DC Velocity - Tip Sheet 2012

[FIGURE 6] MULTI-DIMENSIONAL ALLOCATION AND ORDER PROMISING

Product

All products Desktop Laptop Notebook Small

Customer

All customers Large Medium

Supply Chain

RDC
RDC
CDC

Promising Techniques

▪ Available to promise ▪ Allocated available to promise ▪ Capable to promise ▪ Allocated capable to promise

Promising Policies

▪ As soon as possible
▪ All
▪ On time
▪ All on time
Component 1 Component 2

Strategic
Growth
MFG
RDC = regional distribution center CDC = central distribution center MFG = manufacturing
SOURCE: JDA SOFTWARE GROUP INC.

ing profitable sourcing strategies to turn unprofitable much more quickly than they have in the past.

Historically, sourcing strategies were largely based on unit price, and they were executed that way for years. Leading companies today have integrated workflows across engineering, procurement, and supply chain organizations to incorporate total-landed-cost analysis into engineering and procurement decisions. These decisions are based on a holistic view of cost, including:

• Unit price

• Transportation costs, including fuel surcharges

• Expediting costs

• Handling costs

• Inventory carrying costs

• Inventory obsolescence costs

• Duties and taxes

• Product rework and damage costs

• Customer service penalties
Furthermore, sourcing decisions have a large impact on
the cost to serve discussed earlier. Accordingly, supply chain
managers are ensuring that sourcing decisions are made
within the overall segmentation strategy for serving cus-
tomers profitably.

7. Implement differentiated allocation and order
promising

Allocation and order promising are critical areas for
implementing policies that enable segmented and prof-
itable customer service strategies. Allocation is the process
of reserving inventory and/or capacity for certain cus-
tomers or groups of customers, or for other entities, such as
sales groups or geographies. The intention is to provide
preference for certain customers based on objective criteria
such as volume, profit, and service-level agreements. Order
promising is the process of providing a date by which a
product will be delivered, with a high level of reliability.