and confirmation Instantaneous after purchase

Information fulfillment of digital service-product attributes Low cost delivery of information Instant gratification for customer

Picking and Packing Delivery Reconciliation/settlement of credit card payment request Post-delivery activities that ensure customer satisfaction

Returns Exchanges


Fulfillment Recommendations (e-Service, Chap. 8) Build an order confirmation system into your service process to

ease customer worries Grant customers online access to production order process and

shipping data Build (or outsource) warehouse, fulfillment, and product

delivery chains that create as much customer contentment on the back end of your service process as on the front end

Focus on fast, efficient fulfillment Shipping charges …

Probably don’t want to make them free Perhaps free for …

Large purchase size above some dollar amount Loyal, high-value customers In-store pickup


Fulfillment Recommendations (e-Service, Chap. 8) Integrate online bill payment into the fulfillment process Return policies … make the return process as easy as the

process for buying Synchronize returns between digital and physical storefronts Supply on-the-spot return authorization numbers

Be careful with using purchase information for permission marketing

Where possible, employ online post-sale self-help Use post-transaction web surveys to gather customer feedback

and continually improve service performance


Fulfillment Tasks for e-Businesses GOAL: Achieve total end-to-end visibility throughout the

supply chain Must deal with international pricing/taxation and shipping issues

Pricing customized to location of customer Shipping agents to deal with tax issues Local fulfillment center

Provide online shipping tools Link web site to package carriers’ host systems

FedEx, UPS – online tracking tools with APIs USPS – eventually will have tracking tools

Integrate shipping, tracking and distribution systems with ERP systems

FedEx, UPS – systems with APIs for doing so


Fulfillment Outsourcing Potential benefits

Speed to market Deploy e-Service quickly No capital investment in fulfillment Level of service provided by outsourcer may be better than a

start-up’s fulfillment service Scalability

Higher when using an large fulfillment service Focus

On business competencies, not on shipping Lower costs

No need to hire shipping staff Focus on the customer Capitalize on efficiencies

Supply ChainsSupply Chains

Supply ChainsSupply ChainsWhat is a Supply Chain?What is a Supply Chain?

Porter’s “Value Chain”

Firm Infrastructure

Human Resources Management

Technology Development

Procurement

InboundLogistics Operations

OutboundLogistics

Marketing& Sales Service

ProfitMargin


Value Chain of Supplier Value Chain of Buyer


Value Chain of Buyer

Buyer’s Virtual Value Chain

Value Chain of Supplier

Supplier’s Virtual Value Chain

ProfitMargin

ProfitMargin

ProfitMargin

ProfitMargin

InformationFlow

InformationFlow

Supply Chain ComponentsSupply Chain Components

Supply Chain ComponentsSupply Chain ComponentsComponents of a Supply Chain?Components of a Supply Chain?

Value Chain of Buyer

Buyer’s Virtual Value Chain

Value Chain of Supplier

Supplier’s Virtual Value Chain

Digital Content Networks Digital Content Networks

Networks of Physical ObjectsNetworks of Service Providers

Networks of Physical ObjectsNetworks of Service Providers

Supply Chain ComponentsSupply Chain ComponentsComponents of a Supply Chain?Components of a Supply Chain?

Supply chain is a “network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services in the hands of the ultimate customer.” (Christopher, 1998)

Supply chain components Two or more legally separated organizations Material, information, and financial flows Firms producing objects Logistics service providers Ultimate customer

Supply Chain ProblemsSupply Chain Problems

Supply Chain ProblemsSupply Chain Problems

Supply Chain Problems Inventory

Work of the devil Holding costs Risk of obsolescense Quality problems hidden

The Bullwhip Effect

Retailer Distributor Wholesaler

Manufacturer

“The BullwhipEffect”

Supply Chain ProblemsSupply Chain ProblemsThe Bullwhip EffectThe Bullwhip Effect

A SmallDemand

ShiftLeads To

Huge Variation inOrders and Inventories

Huge Variation in On-Hand Inventory

and Manufacturing

Supply Chain ProblemsSupply Chain ProblemsHistorical Inventory ManagementHistorical Inventory Management

Inventories Independent demand

Multiple Period Demands Assume demand pattern. Forecast when you will stock out. At the appropriate time,

order some order quantity (or up to some quantity), so that with the amount you receive at a future date -- plus the buffer inventory (“safety stock”) -- you will have a small probability of stocking out

Single Period Demand -- “paperboy problem”; “fashion goods” Order to balance costs of “overage” against costs of “underage” -- giving maximum

profit A/B/C -- some inventories more important or costly than others

Monitor costly inventories closely Don’t monitor cheap inventories, just hold lots of buffer stock

Dependent demands MRP/MRP II ERP/Extended ERP

Supply Chain ProblemsSupply Chain ProblemsDrawbacks of Inventory MethodsDrawbacks of Inventory Methods

Inventories Independent demand

Multiple Period Demands, Single Period Demand, A/B/C Paper orders Misplaced products Inaccurate inventories Human errors Cycle Counting -- strategies to count everything in warehouse (e.g., 1/N of warehouse

at a time, over N periods); facilitates balancing the objectives of different inventory methods

Dependent demands MRP/MRP II/ERP/Extended ERP

Stacks of paper production schedules Paper order releases Change reports -- to previous schedules System nervousness -- when allowing updating of schedules

Supply Chain ProblemsSupply Chain ProblemsWhat “The Experts” Now SuggestWhat “The Experts” Now Suggest

Rocket Science Retailing (Fisher et al., HBR, July/Aug 2000)

Retailer objective: “right product, right place, right time, right price” Historically, the opposite has happened

most inventory planning is for long life-cycle products online and offline stockouts increasing markdowns supply chain lead times often are so long, that forecasts of demand only

confirm that the product will tank, and nothing can be done about it Rocket Science Retailing

“create a high-tech forecasting system supported by a flexible supply chain”


Rocket Science Retailing (Fisher et al., HBR, July/Aug 2000) Forecasting

Update forecasts based on early sales data Track and predict forecasting accuracy Get product testing right -- make it scientific Use a variety of forecasting approaches

Supply Chain Speed Work with supply chain partners Reserve production capacity; hold generic raw-material

inventories that can later be developed into finished product Troubleshoot production problems, design for easy

manufacturability Make decision making flexible; empower employees


Rocket Science Retailing (Fisher et al., HBR, July/Aug 2000) Inventories

Need to track stockouts UNFORTUNATELY, no commercial software available to track stockouts

Accurate, Available Data Most retailing data inaccurate and inaccessible to employees Store-level sales data usually incorrect

Why: (1) clerk scanning one item multiple times to ring up multiple slightly different items, (2) like-for-like returns, without scanning in return and exchange

Inventory counts usually off warehouse ships wrong item, supplier shorts, case-pack dimensions change without changing in inventory

system

Most companies don’t keep enough data kills their ability to forecast time-series of demand accurately aggregation of data kills knowledge at SKU level lack of SKU kills ability to customize supply chain and shipments


Manufacturing for Lean Retailing (Abernathy et al., HBR, Nov/Dec 2000)

Historical large order at beginning of period manufacturers treated SKUs within a product line all the same

Lean Retailing Manufacturers must replenish retailers stocks on an ongoing basis; tend to

accomplish by holding extra inventory; get stuck with inventory if styles change; risk of getting stuck increases with product proliferation

Solution Need to differentiate between SKUs -- think of product lines as portfolios of

distinct goods Need to rethink sourcing strategies, reallocating manufacturing across

off-shore sources (high volume, low-variance demands) close-to-market sources (low volume, high-variance demand)

Supply Chain ProblemsSupply Chain ProblemsIT to the RescueIT to the Rescue

“The Wearable Warehouse”, Business 2.0 VISION

“Turn the supply chain into the warehouse” reliable inventory numbers better order fulfillment security: reducing in-transit theft … (in turn, improving on-hand data) accurate tracking of goods

Humans (networked objects) provide services to the system Essentially automated Cycle Counting Wireless IS implements strategy for what item should be counted when

Distributed, heterogeneous objects [inventory containers] report what they contain and where they are, to update system information

Supply Chain DesignSupply Chain Design

Supply Chain DesignSupply Chain Design

Research in Supply Chain Design and Management Stretches back to 1940s/1950s Prior to 1990s, most SCM research was for “simple”

material flows and transportation Most complex: optimal policy for a single-product, single-stage,

capacitated SC with a stationary demand process

Simple multi-stage and/or multi-product supply chain models were computationally intractable

First mathematical modeling papers with computational results were published in 1991 Start of modern supply chain management research

Supply Chain DesignSupply Chain DesignConceptual ApproachesConceptual Approaches

Research in Supply Chain Design and Management Conceptual SCM Research

Porter’s Value Chain Model (1985) Fine’s Clockspeed (1998) Approach

Supply ChainsSupply ChainsConceptual FrameworksConceptual Frameworks

Clockspeed (Charles Fine, MIT) “Biologists study fruit flies because their fast rates of

evolution permit rapid learning that can then be applied to understanding the genetics of slower-clockspeed species -- like humans.”

Managers should study industrial equivalents of fruit flies Fast clockspeed industries

Internet services personal computers multimedia entertainment


Clockspeed (Charles Fine, MIT) “The ultimate core competency of an organization is

“supply chain design,” which I define as choosing what capabilities along the value chain to invest in and develop internally, and which to allocate for development by suppliers.”

“Fast-clockspeed” supply chain characteristics rapidly evolving world designing and redesigning firm’s chain of capabilities objective is a series of competitive advantages -- often quite

temporary


Clockspeed (Charles Fine, MIT) Computer-industry motivated principles about the design

and evolution of supply chains “Beware of Intel Inside”

IBM employed modular supply chain design (Intel, MS DOS) power in the chain, and financial rewards, had shifted upstream since most modern products are largely computer components and

electronics, they potentially fall prey to same forces Supply Chain Double Helix

oscillation of supply chain structure Three-Dimensional Concurrent Engineering

concurrent design of capabilities (product, process, supply chain)


Integral Product,Vertical Industry

Modular Product,

Horizontal IndustryNiche

Competitors

High-DimensionalComplexity

OrganizationalRigities

Pressure toDis-Integrate

TechnicalAdvances

Supplier MarketPower

ProprietarySystem

Profitability

Pressure toIntegrate

Supply ChainDouble Helix(Charles Fine, Clockspeed, 1998)


3-D C. E.:Supply ChainOverlapping

Responsibilities

PRODUCT PROCESS

SUPPLYCHAIN

PerformanceSpecifications

Technology,& Process Planning

Time, Space,& Availability

Recipe,Unit Process

Details,Strategy

ManufacturingSystem,Make/Buy

Product Architecture,& Make/Buy

(Charles Fine, Clockspeed, 1998)


3-D C. E.:Supply ChainConcurrency

Model

(Charles Fine, Clockspeed, 1998)

PRODUCT PROCESS SUPPLY CHAIN

DesignDetailed

PerformanceSpecific’s

and Functions

ArchitectureModular

vs.Integral

UnitProcessesTechnology

&Equipment

Manufact.SystemFunctional

Cellular

SupplyChain

Architect.Set of

Organizationsand

Allocationof Tasks

Logistics& Coord.

SystemAutonomous

vs.Integrated

Technology

Architecture

Focus


Clockspeed (Charles Fine, MIT) Prediction:

“supply chain design as a strategic precursor to supply chain management will only increase in the decade to come as industry clockspeeds continue to accelerate, and the half-lives of many capabilities in our existing supply chains need replacement and/or upgrading”

Extending Supply Chain Concepts Extending Supply Chain Concepts to e-Service Operationsto e-Service Operations


Service-ProductProcess Control

Static Dynamic

NicheNeed

BroadNeed

Static;Mechanization

Dynamic;Intelligence

UniqueItems

CommonItems

(Heim and Sinha, 2001) (Jaikumar, 1994)

?


(Schonberger, World Class Manufacturing: The Next Decade, 1996)

Past:Many suppliers/customer flowsFlow volumes small and sporadic

Coming:Stable, selective supply chain relationshipsFew suppliers/customer flows(Reliable suppliers, Loyal customers) Large, steady flow volumesGeographic proximity

Evolution


Supply Chain ControlStatic Dynamic

UniqueItems

(MD850, 2001)

CommonItems

Covisint

Li & Fung

Relationship Relationship +Speedy e-Service Communication

Relationship +Speedy e-Service Communication +Network Design, Control & Management


Business 2.0, Kalakota & Robinson, 2001 First Generation: Communities, Storefronts, and

RFP/RFQ Facilitators Second Generation: Virtual Distributors and Auction

Hubs Third Generation: Collaborative Trading Hubs

end-to-end management of their supply chains Industry Consortiums: Joint-Venture Procurement

Hubs Covisint -- automotives Orbitz.com -- airlines


Service-ProductProcess Control

Static Dynamic

NicheNeed

BroadNeed

Static;Mechanization

Dynamic;Intelligence

UniqueItems

CommonItems


UniqueItems

CommonItems

Goods Services

DigitalContent

e-Service

49 = 262,144possibledesign

positions

Guiding PrinciplesGuiding Principles

Supply ChainSupply ChainSome Guiding PrinciplesSome Guiding Principles

Align (a la 3-D Concurrent Engineering) Product Process Supply Chain

Reasonable Question: Yes, but how?

Conceptual Supply Chain Conceptual Supply Chain Modeling and EvaluationModeling and Evaluation

Supply ChainsSupply ChainsSupply Chain StructuresSupply Chain Structures

e-Fulfillment Step #1: Model Supply Chain Process Example: Furniture Industry

Manufacturing Ship to Retail Inventory at Retail

Repair Damage Local Shipping Assembly at Home

Traditional Furniture Supply Chain


Manufacturing Long Distance Shipping

Repair Damage

Local Shipping Assembly at Home

Pure e-Tailer Furniture Supply Chain

Manufacturing Ship to Warehouse Inventory at Warehouse

Repair Damage Local Shipping Assembly in Home

Pure e-Tailers with Warehouses Furniture Supply Chain


Manufacturing Long Distance Shipping

Repair Damage

Local Shipping Assembly at Home

Manufacturer Direct Furniture Supply Chain

Retailers On The Web Furniture Supply Chain

Manufacturing Ship to Retail Inventory at Retail

Repair Damage Local Shipping Assembly at Home

Supply ChainsSupply ChainsSupply Chain EvaluationSupply Chain Evaluation

e-Fulfillment Step #2: Back to the Basics (Cost, Quality,

Flexibility, Delivery) Analyze supply chain characteristics -- basic operations

strategies -- based on knowledge of product and process characteristics in that industry

3-D Concurrent Engineering Determine if there exists a dominant strategic position

compared to existing position(s) of incumbents … (Cdom, Qdom, Fdom, Ddom) “better than” (Cx, Qx, Fx, Dx) for all

design positions X

Supply ChainsSupply ChainsSupply Chain EvaluationSupply Chain Evaluation

e-Fulfillment Furniture Industry

TraditionalRetailer

Puree-Tailer

e-Tailerw/ Warehouse

Retaileron the Web

RelativeCost ofReturns

Cost ofInventory

Cost ofRepair

Cost ofShipping

Cost ofOrder

CaptureCost ofQuality

L M L L H L

H L H H M H

H M M M M M

L M L L H M

PossiblyBetter

PossiblyWorse

Supply Chain Management Supply Chain Management TechnologyTechnology

BackgroundBackgroundSupply Chain Management TechnologySupply Chain Management Technology

Procurement Production Distribution Sales

Strategic Network Planning

Master Planning

MaterialRequirements

Planning

ProductionPlanning

Scheduling

DistributionPlanning

TransportPlanning

DemandPlanning

DemandFulfillment & Available-to-

Promise

long-term

mid-term

short-term

AdvancedPlanningSystem(APS)

SoftwareModules

BackgroundBackgroundSupply Chain Management TechnologySupply Chain Management Technology

Procurement Production Distribution Sales

Strategic Network Planning

Master Planning

MaterialRequirements

Planning

ProductionPlanning

Scheduling

DistributionPlanning

TransportPlanning

DemandPlanning

DemandFulfillment & ATP

Forecast

Forecast

Configuration Simulation Results

PurchasingQuantities

Capacity BookingStock Levels

Capacity BookingDist’n Quant./Alloc.

Due Dates Due Dates Supply

Lot-Sizes

Lot Sizes

TranportationQuantity/Modes

Current Orders

Coordination and Data

Flows of APS Modules

Supply Chain e-ServicesSupply Chain e-ServicesTechnologyTechnology

SCM Technologies J2EE Technologies

SAP re-tooled all of its applications to support the J2EE protocol, in addition to its own ABAP technology standards

Many examples of using Java for enhanced SCM

.NET Technology Doesn’t support multiple platforms, which will be difficult

for integration of supply chain Supply chain vendors have been trying to convince

Microsoft to support J2EE, so they could easily integrate enterprise SCM to the desktop, but Microsoft has refused

Supply Chain e-ServicesSupply Chain e-ServicesTechnologyTechnology

SCM Technologies OpenAdaptor.org

open source supply chain integration system, made open-source on 1/30/2001

originally developed for financial services developed by investment bank Dresdner Kleinwort

Wasserstein (DrKW) already used in global integration 40 projects by DrKW “allows the rapid, simple and often code-free integration of

any system to any other system, enabling the complete supply chain, plus internal systems, to be integrated while allowing access to the web”

SCM Perspective on Li & Fung SCM Perspective on Li & Fung Case StudyCase Study

SCM PerspectiveSCM PerspectiveLi & FungLi & Fung

Sourcing Characteristics Seasons

Past: 2-4 Now: 6-7 … “fast clockspeed”?

Customers Past: potentially many, but very slow deals, as translation was the

service Now: 350 big customers, potentially 22,800 SMEs might be added

Suppliers Past: relatively few Now: 7500 suppliers, 26 countries … more than 1 million workers

engaged on their behalf (assuming 200/plant)



UniqueItems

CommonItems

1980s: Delivering Manufacturing Programs

Present Li & FungMargin = 6-8% softgoods,10-30% hardgoods, function of sourcing complexity

Breaking up Value ChainDispersed Manufacturing

Rational Kitting of Parts

1910 InterpreterMargin=15%

BrokerMargin=10, 5, then 3%

1970s: Regional Sourcing Agent


DesignEngineeringProductionPlanning

Softgoods

Textiles USA

Textiles ROW

Hardgoods

ToysAccessoriesFestive ItemsFurnishingsHandicraftsHomeTravel GoodsSporting Goods

Quality ControlTestingLogistics

Front End Back End

Raw Material and Component Sourcing Managing Production

The ProcessThe Goods and Related Services


Li & FungClient

Design Materials Sourcing Factories Quality Control Logistics

“Sense”

“Respond”

Communications


Li & FungClient


“OperationalSupportSystem”


Li & FungClient


Cost: $1

Retail Price $4Margin to Share = $3

SCM PerspectiveSCM PerspectiveCovisintCovisint

CovisintFord, GM, et al.

Design Materials SourcingTier 1 Only

FactoriesTier 1 Only

Quality Control LogisticsTier 1 Only

Retail Price $19,000Margin (Ford, GM) = $3,000

Cost: $16,000?

Transaction Fee %

SummarySummary

Conceptual supply chain frameworks Fine: Two supply chain “periods” within an industry Fine: 3-D engineering of product, process, supply-

chain Guiding principle: link up service-product,

service-process, service supply chain Very complex task 3 product components, 3 process components, 3

supply chain types … all must work together Many different supply chain models

SummarySummary

Evaluation can initially (subjectively) be done based on standard operations strategies/metrics Cost Quality Flexibility Delivery

Thorough analysis and management of supply chains will involve hefty mathematics/OR models

Date post:	03-Nov-2014
Category:	Business
Upload:	nirmala-last
View:	14 times
Download:	1 times