Fundamental behaviour of virtual-build-to-order systems

Virtual-build-to-order (VBTO) is an emerging order fulfilment system within the automotive sector that is intended to improve fultilment performance by taking advantage of integrated information systems. The primary innovation in VBTO systems is the ability to make available all unsold products that are in the production pipeline to all customers. In a conventional system the pipeline is inaccessible and a customer can be fulfilled by a product from stock or having a product built-to-order (BTO), whereas in a VBTO system a customer can be fulfilled by a product from stock, by being allocated a product in the pipeline, or by a BTO product. Simulation is used to investigate and profile the fundamental behaviour of the basic VBTO system and to compare it to a conventional system. A predictive relationship is identified, between the proportions of customers fulfilled through each mechanism and the ratio of product variety/pipeline length. The simulations reveal that a VBTO system exhibits inherent behaviour that alters the stock mix and levels, leading to stock levels being higher than in an equivalent conventional system at certain variety/pipeline ratios. The results have implications for the design and management of order fulfilment systems in sectors such as automotive where VBTO is a viable operational model. (c) 2006 Elsevier B.V. All rights reserved.