The North Carolina State University Poole College of Management Supply Chain Resource Cooperative offers the following definition for order management:
Order management involves the seamless integration of orders from multiple channels with inventory databases, data collection, order processing including credit card verification, fulfillment systems and returns across the entire fulfillment network. For proper execution the process involves real-time visibility into the entire order lifecycle starting from the placement of order and ensuring that orders (SKUs) are not lost, delayed, or corrupted during the fulfillment process. The system may also comply with and support parcel carriers and provide sophisticated, centralized freight management and tracking/tracing capabilities. Clients, Customer service representatives account managers and suppliers will thus have the ability to track real-time inventory levels for each SKU and inquire about order and shipment status via the web – anytime, anywhere.
Let’s consider an analogy. The fulfillment of the demand for fuel made by your car’s engine involves a “fulfillment network.” That fulfillment network includes you—at the tail end—assuring that you have sufficient inventories of fuel in your fuel tank to satisfy the demand.
Also involved in the “fulfillment network” are your local gas stations, bulk fuel depots (perhaps), regional refineries, fuel pipeline and long-distance transport companies, and even the companies that extract the crude oil and explore for underground reserves.
Given this analogy, let’s rewrite the opening sentence of this definition in concrete terms:
Order management for the vehicle owner [to keep it properly supplied] involves the seamless integration of orders from multiple channels [e.g., wife and children who may also make demands for fuel by using the vehicle] with inventory databases [i.e., the fuel gauge on the vehicle], data collection [e.g., keeping track of fuel purchases and mileage of the vehicle], order processing including credit card verification, fulfillment systems [e.g., the gas stations’ purchasing and replenishment operations]… across the entire fulfillment network [read: all the way back to the crude oil producers].
This is clearly nonsense!
What I really need to know
- How well am I managing my inventory buffer (the fuel level in my tank) in comparison with available supplies (including lead times) and variations in demand?
- How well does my supplier do at managing his or her inventory buffer in light of available supplies and variability in demand?
For most American drivers, the second question is (with very rare exceptions) one we rarely worry about. We expect to be able to go to the local gas station and fill our buffer (fuel tank) on demand.
For question number one, we use our fuel gauge to tell us how well our inventory buffer is coping with variability in supplies and demand. We know this at a glance and we use simple metrics (i.e., full tank, half-a-tank, and so forth).
So, take a look at this last figure.
Beginning with my position in the supply chain, I really need to know how well my buffers (stock, time and / or capacity) are performing relative to changes in supply and demand.
If I have concerns about upstream or downstream performance in the supply chain, having my trading partners share information with me about the performance of their buffers can help me take appropriate actions that will protect FLOW across the entire supply chain.
I do NOT need…
What I do not need is all of the complexity that would be attendant with “the seamless integration of orders from multiple channels with inventory databases, data collection, order processing including credit card verification, fulfillment systems and returns across the entire fulfillment network.”
That is overkill! It would be costly and would probably give me no more relevant information that knowing how the neighboring buffers are doing in support of FLOW.
Invest in your supply chain where it supports the flow of relevant information, not a flood of irrelevant data.
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