MKT203

Distribution
& Logistics
Management
TOPIC 4
ORDER PROCESSING &
INFORMATION SYSTEM

Course Coordinator :
Mr. Jacob Kulleh
HELP University
Customer Order Cycle
Starts with placement of the order and ends
with receipt of the product by the customer.

1. Order preparation and transmittal

2. Order receipt and entry
3. Order processing
4. Warehouse picking and packing
5. Order transportation
6. Customer delivery and unloading

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 Total Order Cycle
6. Order 5. Order
1. Customer delivered to shipped to
places order customer customer

2. Order 4. Order
received 3. Order picked
processed and packed

Key:
1. Order preparation and transmittal 1 day
2. Order received and entered into system 1 day
3. Order processed 1 day
4. Order picking/production and packing 1 day
5. Transit time 3 days
6. Warehouse receiving and placing into storage 1 day
Total order cycle time 8 days
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 Total Order Cycle with Variability
1. Order preparation 2. Order entry 3. Order picking
and transmittal and processing or production
Frequency: Frequency:
Frequency:

1 2 3 1 2 3 1 9

5. Transportation 6. Customer
receiving TOTAL
Frequency: Frequency: Frequency:

1 3 5 .5 1 1.5 3.5 days 8 20 days

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Order Cycle Variability
 Variability in order cycle
time is costly to customers.
 They have to carry safety
stocks to avoid stock-outs
(lost sales). This increases
costs (what types?)
 Customers prefer order
cycle consistency to fast
delivery. Why?
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Electronic Methods of Order Entry
 Traditional method – write & post; slow and
error prone.
 Next, order transmitted by telephone/fax
and entered into computers; faster but error
may also arise. Why?
 Today, computer-to-computer hook-ups are
used; gain maximum speed & accuracy
in order transmittal & order entry.
 Reduces inventory carrying costs.

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Customer recognises The Path of a
need for a product
Customer’s Order
Customer Customer Ship
order delivery customer
order

Order
transmittal
Back
order Invoice
Inventory
available

Enter Inventory
customer Check Process Warehouse
order credit file order withdrawal

Production
schedule Shipping
Production Transportation
documentation scheduling

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The Communications Function
(network linking customers and suppliers)
 Need to evaluate alternative
methods of order transmittal
– based on speed, cost,
accuracy and consistency.
 Order processing system
communicates useful sales
information to marketing,
finance and production.
 Communication sets the
logistics system in motion.

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Traditional Supply Chain Flows
Demand flow

Supplier Manufacturer Distributor Retailer

Product flow

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 Information-based
Supply Chain Flows
Timely, accurate information flow

Supplier Manufacturer Distributor Retailer

Smooth, continual product flow

matched to demand

Each member of the supply chain receives timely

information on what is actually selling at retail
level and adjust its operation accordingly.
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Benefits of Having Advanced
Order Processing Systems (AOPS)
 Increases order processing speed, accuracy
and consistency.
 Increases customer satisfaction.
 Reduces inventories throughout the system.
 Reduces transportation costs.
 Use time saved on order cycle for other
purposes, e.g. transportation efficiency.

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 Definition of EDI
Inter-organizational exchange of business
documentation in structured, machine-
processable form.
Unstructured Structured

Fax EDI
E-Mail (Order entry computer-
Person-to-person to-computer; real time)

The inter-organisational exchange of

business documentation in structured,
machine-processable form.
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 EDI Standards
 Computer language compatibility (khả năng tương thích).
-> hạn chế: không biết đc mình làm sai, làm như thế nào; phải sau khi
đưa vào máy tính mới biết
 Transmission speed compatibility.

-> đường truyển internet, tốc đọ truyền dữ liệu giữa các phòng ban,
giữa các thiết bị trong công ty PHAỈ cùng tốc độ
 Common terminology – definition of words, codes and symbols.
 EDI protocols: American National Standards Institute (ANSI X12
Standard) and industry-based standards.

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 EDI Versus
Traditional Methods

PO POST OFFICE PO ORDER

BUYER'S SELLER'S
ENTRY
COMPUTER COMPUTER

EDI FLOW
PURCHASING

PURCHASING BUYER'S PURCHASING SELLER'S ORDER

APPLICATION ENTRY APPLICATION

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Source: Margaret A. Emmelhainz, Electronic Data Interchange: A Total Management Guide (New York: Van Nostrand
Reinhold, 1990), p. 5.
Typical EDI Configurations
Proprietary system Supplier
(độc quyền)
Manufacturer Supplier

Supplier
Value-added network (VAN)

Manufacturer Supplier
Third-
Manufacturer party Supplier
vendor
Acts as a central
Manufacturer Supplier
clearing house

15of EDI,"
SOURCE: GE Information Service, as reported in Lisa H. Harrington, "The ABC's
Traffic Management 29, no. 8 (August 1990), p. 51.
 EDI and the Internet
 Initial software and systems setup
costs; otherwise, virtually free.
 Compaq, HP, Digital Equipment Corp,
Microsoft and Oracle working at
improving Internet EDI.
 NASA Goddard, AVEX Electronics,
UNISYS use Internet for EDI.
 Internet EDI replacing VANs – likely.

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Benefits of EDI Implementation
 Reduced paperwork
 Improved accuracy
 Increased speed
 Reduced inventory
 Improved information availability
 Reduced clerical and administrative work
 Increased opportunity for proactive contribution
by employees

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 Benefits of a Logistics MIS
(Management Information System)
 Provide knowledge to exploit new markets.
 Make changes in packaging design.
 Choose bet. common, contract or private carriage.
 Increase or decrease inventories.
 Determine profitability of customers.
 Establish profitable customer service levels.
 Choose between public and private warehousing.

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Sources of Data
Order Company Industry Management
processing records data data
system
Customer Manufacturing & Statisticson Likely reactions
location logistics costs info competitors by competitors
Items demanded Cost of capital Relative market Future sales
Revenue by Company share trend
item/customer resources Research Government
Sales pattern Amount spent on projects policy
Order size insurance, taxes, Current practices Availability of

Salesperson etc Population shifts supplies

Probable
Consumer-credit
success of
expenditures
alternative
strategies

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 The Logistics Information Flow
Company records Industry data Management data

Customer data Common database Order performance

Order processing system
Inventory management
Freight payment system
Shipping performance
Transportation history
Damage/product
return reports
Customer master file
Transportation
Inventory administration

Product tracking &

Credit information
forecasting report

Order status Performance/cost report

for physical distribution
Product movement
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Capabilities of a Computerised
Information System
 Data retrieval – recall raw data (freight rates,
standard warehouse costs)
 Data processing – transform data to more
useful form (prepare bills of lading, print
purchase orders)
 Data analysis – provide info for strategic and
operational decision making
 Report generation – on order performance,
inventory management, shipment performance

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Latest Technology/Tools
for Logistics Management
 Bar Coding
 Point-Of-Sale (POS) Data Gathering
 QR and ECR
 Decision Support Systems (DSS)
 Artificial Intelligence (AI)
 Database Management
 Enterprise Resource Planning (ERP)

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Bar Coding
 Bar patterns convey letters, numbers and
special characters.
 Many uses – identify products, package
tracking, product picking, routing, cheque
generation, inventory management, etc.
 Bar-code error rate – 1:100,000
Manually-keyed data – 1:30
 2-D bar-codes gaining popularity; 100
times the capacity of ordinary bar-codes.

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Quick Response and
Efficient Customer Response
 QR combines EDI with bar-coding techno.
 Sales are captured at POS and the data
captured in computers. Suppliers can
access data and schedule production and
deliveries.
 ECR (Efficient Customer Response) is a
form of QR. It links consumer households,
retail stores, distributors and suppliers.
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Decision Support Systems
 Programmes designed to aid and
improve managerial decision making.
 Assist in evaluating alternative
transportation options, determining
warehouse location, setting levels of
inventory, etc.

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 Artificial Intelligence
 Includes computer-aided instruction,
voice synthesis and recognition, game-
playing systems, natural language
translator, robotics and expert systems
(ES).
 AI used to model transportation
time/cost/ location/routing, warehouse-
plant matching, response-time
requirements for customer delivery, etc.

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Database Management
 Allows application programs to retrieve
data stored in computers, e.g. inventory
management, order performance, cost
reports, transport administration, etc.
 Many companies are using local area
networks (LAN) that allow access to a
common database, software and other
systems feature.

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Enterprise Resource Planning
 Captures data and reduces the manual
activities and tasks associated with
processing financial, inventory and
customer-order information.
 Example: SAP R/3 applications are fully
integrated so that data are shared among
all applications (sales & distribution,
accounts payable, inventory management).

THE END
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