Order management

Order fulfilment and customers’

satisfaction
Fulfillment
Fulfillment – the act of carrying out a
customer’s expectations
Delivery of products and information
ulfills a Customer Satisfaction
consumer’s needs, Defined
desires, and expectations
THE DELIVERABLES OF AN ORDER
FULFILLMENT SYSTEM
• To design a winning order fulfillment capability, you need to begin with the end in
mind.
• What do you need your order fulfillment system to accomplish?

• Generally speaking, customers require some mix of the traditional seven rights of
logistics:
• the right product in the right condition and right quantity at the right time
and right place for the right price to the right customer.
 Order Management
The Deliverables of an Order
Fulfillment System
THE DELIVERABLES OF AN ORDER
FULFILLMENT SYSTEM - operational targets
Order fulfillment system will need to provide the following operational targets:
 Product availability
 Timely—i.e., fast, consistent, flexible—delivery
 Transparent, reliable service
 Service recovery
 Efficient operations
 Product Availability
• Availability is the most basic output of an order fulfillment system. Do you have
the product available to deliver to customers when and where they want it?
Companies assess availability by looking at:
Stock out frequency—A stock out occurs when product is not available to fill a
customer order.
Fill rate—A fill rate is defined as the percent of orders filled from stock on hand.
Fill rates can be measured at the item, line, and order level.
Orders shipped complete—As the name implies, orders shipped complete is a
measure of your ability to ship complete orders to customers. If a single item is
missing, the order is not complete and is recorded as a zero for calculation
purposes.
Timely Delivery

• The customer goal is to minimize costs, maintain efficient operations,

and support sales. Customers care about three aspects of delivery:
speed, consistency, and flexibility:
• Speed—Speed refers to the length of the order cycle; that is, how
long it takes from order placement to order receipt.
• Consistency—Consistency is synonymous with dependability and may
be more important than speed
• Flexibility—Flexibility refers to your company’s ability to effectively
respond to the unexpected.
Transparent, Reliable Service

• Reliable, worry-free service

• Providing customers real-time awareness of their order status
enhances the perception of reliability.
• A variety of “perfect order” definitions a “perfect” order is received,
processed, picked, packed, shipped, documented, and delivered on
time without damage.
• Modern information technologies enable efficient, transparent supply
chain operations and strengthen supply chain relationships.
 Service Recovery
• In real life, no company achieves 100 percent perfect orders.
• 1. Scan operating environment—Identify potential opportunities for service
failures.
• 2. Risk assessment—Evaluate potential consequences of specific service
failure. Ask three questions: (a) How likely is each service failure? (b) What
are its potential impacts? and (c) How prepared is our order fulfillment
system to deal with the failure?
• 3. Recovery plan—Develop a service recovery plan for the service failures
that are most likely to happen or that will have the greatest cost impact.
• 4. Enact/execute—Implement the recovery plan when a service failure
occurs.
• 5. Evaluate—Develop an after action or corrective action report that assesses
the effectiveness of the recovery plan. Be sure to include a cost benefit
analysis.
• 6. Improve—Update the recovery plan based on the after action plan and the
customer’s response and feedback.

Figure 2-1 Contingency planning process

Efficient Operations

• Higher service tends to cost more.

• Strategically speaking, even if it were doable, you might not want to

achieve 100 percent perfect orders.

• The reality is that cost-service tradeoffs exist throughout the order

fulfillment process.
 Order management
The details of an order fulfillment
system
THE DETAILS OF AN ORDER
FULFILLMENT SYSTEM

Source: CSCMP
Mapping the Order Delivery Cycle: The SCOR Model
The anatomy of an order fulfillment system

Source: CSCMP
The Cost of Stock outs
• Back orders
• Lost sales
• Lost customers
 Order management
Two conceptual models of service quality
(Value Gaps)
Basic service model
• A very simple, yet effective, view of service quality is that it is the
match between what the customer expects and what the customer
experiences. Any mismatch from this can be called the ‘service quality
gap’.

Perceived quality is always a judgement that the customer makes – whatever the customer thinks is
reality, no matter what the supplier may believe to the contrary!

This is another reason why careful measurement of customer service is necessary:

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Value Gaps
• Only the customer determines satisfaction.
• At times, your company may deliver to promise, exceed industry standards, and
meet customers’ a priori expectations; however, having experienced both
moments of truth, the customer determines that he/she overestimated the
anticipated benefit.
• Disappointment and dissatisfaction follow—largely because an unexpected value
gap emerged.
• Because value gaps are so important, in the next figure, scholars have identified
six gaps that affect satisfaction perceptions and can damage buyer/supplier
relationships

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Extended service model
Expected Service
Customer
satisfaction or service quality gap
6. Perceived service – expected service gap

Customers Perceptions of
Actual Services
perception gap 
5. Actual service – perceived service gap

Communication gaps 
4. Service delivery
– external
Service Delivery communication External communications
(actual performance) gap to customers

3. Service standard – service delivery gap performance or service delivery gap

1. Customer expectation -
management Perception Service quality standards
gap ….(knowledge gap) and specification

2. Management perception – service standard gap  

translation or specification gap  
Management perception of
Supplier
customer expectation

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Based on work by Parasuraman and Zeithaml 0
A conceptual model of service quality: the service gaps
• Gap 5: actual service–perceived service gap: this is the difference between the service that the supplier is
providing and the service that the customer thinks is being received. This gap may, typically, be caused
because the supplier and the customer are measuring service in a different way.
• Gap 4: service delivery–external communication gap: this is the difference between the actual service that is
provided and the promised level of service that was communicated to the customer. This gap may be caused
by a misunderstanding in communication.
• Gap 3: service standard–service delivery gap: this is the difference between the actual service that is
provided and the planned level of service based on the service specification that has been set. The cause for
this gap may be inefficiency within the delivery service.
• Gap 2: management perception–service standard gap: this is the difference between the service
specification that is set and the supplier management assessment of customer service requirements. This
gap is likely to be caused by an inadequate initial operational set-up.
• Gap 1: customer expectation–management perception gap: this is the difference between the service that
the customer expects and the service level that the supplier thinks that the company wants. This gap is
usually caused because the supplier does not understand the real customer requirements.

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