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

D A Y 1

Prepare, transmit order D A Y 1

D A Y 1

D A Y 2

D D A A Y Y 3 3

Receive, process order

D A Y 1

D A Y 2

D A Y 3

D A Y 4

Pick and pack order.

D A Y 1

D A Y 2

D A Y 3

D A Y 4

D A Y 5

D A Y 6

D A Y 7

Transportation

D A Y 1

D A Y 2

D A Y 3

D A Y 4

D A Y 5

D A Y 6

D A Y 7

D A Y 8

Customer receives and unloads order

Actual order cycle = eight days

D A Y 1

D A Y 2

D A Y 3

D A Y 4

D A Y 5

D A Y 6

D A Y 7

D A Y 8

Actual order cycle = eight days Receive, process

Pick, pack

D A Y 1

D A Y 2

D A Y 3

D A Y 4

D A Y 5

D A Y 6

D A Y 7

D A Y 8

The sending organizations actual processing.

Actual order cycle = eight days Receive, process

Pick, pack

D A Y 2

D A Y 3

D A Y 4

What the sending organization sometimes sees.

Actual order cycle = eight days Prepare, transmit order

Receive, unload order.

D A Y 1

??????????

D A Y 8

What the receiving organization sometimes sees.

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

1. Order preparation and transmittal
Frequency: Frequency:

2. Order entry and processing

3. Order picking or production

Frequency:

5. Transportation
Frequency:

6. Customer receiving
Frequency:

TOTAL
Frequency:

.5

1.5

3.5 days

20 days

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

Supplier

Manufacturer

Distributor

Retailer

Product flow

Instructional material from Strategic Logistics Management, by Stock and Lambert (2001).

Traditional Supply Chain Flows

Demand flow
Supplier Manufacturer Distributor Retailer

Product flow

Barriers because individual 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.