The Infosys global supply chain management blog enables leaner supply chains through process and IT related interventions. Discuss the latest trends and solutions across the supply chain management landscape.

« Fulfillment Options - Recent Trends | Main | The Real Headline for the 2011 Holiday Buying Season- Need for Balancing Retailer Online and Fulfillment Process Investments »

Scheduling 'Order Release Process' Intelligently

A standard retail sales order goes through four main processes during its fulfillment cycle. They are order sourcing, order scheduling, order release and finally order shipping & delivery. Order sourcing process finds the optimal node from which order can be sourced; whereas scheduling determines when the order can be shipped or delivered. Order release process releases the order to warehouse management application in order to allow its processing in warehouse. In other words, order release process transfers order control from order management system to warehouse management system. Hence, timing the release process astutely, is extremely important. A mistimed release process can lead to undesirable outcomes and may prevent realization full OMS implementation benefits. Today, I would like to share one such experience with you...

Sometime back I was involved in implementation of Order Management system for one of the retailers. The retailer delivers customer orders using own fleet of vehicles. Hence, in addition to four order fulfillment processes discussed earlier, client has one more key process of route optimization to be performed on order. Route optimization process determines the sequence in which orders are delivered to customer, so as to reduce overall cost of transportation. This process was performed after order scheduling and before order release process. Since, customer orders were route optimized prior to their release, two unique problems were encountered.

The first problem was that of underutilized capacity. During the release process, if sufficient inventory is not available, order used to get backordered. The capacity booking corresponding to such backordered orders remained unutilized since, route (of the load which contains backordered order) had already been optimized. The second problem was around Brocken Promise Management. After route optimization, call center executive used call customer to communicate delivery date of order. If customer order happens to backorder after release transaction, call center executive had to call customer again to inform that order would not be delivered on delivery date communicated earlier. This, Broken Promise, had to be managed by giving goodwill discount resulting in loss to retailer. Both the problems were resolved by simply moving order release process ahead of route optimization process.

However, it may not always be so easy to reschedule release process. The order release process should be timed strategically considering various factors like, warehouse processing time, delivery date, fulfillment method, and inventory considerations.

Depending on business policies, retailer may allow order placement only against on hand stock, on hand & future inventory or pre-ordering. If customer orders are taken only against on hand inventory, then it makes sense to release them as soon as they are scheduled. This allows WMS sufficient time to deliver the order within stipulated time. However, OMS should ensure that orders are validated for fraud before they are released to warehouse management system. Likewise, Next Day Delivery orders and Expedited Delivery orders should be released as soon as they are scheduled as they are mainly taken against physical on hand inventory.

Preorders should be released as soon as they are taken into the system subject to fraud check. Preorders are taken into the system without checking inventory. So, possibility of order getting back ordered is more. When preorders are released as soon as they are taken into the system, it gives supply team more time to arrange inventory for backordered orders. Similarly drop-ship orders also can be releases to third part vendor as soon as they are taken into the system, to allow supplier sufficient time to delivery customer order.

Timing order release process is probably most difficult, when retailer is taking customer order against both on hand & future inventory. Since, orders are taken against future inventory, they cannot be released as soon as they are scheduled or taken. One possible approach is to consider delivery date, warehouse processing time and time required to deliver order from warehouse, while slotting release process. An order can be released to WMS x days prior to its delivery date. The value of x would depend on warehouse processing time and time required to deliver order from warehouse. This would ensure that orders are not released before future stock turns into on hand inventory, thus avoiding incorrect backordering.

Do you think of any other factors to be taken into account before scheduling order release process?

Comments

One of the criteria that can be used for scheduling is Margin Based Order Order scheduling. As part of the scheduling process Retailer can source from Its own fulfillment point only if it is profitable. i.e Source from Retailer’s fulfillment point first if it is within profitability criteria, where Profitability = Retail price - Delivered cost)
And Delivered Cost = product cost + handling cost + transportation cost + return allowance + X .
All costs are at the item-warehouse level. A comparison of the profitability with a pre-defined threshold will ensure that Retailer’s products are sold first until the margin drops below a pre-determined value set by Retailer’s, Otherwise source it from DD suppliers.

Post a comment

(If you haven't left a comment here before, you may need to be approved by the site owner before your comment will appear. Until then, it won't appear on the entry. Thanks for waiting.)

Please key in the two words you see in the box to validate your identity as an authentic user and reduce spam.

Subscribe to this blog's feed

Follow us on

Blogger Profiles

Infosys on Twitter