1. Chapter 5 Order Processing

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

3. 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

4. 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

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

6. 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

7. Order Processing and Information Systems

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

9. 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

10. 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

11. Order Placement Technologies Used

12. 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

13. 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

14. 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

15. 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

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

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

18. 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

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

20. 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

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

22. 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

23. 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 B C D E F
Order Processing and Information Systems

24. 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 B C D E F
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

25. 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 C E B D F
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

26. 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 C E B D F
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

27. 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 F D B E A
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

28. 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
SPT DD CR
Order Processing and Information Systems