Product at the right cost and marketing can sell it

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Unformatted text preview: vailable M༄ Four possible events §༊ The buyer waits until the product is available §༊ The buyer back- orders the product §༊ The seller losses current revenue §༊ The seller losses a buyer and future revenue Chapter 8 – Order Management and Customer Service Summary: S༅ S༅ S༅ S༅ S༅ S༅ S༅ S༅ M༄ Back Orders §༊ Occurs when a seller has only a portion of the products ordered by the buyer §༊ Are created to secure the portion of the inventory that is current not available M༄ Lost Sales §༊ Some customers will turn to alternative supply sources M༄ Lost Customers §༊ Customer permanently switches to another supplier Figure 8.12 – Linking Order Management Outputs Order Management Influences on Customer Service M༄ Product Availability §༊ Did I get what I wanted, when I wanted it, in the quantity I wanted? §༊ Internal Metrics • Item fill rate • Line fill rate §༊ External Metrics • Order fill rate • Perfect order M༄ Financial Impact §༊ Improving fill rates improves financial performance §༊ Cash Flow Lost = (Number of Incomplete Orders Back- Ordered x Back Order Cost per Order) + (Number of Incomplete Orders Cancelled x Lost Pretax Profit per Order ) + (Number of Incomplete Back- Ordered x Invoice Deduction per Order) Table 8.7 – Cash Flow and Inventory Investment Figure 8.13 – Fill Rate and Inventory Investment Figure 8.14 – Cash Flow Lost/Inventory Investment Tradeoff Order Management Influences on Customer Service, cont. M༄ Order Cycle Time §༊ The time that elapses from when a buyer places an order until receipt of the order §༊ Absolute length and reliability of order cycle time influences both firm’s inventories, resulting in impacts on both revenues and profits for both organizations §༊ Metrics • Customer wait time ...
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