Managing stock‐outs effectively with order fulfilment systems

Abstract

Purpose

When approaching a stock‐out situation, a company should be able to actively manage the allocation of available products on the basis of customer requirements and priorities as well as contractual relationships. The purpose of this paper is to describe different order promising mechanisms and analyze how well they can contribute to the effective management of stock‐out situations.

Design/methodology/approach

The paper provides a formal description and analysis of alternative order promising mechanism applicable in make to stock systems. Numerical analysis is conducted based on the data of a pharmaceutical company.

Findings

The paper clearly points out the potential of alternative order promising mechanisms to alleviate the negative consequences associated with a temporary stock‐out situation.

Research limitations/implications

The paper does not consider implications of inventory pre‐allocation to customer classes. Further research should address the interplay between pre‐allocation and different order allocation mechanisms.

Practical implications

The results obtained from this analysis provide guidelines for manufacturers, retailers, and vendors of supply chain software on how to design and utilize order promising systems.

Originality/value

The paper provides a consistent formal approach to modelling order promising mechanisms, introduce new and innovative order promising mechanisms and provide valuable insight into their performance through numerical analysis.

Citation

Pibernik, R. (2006), "Managing stock‐outs effectively with order fulfilment systems", Journal of Manufacturing Technology Management, Vol. 17 No. 6, pp. 721-736. https://doi.org/10.1108/17410380610678765