As managers of our enterprises. we entice our customers to select our products & services. Once our customers show interest in the items we are selling, the demand creation process comes closer to ending, and the demand fulfilment comes closer to beginning. Hence, we don’t wait for customers to order when we start the fulfilment process. We act to make available our products and services as soon as customers indicate their preferences for them.
Customers (i.e., clients, buyers, patrons) show preference for our products and services in different ways, depending on the business we’re in. Examples are:
- contracts, or written agreements;
- requests for quotations;
- items in online shopping carts;
- a shopping list of groceries
- a winning bid for a service or product.
When customers choose the items we are selling such as via these examples, our job as operations managers is to make those items available. We do so first and foremost via planning.
Planning involves the scheduling of production and services, the procurement of requirements such as materials, labour, & supplies, and the preparations for needed operating capacities.
Planning is not dependent on orders, which are final manifestations of the customers’ choices for our products and services. The purpose of planning is to anticipate the orders and make ready the products & services consistent with the terms & conditions of the customers’ orders.
Planning speculates on the actual demand manifest by orders; hence we tend to build in allowances or contingencies. When it comes to tangible products, these allowances or contingencies are in the form of inventories. When it comes to services, these allowances or contingencies come in the form of preparations of resources such as labour, equipment, utilities, and supplies.
In the fast-moving consumer goods (FMCG) industry, companies would rely on demand forecasting or market research surveys of consumers. The companies would produce and stock items at the shelves of retailers such that consumers can immediately avail of products. Success in FMCG demand fulfilment therefore depends on the complete availability of items that the FMCG is selling. Out-of-stock and the consumer’s inability to avail the item is a lost opportunity as much as it is a failure to fulfil demand.
Managers of job shops, like woodworking and machine shops, would stock up on raw materials such as lumber and steel bars based on the requests for quotations of potential customers. Quotations would include the times of availability as much as it would include the prices and quantities of the items customers are requesting quotations for. Lead times of job shops are significantly shorter when they have the raw materials ready once customers make their orders and this can be competitively advantageous versus rival shops who procure materials only when they receive orders.
Utility companies, like those which distribute electricity to consumers, forge contracts with power generation enterprises. The utility companies look at trending demand and negotiate agreements for the supply of power to their grids. The utility companies would agree to a minimum power supply available during the day and pay for it regardless of whether their consumers use all the electricity or not. On one hand, utility companies would like to ensure consumers have electricity at the flick of a switch; power failures are not an option. On the other hand, the utility companies would want to minimise any excess unused power they would have to pay for and avoid having to pass it on to consumers sensitive to what they would be charged for.
Online sellers of tangible products like groceries and hardware invite and accredit multiple vendors to ensure there would be a high chance of items available for buyers who likely would instantly order. Online sellers also monitor the online shopping carts and wish lists of buyers who have yet to click the order button. The data from these yet-to-be-purchased items provide some basic information on future demand.
Demand fulfilment begins as soon as our customers indicate a preference for our products and services. We don’t wait for orders. We plan materials and operations as we await the orders which we believe will be coming. We do speculate what we think customers will order so we build in contingencies and allowances, such as inventories for tangible items and labour & supplies for our operations.
How we plan varies from industry to industry, enterprise to enterprise, but in a nutshell, we anticipate the orders from the contracts, the market research surveys, and the quotations which our customers request. We then prepare for the orders and fulfil them completely and on-time to what our customers expect, and much better than what our rivals would.