Published in Operations and Supply Chain Terms by MBA Skool Team
What is Order Cancellation?
Order cancellation can be defined as the act of making an order void i.e. the customer is no longer wanting an originally ordered product. A company or an individual can decide to cancel an order if they no longer see a need for that product. For e.g.- A customer may order a product from one of the ecommerce website and then after the buying process can make the order void. This means that the order no longer stands and the e-commerce website need not deliver the product.
Application in Real World
In real world this may mean a cost a to the company because many a time the company has already shipped the product by the time customer cancels the product. This means by the time customer cancels the product the company has already paid the logistic partner.
Many a time this can also lead to accumulation of inventory in the ware house or bullwhip effect. Consider a situation where a large no of customers’ orders white mobile of a particular brand. Now due to such a large no of orders the e commerce website orders the same to the particular brand. After some time let us assume that all the customers cancel the original order. Now due to this cancellation of order the ecommerce website has an accumulation of the inventory and as a result this inventory the ecommerce website’s ware house id occupied due to no fault on their part
Course of action for the Company
In this case of accumulated inventory, the e commerce website has to make sure that it takes steps to counteract any such unseen situation. For this the ecommerce website should recognize the sale after the product is delivered to the customer and the customer accepts the same. This can result in proper care of the inventory and any unforeseen situation can be avoided.
Hence, this concludes the definition of Order Cancellation along with its overview.
This article has been researched & authored by the Business Concepts Team. It has been reviewed & published by the MBA Skool Team. The content on MBA Skool has been created for educational & academic purpose only.
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