Balancing Accuracy of Promised Ship Date and IT Costs

In an ideal e-business environment, when a customer order is scheduled and a ship date is computed, the availability should immediately be reserved and not be available for future orders. However, in reality the availability data that are used for the scheduling the orders are not real time availability (physical availability), but they are availability information stored in an IT system (system availability). The availability data in the IT system (static view of availability) is typically refreshed (synchronized with real time availability) only periodically since it is very expensive to update the database in real time. Due to this potentially inaccurate view of the availability, some orders can't be shipped on the promised ship date. Therefore, for certain customer orders, products are shipped later than the promised ship date resulting in customer dissatisfaction. Therefore, one of key decisions in order fulfillment process is to properly balance IT system (e.g., IT expense) and accuracy of promised ship date. In this work, we study how availability fresh rate (IT system) impacts customer service level. The simulation model we develop helps making critical business decision on refresh rate of availability, and avoiding expensive IT investment.

By: Young M. Lee

Published in: RC24298 in 2007


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