CR (2004) Prentice Hall, Inc

5-1CR (2004) Prentice Hall, Inc.

Chapter 5

Order Processing and Information

SystemsThe difference between mediocre and excellent logistics is often the firm’s information technology capabilities.

Dale S. RogersRichard L. Dawe

Patrick Guerra

5-2

Order Processing and Information Systems in Planning Triangle

CR (2004) Prentice Hall, Inc.

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Transport Strategy• Transport fundamentals• Transport decisions

Customer service goals

• The product• Logistics service• Ord. proc. & info. sys.

Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply

scheduling decisions• Storage fundamentals• Storage decisions

Location Strategy• Location decisions• The network planning process

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Transport Strategy• Transport fundamentals• Transport decisions

Customer service goals

• The product• Logistics service• Ord. Proc. & info. sys..

Inventory Strategy• Forecasting• Inventory decisions• Purchasing and supply

scheduling decisions• Storage fundamentals• Storage decisions

Location Strategy• Location decisions• The network planning process

5-3

Typical Elements of Order Processing


Sales order

Order Preparation•Requesting products or services

Order Transmittal•Transferring order information

Order Entry•Stock checking•Accuracy checking•Credit checking•Back ordering/ order canceling

•Transcription•Billing

Order Filling•Product retrieval, production, or purchase•Packing for shipment•Scheduling for delivery•Shipping document preparation

Order Status Reporting•Tracing and tracking•Communicating with customer on order status

Sales order

Order Preparation•Requesting products or services

Order Transmittal•Transferring order information

Order Entry•Stock checking•Accuracy checking•Credit checking•Back ordering/ order canceling

•Transcription•Billing

Order Filling•Product retrieval, production, or purchase•Packing for shipment•Scheduling for delivery•Shipping document preparation

Order Status Reporting•Tracing and tracking•Communicating with customer on order status

5-4

Order Filling


Processing rules affect order filling speed•First-received, first-processed•Shortest processing time first•Specified priority number•Smaller, less complicated orders first•Earliest promised delivery date•Orders having the least time before promised delivery date

Order fill rate lower than item fill rate

iiPn

inPFR

item of yprobabilit stock-in order on item of number

where

5-5

Order Filling (Cont’d)


Question Suppose that an order contains five items, each having a stocking probability of 93%. What is the probability that the order will be filled complete?

70% or ,70.0)93)(.93)(.93)(.93)(.93(. FR

Answer

5-6

Commerce Through the Internet


Orders:ConfirmationShipment arrivalShipment status

COMMUNICATION NETWORK - INFORMATION SUPERHIGHWAY

Orders:ConfirmationShipment noticeShipment status

Distributor

CustomersSuppliers Products

Logisticsprovider

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Factors AffectingOrder Processing Time


•Processing priorities•Parallel versus sequential processing•Order-filling accuracy•Order batching•Lot sizing•Shipment consolidation

5-8

The Logistics Information System


INTERNAL

Finance/Accounting

Marketing

Logistics

Manufacturing

Purchasing

EXTERNAL

Customers

Vendors

Carriers

Supply chain partners

LOGISTICS INFORMATION

SYSTEM

OMS

•Stock availability

•Credit checking

•Invoicing

•Product allocation to customers

•Fulfillment location

WMS

•Stock level management

•Order picking

•Picker routing

•Picker assignments and work loading

•Product availability estimating

TMS

•Shipment consolidation

•Vehicle routing

•Mode selection

•Claims

•Tracking

•Bill payment

•Freight bill auditing

INTERNAL

Finance/Accounting

Marketing

Logistics

Manufacturing

Purchasing

EXTERNAL

Customers

Vendors

Carriers

Supply chain partners

LOGISTICS INFORMATION

SYSTEM

OMS

•Stock availability

•Credit checking

•Invoicing

•Product allocation to customers

•Fulfillment location

WMS

•Stock level management

•Order picking

•Picker routing

•Picker assignments and work loading

•Product availability estimating

TMS

•Shipment consolidation

•Vehicle routing

•Mode selection

•Claims

•Tracking

•Bill payment

•Freight bill auditing

5-9

Order Management System Module


Elements•Stock availability•Credit checking•Invoicing•Product allocation to customers•Fulfillment location

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Warehouse Management System Module


Elements•Receiving•Putaway•Inventory management•Order processing and retrieving•Shipment preparation

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Transportation Management System Module


Elements•Mode selection•Freight consolidation•Routing and scheduling shipments•Claims processing•Shipment tracking•Bill payment and auditing

5-12

Operating Components of the LIS


Environment

Data input

Data base activities1. Data storage

• Filing• Retrieval• File maintenance

2. Data transformation• Basic data

processing operations

• Data analysis using statistical and mathematical techniques

Output communications

Logistics manager(Decision maker)

EnvironmentEnvironment

Data inputData input















DecisionsDecisions

Limits of the information system

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Exploded View of the LIS


Customerdata

Companyrecords

Publishedinformation

Managementdata

Dataanalysis

Dataretrieval

Dataprocessing

Data basemanager

Input

Output

Data Base

Computerfiles

Manualrecords

Summaryreports

Statusreports

Exceptionreports

Prepareddocuments:purchaseorders, bills oflading, etc.

Results ofanalysis

Actionreports

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Information System Examples


•A retail system•Vendor managed inventory•E-commerce•A decision support system

5-15

LIS

fo

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Item sold

Department manager review

Del

iver

ies

from

su

pplie

r

Supplier-- Coffee makers

TransmissionRegional center main

computer• Corporate payroll• Corporate

accounting• Corporate credit• Inventory

management

Purchase order

Corporate sales report

Sales counterBar code

item at store

Manual register input

Bar code scanning

In- store computer• Credit data• Payroll• Accounting• Merchandising

Customer credit

verification

EDI

Item soldItem sold



Del

iver

ies

from

su

pplie

rD

eliv

erie

s fr

om

supp

lier

Supplier-- Coffee makers

TransmissionTransmissionRegional center main

computer• Corporate payroll• Corporate

accounting• Corporate credit• Inventory

management

Purchase order

Purchase order



Sales counterSales

counterBar code item at store

Bar code item at store

Manual register input

Bar code scanning

In- store computer• Credit data• Payroll• Accounting• Merchandising

Customer credit

verification

EDIEDI

Documents

CR (2004) Prentice Hall, Inc