In the world of logistics and supply chain management, timing is everything. From when a product is designed to when it reaches the customer, every stage introduces trade-offs between efficiency, flexibility and responsiveness. A central concept that helps manage these trade-offs is the Customer Order Decoupling Point (CODP), the point in the supply chain where a product is assigned to a specific customer order.
By identifying the CODP, logistics professionals can design supply chains that balance forecast-driven efficiency with order-driven responsiveness.
What Is the Customer Order Decoupling Point?
The CODP is the moment in a supply chain where activities shift from push (forecast-based) to pull (demand-driven). Before the CODP, products are made or moved based on anticipated demand. After the CODP, products are customized, finished, or delivered in response to specific customer orders. The position of the CODP has a major influence on inventory strategy, lead times and the agility of the supply chain.
Common Decoupling Point Strategies
Different supply chains adopt different CODP positions depending on the product, market requirements and competitive strategy. Some typical configurations include:
Make to Stock (MTS)
- CODP is at the finished goods level.
- Products are produced and stocked in anticipation of demand.
- Suited for stable, high-volume products (e.g., bottled drinks, consumer packaged goods).
- Emphasizes low lead times and cost-efficiency.
Assemble to Order (ATO)
- CODP is at the assembly stage.
- Components are stocked, and final assembly begins after an order is placed.
- Suitable for modular products (e.g., computers, machinery).
- Balances variety with manageable inventory levels.
Make to Order (MTO)
- CODP is at the production stage.
- Manufacturing begins only after an order is received.
- Ideal for customized or low-volume items (e.g., industrial equipment, tailored clothing).
- Reduces finished goods inventory but increases lead time.
Engineer to Order (ETO)
- CODP is at the design stage.
- Entire product is designed and built after an order.
- Suitable for highly complex or unique products (e.g., ships, infrastructure projects).
- Longest lead times, but maximum customization.
Implications for Logistics Management
The location of the CODP affects logistics operations in several ways:
- Inventory placement: Earlier CODPs require holding more finished goods, later CODPs shift inventory upstream to components or raw materials.
- Lead times: Earlier CODPs support short delivery times, later CODPs require customers to wait longer.
- Forecasting needs: Earlier CODPs demand accurate demand forecasting, later CODPs reduce forecast dependency but increase production complexity.
- Customization: Later CODPs support greater product customization and responsiveness to unique customer needs.
Choosing the wrong CODP can lead to overstock, understock, poor service levels or inefficiency. Aligning CODP strategy with customer expectations and product characteristics is essential for achieving desireable outcomes.
Why This Matters in the LOBRA Context
In the LOBRA project, we explore how different logistics and supply chain strategies, including CODP placement, influence transport corridors, terminal functions and system responsiveness.
For example:
- MTS strategies may benefit from centralized warehouses and high-volume transport routes.
- ATO and MTO strategies often require more flexible transport networks and buffer terminals for components.
- ETO models demand highly integrated planning systems and supplier coordination.
Understanding where the CODP lies helps logistics planners design smarter flows, adapt to market changes and reduce unnecessary inventory movement.
As we develop digital planning tools and transport models under the LOBRA framework, integrating CODP insights ensures that supply chains are not only efficient but also agile, resilient and demand-responsive!
Project number: 404191