The first research towards defining order fulfiment strategies was published by Mather (1988) and his discussion of the P:D ratio, whereby P is defined as the production lead-time, i.e. how long it takes to manufacture a product, and D is the demand lead-time, i.e. how long customers are willing to wait for the order to be completed. Based on comparing P and D, a firm has several basic strategic order fulfilment options:
- Engineer-to-Order (ETO) - (D>>P) Here, the product is designed and built to customer specifications; this approach is most common for large construction projects and one-off products, such as Formula 1 cars
- Build-to-Order (BTO); syn: Make-to-Order (MTO) - (D>P) Here, the product is based on a standard design, but component production and manufacture of the final product is linked to the order placed by the final customer's specifications; this strategy is typical for high-end motor vehicles and aircraft
- Assemble-to-Order (ATO) - Here, the product is built to customer specifications from a stock of existing components. This assumes a modular product architecture that allows for the final product to be configured in this way; a typical example for this appraoch is Dell's approach to customising its computers.
- Make-to-Stock (MTS); syn: Build-to-Forecast (BTF) - (D=0) Here, the product is built against a sales forecast, and sold to the customer from finished goods stock; this approach is common in the grocery and retail sectors.
In its broadest definition the possible steps in the process are :
- Product Inquiry - Initial inquiry about offerings, visit to the web-site, catalog request
Sales Quote - Budgetary or availability quote - Order Configuration - Where ordered items need selection of options or order lines need to be compatible with each other
- Order Booking - The formal order placement or closing of the deal (issuing by the customer of a Purchase Order)
we talk more steps in next post.
