Order fulfillment involves processing and distributing customer orders from a supply chain. Strategies include make-to-stock, assemble-to-order, build-to-order, and engineer-to-order, each with its own advantages and disadvantages. Make-to-stock is the most common strategy, while engineer-to-order is the least common.
Order fulfillment can involve a variety of wholesale and retail manufacturing strategies. The basics of order fulfillment include processing and distributing customer orders from a supply chain. In other words, a customer places an order for a product or service with a supplier. When the supplier delivers the product or service, this is called order fulfillment.
From a manufacturing and industry perspective, order fulfillment strategies can include assemble-to-order, build-to-order, engineer-to-order, and manufacture-to-order strategies. Each of these offers its own advantages and disadvantages. The individual strategies all carry a central theme of how a supplier delivers a product to a customer.
The most common order fulfillment strategy is make-to-stock, where the manufacturer determines an estimated number of units to make as stock items. This estimate is calculated using the economic laws of supply and demand, sometimes called the P:D ratio, to calculate consumer demand for a product. The manufacturer then creates these units in stock, which are available for immediate shipment. The advantage of this strategy is the ready availability of units for sale. The downside is the possibility of a public interest miscalculation, which can leave the manufacturer with a warehouse full of unsold products.
Assemble-to-order strategies are formulated to help eliminate the possibility of large quantities of unsold inventory. Unlike make-to-stock products, the components of these products are not assembled into a finished product until an order is placed. Using this strategy, the manufacturer has the advantage of the flexibility to use the components for other products and lower labor in unsold products. The strategy offers a distinct disadvantage, however, in that it can increase product lead times and can also lead to the possibility of excess parts inventory.
Some manufacturers choose a build-to-order strategy. It is similar to assemble-to-order, as the product isn’t created until orders are placed. Unlike the assemble-to-order strategy, however, components are also not manufactured prior to order entry. This can result in much slower product delivery times and backorders, a term used to describe a product that is not available at the time of ordering. The assemble-to-order strategy offers advantages in that no excess inventory is kept on hand and the only investment before the sale is in the actual engineering process and manufacturing equipment purchases.
Engineer-to-order strategies are the least common in order fulfillment. This method is usually reserved for manufacturers who supply bespoke prototype products. Engineer-to-order products are often not even designed in advance of the customer’s order. This order fulfillment method offers the longest product lead time and is generally not a multi-sell scheme. The redeeming factor of this strategy is that there is no excess inventory or investment in products prior to order entry.
Protect your devices with Threat Protection by NordVPN
