The customer order decoupling point determines the position of order status in the supply chain.

Decoupling point

Decoupling point는 주문정보를 생산지시로 변환시키는 지점을 의미합니다.
제조방식에 따라 그 포인트(CODP: Customer order decoupling point) 가 상이한 것을 볼 수 있습니다. 재고(Inventory)는 주문의 Decoupling의 지점을 가지고 갑니다.

 CODP 이전은 Forecast, 이후는 Order가 들어간다고 생각 하시면 됩니다.
예를들어 MTS방식에서 보면 Inventory에서 주문을 Consume하는 개념이니 Decoupling이 재고부문에서 일어나겠지요. ATO, MTO의 경우에도 동일한 개념에서 확장하시면 되겠습니다.

A key factor that affects the design and management of a value chain is the position of the customer order decoupling point; some products are produced to order (e.g. configured to particular customer needs) while others are produced to stock (typically standard products). The customer order decoupling point (CODP) identifies the point in the material flow where the product is linked to a specific customer.
In order to compete successfully, operations in any type of firm need to be strategically aligned to the market requirements. This concerns all aspects and operations of the value chain. The customer order decoupling point (CODP) is gaining attention as an important factor in the design and management of manufacturing operations as well as supply chains. The CODP is the point in the material flow where the product is tied to a specific customer order; the basic choices being make-to-stock, assemble-to-order, make-to-order, and engineer-to order.
As a rule, the CODP coincides with the most important stock point, from where the customer order process starts. From the value chain perspective, there is typically one dominant CODP along the material flow of the value chain. From a company perspective, the CODP can be positioned inside their manufacturing operations or it can be positioned at the suppliers (first tier or even further upstream in the value chain), at the interface with the supplier (raw material inventory), at the border towards the customers (at some finished goods inventory), or even further downstream in the supply chain.
 
The CODP is traditionally defined as the point in the value chain for a product, where the product is linked to a specific customer order. Different manufacturing situations such as make-to-stock (MTS), assemble-to-order (ATO), make-to-order (MTO) and engineer-to-order (ETO) all relate to different positions of the CODP.


A key aspect of the value perception for the manufacturer is the profit margin of the products sold to the market. A low margin corresponds to a competitive market place with many competitors, which is common for mature products that typically are produced to stock. On the other hand, a high margin is more typical for products that are customized or where the product range is wide, offering the customer a wider choice.
 
The CODP has a key role in developing and managing value chains in that value chain operations upstream the CODP perceive value differently than those downstream the CODP. As a consequence, the two parts around the CODP should be designed and managed differently in order to support the value creation at each respective stage. These results are generally applicable to value chain operations. For firms where there is only one type of decoupling situation, i.e. only MTO or only MTS, the firm can apply a single approach for the value chain. However, most firms tend to have a mix of MTO and MTS products, wherefore different approaches have to be applied for different parts of the firm. Also, in ATO situations the two types of approaches need to be applied to different parts of the value chain for a single product line.

The fact that the entire value chain is not aligned towards one goal (i.e. the competitive priorities of the ultimate consumer) is not a dilemma per se. The important issue is to fit the approach to the task of each respective material flow – both upstream and downstream the CODP.

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The customer order decoupling point determines the position of order status in the supply chain.

The customer order decoupling point determines the position of order status in the supply chain.

Highlights

A decision model of CODP in LSSC based on the insertion order scheduling is analyzed.

A multi-objective model considering capacity and time factors is proposed.

The effects of new order parameters on the CODP decision are investigated.

Unexpected conclusions and management insights are found.

Abstract

In the context of mass customization logistics service, we explore how a new inserted order affects the logistics service integrator (LSIs) decision regarding the location of the customer order decoupling point (CODP). Considering a two-echelon logistics service supply chain (LSSC), consisting of an LSI and several functional logistics service providers (FLSPs), we establish a CODP decision model based on time scheduling with capacity and time constraints. The optimization objectives of the model include minimizing the average unit operation cost for the LSI and maximizing the average satisfaction of the FLSPs. In order to verify the viability of our model, with specific data derived from the daily scheduling operation records of the Baoyun Logistics Company, we perform a numerical analysis using genetic algorithms based on multiple datasets where a single parameter is changed each time while the other parameters remain unchanged. The results show that the CODP moves earlier with the increase of the volume of new order. Furthermore, as the new order's similarity coefficient increases or the new order's completion time requirement is relaxed, the CODP moves later in the LSSC. With a given similarity coefficient or time patience variance related to the new order, the maximum insertion volume decreases and the CODP moves later in the LSSC.

Keywords

Logistics service supply chain

Mass customization logistics service

Customer order decoupling point

Capacity and time constraints

Order insertion scheduling

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© 2017 Elsevier Inc.

What is the customer order decoupling point?

The CODP is traditionally defined as the point in the value chain for a product, where the product is linked to a specific customer order. Sometimes the CODP is called the order penetration point [1], [2].

What is decoupling point in SCM?

The Material Decoupling Point (MDP) is generally considered to be the point in the supply chain's materials pipeline where push meets pull. Typically, products are pushed to the MDP, and pulled from it. The MDP often coincides with a significant stock-holding point such as a warehouse or distribution hub.

Where is the customer order decoupling point justify your answer?

Customer order decoupling points in the internal supply network. The decoupling point defines the boundary between replenishment of standard components and order fulfillment. Physically the CODP is an inventory buffer which is replenished based on a prediction of future demand.

What does selection of decoupling points determine?

Selection of decoupling points is a strategic decision that determines customer lead times and can greatly impact inventory investment. The closer the point is to the customer, the quicker they can be served.