Turbulence Costs within Order Management

Abstract

Customer order changes, unreliable suppliers, and fluctuating demands are, among others, potential causes of turbulences within manufacturing companies. The effects of these turbulences are manifold and usually lead to inefficiencies within order management, therefore causing additional costs, so-called turbulence costs. Exemplary types of turbulence costs are overtime, underutilization, setup, downtime, and additional costs of the procurement as well as loss of sales. Increasing competitive pressure leads to lower prices and thus lower contribution margins. Hence, it is necessary to determine any additional costs according to their origin, which requires a detailed consideration of the costs caused by turbulences. This paper develops a turbulence-based approach for identifying additional costs within order management, caused, e.g. by deviations or fluctuations. The aim is a framework that enables the identification and operationalization of turbulence cost triggers and, therefore, serves as a basis for their quantification. In this paper, the procedure is presented based on the use case of a customer order change.