Order penetration point in paper supply chains

The order penetration point (OPP) of a material flow is the place where a p roduct is assigned to a particular customer. I Before this point the materi al flow is controlled by forecasts and plans, and afterwards as deliveries according to customer orders. This article studies how different OPPs affec t the capital bound up in the supply chain. The underlying sample is based on a quantitative study of the OPPs and supply chain inventories at three f ine paper mills located in Europe. The general conclusion is that the contr ol principles applied and the order types used are generating more capitol- tied-in-inventories in the various stocks and buffers of the supply chain t han one would expect if simpler principles and fewer order types were used. One of the cases supports this finding. Unlike the design-to-order industr y and many consumer goods industries, in which the OPP is strictly defined by the nature of the process, the paper industry uses several OPPs right fr om the paper machine throughout each echelon of the supply chain up to the market depots. This article provides guidelines and suggestions as to how O PPs should be managed to improve the flow of materials.