A global fast-moving consumer goods (FMCG) corporation had set up a contact centre in Singapore to centralise sales orders management in the Asia-Pacific region. Customers and field sales of the Southeast Asian market of the FMCG company would inquire or send their orders via email, SMS, or via internet calls to the Singapore office. The Singapore office would screen the inquiries and orders versus available inventories at different distribution centres around the region. The contact centre staff would edit orders by deleting unavailable items or cancelling any that didn’t meet the corporation’s terms or conditions.
The FMCG corporation was able to fill 99% of orders on-time and completely after the centralisation of order entries at the Singapore office. There practically were no unserved orders at the end of every working day. The FMCG logistics team delivered practically all the orders that the Singapore office entered within 24 hours. The FMCG’s Asia-Pacific executives lauded their order fulfilment performance and boasted to the corporation’s global headquarters.
The FMCG corporation’s Singapore order-entry office claimed success in addressing pending unserved sales orders. In the past, salespeople would submit order after order for items even if some products were not available or even if the account executives were unsure customers would meet sales terms & conditions. For several years, executives would always see a pile of pending customer orders that remained unserved or waiting for approval for as long as a month. Marketing executives and salespeople complained about the unserved orders and impatient customers would cancel or penalise the FMCG corporation for the poor servicing of their orders. The Singapore order-entry office emerged as the saviour that eliminated the unserved order pariah.
But as the FMCG corporation’s executives patted themselves on the back for the purging of unserved pending orders, many of the company’s customers weren’t any happier. Customers weren’t getting all the items they wanted as Singapore edited out unavailable items from their orders. Customers also didn’t like they had to pay for deliveries that didn’t include all the items they asked for. Some customers as a result shifted to competing brands and the FMCG executives realised too late it was losing market share in some of their best-selling products.
Pending unserved orders are customer orders that are either waiting to be serviced and delivered and if not, become destined for cancellation. They could be incompletely delivered orders, or orders just waiting for go-signals for dispatch. They could be orders waiting for specific instructions to be carried out or they could be orders that enterprises had put on hold because customers didn’t meet pre-agreed terms such as remitting a down-payment.
Unserved orders are often what are brought to our attention as supply chain managers. If our subordinates don’t bring it up, our executive superiors will. When our customers don’t get their orders, they will inevitably complain, and some would penalise our businesses via deductions in payments or by rejecting late deliveries. Pending unserved orders are obviously hindrances to our strategic performance since business success counts on customer satisfaction.
We tend to push outbound logistics managers (i.e., shipping supervisors, distribution centre managers, or those in charge of processing customer orders) to address unserved orders, even though it isn’t outbound logistics who really have full control over fulfilling unserved orders. When it comes to demand fulfilment, responsibility lies with whoever oversees the supply chain, typically the chief supply chain officer (CSCO). Unfortunately, in the real world, we don’t have CSCOs and the reason for such is that we don’t have structures and systems that support supply chain management.
The supply chain is the core of many enterprises’ s operations. Operations is one of four (4) basic pillars of business, which stands alongside with Marketing, Finance, and People. In an enterprise that markets products & services, the operations manager is charged with the activities that fulfil market demand and many, if not all, of these activities are inter-connected in the supply chain.
Unserved orders are symptoms of flaws in supply chains. They are not the problems but their effects. They are the tips of structural and systemic icebergs that inhibit the productive flow of merchandise and services from the sources to end-users.
We, however, believe supply chain problems like unserved orders can be managed via directives and policies. We would, for example, increase production and build up inventories to ensure most, if not all, items would be available anytime. We may, just like the FMCG corporation, establish policies where orders would be based on available items and strict customer service terms & conditions.
But experience has shown that these management mandates don’t solve the problem. We may eliminate the pending unserved orders, but we don’t actually resolve the underlying issues such as stock-outs and incomplete deliveries.
There are two (2) very basic tasks in running a business:
- Create Demand;
- Fulfil It.
Pending unserved orders are symptoms of not being able to successfully do number #2. As much as we may manage pending unserved orders, we may not be tackling the bigger problem that it represents, which is the failure to fulfil market demand.
Getting rid of pending unserved orders is, thus, a starting point to improving our basic task of demand fulfilment. It begins with working on the system of how we detect and respond to demand, translating that demand into valid orders, and finally in planning and executing the activities to serve those orders. It gets away from piecemeal solutions to one that attempts to address the big picture of a supply chain’s operations.
Knowing the supply chain’s role in fulfilling demand, not just eliminating pending unserved orders, is a basic first step. The second step is accepting that mere management isn’t the best way to set up structures and systems to support a productive demand fulfilment strategy. What are needed are skills grounded in problem-solving and engineering.
It may sound intimidating and expensive. But it doesn’t have to be. We invest in talented people in our organisations. When we utilise the talent we have in demand fulfilment as much as we do for demand creation, we are on our way to making progress.
Ellery's Essays 