Multi-Modal Order Fulfillment: Concept and Application

Empirical work on order fulfillment strategies suggests that building products to customer order is an important driver of organizational value. Similarly, the experimental literature indicates that customers derive value from customization. The modeling literature provides a more equivocal perspective, suggesting that a combination of build-to-forecast (BTF) and build-to-order (BTO) fulfillment modalities may lead to the best system-wide outcomes. Using an industry studies approach, we build on these theoretical perspectives to examine order fulfillment at a global automotive producer. Interviews with key decision makers and a statistical analysis of 48,534 individual vehicle sales enable the development of four propositions on the organizational and profitability implications of the firm's evolution in order fulfillment strategy. Our analyses indicate that building products to customer order is a source of higher unit profit margin. The build-to-order process also exposes fault lines and generates opportunities for operational improvement, both in the order-to-delivery system and in the broader organization. Build-to-order evolves to provide the firm with insight on customers’ willingness to trade delivery lead times against their product attribute preferences. This information allows build-to-order to incorporate a demand management role, for example, by shifting custom orders to later time periods to accommodate excess demand. These changes lay the groundwork for a multi-modal order fulfillment strategy that no longer distinguishes between the order source or production modality. This strategy enhances customer responsiveness, while addressing manufacturing capacity management imperatives. Our findings open new avenues for theory building, as well as experimental, empirical and modeling research in order fulfillment.