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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
DAY
1
DAY
1
Prepare, transmit order
DAY
1
DAY
2
DAY
3
DAY
3
Receive, process order
DAY
1
DAY
2
DAY
3
DAY
4
Pick and pack order.
DAY
1
DAY
2
DAY
3
DAY
4
DAY
5
DAY
6
DAY
7
Transportation
DAY
1
DAY
2
DAY
3
DAY
4
DAY
5
DAY
6
DAY
7
DAY
8
Customer receives and unloads order
Actual order cycle = eight days
DAY
1
DAY
2
DAY
3
DAY
4
DAY
5
DAY
6
DAY
7
DAY
8
Actual order cycle = eight days
DAY
1
DAY
2
DAY
3
DAY
4
DAY
5
DAY
6
DAY
7
DAY
8
The sending organization’s actual processing.
Receive, process Pick, pack
Actual order cycle = eight days
DAY
2
DAY
3
DAY
4
What the sending organization sometimes sees.
Receive, process Pick, pack
Actual order cycle = eight days
DAY
1
DAY
8
What the receiving organization sometimes sees.
Prepare, transmit order
Receive,unload order.
? ? ? ? ? ? ? ? ? ?
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
Frequency:
1 2 3
3. Order picking or production
Frequency:
1 9
Frequency:
TOTAL
3.5 days 8 20 days
5. Transportation
Frequency:
1 3 5
6. Customer receiving
Frequency:
.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 RetailerDistributorManufacturer
Instructional material from “Strategic Logistics Management,” by Stock and Lambert (2001).
Traditional Supply Chain Flows
Demand flow
Product flow
Supplier RetailerDistributorManufacturer
Barriers becauseindividual 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.
