Join Steven Brown for an in-depth discussion in this video Understanding order fulfillment, part of Fundamentals of Logistics.
- View Offline
- What happens when you buy something? When you place an order online, for example, have you ever wondered what has to take place to get that order delivered to you? Well, actually there's a specific series of activities that must take place to make that happen. Let's go through those steps. The first thing that happens is the seller checks his inventory to make sure he has enough of this item in stock to fill your order. If not, the order is cancelled. Or perhaps the seller might ask if you want to place the order on hold, called a backorder, until he has enough inventory in stock.
If your order can be filled, of course, the seller is not going to ask for a payment. So far, so good. Now the seller will process your order along with any paperwork that may be required. Normally, this means an invoice, an order request, and shipping documents will be prepared and sent to the warehouse. Next, a warehouse worker will find the item your ordered and package it for shipment. Then, your order is placed on a truck to begin the delivery process. Lastly, this truck or some other truck arrives at your door with your order.
Pretty straightforward process, don't you think? And this straightforward process applies just as well to filling your business orders no matter how complex your orders may be. Whether you are buying office supplies, a new machine for your factory, or packing material for your distribution center, these processes are the same. One key difference, however, might be in the payment process. In business-to-business transactions, most often you are extended credit for the value of the order, and you make a payment sometime after delivery.
Your order impacts many business functions, not just in your company, but also in the seller's company and the manufacturer's company. Accounting, warehouse, transportation, production, and finance people, are all impacted along the way. Although the processes may seem simple, there are also plenty of opportunities for problems. That is why business owners and managers should take special care to help make the order fulfillment process run as smoothly as possible. After all, it's very important to you that your orders arrive on time, in the correct amount and at the right location.
There are a few things you can do in your business that can help make things go smoothly. First and foremost, order what you need. Now, you're probably thinking, well, that's silly. Of course I will order what I need. As a business manager, you know that for some items you need small batches delivered just in time, and for other items you want to order a larger volume so that you can save on shipping costs. You have to make the decisions that are right for your company on a day-to-day basis, because of course, things change.
Secondly, know the seller. Know your suppliers and their capabilities. Plan ahead and place your orders at the right time based on those capabilities and the capabilities of the delivery system. Rush orders are much more expensive to fill and cause many more headaches along the way. If you do have to place a rush order, recognize that it may have a slightly different order fulfillment process, and you must take the time to understand what you can expect from that process. This way, you can amend your schedule accordingly.
Next, you should study alternatives to your current suppliers. International orders are much more complex due to customs requirements, additional distances involved, and transportation delays. You should constantly balance this trade off with the low cost savings you gain. Finally, consider the environment. Smaller orders delivered throughout the week put more trucks on the road and contribute more to pollution, for example. Larger orders certainly can increase your inventory holding costs, but do consider the trade off.
So, what about your business? Do you have good relationships with your suppliers? What about your buyers? From my experience, these relationships play a huge part in your overall success. What about rush orders? Do you plan ahead so that you can hold your costs down? If you're not considering all of these steps, don't be too worried. A lot of business could use help in these areas. Considering these factors is a key to becoming a logistics professional.
These lessons will help you understand the importance of logistics and help your company prepare for efficient delivery, distribution, and inventory. Plus, get insights on the latest logistics trends.
Lynda.com is a PMI Registered Education Provider. This course qualifies for professional development units (PDUs). To view the activity and PDU details for this course, click here.
The PMI Registered Education Provider logo is a registered mark of the Project Management Institute, Inc.
- Understanding order fulfillment
- Defining logistics
- Comparing inbound, outbound, and reverse logistics
- Key decisions: delivery, distribution, and inventory
- Coordinating the supply chain
- Trends in logistics management