A project management view of order fulfilment

In Canada, many nutraceutical contract manufacturers offer OEM and private label service of Natural health products, Vitamins and Dietary supplements. Contract manufacturing, by nature, is featured by its uncertainty and unbalanced working orders. A rough production schedule/plan could serve as a good visualization tool to inform relevant team members and alert management if any crisis is emerging. This article is to analyze the potential reasons of the lack of production schedule/plan and common challenges to contract manufacturers. And it’s proposed to solve/relieve the challenges by a project management view of order fulfillment.

Keywords: contract manufacturer, natural health products, dietary supplements, project management, challenges

1. Contract manufacturing

In Canada, many nutraceutical contract manufacturers offer OEM and private label service of Natural health products, Vitamins and Dietary supplements. Contract manufacturing, by nature, is featured by its uncertainty and unbalanced working orders. As a result, an organization’s ability to predict and react to such situations is critical to its production efficiency, revenue, profit, and even survival. A rough production schedule/plan could serve as a good visualization tool to inform relevant team members and alert management if any crisis is emerging. On the other end, a properly-organized production plan is also a powerful weapon to secure OEM customers, both established and developing. A stronger customer-vendor bond would form if the vendor can keep fulfilling orders in a fast-paced and timely fashion. Failing to meet order delivery deadlines could result in damaging of brand image, thus order fulfillment rate is a huge factor (besides pricing) in growing contract manufacturing business.

2. Common challenges

Common challenges to contract manufacturers include small orders, rush orders, high-volume orders in a short time period, as well as delays in upstream vendors (packaging material preparation, for example). The average lead time for Canadian contract manufacturers in the diretary supplement industry turns out to be 12-14 weeks, with some longer extremes. Most facilities do not formulate a solid fulfillment timeline due to great uncertainty in material acquisition, quality testing, and available production capacity. It is not an unusual thing that in the presence of rush orders, a decision is made to allocate limited resources without considering the negative impacts it may have on other orders/customers. This is one of the direct consequences of not having a well-established production plan in the first place. The lack of production schedule/plan is rooted in the common fulfillment mode of action. With confirmed sales order as a starting cue (with a set promised date, agreed by the customer), the internal purchasing/logistic/ quality/production departments would start the workflow, only passively. Unlike mass-produced standardized commodities, customized products with unique features (could be ingredients, packaging, etc.) are produced, generating purchasing demands. However, purchasing and logistics would acquire the materials without considering much about the promised date so potential delay is possible. Furthermore, production can schedule only if all materials (raw materials and packaging materials) have arrived thus a time gap is inevitably created. In lots of cases, a single missing component could halt the whole order. Extra time/energy is also required to search for “complete” orders. The salesperson usually have no control in the hole process so ETA (estimated time of arrival) cannot be easily assured to the client. In extreme cases where a problem arises in the purchasing/manufacturing process but the salesperson is not notified, client relationship could be compromised.

3. Project management view

The above challenged could be solved/relieved by a project management view of order fulfillment.

• Each order is individually initiated/tracked, pro-actively.

• The project starts during the quotation approval stage, not when sales order gets placed. To meet clients’ target date, realistic time points are mapped BEFORE the order starts.

• A project manager would determine critical time points based on on-hand material, upstream vendor timeline, existing production schedule, and appropriate time model4. The mapped schedule must be made public to all team members (visualization preferred).

We hereby present the recommended workflow based on experience:

• At the same time as Quotation approval, Project Manager (PM) would determine the feasibility to meet the client’s target date based on current inventory, current schedule and urgency level. For critical materials, he/she may need to check with upstream vendors immediately, or judge based on historical orders. Proposed lead time should be indicated on Quotation.

• Sales Order should be issued based on today’s’ date and agreed proposed lead time.

• When batches are created, critical time points (blending, encapsulation/tableting, finished good packaging) should be clearly mapped and indicated in “Scheduled Start Time”. Such info must be made public to all team members via a shared platform

• Purchasing/QA process needs to follow the timeline. Back-up vendors are needed for critical materials. In case of difficulty in meeting the timeline, PM must be notified immediately.

• Three weeks before the scheduled start time of a certain batch, PM must check the availability of all materials pro-actively. If an extension is needed, subsequent time points should also be adjusted.

• The performance of PM will be assessed by comparing “Batch Scheduled Start Time” with “Batch Actual Start Time”. The effectiveness of such methodology could be reviewed by analyzing lead time improvement and the variance between “Promised Date” and “Actual Finish Date”.

References

[1] Maria Elena Nenni, Vincenzo Arnone, Paolo Boccardelli, Iolanda Napolitano.How to Increase the Value of the Project Management Maturity Model as a Business-Oriented Framework.

International Journal of Engineering Business Management. January 1, 2014. [2] Keely L. Croxton. The Order Fulfillment Process. The International Journal Of Logistics Management. Volume 14, Issue 1.