Order Fulfillment Challenges – Get control now!!

1. Vibrant Channels Inc Order Fulfillment Challenges – Get control now!! Ram Subramanianram@vibrantchannels.comVibrant Channels IncBooth # 16 NorCal OAUG Training Day 2008

2. Learning Objectives • Overview of Order Fulfillment • Process Components • Challenges • Closer Look • Solutions & Opportunities

3. Today’s Speaker • Vibrant Channels Inc • Oracle Partner focused on E-Business suite. • Providing specialized implementation and development services. • Extensive onshore and offshore capabilities. • Products: • Vibrant iClose • Automate month end close – Effectively and efficiently! • Vibrant iPick • Order fulfillment – Always, every-time! • Vibrant iTrack • Transparent real time data – from wherever, whenever! • Vibrant iManage • Manage Integration – Plug & play with Oracle E-Biz suite • Vibrant iMap • Bring life into business data Ram Subramanian Head of Enterprise Solutions division of Vibrant Channels Inc. Functional Consultant, with over 12 years in Oracle E-Biz suite implementations – Finance, Distribution, Planning and Manufacturing modules. Oracle Customer Advisory Board Member for OSFM and pioneer in OSFM implementations. Senior Program Manager (Consulting) at Cisco Systems, San Jose, handling global programs. Manufacturing Application Specialist (Consulting) at Qualcomm, San Diego. Implementation Lead for several rapid implementations in Bay area with Quovera. Business Analyst (Consulting) with Alcoa Fujikura Limited. Over 15 years experience in Finance and Accounting in India. CPA and Management Accountant (CIMA).

4. What is Order Fulfillment? Do we understand the depth and importance of the order fulfillment process? Lets look at some familiar scenes..

5. Customer Woes Delayed Shipments No status on delivery Wrong part delivered Dead on arrival Poor customer service Bound, no way to escape Swear, no more business! Low Customer Satisfaction !!

6. Exhausted Workforce! Insufficient Inventory Unreliable supplies Inefficient automation Increasing pressures System Issues Limitations in planning and scheduling… Attrition … Drop in revenues Eroding bottom line!

7. Change What could change this to ….

8. Happy Customers

9. Motivated Workforce

10. The Key.. Order Fulfillment Process Serving right things, at the right time, with a smile….

11. What is Order Fulfillment Sales force bring orders to the company. Order fulfillment is the whole gamut of processes that bridges this gap, between orders and customer deliveries. Order fulfillment should among other things ensure highest customer satisfaction with • Timely delivery • Correct products • At right location • Without damage • Synchronized delivery from multiple sources The customer has to get the goods ordered.

12. Why is Order Fulfillment Critical? • Companies work hard to secure orders. • Orders do not turn into revenues automatically. • Order fulfillment process is the key to turn orders into revenues. • Customer satisfaction is directly tied to an effective order fulfillment process. • Future orders and continued growth are directly contributed by an effective order fulfillment process. • Within the company, an efficient and effective order fulfillment system reduces stress, extends supply chain and promotes collaboration at all levels.

13. Order Fulfillment Process Revenue Booking Process Develop Market Build/ Procure Sell Deliver Book Revenue Deliver Provision Pick & Pack Ship Forecast Plan Procure Produce Deploy Manage/Optimize Schedule Prioritize Allocate material Select serial/lot/rev Pick Pack Manage delivery Generate docs Comply with legal requirements Manage Drop-ships Synchronize shipment points Coordinate with Logistics Coordinate with customs Install

14. Order Fulfillment & After-Sales • Companies have realized the need to focus on after-sales area, to retain customers and gain additional revenues. • Supply chain is getting extended with reverse logistics, to support the after-sales focus. • Scope of order fulfillment is increasing, with a critical role in the reverse logistics area. • RMA Management, provision of service and replacement of parts – both advance replacement and repair-replacement – are tasks getting added to order fulfillment team.

15. Extended Supply Chain & Reverse Logistics Extended Supply Chain Reverse Logistics Regular Supply Chain Order fulfillment is extended in the After Sales area. RMA Management, Replacement and Service provision are tasks of Order Fulfillment processes.

16. Order Fulfillment Challenges The objective sounds simple – get the customer the goods ordered; but in achieving this... • Challenges are everywhere! • A complex and critical process like Order Fulfillment has all the more challenges. • The critical nature of the process increases the importance of management of the challenges.

17. Major Challenges • Complexity of Process Challenges for Order Fulfillment starts with the very nature of the process. • A complex one involving so many sub-processes and steps. • Requiring a lot of coordination with timely and proper execution. • Demand Management • Seasonal and cyclic demand, making far high demands on available facilities and resources at specific times. • Customer priorities and strategic focus. • Outsourced Logistics • Diverse locations, different time zones, heterogeneous systems and practices, integration issues etc. • Collaborative and Contract Manufacturing • Competing capacities, diverse systems, quality management, component availability. • Optimized inventory levels • Limited inventory to support required level of service. • Increased complexity with revisions and lot numbers. • Multi-sourcing & Drop Ship Sources • Challenges in allocation, coordination and ensuring timely supplies. • Customer preferences for specific sources, quality issues etc. • Forecasting and Planning Challenges • Too many subjective factors, making forecasting a challenging task. • Accuracy of planning greatly influenced by quality of forecast and other inputs.

18. Automation Why automation? What are the current practices of automation? What are the challenges in current automation? What are the opportunities for improvement? Part Management What are the complexities in Part management? Why is it critical to manage the parts? What cross functional impacts to be aware of? What solution options are available? How to effectively use available solutions? Challenges in Focus Allocation • What is the scope of the allocation process? • What are the challenges in Allocation? • What are the current practices of automation? • What are the opportunities for improvement?

19. Automation • Order fulfillment requires timely execution of multiple steps, covering volumes of transactions. Automation is the way to go. • Automation in this area is challenging – the process span across various functional areas, where achieving an effective result is a big challenge. • Lets focus on the core area of fulfillment: Order Selection Review Available Inventory Pick Release Allocate Inventory Transfer to Staging Serial Entry Delivery Management Enter Shipping Details Ship Confirm & Generate Docs

20. Order Pick and Ship Processes Effective fulfillment involves over 15 steps, accessing at least 10 forms in Oracle.

21. Automation – General Practices • Companies manage their core fulfillment process with a variety of automation. • Some pieces of automation are out-of-box functionality in the E-Business Suite. • Most of the core pieces are extensions and back ground processes. • Automation is mostly for specific segments of the process, disjoint in nature. • Some sections of the processes are managed manually, either directly in Oracle or in other systems and interfaced.

22. Automation – Key Challenges • Synchronization – with the fulfillment process requiring so many steps to execute, automation is a big challenge to synchronize and execute. • Outsourced Manufacturing - Companies use different agencies to handle different sections. With manufacturing and inventory management being outsourced, the entire pick, pack, stage and ship confirm processes require execution in multiple systems, some owned by the outsourced partners. Integration across multiple systems is a key challenge. • Outsourced Logistics – Using specialist third party logistics (TPL) is a common model. The process of delivery management, ship confirmation and document generation are executed mostly in the TPL systems. Interface of the shipment information from multiple partners pose real challenges. • Changing Requirements and Priorities – Requirements and priorities change on regular basis and any automation has to have the flexibility to deal with the ever changing dynamic requirements. Business rules defined prove ineffective and actually a problem in specific circumstances. • Black Box Solutions – Automation is designed as core IT processes that provide much less visibility or control to the business users. What orders will get released or whether a specific order will get shipped have become more a game of chance.

23. What Customers Say: “I want to automate the end-to-end order fulfillment process effectively.” “I want a system that is user-friendly and business rule driven.” “I want a system where I can control the automation and overrule as required to match business conditions.” “I want the system to be intuitive and to provide full visibility to its processing.” “I want the system to help reduce errors, improve productivity and save time.” “Order fulfillment is very critical to ensure customer satisfaction.” “To meet our commitments in this area…”

24. Automation - Opportunities • The E-Business suite provides various options for automation, including: - Pick Release Background Process - Delivery based picking and shipping - Quick Shipping - XML and EDI Gateways - Extensive business rules in WMS Module • Opportunity exists to make the automation: • Flexible to meet changing requirements, without making setup or code changes. • Providing better visibility of the processing to the users and capability to know in advance the output that would be generated. • A synchronous process instead of being disjoint pieces of automation.

25. Allocation of Inventory • Fulfillment process includes the step to review and decide on allocation of inventory to the order lines. • If sufficient inventory is available and all items are available at one location, the allocation task is simple. • Reality is • Insufficient Inventory. • Availability in multiple locations. • Drop ship from multiple locations. • Complexities with revisions, lots and serial numbers. • Differential tax and legal formalities from each location. • Customer preferences for specific sources, lots and revisions. • Allocation process requires to be totally dynamic, to meet the changing inventory position.

26. Importance of Allocation Process • An efficient allocation process provides benefits to both the operations team as well as the customers. • Priority customers can be serviced, with their agreed timelines, ensuring customer confidence and support. • Shipments to customers can be with more consistent material – not from multiple revisions & lots with varying characteristics. • Pick & pack processes are streamlined, bringing about operational efficiencies. • Optimal usage of available inventory, including usage of aged inventory, older version material, small lots etc. • Optimization of transportation costs, taxes and duties, with more intelligent sourcing from best sources. • Optimal utilization of the resources in the warehouse and the logistics team.

27. Allocation - Challenges • Picking specific revisions/lots • Options available are limited to ensure picking of specific lots/ revisions. • Scope to accommodate customer specific requirements in automation is limited. • Partial picks • Facility for partial pick release is limited. • Facility to iteratively allocate available inventory to competing orders is limited. • Reservation management • Reservation is useful for one off specific orders, but proves to be a challenge to identify and re-allocate for competing orders. • Process for release of partial reservation and re-use of quantity for other orders has challenges. • Process to reverse wrong picks • If allocation used during auto-picks are not as expected, the process to back out the wrong picks and re-use for specific orders is tedious and challenging. • Pick from multiple locations • If specific inventory allocation detail is entered on the order line, flexibility to allocate from other locations is not convenient. • Rigidity in Pick Release Rules • Pick release rules in Inventory Module provide basic features for automating the allocations. But the rules prove to be rigid and not suited for all products, all locations and at all times.

28. Allocation - Opportunities • Oracle E-Business Suite in the WMS module provides extensive facility to automate the allocation process. • However, opportunity still exists to: • Improve reservation management process. • Provide multi-user, parallel processing capabilities. • Support session specific overrides. • Provide partial pick and iterative allocation capabilities among multiple orders. • Improve release rule options, using additional attributes and introducing option to choose sort by ascending/ descending order.

29. Part Management • The customer is ordering a specific part. • Order fulfillment has to ship the specific part. • What’s the complexity here?

30. Need for Part Management Part Management in Order fulfillment is a critical function. Complexity comes from the way parts are manufactured and marketed. Engineering Change Orders, leading to product revisions add further complexity. Where the management is conscious of ensuring maximum cost savings and usage of available inventory, the part management becomes totally critical. Part management also has customer and legal dimensions, making it a totally complex area. Opening the Pandora Box.. Complexity in Part Management arises due to various types of relationships that could exist for a part.

31. Part Relationships – Adding Complexities Engineering Change Orders • One manufacturing part is a substitute of another part number. • One or more manufacturing part number is superseded by another part number, with flexibility to use the superseded part. • One or more manufacturing part numbers is superseded by another part number, with no flexibility to use the superseded part. • Region specific products due to varying input power and language requirements. Manufacturing to Marketing Part Number: • One manufacturing part number could be marketed as multiple. marketing part numbers globally. • Same manufacturing part number could be marketed as different marketing part numbers in different regions. • Multiple manufacturing part numbers, coming from different manufacturing sources, could be mapped to the same marketing part number. Customer specific part numbers: • One marketing part number mapped to multiple customer part numbers. • Multiple customer part numbers linked to same marketing part number. • Customer approved specific versions/ revisions. Compliance Requirements • Restrictions in marketing specific parts in specific regions. • Restrictions on product substitutions in specific regions.

32. Part Management - Importance • Effective management in this area is critical for meeting: • Marketing programs and strategies. • Manufacturing upgrades and substitutes. • Compliance requirements. • Customer preferences and specifications. • It is critical from a cost savings and revenue perspective to: • Better utilize available inventory – using up compatible inventory. • Serve more orders potentially and increase revenue. • It improves order fulfillment by: • Complying with customer preferences. • Serves more orders, using compatible and acceptable substitutes. • Savings in time and costs by sourcing suitable products from closest locations.

33. Part Management - Challenges • Part relationships fall under different categories, based on who has initiated this. Most relationships are specific to the purpose of creation and not compatible with other purposes. • Managing region level relationship is not a directly supported feature – in some areas, relationship can be defined at organization level, but not in all. Also, maintenance at a Part – Organization level could be challenging. • Managing multiple dimensions of relationship at same time may pose challenges, especially in automation. Manual processes may not be scalable and may add to costs. • Managing part relationship at customer/ customer site level may be cumbersome. • Integrating different sections of the business and system processes to honor the part relationships may not be fully feasible or cost prohibitive.

34. Part Management – Impacted Processes • Part management cannot be done in isolation in Order fulfillment. Key processes requiring consideration: • Planning • How to plan use-up of inventory and plan procurement of new inventory, if it is region or customer specific? • How to more effectively manage one to many relationship, other than static planning percentages? • Order Entry • What should the item be on the order – the Superseded part of the new part? • What if the old is entered for use up, but need to change at a later stage? • Pricing • Can price be different between parts set up as substitutes? • Can the superseded part be priced differently from the new part? • Picking & Shipping • Shipping execution does not allow parts to be changed – if at the time of actual pick, the planned part is not available, but a substitute is available, there is no direct option to use it. • Order Scheduling • Can scheduling processes consider all the complexities and priorities of relationships? • Order Change management • Would customers accept the change to the ordered parts? • Would there be customs/ legal restrictions or impacts from part change? • RMA • Can RMA process support effectively the return of parts, with correct identification of the actual part?

35. Part Management – Solution Options Oracle E-Business suite supports the following features: • Cross References • Provides flexibility to define multiple types of user defined relationships • Relationship can be applicable to all organizations or specific ones. • Item Relationships • Allows definition of pre-defined relationship – including Superseded Parts, Substitutes etc. • Relationship can be set as reciprocal or one way. • Relationship set up at Master item level, applicable for all organizations. • Customer Item Cross References • Allows definition of customer specific part numbers and association to internal part numbers. • Definition can be at customer or customer address or address category levels. • Manufacturing Part Numbers • Defines relationship between manufacturing part numbers to internal part numbers • Relationship is at the master item level, applicable for all organizations.

36. Part Management – Opportunities Order fulfillment requires support for the following: • Region level substitution • Region level enforcement of specific item relationships • Customer/customer site level part enforcement • Customer level enforcement in specific regions Importantly, order fulfillment requires the part management to be dynamic to support • Substitution not just at the time of booking, but during actual shipping execution. • Pro-active scheduling and substitution based on changed availability, prior to shipping execution. Opportunities: • The different solution options allow different dimensions of the relationship – some being global and some applicable for specific organizations. • A combination of the relationship could be used to achieve some of the above requirements. • However, constraints in changing Part Number, after an order is booked, puts restrictions on the effective use of the related parts. • Capability for setting up region level relationship could improve management of the item relationships for specific regions.

37. In Summary… Order fulfillment is a critical process, that converts orders booked into revenues. Customer satisfaction and continued support is a direct outcome from an effective order fulfillment process that meets customer expectations. The fulfillment process is a complex one involving many steps that are cross functional. Oracle E-Business suite supports various features to support the process. Opportunity exists to refine the process and design the system to meet the changing dynamics.

38. Q & A Q & A

39. Thank You! For additional information: Please visit www.vibrantchannels.com Email : ram@vibrantchannels.com