Order Processing

Order Processing & Information Systems

Prepared by DeepaChandrasekar IIPM Gurgaon

Order Processing

Order processing includes the following activities Order Preparation Order Transmittal Order Entry Order Filling Order Status Reporting

Order Preparation

Order Preparation refers to the activities of gathering information needed about the products and services desired and formally requesting the products to be purchased.

Order Processing involves

Selecting vendor Filling order form Checking stock availability Communicating order information

Latest trend in Order Preparation

Bar code technology used to get the complete information of product

Web portals used for selecting standard products and order placement

Electronic Data Interchange (EDI) connects the buyer to the seller via computer, where the order is placed automatically as the stock depletes.

RFID (Radio Frequency Identification) are latest technology that helps in reducing order preparation

Order Transmittal

Transferring the order request from its point of origin to the place where the order entry can be handled; either manually of electronically

Order Transmittal Methods Electronic

Transmission Toll free telephone Internet EDI Facsimile machines Satellite

communications

Manual Transmission Mailing of orders Physical carrying of

orders by staff

Order Transmittal

Electronic transmission of order is more reliable, accurate, reduces cost and has replaced the manual order transmittal methods

Advantages & Disadvantages of EDI in Order Transmittal

ADVANTAGES

Dedicated electronic link between the computers of buyers and sellers and hence the chance of fraud is less

Message delivery is instantaneous and secure

DISADVANTAGES

Transmission cost is high compared Internet

Advantages & Disadvantages of Internet in Order Transmittal

ADVANTAGES

Low-cost, widely available, uses standard network of telephone system

Message delivery is instantaneous and secure

DISADVANTAGES

Security of data Message delivery

not guaranteed

Improving internet technology will help in overcoming the security issue

Oder Entry

Activities that take place before the order filling is done

Checking the accuracy of the order information, such

as item description and number, quantity & price

Checking the availability of the requested items

Preparing back-order or cancellation documentation

Checking customer credit status

Transcribing the order information as necessary

billing

Oder Entry - II

Order Entry has benefited from technological improvements like Bar Codes Optical Scanners Computers

This has increased the productivity of this activity

Oder Entry Method of Data Entry

Characteristic Keyboard Entry Bar Code

Speed 6 seconds for 12 character 0.3 to 2 seconds

Substitution error rate

1 character error in 300 characters entered

1 character error in 15 thousand to 36 trillion characters entered

Encoding Costs High Low

Reading Costs Low Low

Advantages

Human Low error rate

Low cost

High speed

Can be read at a distance

Disadvantages Human Requires education of the user community

High Cost Equipment cost

High Error rate Dealing with missing or damaged images

Low speed

Order Filling

Order filling involves the following activities: Acquire the items through stock

retrieval, production, or purchasing Pack the items for shipments Schedule the shipment for delivery Prepared the shipping documentation

Order Filling Priorities in order filling

Priorities for processing orders may affect the speed with which all orders are processed or the speed with which the more important orders are handled.

First-received, first-processed Shortest processing time Specified priority number Smaller, less-complicated orders first Orders having the least time before promised delivery date

The priority rule depends upon such criteria as fairness to all customers, the differentiated importance among orders, and the overall speed of processing that can be achieved

Order Status Reporting

This activity ensures that good customer service is provided by keeping the customer informed of any delays in order processing or delivery of order.

Tracing and tracking the order throughout the entire order cycle

Communicating with the customer about where the order may be in the order cycle and when it may be delivered

The monitoring activity does not affect the over all time to process an order

Barcode, RFID, GPRS technology are used

Observations FedEx , UPS , DHL

Laser beam bar coding and specially designed software.

Truck mounted device eLogistics Private Limited offers a patented e-tracking product based on the global system for mobile communication.

Factors affecting Order-Processing Time

Processing Priorities

FIFO – First In First Out

Small orders first

More Profitable orders first

Parallel versus Sequential Processing

When activities are performed simultaneously (parallel) time can be saved.

Example : Credit check of the buyer and the availability of the stocks can be done simultaneously.

Order Filling Accuracy

If the order filling is done accurately the order processing time will be minimized.

Order Batching

Collecting orders from multiple customers into groups for batch processing may reduce processing cost.

Holding orders until the batch size is realized will likely add to processing time.

Lot Sizing

When the customer places a huge order , instead of waiting to complete the manufacturing of the entire order , the small batches should be delivered at regular intervals.

This will increase the transportation cost but can reduce the waiting time of the customer.

Shipment Consolidation

Orders may be held to create an economical shipment size.

Consolidating several small orders to build a larger shipping volume reduces transportation.

Processing time may be increased but the transportation cost is reduced.

The Logistics Information System

Function Internal Operation

Logistics Information

System

OMS•Stock Availability•Crediting Checking•Invoicing•Product Allocation to Customers•Fulfillment Location

WMS•Stock Level Management•Order Picking• Picker Routing•Picker Assignment & work loading•Product availability estimating

TMS•Shipment consolidation•Vehicle routing•Mode Selection•Claims•Bill Auditing•Tracking•Bill Payment

Internal

Financial AccountingMarketingLogistics

Manufacturing

Purchasing

External

CustomersVendorsCarriersSupply Chain

Partners

Order Management System OMS• Stock Availability• Crediting Checking• Invoicing• Product Allocation

to Customers• Fulfillment

Location

Manages the initial contact with the customer at the time of product inquiries and order placements.

Order Management System

OMS

WarehouseManageme

ntSystem

Checks Product Availability

Order Management System

OMS

WarehouseManageme

ntSystem

Financial Information System

Checks Credit Status Of the Customer

Order Management System

OMS

WarehouseManageme

ntSystem

Financial Information System

Transport Management System

Tracks the order

Warehouse Management

It is the information subsystem assisting in the management of product flowing through and stored in the facilities of the logistics network.▪ The key elements can be identified as▪ Receiving▪ Put away▪ Inventory management▪ Order processing and retrieving ▪ Shipment preparation

Warehouse Management

Receiving Put away Inventory

management Order processing

and retrieving Shipment

preparation

Entry / Check in point Data about the

product are entered into the WMS using bar code scanners, radio frequency RF data communication terminals, or manual key boards.

Warehouse Management

Receiving Put away Inventory

management Order processing

and retrieving Shipment

preparation

Based on the available space and stock layoutrules , the WMS assigns the incoming product to a specific location for later retrieval.

Warehouse Management

Receiving Put away Inventory

management Order processing

and retrieving Shipment

preparation

Monitors the product levels at each stocking location in the warehouse.

Replenishment quantities

Timing

Warehouse Management

Receiving Put away Inventory

management Order processing

and retrieving Shipment

preparation

Entry / Check in point

Data about the product are entered into the WMS using bar code scanners, radio frequency RF data communication terminals, or manual key boards.

Warehouse Management

Receiving Put away Inventory

management Order processing

and retrieving Shipment

preparation

Packing Bar codes Necessary

documents

Transport Management System

Its purpose is to assist in the planning and controlling of the firms transportation activity.▪ Mode Selection▪ Freight Consolidation▪ Routing▪ Claims Processing▪ Tracking Shipments▪ Freight Bill Payments and Auditing

Transport Management System

Mode Selection

Transport Management System Freight Consolidation

Unit Shipping costs drop disproportionately as shipment size increases, shipment consolidation can result in substantial transport savings.

Suggests the patterns for consolidating small shipments into larger ones.

Transport Management System

Routing Ensure the fleet is operated

efficiently Assigns loads to vehicles Suggests the sequence in

which the stops should be made.

Pickup of returning merchandise

Length of driving and rest breaks

Transport Management System

Claims Processing Some shipments will be

damaged. By retaining the

information of the shipment value , content , carrier used , origin , destination and liability limits many claims can be processed automatically

Transport Management System

Tracking Shipments Bar coding , radio

transmission en route, global positioning systems and on –boards computers .

Information regarding the shipments are provided to the receiver through internet

Freight bill payment & Auditing Determining the freight

charges for shipments can be complicated because of the many that can be placed on the freight rates.

When a rating error occurs , the shipper can make a claim on the carrier for the difference between the actual charges and lowest charges.

Internal Operations

Input Database

and its manipulation

Output

Environment

Data Input

Database activities1.Data Storage

FilingRetrieval

File Maintenance2.Data

TransformationBasic Data Processing operations

Data Analysis using statistical and mathematical

techniquesOutput

Communications

Logistics Manager

Decisions

Exploded View of the logistics Information Systems

Customer data

Computer Files

Data Analysi

s

Manual Records

Data Processing

Summary Reports

Purchase Orders

Status Reports

Result of Analysis

Exception Reports

Action

Reports

Customer Records

Published Information

Management DataInput

DatabaseManager

Output

No Questions Please …..

Thank you …..