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Posts Tagged ‘Line Item Fill Rates’

The Specifics of Available and Capable to Promise Order Management for the Wholesale Distributor

Tuesday, June 23rd, 2009 by Alex Smith

A key functional element to any wholesale distribution software solution is order management. One’s ability to enter orders quickly and in an efficient manner can dramatically improve customer relations and service. As part of the order management process, a sophisticated distribution software solution should include both available-to-promise (ATP) and capable-to-promise (CTP) order management processes to ensure accurate commitment of shipment and delivery dates for customers at the time of order entry.

Available to promise means that when a customer places an order for a given item, the item is available in inventory (taking into account items that have already been allocated to previous orders). Available to promise functionality can go one step further to include a “commit to planned inventory” feature. This functionality is utilized when a sales order is placed for an item that is not currently in inventory, or is in inventory in insufficient quantity to satisfy the requirements of the customer. If there is already an existing open purchase order for that given item, the system can commit items on that purchase order to the existing open sales order based on the vendor’s delivery promise dates. Such a feature can dramatically improve anticipated shipping and delivery dates for the organization’s customers while simultaneously increasing inventory turns and lowering on-hand inventory levels.

In contrast to available to promise, capable to promise defines the ability of the organization to execute against a given customer requirement. For example, consider the situation when a customer places an order for a given item and the item is not in available inventory and there are no existing open purchase orders for the given item. In Enterprise 21, the system will alert the customer service representative in real-time that while the item is not in available inventory and that there are no open purchase orders for that item, the item is capable of being ordered, received into inventory, and shipped to the customer within a specific time frame based on the item’s lead time from a given supplier. While accounting for the item’s lead time, Enterprise 21 will immediately suggest an expected receipt date of the item into the warehouse, an expected ship date to the customer, and a final receipt date at the customer’s facility. In other words, at the time of order entry, the organization has the ability to identify its capability to fulfill the given customer order and provide an accurate shipping and delivery date for that order to the customer. Enterprise 21 can then generate a purchasing requirement and alert employees in the purchasing department that such a purchase requirement exists in the system. The purchasing manager can then analyze potential suppliers and look for discount opportunities from each supplier, submit requests for quotes to suppliers, generate purchase requisitions, and convert quotes into final purchases orders, all directly from within Enterprise 21.

By implementing available to promise, commit to planned inventory, and capable to promise functionality within the sales order management process, wholesale distributors can dramatically improve customer satisfaction, increase order and line item fill rates and inventory turns, and realize significant cost savings due to reduced inventory carrying costs.

The Secret to Increasing Distribution Service Levels and Fill Rates

Wednesday, March 25th, 2009 by Alex Smith

A key element to the success of wholesale distributors is to simultaneously manage appropriate inventory levels while maintaining high levels of customer service and satisfaction. Depending on the reliability of the distributor’s supply base, performing these tasks effectively may seem virtually impossible. Achieving desired service and order fill rate goals is based on the successful implementation of an effective inventory replenishment program. While the concepts of inventory replenishment, service levels, and order points have been used for decades, the number of distribution companies who understand and utilize these concepts is significantly lower than one might imagine. The fact of the matter is that most distribution companies struggle with inventory optimization.

While there are complexities in the details, at an overall level, smart distribution companies are focused on delivering the highest possible service levels to their customers while minimizing on-hand inventory. For distributors, long-term profitability is contingent upon having the right products available to meet customer demand at the right time. If this concept is so elementary, why do so many companies struggle with establishing optimal inventory levels, and why do distributors struggle to have adequate product supply to fulfill customer orders?

The two-word answer to this conundrum is “service levels.” Excellence in distribution is synonymous with the ability to supply customers with a high service level that is both consistent and reliable.

What is a service level? Service level refers to an organization’s ability to enter and ship all of the items requested on a given sales order to meet the customer’s desired receipt dates. This means there are no inventory shortages or backorders, and the order is filled within the customer’s requested delivery window.

In TGI’s Enterprise 21 ERP system, a service factor can be defined by item or SKU, which defines the desired line item fill rate for that given item. Service factors can be set on a global basis or can be defined uniquely by location or facility. For some fast-moving items, a service factor of 95 or 99 may be desired, while others may require much lower service levels of 50 or 60.

How does Enterprise 21 use service factors? Once a service factor is defined – by SKU – Enterprise 21 uses the service factor in its time-phased inventory replenishment process. In Enterprise 21, a service factor of 95 implies that 95% of the time a customer places an order for a given item, the item can be shipped out of inventory, while a service factor of 99 means this is to occur 99% of the time.

In Enterprise 21, the inventory replenishment process analyzes supply and demand to help distribution organizations improve order and line item fill rates and optimize their overall inventory management performance. The process considers a variety of criteria such as desired service level and safety stock, minimum and maximum inventory levels on a product-by-product basis, on-hand inventory, forecasts and current customer demand, supplier lead times, minimum order requirements, and order multiples. In organizations with multiple facilities, Enterprise 21 can review requirements for an individual warehouse or distribution center and for the organization as a whole. Once the Enterprise 21 system’s inventory replenishment process calculates the necessary recommended replenishment quantity, the application generates online requisitions for review and conversion into purchase orders and inventory transfer requests.

What further sets Enterprise 21 apart is the continuation of this process to gather transactional data as things occur and to report on that information for analysis purposes. An integral part of Enterprise 21’s distribution software functionality is the ability to monitor service levels automatically and produce suggestions for necessary changes to existing replenishment rules. By interactively collecting and analyzing information such as order and line-item fill rates, Enterprise 21 produces reports and management alerts to notify the organization of any anomalies compared with existing service level metrics.

Successful distributors know the key to ongoing and improved profitability is due in large part to managing the balance between customer service and inventory levels. Enterprise 21’s advanced inventory replenishment capabilities, including the use of service factors, are just one of the reasons leading distributors adopt Enterprise 21 for its complete distribution software capabilities.