Order fulfillment

Order fulfillment (in British English order fulfilment) is in the most general sense the complete process from point of sales inquiry to delivery of a product to the customer. Sometimes Order fulfillment is used to describe the more narrow act of distribution or the logistics function, however, in the broader sense it refers to the way firms respond to customer orders.

The first research towards defining order fulfillment strategies was published by Hans Wortmann, and was continued by Hal Mather in his discussion of the P:D ratio, whereby P is defined as the production lead-time, i.e. how long it takes to manufacture a product, and D is the demand lead-time. D can be viewed as:

1.The lead time quoted by the firm to the customer

2.The lead time the customer wishes it was

3.The competitive lead time

Based on comparing P and D, a firm has several basic strategic order fulfillment options:

In the broader sense, the possible processes in a logistic-production system are:

The order fulfillment strategy also determines the de-coupling point in the supply chain, which describes the point in the system where the "push" (or forecast-driven) and "pull" (or demand-driven see Demand chain management) elements of the supply chain meet. The decoupling point always is an inventory buffer that is needed to cater for the discrepancy between the sales forecast and the actual demand (i.e. the forecast error). Typically, the higher the P:D ratio, the more the firm relies on forecasts and inventories. Hal Mather suggests three ways to tackle this "planning dilemma":

It has become increasing necessary to move the de-coupling point in the supply chain to minimize the dependence on forecast and to maximize the reactionary or demand-driven supply chain elements. This initiative in the distribution elements of the supply chain corresponds to the Just-in-time initiatives pioneered by Toyota.

The order fulfillment strategy has also strong implications on how firms customize their products and deal with product variety. Strategies that can be used to mitigate the impact of product variety include modularity, option bundling, late configuration, and build to order (BTO) strategies—all of which are generally referred as mass customization strategies. The decoupling point can place a much stronger emphasis on supply chain based on the process as well as nature of supply chain configurations.

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Wikipedia