Order Processing and Information Systems

The difference between mediocre and excellent logistics is often the firms information technology capabilities. Dale S. Rogers Richard L. Dawe Patrick Guerra

Chapter 5
CR (2004) Prentice Hall, Inc.

5-1

Order Processing and Information Systems in Planning Triangle

Inventory Strategy Forecasting Inventory decisions Purchasing and supply Customer scheduling decisions service goals Storage fundamentals The product Storage decisions Logistics service Ord. proc. Proc. & info. sys sys. Ord. . Transport Strategy Transport fundamentals Transport decisions

Location Strategy Location decisions The network planning process

CR (2004) Prentice Hall, Inc.

CONTROLLING
5-2

ORGANIZING

PLANNING

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 Status Reporting Tracing and tracking Communicating with customer on order status
CR (2004) Prentice Hall, Inc.

Order Filling Product retrieval, production, or purchase Packing for shipment Scheduling for delivery Shipping document preparation
5-3

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 FR nP i where n number of item on order P in - stock probability of item i i
CR (2004) Prentice Hall, Inc.

5-4

Order Filling (Contd)

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? Answer
FR (.93)(.93)(.93)(.93)(.93) 0.70, or 70%

CR (2004) Prentice Hall, Inc.

5-5

Commerce Through the Internet

COMMUNICATION NETWORK - INFORMATION SUPERHIGHWAY

Orders: Confirmation Shipment notice Shipment status

Logistics provider Distributor

Orders: Confirmation Shipment arrival Shipment status

Suppliers
CR (2004) Prentice Hall, Inc.

Products

Customers
5-6

Factors Affecting Order Processing Time

Processing priorities Parallel versus sequential

processing Order-filling accuracy Order batching Lot sizing Shipment consolidation
CR (2004) Prentice Hall, Inc.

5-7

The Logistics Information System

LOGISTICS INFORMATION SYSTEM INTERNAL Finance/Accounting Marketing Logistics Manufacturing Purchasing 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
CR (2004) Prentice Hall, Inc.

EXTERNAL Customers Vendors Carriers Supply chain partners

TMS Shipment consolidation Vehicle routing Mode selection Claims Tracking Bill payment Freight bill auditing

5-8

Order Management System Module

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

CR (2004) Prentice Hall, Inc.

5-9

Warehouse Management System Module

Elements Receiving Putaway Inventory management Order processing and retrieving Shipment preparation

CR (2004) Prentice Hall, Inc.

5-10

Transportation Management System Module

Elements Mode selection Freight consolidation Routing and scheduling shipments Claims processing Shipment tracking Bill payment and auditing
CR (2004) Prentice Hall, Inc.

5-11

Operating Components of the LIS

Environment Data input Data base activities 1. Data storage Filing Retrieval File maintenance 2. Data transformation Basic data processing operations Data analysis using statistical and mathematical techniques

Decisions

Output communications

Logistics manager (Decision maker) Limits of the information system

CR (2004) Prentice Hall, Inc.

5-12

Exploded View of the LIS

Input Customer data Company records Published information Data Base Data base manager Data analysis Computer files Manual records Management data

Data retrieval

Data processing

Summary reports Output Prepared documents: purchase orders, bills of lading, etc.

Status reports Results of analysis

Exception reports Action reports

CR (2004) Prentice Hall, Inc.

5-13

Information System Examples

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

CR (2004) Prentice Hall, Inc.

5-14

Item sold

Bar code item at store Customer credit verification

Manual register input

Bar code scanning

Deliveries from supplier

In -store computer Credit data Payroll Accounting Merchandising

Transmission

Regional center main computer Corporate payroll Corporate accounting Corporate credit Inventory management

Corporate sales report

Purchase order

Supplier -- Coffee makers

EDI

Department manager review

LIS for a Large Retailer

5-15

Sales counter