12 Order Fulfillment Along the Supply Chain

Activity 4: Insurance. Sometimes the con- tents of a shipment need to be insured. This could involve both the finance department and an insurance company, and again, information needs to flow, not only inside the company, but also to and from the customer and insurance agent.

Activity 5: Replenishment. Customized orders will always trigger a need for some manufactur- ing or assembly operation. Similarly, if standard items are out of stock, they need to be produced or procured. In both cases, production can be done in-house or by suppliers. The suppliers involved may have their own suppliers (sub- suppliers or tier-2 suppliers).

Activity 6: In-house production. A plan is needed for in-house production. Production planning involves people, materials, compo- nents, machines, financial resources, and pos- sibly suppliers and subcontractors. In the case of assembly, manufacturing, or both, plant services may be needed, including possible collaboration with business partners. Services may include scheduling of people and equip- ment, shifting other products’ plans, working with engineering on modifications, getting equipment, and preparing content. The actual production facilities may be in a different country than the company’s headquarters or retailers. This may further complicate the flow of information, collaboration, and communi- cation. All this needs to be done efficiently and effectively.

Activity 7: Use contractors. A manufacturer may opt to buy products or subassemblies from contractors. Similarly, if the seller is a retailer, such as in the case of Amazon.com or Walmart.com, the retailer must purchase products from its manufacturers. Several sce- narios are possible. Warehouses can stock purchased items, which is what Amazon.com does with its best-selling books, toys, and

other commodity items. However, Amazon. com does not stock books for which it receives only a few orders. In such cases, the publishers or intermediaries must make spe- cial delivery arrangements. In either case, appropriate receiving and quality assurance of incoming materials and products must take place. Once production (activity 6) or purchasing from suppliers (activity 7) is completed, shipments to the customers (activity 3) can be arranged.

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