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11.9 Problems in Order Fulfillment Along Supply Chains 363

SECTION 11.8 REVIEW QUESTIONS number of customers’ doors. Improper inventory levels are
typical in EC, as are poor delivery scheduling and mixed-up
1. Define order fulfillment and logistics. shipments.
2. Compare traditional logistics with e-logistics. At the root of many of the problems and challenges are
3. List the nine activities of the order fulfillment process. deficient planning and execution practices. These are some
of the key causes:

11.9 PROBLEMS IN ORDER FULFILLMENT • Uncertainties in Demand. Many problems along the EC
ALONG SUPPLY CHAINS supply chain stem from demand uncertainties and the dif-
ficulties that ensue across the supply chain in trying to
Order fulfillment is considered a critical success factor for meet this uncertain demand. This is where demand fore-
e-commerce. A relatively recent study of close to 600 top casting comes into play. Here the major goal is to forecast
supply chain executives conducted by Peerless Research at a very detailed level the number of products (at the
Group (2013) revealed the order fulfillment was much more SKU level) of a certain type that will be needed to meet
intricate and that management and delivery performance is the demand at specific locations at particular points or
slipping. As a consequence, customer satisfaction has suf- time intervals in the future. These forecasts rest on statis-
fered. The main challenges that these executives and their tical (time series) estimates from historical patterns,
companies are facing include (VanLandingham 2014): trends in sales or order data, and causal factors like the
weather or promotions. These factors can all change
• Order Expectations. EC orders require higher levels of quickly, which is why demand forecasting is as much an
service and attention. The delivery times are much shorter, art as it is a science. The basic issue is that if the demand
and the order changes and cancellations are usually last plan is wrong it will ripple across the chain impacting that
minute. planned needs for inventory, raw materials, works in
• Order Accuracy. If the deliveries to a store are off by a progress, factory capacity, etc. Companies try to address
couple of units either way, it is no big deal. If the same these problems by making adjustments to the forecasts
thing happens to an EC customer, a merchant might lose and by sharing the forecasts with the major players in the
the customer’s business. chain.
• Multi-Channel Order Management. Because most • Lack of Information Sharing. In today’s world the flow
companies have separate systems for the various chan- of information across the supply chain is almost as critical
nels, it is very difficult to present one view of the com- as the flow of goods and services. Information systems
pany to consumers. support this flow, enabling communication and coordina-
• Complex Distribution. In contrast to off-line orders and tion of the various players and systems in the chain. A
deliveries, each EC order is usually small with a few good example of the types of issues that arise with poor
units, and there are many more of them. Packing and ship- information flow is the bullwhip effect which is a mis-
ping is harder. Because consumers cannot “touch, see, match between the actual demand for goods and the
and feel” the products before they buy, there are numer- inventory supplied upstream in the supply chain to meet
ous returns. the assumed demand. The mismatch results in excess
inventory and safety stock that is used as a buffer against
As a consequence, surveys (e.g., Kinnison 2015) fre- underestimated demand. In practice the mismatch grows
quently show that customer satisfaction suffers because of as you move up the chain from the retailer to the distribu-
the fulfillment process. Dissatisfaction is usually the result tor to the supplier to the manufacturer so that variability
of: (1) inaccurate orders; (2) the lengthy time of the order in inventory and safety stock increases along the way.
process; (3) missed delivery schedules; and (4) the lack of One way to reduce the mismatch is to ensure that infor-
visibility as the order moves as it move across the process. mation and, thus visibility, about demand flows to all the
These issues and problems are typical of the types of chal- parties involved, so that there is only “one version of the
lenges that continue to confront both off-line and online truth.” The bullwhip effect is described in Online File
businesses. The problems are exacerbated in EC, especially W11.1.
omni-channel EC, because of the mismatch between stan- • Inadequate Logistical Infrastructure. Pure play EC
dard supply chain structures and processes and the special companies are likely to have more problems because they
nature and requirements of EC. For example, most manufac- do not have a logistics infrastructure already in place and
turers’ and distributors’ warehouses are designed to ship are forced to use external logistics services rather than in-
large quantities to a set number of stores; they are not house departments for these functions—much like Ama-
designed to optimally pack and ship small orders to a large zon has done with UPS and FedEx. These external