PRODUCT DELIVERY

Product Delivery

Product Delivery

A product launched by Applebee restaurant with its label on it can be delivered within the set deadline by using technologies such as radio frequency identification (RFID). Until recently, the physical operating layer in logistics operated in disconnected isolation from the information layer of SCM. The movement of products within Applebee Restaurant facility was nearly invisible (Middleton, 2006). Of course, the product delivery information, (Applebee product delivery in this case) could show that they were somewhere in the facility, and possibly the designated storage location, but little beyond that—particularly if the items were in transit. The same was even true of outside facilities. Goods that were shipped to a retail store were “on the road, boat, or air,” but little more was known other than possibly when they were received at their destinations (Austin, 2008).

Successfully managing a product delivery operation requires several metrics. For example, Applebee restaurant often track service measures such as item-order fill rates, order-to-delivery cycle time, and order defects (wrong item shipped). On the other hand, we also must measure the costs of providing the customer service—for example, the inventory holdings or transportation costs. In addition to these tactical measures, Applebee restaurant needs a general way to access aggregate performance—something that quickly indicates the overall performance of the supply-chain. A qualitative way to represent performance appears in Figure 40.6. By combining two metrics—one for service and one for inventory—we satisfy two constituencies (Middleton, 2006).

Customers—Service measures (e.g., reliable delivery to a customer's desired delivery date) represent the customer's view. Better service, we assume, means happier customers.

Financial analysts— quantifying the inventory investment, from raw materials to finished goods, serves the needs of the financial analysts. All else being equal, Applebee restaurant would rather hold fewer inventories (Austin, 2008).

With this view of service and inventory investment, we have an indication of whether we are making effective use of assets. If we are performing in quadrant A, we suffer from both too much inventory and poor customer service. Everything is going wrong—despite substantial investment in inventory, we are losing sales because of inadequate service. This problem could result from holding too much stock of unpopular products or components while stocking out of those in great demand (Middleton, 2006). Another explanation might be that the order processing systems cannot turn stock around quickly enough to meet customer demand—or other operational difficulties.

In quadrant B, we see that it should be easy to provide good service by holding lots of inventory. Likewise, if you hold too little inventory (quadrant C), product availability will drop and customer service will suffer. However, this simple matrix does not capture all aspects of the delivery performance problem. While the poor service indicated by quadrant C might be explained by insufficient stocks, other factors might contribute. More specific measures of performance might help to reveal the underlying cause of the imbalance between inventory and service (Austin, 2008).

Quadrant D is where most firms hope to operate. Here we are able to achieve high levels of customer ...