Order Penetration Point Research Articles

Differentiation of stocks by the ABC approach in the synergy of the order penetration point of the logistics chain

This research summarizes the results of the scientific discussion about the logistic chain and its order penetration point and influences on the costs of stocks. The main goal of this article is to point out determining the order penetration point of the logistics chain and differentiation of stocks according to importance from the point of view of optimizing costs and securing liquid financial resources. The object of the research was the industrial company. In this research, methods focused on using ABC analysis and Pareto analysis. The results of this research show 5 order penetration points (OPP1-OPP5) and a Push and Pull system to manage material flows for order penetration point of the logistics chain at the customer's order point. Cost optimization was solved by classifying the stocks into categories A, B, and C which is an important fact for planning and inventory management. ABC method divided 100 types of inventories with costs €5 million into categories A, B, C. Critical types of stocks in category A represents the group of stocks 38,92,7,52,13,54,90 that were reduced. This reduction of critical stocks led to the release of funds tied up in stocks. This change has a positive effect on the financial side of the company's cash flow – financial flows.

Last‐minute coordination: Adapting to demand to support last‐mile operations

AbstractIn the highly competitive e‐commerce industry, customer‐facing warehouses are crucial as the “order penetration points” for e‐commerce last‐mile operations. This research examines how warehouses use last‐minute coordination, an unstructured mechanism, to ensure sufficient inventory at the order penetration points. Previous research has focused on structured mechanisms like contracts and inventory management systems to enhance warehouse performance. However, these mechanisms can be ineffective when faced with unforeseen local contingencies. To adjust inventory and adapt to changes in supply and/or demand, warehouses need to engage in unstructured, last‐minute coordination with other warehouses. Using coordination and loose coupling theories, we find that coordinating with many warehouses (i.e., large coordination scope) reduces the operational efficiency of individual warehouses. At the network level, we find that a centralized coordination structure improves the operational efficiency of the entire network. We also show that demand uncertainty reinforces the existing last‐minute coordination patterns, using the Separable Temporal Exponential Random Graph Model (ST‐ERGM). This research highlights the importance of last‐minute coordination and reveals its effects on both individual warehouses and the overall network.

Leagile supply chain network design through a dynamic two-phase optimization in view of order penetration point

In the contemporary world, combining the concept of agile and lean manufacturing (LM) is one of the most strategic and appealing concerns in the industrial environments. In this paper, a new Leagile structure is proposed for a supply chain. This research covers long term and mid-term horizon by designing a supply chain network up to the order penetration point (OPP) and final assembly and sale planning respectively. The problem is programmed in two phases. First, a bi-objective optimization is developed to minimize the total cost related with LM. In the second phase, the total cost and the customer service level (CSL) are considered as the agile manufacturing (AM) architecture. In the proposed model, a utility function is applied to set balance between the price and customer satisfaction. In addition, a robust credibility-based fuzzy programming (RCFP) is developed to handle uncertainty of the first phase. The proposed model and the solution method are implemented for a real industrial case study to show the applicability and usefulness of this study. According to the results, improving the customer service level can enhance the total cost of the second phase meaning that customer responsiveness price is too high for the proposed system.

Develop a Framework of strategic positioning for the order penetration point/decoupling point

Recent global challenges to appropriate implementation of manufacturing value chain, their specific product is linked to specific customer order. The order penetration point defined to value addition of manufacturing value chain. According to strategic perspective, different factors such as Market, product, and production factors are identified that affect the OPP positioning and the shifting of the OPP upstream or downstream in the manufacturing value chain. The major factors such as demand volume and volatility and their relationship between delivery lead time and production lead time and logistic service integration have identified. Comparison of manufacturing strategies must be generate between pre-OPP operations (i.e. upstream; forecast-driven) and post-OPP operations (i.e. downstream, customer order-driven), which has fundamental differences examine. And finally develop a framework to the order penetrations point or decoupling point which has affected in different factors and strategic decision categories to such as production planning and control.

Production line performance analysis within a MTS/MTO manufacturing framework: a queueing theory approach

Abstract Paper aims Mixing the Make-To-Stock (MTS) and Make-To-Order (MTO) strategies to benefit from the both manufacturing systems in an environment with impatient customers. Originality This is the first research article which uses the queuing theory to find the best place of the Order Penetration Point (OPP) in a production line with impatient customers. Research method Two scenarios are studied in this paper. 1- Semi-finished products are produced and stored in a buffer. No semi-finished product will be completed until a specific order comes to the system. This strategy leads to idle cost, but there is savings obtained in terms of eliminating investment in finished goods inventory and its holding cost. We can calculate the total cost of the system and find the optimal machine for the buffer of semi-finished products. 2- We use both MTS and MTO for completing the semi-finished products. When there is no customer in the system, semi-finished products are completed based on the MTS strategy and finished products are sent to a warehouse. But, when an order comes in for customization, a semi-finished product get assigned to that order and after finishing the current MTS job on each machine, this MTO job starts to complete the semi-finished product. To calculate system performance indexes, we use the Matrix Geometric Method (MGM) after modeling the systems with queuing theory concepts. Main findings Numerical examples show the convexity of total cost in terms of product completion percentage and number of customization lines after the OPP. Also, increasing the production rate leads to higher expected number of semi-finished products in the buffer. Implications for theory and practice Positioning OPP in manufacturing systems to compare different production strategies (MTS/MTO) has not been widely studied yet. This paper shows how manufacturing companies can apply the OPP to obtain benefits from both MTS and MTO strategies according to various cost parameters of the production lines. Using queuing theory concepts to model the problem under study helps to consider the external factors such as impatient customers and demand arrival uncertainty that can affect the performance measures of the system besides the internal factors such as production rate and inventory related costs. The idea of expanding the production line after a specific station and have more customization lines to improve customer satisfaction is studied in this paper as well.

3D printing the future: scenarios for supply chains reviewed

PurposeThe purpose of this paper is to evaluate the existing scenarios for 3D printing (3DP) in order to identify the “white space” where future opportunities have not been proposed or developed to date. Based around aspects of order penetration points, geographical scope and type of manufacturing, these gaps are identified.Design/methodology/approachA structured literature review has been carried out on both academic and trade publications. As of the end of May 2016, this identified 128 relevant articles containing 201 future scenarios. Coding these against aspects of existing manufacturing and supply chain theory has led to the development of a framework to identify “white space” in the existing thinking.FindingsThe coding shows that existing future scenarios are particularly concentrated on job shop applications and pull-based supply chain processes, although there are fewer constraints on geographical scope. Five distinct areas of “white space” are proposed, reflecting various opportunities for future 3DP supply chain development.Research limitations/implicationsBeing a structured literature review, there are potentially articles not identified through the search criteria used. The nature of the findings is also dependent upon the coding criteria selected. However, these are theoretically derived and reflect important aspect of strategic supply chain management.Practical implicationsPractitioners may wish to explore the development of business models within the “white space” areas.Originality/valueCurrently, existing future 3DP scenarios are scattered over a wide, multi-disciplinary literature base. By providing a consolidated view of these scenarios, it is possible to identify gaps in current thinking. These gaps are multi-disciplinary in nature and represent opportunities for both academics and practitioners to exploit.

Extending customer order penetration concepts to engineering designs

PurposeThe customer order decoupling point (CODP) concept addresses the issue of customer engagement in the manufacturing process. This has traditionally been applied to material flows, but has more recently been applied to engineering activities. This later subject becomes of particular importance to companies operating in “engineer-to-order” (ETO) supply chains, where each order is potentially unique. Existing conceptualisations of ETO are too generic for practical purposes, so there is a need to better understand order penetration in the context of engineering activities, especially design. Hence, the purpose of this paper is to address the question “how do customer penetration concepts apply to engineering design activities?”Design/methodology/approachA collaborative form of inquiry is adopted, whereby academics and practitioners co-operated to develop a conceptual framework. Within this overarching research design, a focus group of senior practitioners and multiple case studies principally from complex civil and structural engineering as well as scientific equipment projects are used to explore the framework.FindingsThe framework results in a classification of nine potential engineering subclasses, and insight is given into order penetration points, major uncertainties and enablers via the case studies. Focus group findings indicate that different managerial approaches are needed across subclasses.Practical implicationsThe findings give insight for companies that engage directly with customers on a one-to-one basis, outlining the extent of customer penetration in engineering activities, associated operational strategies and choices regarding the co-creation of products with customers. Care should be taken in generalising beyond the sectors addressed in the study.Originality/valueThe paper refines the definition of the ETO concept, and gives a more complete understanding of customer penetration concepts. It provides a comprehensive reconceptualization of the ETO category, supported by exploratory empirical research.

The role of uncertainty in supply chains under dynamic modeling

Article history: Received April 4 2016 Received in Revised Format June 16 2016 Accepted June 27 2016 Available online June 27 2016 The uncertainty in the supply chains (SCs) for manufacturing and services firms is going to be, over the coming decades, more important for the companies that are called to compete in a new globalized economy. Risky situations for manufacturing are considered in trying to individuate the optimal positioning of the order penetration point (OPP). It aims at defining the best level of information of the client’s order going back through the several supply chain (SC) phases, i.e. engineering, procurement, production and distribution. This work aims at defining a system dynamics model to assess competitiveness coming from the positioning of the order in different SC locations. A Taguchi analysis has been implemented to create a decision map for identifying possible strategic decisions under different scenarios and with alternatives for order location in the SC levels. Centralized and decentralized strategies for SC integration are discussed. In the model proposed, the location of OPP is influenced by the demand variation, production time, stock-outs and stock amount. Results of this research are as follows: (i) customer-oriented strategies are preferable under high volatility of demand, (ii) production-focused strategies are suggested when the probability of stock-outs is high, (iii) no specific location is preferable if a centralized control architecture is implemented, (iv) centralization requires cooperation among partners to achieve the SC optimum point, (v) the producer must not prefer the OPP location at the Retailer level when the general strategy is focused on a decentralized approach. © 2017 Growing Science Ltd. All rights reserved

Customer-oriented Production System for Supplier Companies in CTO

Configure-to-Order (CTO) is one of the common market interaction strategies for suppliers. In CTO, the customer configures the product where bill of materials, drawings and working plans are elaborated automatically. Traditionally, the Order Penetration Point (OPP) is set too early which induces high costs of stock and long delivery times. For assuring short delivery times and low levels of stock, the supply chain should be triggered according to the customer demand.The paper presents an applied research project performed by a German medium-sized windows and doors production company, where a new customer oriented production system was developed and implemented. The main objective of the holistic production system is to allow a Just-in-Time (JIT) production of windows and doors with short operating costs. It is based on the CONstant Work In Progress (CONWIP) approach needed for assuring short delivery times. More in detail, it presents an approach for medium and short-term production planning needed for triggering JIT the first and second-tier supply chain. As a result, the paper presents design guidelines for production systems with short delivery times in the CTO-market interaction strategy.

행정 프로세스 확장에 따른 공공 데이터 융합 관리 방안

최근 이슈가 되고 있는 '빅 데이터'의 사회적 잠재성을 정부의 대국민 서비스와 연계지어, 정부의 행정서비스 혁신에 빅데이터의 사상이 기여할 수 있는 구체적 방안을 모색하였다. 특히 주민 생활공간과 정부 업무공간의 이원화가 초래한 정부 행정서비스의 본원적 한계를 행정 프로세스의 외부 확장을 통해 극복할 수 있는 방안을 제시하였다. 또한 이로부터 제기될 수밖에 없는 선결과제, 즉 주민 공간의 각종 사물데이터를 어떻게 행정 데이터 영역에 편입할 것인가에 대한 논의를 포함하였다. 이로써 행정서비스 영역에 대한 빅데이터 기반 조성이 신고와 신청에 의존하던 수동적 행정서비스를 선제적으로 바꿔내는데 어떤 역할을 할 수 있는지에 대한 시사점을 제시하였다. This study explores the possibility of innovative government's administrative services to the public by reflecting the social implications of 'Big Data'. In particular, the idea of OPP (Order Penetration Point) and SOP (Service Offering Point) as a management scheme for the extension of administrative processes into the resident's living space is proposed to overcome the inherent limits of e-government service quality, the root cause of which is believed in the segregation of two spaces - the resident's living space and the government's offices. Furthermore, a discussion is made on how to integrate sensor data from the resident's living space with traditional administrative database, which is a new challenge in the course of synchronizing the two spaces. The implications on the process extension are also provided centering around the shift from reactive to proactive services.

Analysis of the order recovery point location in the supply chain

The order penetration point (OPP) determines the point at which the customer enters the supply chain (SC) with their individual product-related preferences. The OPP therefore separates the demand-driven parts from customer order-driven parts in the SC. Another concept - the order recovery point (ORP) - is also frequently used in practice to determine the last stage at which the customer's individual preferences can be taken into account. Therefore the ORP determines the stage where the customer leaves the SC. This paper introduces the ORP concept and investigates the issue of how to determine the ORP's location in the SC. We analyse the factors which influence the ORP location and propose a formula for its location. The results of this study can be applied as a strategic decision-making support of the ORP location determination and provide deeper insights into SC efficiency and agility from the point of view of ORP location.

A Queueing-Game Model for Making Decisions About Order Penetration Point in Supply Chain in Competitive Environment

This study is dedicated to Order Penetration Point (OPP) strategic decision making which is the boundary between Make-To-Order (MTO) and Make-To-Stock (MTS) policies. This paper considers two competing supply chains in which a manufacturer produces semi-finished items on a MTS basis for a retailer that will customize the items on a MTO basis. The two-echelon supply chain offers multi-product to a market comprised of homogenous customers who have different preferences and willingness to pay. The retailer wishes to determine the optimal OPP, the optimal semi-finished goods buffer size, and the price of the products. Moreover, the authors consider both integrated scenario (shared capacity model) and competition scenario (Stackelberg queueing-game model) in this paper. A matrix geometric method is utilized to evaluate various performance measures for this system and then, optimal solutions are obtained by enumeration techniques. The suggested queueing approach is based on a new perspective between the operation and marketing functions which captures the interactions between several factors including inventory level, price, OPP, and delivery lead time. Finally, parameter sensitivity analyses are carried out and the effect of demand on the profit function, the effect of prices ratio on completion rates ratio and buffer sizes ratio and the variations of profit function for different prices, completion percents, and buffer sizes are examined in both scenarios.

Order Penetration Point: Just a Stock within Production?

Nowadays, for customers the logistical performance of industrial companies is as important as the price and quality when buying decisions have to be made. It can be observed that considering the KPIs of logistical performance as quality figures, similar to the product quality, becomes quite popular within national and international markets. Two logistical performance key figures that can be pointed out in that context are short lead times and high schedule reliability. The delivery times demanded by markets often are shorter than the realizable lead times of products or the replenishment time of raw materials or purchased parts. In order to deliver the products in time, companies have the opportunity to implement so called order penetration point (OPP) within their productions. The OPP specifies the point within a production which connects upstream processes linked with work orders and downstream processes link with costumer orders. The OPP is often built up as a stock of unfinished goods. Currently companies position their OPP only with the goal to satisfy the demand of short lead times set by the market. Other logistical targets such as a low work-in-process (WIP), high schedule reliability or a high utilization are usually not taken into account. Hence, due to the complexity of positioning the OPP companies underestimate the logistical potentials that can be achieved by positioning the OPP optimally. In this publication the fundamental determining factors which both influence the position of the OPP and are influenced by the selected position of the OPP are presented. In particular the dependencies between the four logistical targets, lead time, WIP, schedule reliability and the grade of utilization, and the position of the OPP are discussed. Exemplarily the correlation between the position of OPP and the schedule adherence at the end of the supply chain are presented. It can be assumed that the schedule adherence increases by moving the OPP towards the end of the supply chain. Possible reasons that explain this particular effect, like the reduction of lead time variation, will be discussed in detail.

An integrated operations-marketing perspective for making decisions about order penetration point in multi-product supply chain: a queuing approach

This study is dedicated to strategic decision-making regarding order penetration point (OPP), which is the boundary between make-to-order (MTO) and make-to-stock (MTS) policies. This paper considers a supply chain in which a manufacturer produces semi-finished items on an MTS basis for a retailer that will customise the items based on MTO policy. This two-echelon supply chain offers different products to a market comprised of homogenous customers who have different preferences and willingness to pay. The retailer wishes to determine the optimal OPP, the optimal semi-finished goods buffer size, and the price of the products with assumption of price sensitive demand function. Moreover, we consider both shared and unshared capacity models in this paper. A matrix geometric method is utilised to evaluate various performance measures for this system, and then, optimal solutions are obtained by enumeration techniques. The suggested queuing approach is based on a new perspective between the operations and marketing functions which captures the interactions between several factors including inventory level, product pricing, OPP, and delivery lead time. Finally, parameter sensitivity analyses are carried out and the effect of demand on the profit function, the effect of prices ratio on completion rates ratio and buffer sizes ratio and the variations of profit function for different prices, completion percents, and buffer sizes are examined.

A framework to engineer production control strategies and its application in electronics manufacturing

One of the most challenging tasks of companies with complex and discrete production systems is to determine an appropriate production control strategy (PCS). The PCS is crucial, as it influences inventory, costs, and service. We propose a framework to address the most important questions of PCS engineering: limiting work in process, positioning the order penetration point (OPP), and coping with demand uncertainty upstream the OPP. Thereby, uncertain advance demand information in the form of forecasts is considered and desirable characteristics of push and pull strategies are combined. A serial manufacturing system with multiple products, variable processing times, and uncertain advance demand information is examined. The model is formulated as a queuing network model and solved numerically by discrete-event simulation. The framework and a resulting hybrid control strategy are applied to a case study from electronics manufacturing, where a significant improvement potential is identified.

A queuing approach for making decisions about order penetration point in multiechelon supply chains

This study is dedicated to order penetration point (OPP) strategic decision making which is the boundary between make-to-order (MTO) and make-to-stock (MTS) policies. A multiproduct multiechelon production supply chain is considered where the first production stage manufactures semifinished products based on an MTS policy to supply the second production stage which operates on the MTO policy. The producer desires to find the optimal fraction of processing time fulfilled by supplier and optimal semifinished products buffer capacity in OPP. To calculate system performance indexes, the matrix geometric method is employed. Afterward, optimal solutions are obtained by enumeration and direct search techniques. Moreover, the system behavior is analyzed by the numerical example. It is shown that system total cost is a concave function of increasing completed percentage in first production stage. According to the total cost function elements, managers desire to locate OPP where to balance the order fulfillment delay cost, holding cost and the cost of disposing unsuitable items. Finally, the impact of different amounts of storage capacity on OPP and total cost are analyzed. Also, the manner of expected numbers of unsuitable products, semifinished products, and expected order completion delay are analyzed versus various quantities of storage capacity and production rate.

New concepts for demand-supply chain synchronisation

This paper examines demand-supply chain synchronisation within demand and supply uncertainty and increased speed requirements. The best-known synchronisation concept, the Value Offering Point – Order Penetration Point, seems to have some limitations in this kind of environment. First, the concept focuses on certain demand information and ignores the utilisation of uncertain demand information and the possibilities and risks related to it. Secondly, the concept does not take into account supply information and its utilisation. Due to these limitations, two new synchronisation concepts were created: the Demand Visibility Point – Demand Penetration Point and the Supply Visibility Point – Supply Information Penetration Point.

Decision Model Research of Production Model Based on Fuzzy Theory

This paper is a new mode of production decision model based on fuzzy theory. The decision model was a combination of qualitative and quantitative analysis, Firstly, according to expert assessment method to establish fuzzy matrix, Application of the paired comparison method to establish the weight, Then considering the combined effects of factors of business costs to build mathematical decision model of order penetration point, Calculate the optimal inventory point of a variety of products in line with order penetration point, through the location of the inventory point to determine the mode of production. The case shown that the decision model can help companies determine which kind of production model can be used, Make-to-order, Make-to stock or Hybrid.

Manufacturing and services: From mass production to mass customization

Manufacturing and services constitute two of the five sectors of every country’s economy; depending on the maturity of the economy, they are — in terms of employment — typically the two largest sectors. The outputs or products of an economy can also be divided into goods products (due to manufacturing, construction, agriculture and mining) and services products. To date, the goods and services products have, for the most part, been mass produced; it is the premise of this paper that recent technological advances — including flexible manufacturing, cloud computing, nanotechnology and smart sensing — can better enable the transformation from mass production to mass customization. We regard mass customization as the simultaneous and real time management of supply and demand chains, based on a taxonomy that can be defined in terms of its underpinning component and management foci. From a components perspective, we first consider the value chain of supplier, manufacturer, assembler, retailer, and customer, and then develop a consistent set of definitions for supply and demand chains based on the location of the customer order penetration point. From a management perspective, we classify the methods that are employed in the management of these chains, based on whether supply and/or demand are flexible or fixed. Interestingly, our management taxonomy highlights a very critical research area at which both supply and demand are flexible, thus manageable. Simultaneous management of supply and demand chains sets the stage for mass customization which is concerned with meeting the needs of an individualized customer market. Simultaneous and real time management of supply and demand chains set the stage for real time mass customization (e.g., wherein a tailor first laser scans an individual’s upper torso and then delivers a uniquely fitted jacket within a reasonable period, while the individual is waiting). The benefits of real time mass customization cannot be over-stated as goods and services become indistinguishable and are co-produced — as “servgoods” — in real time, resulting in an overwhelming economic advantage.

Order partitioning and Order Penetration Point location in hybrid Make-To-Stock/Make-To-Order production contexts

Hybrid Make-To-Stock (MTS)/Make-To-Order (MTO) is one of the product delivery strategies which have recently attracted practitioners’ and academicians’ interest to meet requirements of today competitive environment. Two important decisions involved in hybrid MTS/MTO context are order partitioning and determining Order Penetration Point (OPP) location. In this paper, a model is developed to first decide on which product is manufactured upon MTS, which one upon MTO and which one upon hybrid strategy. Then, a fuzzy analytic network process (ANP) is utilized to locate the OPP for the products which are decided to be manufactured upon hybrid strategy. Finally, a real industrial case study is reported to show applicability of the proposed model.