Chapter 5 Order Processing

Learning objective Importance of Order Processing Activities in Order Processing Factors Affecting Order-Processing Time Performance measures

Importance of Order Processing Time to complete the activities of the order cycle is the very heart of customer service Order prep, transmittal, entry & filling represent 50% to 70% of total order cycle time in most industries Short & consistent order cycle times generate high levels of customer service

Order vs. Replenishment Cycles Order Cycle Outbound-to-Customer shipments Replenishment Cycle Acquisition of additional inventory, as in materials management One firm’s order cycle is another firm’s replenishment cycle

Learning objective Importance of Order Processing Activities in Order Processing Factors Affecting Order-Processing Time Performance measures

Activities in Order Processing Order Preparation Order Transmittal Order Entry Order Filling Order Status Reporting Time needed to complete each activity depends on type of ordering involved. Speed & Accuracy affect costs and customer service levels

Order Processing and Information Systems

Flowchart of Order Processing System © Pearson Education, Inc. publishing as Prentice Hall

Order Preparation The activities of: May involve: gathering information needed about products desired & formally requesting the products to be purchased May involve: Determining the appropriate vendor Filling out an order form by the customer or a salesperson Determining stock availability Voice communication of the order Making selections from a computer menu

Order Transmittal Involves transferring the order request from its point of origin to the place where the order entry can be handled Accomplished in 2 fundamental ways: Manually Mailing the order or physically carrying the order Slow, but relatively inexpensive Electronically Toll-free numbers, Internet, facsimiles, satellite communications Almost instantaneous transfer of order information Highly reliable & accurate Can be expensive

Order Placement Technologies Used

Order Entry Tasks that take place prior to actual filling of order Checking order information accuracy Item descriptions, item numbers, quantity, price Checking availability of requested items Preparing back order or order canceling documentation if necessary Checking customer’s credit status Transcribing order information as necessary Billing

Comparison of Data Entry Techniques Method of Data Entry Characteristic Keyboard Entry Bar Code Entry Speed 6 seconds 0.3 to 2 seconds Error Rate 1 error per 300 characters entered 1 error in 15K to 36 trillion characters entered Encoding Costs High Low Reading Costs Advantages Human Low error rate High speed Can be read at a distance Disadvantages High cost High error rate Low speed Requires education of user community Equipment cost Missing/damaged images

Order Filling Physical activities required to Acquire the items through stock retrieval, production or purchasing Packing the items for shipment Scheduling the shipment for delivery Preparing the shipping documentation

Order Filling Priorities for processing orders can affect the speed at which all orders are processed Alternative priority rules First-received, First-processed Shortest processing time Prespecified priority number Smaller, less-complicated orders first Earliest promised delivery date Orders having the least time before promised delivery date

The 800,000 sq ft DC is one the largest of Amazon's six in the UK Amazon distribution center in Swansea, south Wales

Monday will be the UK's busiest online shopping day of the year with over 2 million orders expected to be made

Order Status Reporting Assures that good customer service is provided by keeping the customer informed of any delays in order processing or the delivery of the order Includes Tracing & tracking the order throughout the entire order cycle Communicating with the customer as to where the order may be in the order cycle & when it may be delivered

Learning objective Importance of Order Processing Activities in Order Processing Factors Affecting Order-Processing Time Performance measures

Factors Affecting Order-Processing Time Processing Priorities Parallel vs. Sequential Processing Longest processing times occur when all tasks are completed in sequence Order-Filling Accuracy Order Batching Processing order in groups or batches may reduce processing costs, but may delay order filling Shipment Consolidation Holding orders for consolidation reduces costs, but extends order processing time

Learning objective Importance of Order Processing Activities in Order Processing Factors Affecting Order-Processing Time Performance measures

Order Processing and Information Systems Performance measures Makespan:total time needed to complete a group of jobs. Average flow time =Total flow time / number of jobs. Average tardiness =Total hours late / number of jobs. Average number of jobs at workstation =Total flow time / makespan Order Processing and Information Systems

Order Processing and Information Systems Example:Processing times and due dates for six jobs waiting to be processed at a work center are given in the following table. Determine the sequence of jobs, the average flow time, average days late, and average number of jobs at the work center for each of there rule:(a)FCFS (b)SPT (c )DD (d)CR Job processing time (days) due date (days) A 2 7 B 8 16 C 4 4 D 10 17 E 5 15 F 12 18 Order Processing and Information Systems

Order Processing and Information Systems The FCFS sequence is A-B-C-D-E-F. (1) (2) (3) (2)-(3) Job processing flow due days late sequence time time date (0 if negative) A 2 2 7 0 B 8 10 16 0 C 4 14 4 10 D 10 24 17 7 E 5 29 15 14 F 12 41 18 23 41 120 54 Average flow time: 120/6=20 days. Average tardiness: 54/6=9 days. The makespan is 41 days. Average number of jobs at the work center: 120/41=2.93 Order Processing and Information Systems

Order Processing and Information Systems The SPT sequence is A-C-E-B-D-F. (1) (2) (3) (2)-(3) Job processing flow due days late sequence time time date (0 if negative) A 2 2 7 0 C 4 6 4 2 E 5 11 15 0 B 8 19 16 3 D 10 29 17 12 F 12 41 18 23 41 108 40 Average flow time: 108/6=18 days. Average tardiness: 40/6=6.67 days. The makespan is 41 days. Average number of jobs at the work center: 108/41=2.63 Order Processing and Information Systems

Order Processing and Information Systems The EDD sequence is C-A-E-B-D-F. (1) (2) (3) (2)-(3) Job processing flow due days late sequence time time date (0 if negative) A 4 4 4 0 C 2 6 7 0 E 5 11 15 0 B 8 19 16 3 D 10 29 17 12 F 12 41 18 23 41 108 40 Average flow time: 110/6=18.33 days. Average tardiness: 38/6=6.33 days. The makespan is 41 days. Average number of jobs at the work center: 110/41=2.68 Order Processing and Information Systems

Order Processing and Information Systems The CR sequence [(due date – current date) / processing time] is C-A-E-B-D-F. (1) (2) (3) (4) (3)-(4) Job Critical processing flow due days late sequence ratio time time date (0 if negative) C 1.0 4 4 4 0 F 1.5 12 16 18 0 D 1.7 10 26 17 9 B 2.0 8 34 16 18 E 3.0 5 39 15 24 A 3.5 2 41 7 34 41 160 85 Average flow time: 160/6=26.67 days. Average tardiness: 85/6=14.17 days. The makespan is 41 days. Average number of jobs at the work center: 160/41=3.90 Order Processing and Information Systems

Order Processing and Information Systems Generally speaking, the FCFS rule and the CR rule be the least effective of the rules. SPT is superior in temrs of minimizing flow time and average number of jobs at the work center and completion time. DD rule on average lateness is very well. Average Average Average flow time lateness number of Rule jobs at the work center FCFS 20 9.00 2.93 SPT 18 6.67 2.63 DD 18.33 6.33 2.68 CR 26.67 14.17 3.90 Order Processing and Information Systems