Unbiased Explanations of SCM Software

What This Article Covers

• Does selling online change the opportunities for moving to make to stock? 
• How selling online changes how long customers will be willing to wait for their purchases to arrive.
• What does all of this mean for forecasting? 

Background

I described in the previous article that many companies that talk about their desire to move to a make to stock environment, will never get there, and that a make to stock environment, if your customers are not willing to wait for your normal lead times is either completely impossible, or greatly increases the costs to provide the item as well as reducing the quality level of the item.

The rise in online commerce is something that companies should include in their supply chain strategy. However, it is not apparent that the move towards online ordering radically changes the strategies that are available to companies. Instead, it provides some extra leeway, that can be used to reduce supply chain costs, and to postpone the final assembly depending upon the assembly lead time. 

Buying and Selling Online

We are in the middle of large changes in retailing. Online retailing has tremendous advantages over buying in stores. These include the following:

1. Far greater selection
2. More and less biased information. This is in fact one of Amazon’s great assets, its review database. When people shop in stores, there are no product descriptions and no objective reviews in the store. Stores have a poor information quality to them. That is the information about products is both low, and the only sources of information tend to be the biased salespeople in the store.
3. Convenience (no driving to a store, finding parking, walking around the store)
4. Speed
5. The ability to be shown truly related products (Amazon does this very well)
6. The ability to try out some products (such as read parts of books and listen to music), although the ability to try or test other products is a disadvantages (such as trying on clothes or shoes, or driving a car).

How are Customers Being Habituated to Wait for Their Products

Buying online is providing more opportunities for assemble to order as consumers are becoming accustomed to waiting a few days for their order to arrive by courier, even if the item is stocked. This is a change from the time when people went to stores, expecting to walk out with the item in hand. This may allow companies that sell online to extend the time between ordering and when the product is received, but taking a day or two to assemble the product. Once a consumer is prepared to wait 2 days for their order, they may be willing to wait a few days longer. However, these are assemble to order opportunities, not make to order opportunities. If some customization is performed on the item (such as monograming or configuration options), this does not change the fact that this is assemble to order. Online purchases do not increase the market for build to stock item much more than what they have always been.

Conclusion

While some companies may think this creates opportunities to move to make to order, in fact its hard to see how it does. Make to order means that procurement orders are sent out when the order is received. However, this produces too long of an overall lead time unless the product is truly customized. However, the opportunities for assemble to order are clearly increasing and this will mean more forecasting at the assembly or component level than at the finished product. The needs for forecasting will be just as great, just at a different level in the bill of material.

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