12 Order Fulfillment Along the Supply Chain

SECTION 12.1 REVIEW QUESTIONS

1. 
   Define order fulfillment and logistics.
   
2. 
   Compare traditional logistics with e-logistics.
   
3. 
   List the nine steps of the order fulfillment process.
   

2. PROBLEMS IN ORDER FULFILLMENT ALONG SUPPLY CHAINS

During the 2011 holiday season online sales increased 15% from the previous year. Some retailers were caught off guard (Hayes 2012). For example, the large demand for some products from BestBuy.com led to problems in fulfilling orders made in November and December 2011. As a consequence, Best Buy was unable to fulfill many of these orders. The reason was that the supply chain management system was unable to

detect problems before they occurred. The problem resulted in bad publicity for Best Buy.

A similar situation arose during the 2013 holi- day season in the U.S., although the fulfillment and delivery problems were much more wide- spread among e-tailers. While online sales increased a little over ten percent from the previ- ous year, last minute orders were up close to 50%. Many of these last minute orders were no doubt predicated on the promise of one to two day deliveries. As a result of this last minute flood of requests, the major carriers – UPS and FedEx – were unable to handle the massive volume, resulting in a substantial percentage of orders failing to be delivered in time for Christmas (Heller 2013). A number of retailers had to offer gift coupons or other forms of remuneration to make up for the missed deliveries.
The inability to deliver products on time is a typical supply chain problem in both offline and online commerce. Several other problems have been observed along the supply chain: Some companies grapple with high inventory costs; shipments of wrong products, materials, and parts occur frequently; and the cost to expedite operations or shipments is high. The chance that such problems will occur in EC is often higher because of the mismatch between standard sup- ply chain structures and processes and the special nature and requirements of EC. For example, most manufacturers’ and distributors’ warehouses are designed to ship large quantities to a set num- ber of stores; they are not designed to optimally pack and ship small orders to a large number of customers’ doors. Improper inventory levels are typical in EC, as are poor delivery scheduling and mixed-up shipments.