Chapter 4: The Fulfillment Process

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 After completing this chapter you will be able to:
► Describe the steps in the fulfillment process.
► Explain the role of different functional areas in
efficiently and effectively completing the fulfillment
process.
► Identify the key steps in the fulfillment process and
the data, document, and information flows associated
with it.
► Explain the financial impact of the steps in the
fulfillment process.
► Explain the role of enterprise systems in supporting
the fulfillment process
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 The previous chapter explained how SSB
purchases, or procures, the products it plans to sell.
This chapter will discuss the process through which
SSB sells these products to its customers. We call
this process the fulfillment process, also known as
the order-to-cash process.

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 the fulfillment process includes all
the steps necessary to take an order
from a customer; fill, pack, and
ship it; and receive payment for it.

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 Outline
A Basic Fulfillment Process
Role of Enterprise Systems in the Fulfillment Process
Exercise Using Simulated SAP

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 Two of the most common strategies are sell-from-stock
and configure-to-order.
Sell-from-stock involves fulfilling customer orders
directly from the company's inventory of finished
goods. Basically, customers are limited to purchasing
only those products that are in stock; they can't
request special or customized products.
Sell-from-stock is common among companies that sell
directly to the consumer via retail. These tend to be
high-volume, low-cost operations, such as grocery
stores, office supply stores, and fashion retailers.

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 In contrast, configure-to-order usually involves taking a
standard or base model a product and then configuring it to
meet the customer's special needs by adding either
special options or add-on parts. The configure-to-order
strategy is common in low-volume, high-cost industries
that require specialized products that must meet very
specific needs. For example, companies in the chemical
and the petroleum industries use similar pumps and pipes,
but use them for different purposes. Consequently, they
must be configured differently to meet the unique needs of
each customer. The configure-to-order fulfillment process
requires suppliers and customers to collaborate closely to
ensure that the customers’s needs are met.
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 A basic fulfillment process
Definition
Order to cash
Quote to cash
Inquiry to cash
All the steps needed to fill a customer order
Key concepts and assumptions
Conceptual Framework
Physical flow
Data and Document Flow
Information Flow
Financial Impact

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 Key Concepts and Assumptions
Sell-from-stock
High volume, low cost products
Little choice for buyer
Example: iPod
Configure-to-order
Low volume, high cost products
Base model + options
Example: computer (Dell, Mac)
SSB uses sell from stock

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 Physical Flow
What is the trigger?
What are the steps?
What is the purpose of each step?
Who is involved in each step?
How is communication and coordination accomplished

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 A Basic Fulfillment Process

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 A Basic Fulfillment Process

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 Document Flow
Customer Inquiry
Quotation
Customer Purchase Order
Sales Order
Picking Document
Packing Document
Customer Invoice
Customer Payment
Key questions regarding documents
What is the purpose?
What are the key data?
 General: Who, when, what, where
 Process / step specific: varies
How does data change across the process?
Who is responsible for the data?

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 Customer Inquiry

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 Quotation

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 Customer Purchase Order

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 Sales Order

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 Picking Document

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 Packing List

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 Customer Invoice

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 Information Flow
Instance-Level Information
Status of a customer inquiry / order
Has the order been acted on? Which step of the process is it in?
Have goods been shipped? When? Where are the goods?
If not, when can we expect shipment?
If shipped, has an invoice been sent?
Has payment been received?
Process-Level Information
How well is the process doing?
How much time does it take on average? Per material? Per
customer?
Which customers are prompt in payment? Who habitually pay late?
What do we sell most? Which customer(s)?

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 Financial Impact of the Fulfillment Process

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 Financial Impact
Impact on balance sheet and income statement
accounts
Example:
Process step Customer
B/S orders $500 I/S
in materials.
Customer inquiry

Quotation
Customer PO
Picking
Packing
Shipment
Customer Invoice
Customer Payment

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 Role of Enterprise Systems in the
Fulfillment Process
Execute the Process
Create Quotation
Create Sales Order
Prepare Shipment
Send Shipment
Create and send Invoice
Receive and process payment
Capture and Store Process Data
Monitor the Process
Instance-Level Information Flow
Process-Level Information Flow

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 Enterprise System in Fulfillment

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 Customer Order (not in the book)

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 Delivery Due List

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 Picking document (Not in book)

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 Billing Due List

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 Process monitoring (Information flow)
Instance level – status information
Status of a customer order (order history)
Process level – aggregate information
How is the process doing?

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 Order history – Completed Order

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 Order history– Payment Pending

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 Process Level Information

Delay Causes
Q1 Order Summary January 08
Packing Delay
January February March 14%

Total Orders 7 11 15
On Time Out of Stock
Total Late Orders 4 3 6 43% 29%

On Time Order % 43% 73% 60%

Shipping Delay
Average Order Time (Days) 2.86 2.12 2.94 14%

Order Details: January

Order-
Order Order to-Ship
Number Customer Name Date Ship Date Order Value (days) Reason for Delay

123456 World Wide Skateboard Distributors 01/04/08 01/06/08 $ 300.18 1 On Time

123457 Extreme Skateboard Sports, Inc. 01/06/08 01/08/08 $ 245.65 2 On Time

123458 "Waldo" Autry 01/08/08 01/11/08 $ 123.43 4 Out of Stock

123459 West Michigan Sporting Goods, Inc. 01/10/08 01/12/08 $ 342.53 2 On Time

123460 Flying Acrobats, Inc 01/12/08 01/20/08 $ 556.43 5 Packing Delay

123461 MI Sporting Company 01/14/08 01/16/08 $ 234.22 3 Out of Stock

123462 Saginaw Dawgs 01/16/08 01/18/08 $ 653.45 3 Shipping Delay

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 Exercise Using Simulated SAP
The exercises will take you through the following
steps that have been discussed in this chapter:
receive customer inquiry
create quotation
receive a customer purchase order
create a sales order
prepare the shipment (pick and pack)
send the shipment (post goods issue)
create a customer invoice
receive a customer payment

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