Fulfillment planning is fundamental in any commerce for the following two reasons:

1.  Planning in commerce, as in any other planning problem, begins with a forecast. Without fail, actual demand does not match forecasts. The farther the actual demand varies from the forecasts, the worse the original plans. The worse the original plans, the more costly the operations and greater the lost sales opportunity. Exacerbating the problem of generating accurate forecasts is the volatility of demand found in e-commerce. Given the inevitable discrepancy between the actual and forecasted demand, how can the impact on profitability be reduced? The answer is fulfillment planning that optimizes real demand against forecasted demand.

2.  The next problem is that of real time performance. Until recently, it has been typical of vendors to take orders over the phone and then take minutes to hours to call back with a ship-date promise. Today the buyer expects to be given multiple choices of realistic, specific delivery date promises while he is still engaged in the buying process, preferably before having to actually place an order. Hence the requirement to quote a promise has now shrunk from minutes and hours, to seconds and milliseconds. Complicating the matter is the fact that fulfillment planning has to consider the same factors that are considered in supply chain planning (materials, capacity, transportation, storage, distribution, production, etc.) - only it has to do it much faster, making the optimization problem very difficult to solve.

Even with tight integration and real time visibility across supply chains, the majority of today's vendors (for example, Amazon.com) provide vague promises of the kinds "usually ships ..." during browsing. Every order taken is given a vague promise based on historical vs. actual availability, which the vendor has no idea if he can meet. Once or twice a day, the vendor batches the orders received thus far, and plans them through a back-end supply chain planning system that runs for several hours, and plans the fulfillment for every order. The result is that a significant portion of ship-date promises made earlier during the day are no longer valid and, consequently, the vendor has to follow up with corrective emails or phone calls. In some cases, such as configure-to-order environments exemplified by Dell and Compaq, the consumer is not given a ship-date promise at the time of order, let alone during browsing. The vendor typically follows up with a promise several days after the order has been placed.

Fulfillment planning is the ability to do supply chain planning for actual (versus forecasted) demand in real time (within seconds to milliseconds).

Fulfillment planning includes:

order promising dynamic pricing transportation management distribution planning warehouse management inventory management production planning

Fulfillment planning bridges the "intelligent real time decision support gap" between front-end order management systems and back-end batch-processing supply chain planning systems. In the end, it is about making the most cost-effective choices in real time, at various decision points across the entire demand-supply chain.

Real Time Fulfillment Planning optimizes the buying and selling process. It occurs at the point where real demand has to be satisfied from an operational plan that was generated from forecasted demand as well as material and capacity constraints. The goal is to give the customer maximum flexibility in formulating the order and its delivery, and satisfy the order quickly, fully, and accurately while minimizing the cost to the vendor. Ultimately, fulfillment planning determines how, when, and where an order will be fulfilled.

A customer may prefer to have five different line items shipped individually as early as possible or, they may prefer to have all five items arrive together as early as possible. Conversely, they may feel that the cheapest possible source and shipping of the products is preferable over an earlier ship date. They may want to restrict the maximum number of shipments they are willing to accept, or specify the days on which they can receive them. In fact, it may truly set apart a vendor from its competition, if by default for every quote request, their site provides three different delivery, availability and pricing options (for example, as early as possible, as late to a date as possible and as cheap as possible).

Supply chain constraints come in many varieties. For example, a supplier may prefer to ship particular products in minimums of certain quantities, a carrier may offer discounts if certain volumes are shipped through them, a warehouse may only fill orders less than a certain quantity, or a click-and-mortar website may require that orders are shipped from their brick-and-mortar retail stores that are closest geographically to their customer.

Regardless, giving the customer the choice while obeying constraints on transit times, shipping capacity, warehouse capacity, assembly capacity, gift wrapping capacity, and supplier capacity yields higher customer satisfaction as long as you can process the request in the few seconds that a customer is willing to wait before they click to a competitor's site.