What happens if I don’t provide my customers with a 100% service level?
Staying ahead of customer demand and delivering orders is a huge challenge for most companies. If you don't have enough inventory in stock you can lose the sale, but overstocking presents even more costly problems. A very effective way to address this is issue if via the use of an order management system.
Given the diverse geography of South African many companies are forced to set up regional branches to ensure that they meet their service level promise to their customers. In theory this is fine as you should have the item available as and when a customer wants it, in practice it places huge amounts of pressure on the supply chain from a fulfilment, transport and inventory carrying perspective.
Most wholesale/industrial and retail companies that we have interacted with are forced to supply their branches/ stores almost daily in uneconomic order quantities either because the branch doesn't have the storage capacity to take full pallet or full case quantities or their ordering patterns are representative of the small infrequent order profiles of their customers.
A very effective way to address this is issue if via the use of an order management system.
During or after the process of order taking, an order management system determines the best way to source the inventory based on a number of factors:
- the overall makeup of the supply chain
- fulfillment capabilities of the company and its trading partners
- customer order requirements
- customer service level requirements
- cost & profit
Determining the ideal inventory source often determines how quickly the order can be shipped. That, in turn, often influences what kind of overall experience the customer has with your brand. What if when your customer places a call with your telesales representative they could choose their delivery date based SKU price (which more than likely includes all distribution costs)
Here are some factors that can play a role in determining the right source:
- Inventory Proximity: Selecting inventory in a nearby DC, branch or store can reduce shipping costs to the requesting store or customer
- Labour Capacity to Fulfill the Order: The nearest store or branch may have the item but not enough labour to fill the order, requiring inventory to ship from another local source.
- Inventory Position in Source Locations: Sourcing inventory from a constrained location creates out-of-stock problems. Instead, inventory should be pulled from a more stock-rich Location.
- Order Priority: DC inventory that's allocated for future orders can be reallocated to fulfill a current customer's order to save the sale.
- Order Contents: When customers order several items, multiple locations must be evaluated for fulfillment costs and shipping times.
Marrying the 'Best' Source of Inventory with Current Demand.
Considering the number of possible inventory sources and factors influencing fulfillment, companies should consider a process that will:
- Determine the ideal inventory source
- Provide the customer with a delivery time frame and cost
- Signal the source location to fulfill the order
- Send an order to the DC to pick, pack and ship the merchandise
- Create a transfer request for the item to another store or branch
- Build out economic order quantities
Bottom Line: It's all about saving the sale whilst meeting your customer service level requirements and improving your profitability.
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