Order Processing

1. Order Processing

2. Order vs. Replenishment Cycles • Order Cycle • Outbound-to-Customer shipments • Replenishment Cycle • Acquisition of additional inventory, as in materials management • One firm’s order cycle is another firm’s replenishment cycle

3. Importance of Order Processing • Time to complete the activities of the order cycle is the very heart of customer service • Order prep, transmittal, entry & filling represent 50% to 70% of total order cycle time in most industries • Short & consistent order cycle times generate high levels of customer service

4. Activities in Order Processing • Order Preparation • Order Transmittal • Order Entry • Order Filling • Order Status Reporting Time needed to complete each activity depends on type of ordering involved. Speed & Accuracy affect costs and customer service levels

5. Order Preparation • The activities of: • gathering information needed about products desired & • formally requesting the products to be purchased • May involve: • Determining the appropriate vendor • Filling out an order form by the customer or a salesperson • Determining stock availability • Voice communication of the order • Making selections from a computer menu

6. Order Transmittal • Involves transferring the order request from its point of origin to the place where the order entry can be handled • Accomplished in 2 fundamental ways: • Manually • Mailing the order or physically carrying the order • Slow, but relatively inexpensive • Electronically • Toll-free numbers, Internet, facsimiles, satellite communications • Almost instantaneous transfer of order information • Highly reliable & accurate • Can be expensive

7. Order Placement Technologies Used

8. Order Entry • Tasks that take place prior to actual filling of order • Checking order information accuracy • Item descriptions, item numbers, quantity, price • Checking availability of requested items • Preparing back order or order canceling documentation if necessary • Checking customer’s credit status • Transcribing order information as necessary • Billing

9. Comparison of Data Entry Techniques

10. Order Filling • Physical activities required to • Acquire the items through stock retrieval, production or purchasing • Packing the items for shipment • Scheduling the shipment for delivery • Preparing the shipping documentation

11. Order Filling • Priorities for processing orders can affect the speed at which all orders are processed • Alternative priority rules • First-received, First-processed • Shortest processing time • Prespecified priority number • Smaller, less-complicated orders first • Earliest promised delivery date • Orders having the least time before promised delivery date

12. Order Status Reporting • Assures that good customer service is provided by keeping the customer informed of any delays in order processing or the delivery of the order • Includes • Tracing & tracking the order throughout the entire order cycle • Communicating with the customer as to where the order may be in the order cycle & when it may be delivered

13. Factors Affecting Order-Processing Time • Processing Priorities • Parallel vs. Sequential Processing • Longest processing times occur when all tasks are completed in sequence • Order-Filling Accuracy • Order Batching • Processing order in groups or batches may reduce processing costs, but may delay order filling • Shipment Consolidation • Holding orders for consolidation reduces costs, but extends order processing time

14. Info System for a Large Merchandise Retailer Sales Counter Coffee pot sold to customer Bar code item at store Manual register input or Bar code scanning In-store computer Credit data Payroll Accounting Merchandising Delivery from supplier Regional center main computer Corporate Payroll Corporate Accounting Corporate Credit Inventory Management Transmission Corporate Annual Report Purchase Order Coffee maker supplier Dept. Mgr. Review