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Learning Objectives
Understand the role of order fulfillment and back-office operations in EC Describe the order fulfillment process Understand the concept of the supply chain, its importance and management Describe the problems of managing the supply chain and the use of innovative solutions
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Orders could not be met in time for the holidays so they gave out $100 coupons
Amazon.com had to ship orders for several products in several shipments instead of one raising the delivery cost
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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
Major Concepts
Order fulfillment: Deliver right order on time Front office operations:
Order taking Advertisement CRM
Figure 15-2
Order Fulfillment and Logistics Systems
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Benefits 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)
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More 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
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Sharing information could save $30 Billion/year just in the grocery industry
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Preliminary 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 People s relationships are a must
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Areas 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
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Using Inventories
Insurance against stock out Can be in several places Can be excessive Can be insufficient Example: Littlewoods stores; UK
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Using Inventories
Using inventories to solve supply chain shortages:
Building inventories as insurance against uncertainty products 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
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Proper 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
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Figure 15-4
Proposed Order Fulfillment for Groceryworks
Source: Steinert-Threlkeld (January 31, 2000). Originally published in Interactive Week, www.xplane.com
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Automated Warehouses
B2C order fulfillment send 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
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Handling 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
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Calculators for computing shipping fees Help customers manage electronic supply chains
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Downloadable tools
Proof of delivery Optimal routing features
Internal: all internal processes that add value, conversion to find products
Production scheduling Costing Inventory control
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Software Support
SCM Activities
Upstream activities
Type of Software
Supplier management Ordering systems Order tracking systems Inventory management Purchasing order management Budgeting, cost control Human resource information Salesperson productivity tools Online telemarketing Ad management etc.
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Downstream activities
Integration-Benefits
Automation of segments useful, but integration brings:
Tangible benefits
Inventory reduction Personnel reduction Productivity improvement Order management improvement Financial cycle improvements
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Intangible benefits
Information visibility New/improved processes Customer responsiveness Standardization Flexibility Globalization Business performance
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Need to streamline operations New business models New organizational relationships (virtual companies) Examples Warner Lambert and Wal-Mart (Box 15.6)
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Areas 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
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ERP 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
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ERP Implementation
Need to interface with EC order taking system Manages all routine transactions in the enterprise Recently extended to suppliers and customers
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SCM software: Production Planning, Manpower utilization, Profitability models, market analysis Integration of SCM capabilities Other added functionalities: CRM, KM
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Managerial 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 backoffice operations
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