Chapter 4 Order Processing and Information Systems Marketing Logistics

Order Processing The nerve center of a logistics system. In marketing and business in general: nothing happens until somebody sells something. In logistics: nothing happens until somebody orders something.

Six Components of the Order Cycle Customer prepares order and transmits it.

Six Components of the Order Cycle Customer prepares order and transmits it.

Six Components of the Order Cycle Order receipt and order entry

Six Components of the Order Cycle Order processing.

Six Components of the Order Cycle Warehouse picking and packing

Six Components of the Order Cycle Warehouse picking and packing

Six Components of the Order Cycle Order transportation

Six Components of the Order Cycle Customer delivery and unloading

D A Y 1

Prepare, transmit order Y 1

D A Y 3 D A Y 1 D A Y 2 D A Y 3 Receive, process order

D A Y 3 D A Y 4 D A Y 1 D A Y 2 Pick and pack order.

D A Y 3 D A Y 4 D A Y 1 D A Y 2 D A Y 5 D A Y 6 D A Y 7 Transportation

D A Y 3 D A Y 4 D A Y 1 D A Y 2 D A Y 5 D A Y 6 D A Y 7 D A Y 8 Customer receives and unloads order

Actual order cycle = eight days 3 D A Y 4 D A Y 1 D A Y 2 D A Y 5 D A Y 6 D A Y 7 D A Y 8

Actual order cycle = eight days Receive, process Pick, pack D A Y 3 D A Y 4 D A Y 1 D A Y 2 D A Y 5 D A Y 6 D A Y 7 D A Y 8 The sending organization’s actual processing.

Actual order cycle = eight days Receive, process Pick, pack D A Y 3 D A Y 4 D A Y 2 What the sending organization sometimes sees.

? ? ? ? ? ? ? ? ? ? Actual order cycle = eight days Receive, unload order. Prepare, transmit order D A Y 1 D A Y 8 ? ? ? ? ? ? ? ? ? ? What the receiving organization sometimes sees.

Improving the 8-day order cycle The three-days in-house may be too expensive to shorten. Better selection/monitoring of carriers may be a more cost-effective way to reduce the order cycle. Also, the 8-day order cycle may be an average. The cycle may range from 4 to 20 days.

Total Order Cycle with Variability 2. Order entry and processing Frequency: 1 2 3 1. Order preparation and transmittal 1 2 3 3. Order picking or production 1 9 TOTAL 3.5 days 8 20 days 5. Transportation 1 3 5 6. Customer receiving .5 1 1.5 Instructional material from “Strategic Logistics Management,” by Stock and Lambert (2001).

Improving the 8-day order cycle The three-days in-house may be too expensive to shorten. Better selection/monitoring of carriers may be a more cost-effective way to reduce the order cycle. Also, the 8-day order cycle may be an average. The cycle may range from 4 to 20 days. To cover variability, customer should carry 12 days safety stock (average of 8 days plus stock to cover maximum of 20-day order cycle).

Traditional Supply Chain Flows Demand flow Product flow Supplier Retailer Distributor Manufacturer Instructional material from “Strategic Logistics Management,” by Stock and Lambert (2001).

Traditional Supply Chain Flows Demand flow Product flow Supplier Retailer Distributor Manufacturer Barriers because individual orders are required. Instructional material from “Strategic Logistics Management,” by Stock and Lambert (2001).

Information-based Supply Chain Flows Timely, accurate information flow Supplier Manufacturer Distributor Retailer Smooth, continual product flow matched to demand Instructional material from “Strategic Logistics Management,” by Stock and Lambert (2001).

End of Program.