Order Management: Deeply rooted in Supply Chain
In this blog I would try to put forth my understanding on the point as to why Distributed Order management is deeply rooted within the supply chain function and why to me it turns out to be a founding member of the SCM club.My thought process strated here. This is an attempt to draw parallels or bring out the core SCM areas Order Management addresses and also talk about few classic supply chain concepts from which the OMS way of problem solving has emanated from. I believe manufacturing is the genesis of all Supply Chains so excuse me if my points/cues are skewed and towards planning in Manufacturing.
This is how I understood, by taking a baby step approach:-
1. "Distributed" in DOM typically refers to the situation where a trading partner (nominal or dominant) eg a retailer or a supplier is offering products to be served to many several demand sources. The word also refers to distributed nature of enterprises and their relationships ( inter and intra) that collaborate to execute demand driven supply chain planning and fulfillment.
If I try to be the author of "The brief history of DOM" and try to corroborate the dominant SCM gene, the primary motive for effective Order Management in the manufacturing world would be to Integrate and coordinate "distributed" production and distribution facilities. In other worlds too the understanding is pretty much the same. Cut it short- the pan organizational view and the need to model the same is something which needs to be clearly drawn at the very outset.
2. All SCM stories and relationships start with SKUs and Bills of material. Pretty much the way BOM is the necessary input for Materials Requirement Planning, solving the Order Management puzzle needs getting the basics right in terms of item definitions, carrying out SKU rationalization between different demand channels, and maybe apply a Pareto Principle/ABC classification of SKUs based on defined criteria (eg velocity) to enable the desired performance on to the front end of the supply chain. Check this to know more. Depending on the degree of penetration (more commonly understood by classification as ATO, CTO, MTO, and MTS) parent and child relationships, components need to be bundled and knitted together. This has further implications the way it would be sourced, packed and shipped maybe delivered with a white glove service till the last mile.
3. Talking on Inventory Implications on Order Promising for manufacturing, this requires detailed/real time (or near real time) visibility into different inventory buckets for e.g. available inventory (be it safety stock/cycle stock in batched processes), pipeline inventory (in transit/aka scheduled receipts) to name a few. Forecasts are also considered here as a valid proxy for frozen orders which are actually consumed when real orders flow in, as essentially in Manufacturing we are talking about planning. In executing real orders flowing in and Managing them forecasts ultimately is seen dictating the Purchase orders and Transfer orders incoming (which is truly representative of the stock transfers) On hand inventory , In transit Inventory , inventory staged in for quality checks, etc are the ones that define fundamental "Supplies" in Order Management. These "supplies" within the frame work of predefined rules are netted against the demands that originate from diverse and often "distributed" sources.DOM plays the key role of matching the most suitable types on demand and supplies on the list.
4. To take ATP calculations to greater detail, the time phased calculations take into account the production lead times, procurement lead times,capacities along with the master production schedule. There is often a need to factor in any back log that could have crept in to the order book .These are measures/checks to finally serve the purpose of making dependable and credible promises to customers. Taking a cue from this,are the calculations done in the retail world too. One has to factor in similar parameters defining the lead times for individual SKUs, define the horizon for looking up demand and supplies both forward and backward, and back orders if applicable. Once again pointing the fact that OMS's membership is not going anywhere and neither is it newfound.
5. Taking about credible promises, one important element of promise is time. As the promise sets expectations in terms of quantity, form and time each element in this triad is paramount. Scheduling the delivery, considering the better, faster cheaper options is another line that Order promising needs to tread. This is where the role of efficient rule based sourcing, scheduling and finally allocating goes a long way in the quest for that elusive perfect order. Whether it is allocating in way that is FCFS or be it following the greedy algorithm for consuming quantities, or whether giving preference to a particular fulfillment channel, proximity, cost to serve, all these are concepts which have caught the imagination and cost countless hours for academicians and practitioners alike. These problems gather multiple facets as the Distributed nature of the business flourishes/multiplies with time.
6. The contrast however is the very nature of the sphere or the context. The examples or the so called cues are from the manufacturing planning context. To delve in to more detail taking the example of Material Requirements planning, forecasts are assumed to be orders which eventually will be consumed by the real orders. This is a major demand signal here. On the supply front master production schedule is considered as supply signal. This clearly comes within the demarcated line of planning. Where as in an e commerce enabled supply chain for example, Order management would mean dealing with orders in real-time forming the concrete demand signal and often satisfying them and promising against the most reliable source of supplies then and there. So an overwhelming majority would classify this as supply chain execution.
In my honest opinion, Order Management has a greater role. The future is about providing the unified brand experience for customers irrespective of the fact where the customer is (physically) or which channel he is using to communicate his intent to buy. We are also envisaging a tomorrow where a pure single channel player for example could exploit partnering with a player who has a stronger presence in terms of physical supply chain/access to channels (off course taking into consideration other critical factors). In my understanding, this is invariably the lynchpin that unites the execution and planning functions across the distributed supply chain. It enables transition from merely estimating to planning and then planning to execution like the critical member of the 400m relay who often helps preempt a win or a loss..