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

CONTROLLING

Transport Strategy
Transport fundamentals
Transport decisions

ORGANIZING

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

PLANNING

Order Processing and Information

Systems in Planning Triangle

Location Strategy
Location decisions
The network planning process

CR (2004) Prentice Hall, Inc.

5-2

Typical Elements of Order Processing

Sales
order

Order Preparation
Requesting
products or
services

Order Transmittal
Transferring
order information

Order Status Reporting

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

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

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

Suppliers
CR (2004) Prentice Hall, Inc.

Logistics
provider
Distributor

Products

Orders:
Confirmation
Shipment arrival
Shipment status

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

EXTERNAL

Finance/Accounting

Customers

Marketing

Vendors

Logistics

Carriers

Manufacturing

Supply chain partners

Purchasing
OMS

WMS

TMS

Stock availability

Stock level
management

Shipment
consolidation

Order picking

Vehicle routing

Picker routing

Mode selection

Picker assignments
and work loading

Claims

Credit checking
Invoicing
Product allocation to
customers
Fulfillment location

Product availability
estimating
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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

Decisions

Data base activities

1. 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)
Limits of the information system

CR (2004) Prentice Hall, Inc.

5-12

Exploded View of the LIS

Input

Customer
data

Company
records

Published
information

Management
data

Data Base
Computer
files

Data base
manager
Data
analysis

Data
retrieval

Summary
reports

Status
reports

Output

CR (2004) Prentice Hall, Inc.

Prepared
documents:
purchase
orders, bills of
lading, etc.

Manual
records
Data
processing

Exception
reports
Results of
analysis

Action
reports

5-13

Information System Examples

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

CR (2004) Prentice Hall, Inc.

5-14

Sales
counter

Bar code
item at store

Deliveries from
supplier

Customer
credit
verification

In-store computer
Credit data
Payroll
Accounting
Merchandising

Manual
register
input

Bar code
scanning

Transmission

Corporate
sales
report

Supplier -- Coffee
makers

EDI

Department
manager review

Regional center main

computer
Corporate payroll
Corporate
accounting
Corporate credit
Inventory
management

Purchase
order

LIS for a Large Retailer

Item sold

5-15