4.6 Order Fulfillment
Figure 4.5 extension the structure of the process of implementation of the orders (Order Fulfillment Process) and of the rate delivery
(Shipment Installments).
Inventory coverage (cover of the warehouse) is the number of weeks during which the company can deliver with the given
rate current its warehouse:
- Inventory Coverage = Inventory/Shipment Installments (4.1)
- Inventory = INTEGRAL (Production Installments - Shipment Installments, Inventoryt0) (4.2)
Indicate that the level of warehouse is increased from the diminished rate production and from the shipment rate.
Shipment Installments normally equals Desired Shipment Installments (wished shipment rate) but if the warehouse is inadequate
some of the articles that the customers demand will go stock outside, reducing the Order Fulfillment Ratio (the rate
orders fulfilled regarding the wished rate implementation):
- Shipment Rate=Desired Shipment Rate*Order Fulfillment Ratio (4.3)
Order Fulfillment Ratio is function of the relationship between the Maximum shipment rate (Maximum Shipment Installments) and the wished shipment rate (Desired Shipment Installments); the values are specify to you from the table for Order Fulfillment (Table for Order Fulfillment):
(4.4)
“Maximum Shipment Installments” depends on the warehouse current of the company and on “Minimum Order Fulfillment Time” (the minimal time of implementation of the order):
Maximum Shipment Installments = Inventory/Minimum Order Fulfillment Time (4.5)
Figure 4.5- Structure of Order fulfillment
“Minimum Order Fulfillment Time” is determined from the process of implementation of the orders of the company (Order fulfillment process),
the complexity of the product and the vicinity of the customers to the center of distribution of the company.
It represents the demanded minimal time for dealing and delivering an order.
In this simple model not there are withdraws to you (backlog) of orders inadempiuti and all the orders not immediately covered
are lost in the moment in which the customers suppliers alternated to you try. From here in then
Desired Shipment Installments = Customer Order Installments
Where Customer Order Installments is one variable exogenous from the point of view of the warehouse and the subsystem Order Fulfillment.
One simpler formulation for shipments (shipments) is:
Shipment installments =MIN (Desired Shipment Installments, Maximum Shipment Installments) (4.6)
This last equation says that the company delivery which can deliver or what it wants to deliver any is smallest between desired and maximum shipment installments.
When Desired Shipment Installments equals Maximum Shipment Installments, some products will go supply outside and therefore the rate implementation of the orders (Order Fulfillment Ratio) will be smaller of 1. Figure 4.6 extension the typical shape for Order Fulfillment Ratio.
Figure 4.5- Order Fulfillment like function of inventory
In order to interpret the figure it must notice the two lines of reference.
Arranging equations (4.3) and (4.4)
- SR=DSR*OFR=DSR*f (MSR/DSR)
Where SR, DSR, and MSR are shipment, desired shipment, and maximum shipment respective and OFR is Order Fulfillment Ratio.
The horizontal line Order Fulfillment Ratio =1 represents the case in which shipment they always equal desired shipments.
If SR is found along the line to 45° passing through the origin it means that SR=MSR: shipment it equals the maximum level
that the warehouse can support.
It puts into effect them relation must be narrow to the region to right and under the two lines of reference.
When the company has a wide warehouse so that maximum shipment installments is the much largest one than desired shipment installments, therefore
the possibility that some product will be outside supply is negligible and order fulfillment ratio is 1 - shipment it equals desired
shipment.
The case in which order fulfillment ratio it intersects the line of 45° when MSR< DSR and 1 when MSR=DSR corresponds to
formulation SR=MIN (DSR, MSR) and represents the situation in which the question it is perfectly expectable and calculable.
If not the company is an adapted warehouse it can decide not to fulfill under orders of small customers.
This strategy reduces order fulfillment ratio under the reference line, in the region in which MSR< DSR.