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
D
A
Y
1
Prepare, transmit order
D
A
Y
1
D
A
Y
D
A
Y
DD
AA
YY
1
2
33
Receive, process order
D
A
Y
D
A
Y
D
A
Y
D
A
Y
1
2
3
4
Pick and pack order.
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
1
2
3
4
5
6
7
Transportation
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
1
2
3
4
5
6
7
8
Customer receives and unloads order
Actual order cycle = eight days
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
1
2
3
4
5
6
7
8
Actual order cycle = eight days
Receive, process
Pick, pack
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
D
A
Y
1
2
3
4
5
6
7
8
The sending organization’s actual processing.
Actual order cycle = eight days
Receive, process
Pick, pack
D
A
Y
D
A
Y
D
A
Y
2
3
4
What the sending organization sometimes sees.
Actual order cycle = eight days
Prepare, transmit order
D
A
Y
1
??????????
Receive,
unload order.
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
2. Order entry
and processing
Frequency:
2
3
1
5. Transportation
6. Customer
receiving
Frequency:
Frequency:
1
Frequency:
Frequency:
1
3
5
.5
1
3. Order picking
or production
2
1
3
9
TOTAL
Frequency:
1.5
3.5 days
Instructional material from “Strategic Logistics Management,” by Stock and Lambert (2001).
8
20 days
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
Product flow
Instructional material from “Strategic Logistics Management,” by Stock and Lambert (2001).
Retailer
Traditional
Supply Chain Flows
Demand flow
Supplier
Manufacturer
Distributor
Product flow
Barriers because
individual orders
are required.
Instructional material from “Strategic Logistics Management,” by Stock and Lambert (2001).
Retailer
Information-based
Supply Chain Flows
Timely, accurate information flow
Supplier
Manufacturer
Distributor
Smooth, continual product flow
matched to demand
Instructional material from “Strategic Logistics Management,” by Stock and Lambert (2001).
Retailer
End of Program.