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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.

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Six Components of the Order Cycle

Customer prepares order and transmits it.

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Six Components of the Order Cycle

Customer prepares order and transmits it.

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Six Components of the Order Cycle

Order receipt and order entry

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Six Components of the Order Cycle

Order processing.

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Six Components of the Order Cycle

Warehouse picking and packing

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Six Components of the Order Cycle

Warehouse picking and packing

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Six Components of the Order Cycle

Order transportation

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D

AY

1

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D

AY

1

Prepare, transmit order

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D

AY

1

D

AY

2

D

AY

3

D

A

Y

3

Receive, process order

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D

AY

1

D

AY

2

D

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D

AY

4

Pick and pack order.

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D

AY

1

D

AY

2

D

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3

D

AY

4

D

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5

D

AY

6

D

AY

7

Transportation

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D

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8

Customer receives and unloads order

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Actual order cycle = eight days

D

AY

1

D

AY

2

D

AY

3

D

AY

4

D

AY

5

D

AY

6

D

AY

7

D

AY

8

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Actual order cycle = eight days

D

AY

1

D

AY

2

D

AY

3

D

AY

4

D

AY

5

D

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6

D

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D

AY

8

The sending organization’s actual processing. 

Receive, process

Pick, pack

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Actual order cycle = eight days

D

AY

2

D

AY

3

D

AY

4

What the sending organization sometimes sees.

Receive, process

Pick, pack

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Actual order cycle = eight days

D

AY

1

D

AY

8

What the receiving organization sometimes sees.

Prepare, transmit order

Receive,

unload order.

? ? ? ? ? ? ? ? ? ?

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Improving the 8-day order cycle

• The three-days in-house may be tooexpensive to shorten.

• Better selection/monitoring of carriers may be a more cost-effective way to reduce theorder cycle.

• Also, the 8-day order cycle may be anaverage. The cycle may range from 4 to 20days.

T l O d C l i h V i bili

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Total Order Cycle with Variability 

2. Order entryand processing

Frequency:

1 2 3

1. Order preparationand transmittal

Frequency:

1 2 3

3. Order pickingor production

Frequency:

1 9

Frequency:

TOTAL

3.5 days 8 20 days

5. Transportation

Frequency:

1 3 5

6. Customerreceiving

Frequency:

.5 1 1.5

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

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Improving the 8-day order cycle

• The three-days in-house may be too expensive toshorten.

• Better selection/monitoring of carriers may be amore 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 12days safety stock (average of 8 days plus stock tocover maximum of 20-day order cycle).

T diti l

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TraditionalSupply Chain Flows

Demand flow 

Product flow 

Supplier RetailerDistributorManufacturer

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

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Traditional

Supply Chain Flows

Demand flow 

Product flow 

Supplier RetailerDistributorManufacturer

Barriers because

individual orders

are required.

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

I f i b d

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Information-basedSupply 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). 

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End of Program.