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Book to Ship Ratio – Definition

Book To Ship Ratio Definition

The book to ship ratio refers to the proportion of the total orders shipped and billed by a company. It is a ratio that relates to demand and supply in a company, it measures the proportion or ratio of orders that a company ships for immediate delivery (which are billed). It also weighs the orders not yet shipped for delivery but already booked for future delivery.

The book to ship ratio perform certain functions such as measuring whether demand is weak or strong. It also assess the efficiency of a company in meeting and delivering orders. This ratio also quantifies the number of outstanding (pending) orders and fulfilled orders, this helps to identify problems in the supply chain and how they can be tackled.

A Little More on What is the Book To Ship Ratio

A book to ship ratio that is greater than one indicates that the company still has outstanding or pending orders. When the ratio is one, the company is efficient in the delivery of orders and a ratio less than one indicates that the company has too much goods at hand.

Quite a number of factors are responsible for each of these ratios, for instance, is a company is temporarily out of stock, orders can accumulate. A quick turnaround of a company to demand is a sign that the company is efficient while excess inventory can cause the book to ship ratio to be less than one.

The book to ship ratio can also mean book-to-bill, this ratio can be released monthly or quarterly. This ratio gives the economic outlook of a company, it is also an effective indication of rise and fall in orders and delivery. This ratio can be used in policy making.

References for Book to Ship Ratio

Academic Research on Book to Ship Ratio

A logistics and supply chain management approach to port performance measurement, Bichou, K., & Gray, R. (2004). Maritime Policy & Management, 31(1), 47-67.

Supply chain integration in vendor-managed inventory, Yao, Y., Evers, P. T., & Dresner, M. E. (2007). Decision support systems, 43(2), 663-674.

Supply chain modeling: past, present and future, Min, H., & Zhou, G. (2002). Computers & industrial engineering, 43(1-2), 231-249.

The allocation of inventory risk in a supply chain: Push, pull, and advance-purchase discount contracts, Cachon, G. P. (2004). Management Science, 50(2), 222-238.

The impact of information enrichment on the bullwhip effect in supply chains: A control engineering perspective, Dejonckheere, J., Disney, S. M., Lambrecht, M. R., & Towill, D. R. (2004). European journal of operational research, 153(3), 727-750.

An empirical analysis of the effect of supply chain disruptions on long‐run stock price performance and equity risk of the firm, Hendricks, K. B., & Singhal, V. R. (2005). Production and Operations management, 14(1), 35-52.

Inventory inaccuracy and supply chain performance: a simulation study of a retail supply chain, Fleisch, E., & Tellkamp, C. (2005). International journal of production economics, 95(3), 373-385.

Integrating the warehousing and transportation functions of the supply chain, Mason, S. J., Ribera, P. M., Farris, J. A., & Kirk, R. G. (2003).Transportation Research Part E: Logistics and Transportation Review, 39(2), 141-159.

Modeling lean, agile, and leagile supply chain strategies, Goldsby, T. J., Griffis, S. E., & Roath, A. S. (2006). Journal of business logistics, 27(1), 57-80.

The competitiveness of short sea shipping in multimodal logistics supply chains: service attributes, Paixão Casaca, A. C., & Marlow, P. B. (2005). Maritime Policy & Management, 32(4), 363-382.

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