An Effective Order Management process in place provides a superior customer service; process and technology improvements enhance performance. Five key performance areas:
- Define - Understand what the customer requires.
- Commit - Make the promise to deliver.
- Produce - Manufacture or acquire the product.
- Deliver - Get the product to the customer.
- Respond - Provide information throughout the order cycle.
Because of their high degree of visibility to the customer - from the time that a customer orders a product until the time that the product is delivered - a company must be successful in each of these five key performance areas.
How does a company enable success in each of these five performance areas?
The implementation of process enablers and technology enablers, support effective order management:
- Ability to realistically promise to deliver according to the customer's requirements.
- Capabilities for meeting promise commitments.
- Infrastructure for maintaining a low cost structure while fulfilling orders.
- Aligning inventory with customer needs.
Technology enablers that support the processes underlying effective order management include access to accurate and reliable information in real time, responsive analytical and planning tools, and integrated order-management and execution systems, that allow close coordination and integration of activities across the entire Supply Chain.
In general, information tends to flow one after another through the Supply Chain, in ways that are slow and inappropriate for effective decision-making. One solution to this problem is to implement real-time systems and data exchanges that enable trading partners to share information and provide visibility throughout the Supply Chain. Accuracy of promises to customers can improve significantly.
Events that interfere with promise commitments typically manifest themselves in two forms:
- Missing the delivery date. One way to address this problem is providing a more realistic promise in the first place. Having systems and processes that provide a more complete understanding of capabilities and constraints throughout the Supply Chain, allows for more accurate promises that reduce delivery errors.
- Missing product specifications. Errors in order fulfilment are often caused by inaccurate or incomplete information. Ensure that products are configured properly during the sales process, providing promises only for products that can be supplied in correct configurations, and provide access to complete and accurate product configuration information for planning, scheduling and production processes.
Other considerations are;
Maintaining a low cost structure. The manufacturer in charged with executing an order should maintain a competitive cost structure. With order aggregation, manufacturers accumulate similar orders until some economies of scale are achieved, and then the accumulated orders are produced concurrently. With lean manufacturing, manufacturers improve their production process and reduce changeover time, resulting in a lower overall cost structure. Technology enablers exist to support both techniques.
Aligning inventory with customer needs - Companies that operate in an industry or business environment that requires that they produce or procure products before customers have explicitly expressed their preferences and demands, have to forecast demand and produce or procure to support that forecast. Mismatches between forecast and actual demand results in excess costs attributable to unsold products or lost sales opportunities.
One of the keys to improving the balance between inventory and customer-service levels, is reducing forecast error by improving the forecast methodology and/or reducing lead times; the average forecast error is reduced, manufacturers can delay commitments to specific product quantity and/or configuration until they have more or higher quality information regarding true customer demands.
An often overlooked but effective method for reducing forecast error is to postpone product commitment until later in the production process. This added time buffer allows companies to learn more about true customer demand, which enables them to reduce forecast error. Companies can leverage process and technology enablers to improve their ability to meet customer requirements and improve customer satisfaction.
Conclusions: By implementing process and technology improvements, companies can more precisely define, commit, produce, deliver, and respond to customer needs and dramatically improve overall customer service and value, resulting in a lower cost structure.
Dave Food