1. Order Management& Logistics Information Systems
Chapter 4 1
Order Management& Logistics Information Systems

2. Order Management
Order management is the activities that take place in the period between the time a firm receives an order and the time a warehouse is notified to ship the goods to fill that order
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3. Order Management
Order management refers to management of the various activities associated with the order cycle
Order cycle (replenishment cycle or lead time) refers to the time from when a customer places an order to when goods are received
Some organizations include order to cash cycle in their order management model

4. Important Trade-off 1 MARKETING LOGISTICS 5
Place/ customer service levels
Product
Promotion
Price
Order processing and information costs
Warehousing costs
Transportation costs
Inventory carrying costs
Lot quantity costs
LOGISTICS
MARKETING
Source: Adapted from Douglas M. Lambert, The Development of an Inventory Costing Methodology: A Study of the Costs Associated with Holding Inventory (Chicago, IL: National Council of Physical Distribution Management, 1976), p. 7.

5. A Customer's Perspective
Order Cycle:
A Customer's Perspective
Key:
1. Order preparation and transmittal days
2. Order received and entered into system day
3. Order processed day
4. Order picking/production and packing days
5. Transit time days
6. Warehouse receiving and placing into storage day
Total order cycle time days
1. Customer places order
6. Order delivered to customer
5. Order shipped to customer
2. Order received by supplier
3. Order processed
4. Order picked and packed

6. Order Cycle: A Customer's Perspective
1.ustomer places order
6. Order delivered to customer
5. Order shipped to customer
2. Order received by supplier
3. Order processed
4. Order picked and packed
Total order cycle time
Customer satisfaction

7. Order Cycle: A Customer's Perspective
1.ustomer places order
6. Order delivered to customer
5. Order shipped to customer
2. Order received by supplier
3. Order processed
4. Order picked and packed
Key:
1. Order preparation and transmittal days
2. Order received and entered into system day
3. Order processed day
4. Order picking/production and packing days
5. Transit time days
6. Warehouse receiving and placing into storage 1 day
Total order cycle time days
7 days
Manufacturer’s control

8. Order Cycle: A Customer's Perspective
1.ustomer places order
6. Order delivered to customer
5. Order shipped to customer
2. Order received by supplier
3. Order processed
4. Order picked and packed
Key:
1. Order preparation and transmittal days
2. Order received and entered into system day
3. Order processed day
4. Order picking/production and packing days
5. Transit time days
6. Warehouse receiving and placing into storage 1 day
Total order cycle time days
6 days
Not directly under the Manufacturer’s control

9. Total Order Cycle with Variability
2. Order entry
Frequency:
1. Order preparation and transmittal
3. Order processing
4. Order picking or packing production
TOTAL
4.5 days days
5. Transit time
6. Customer receiving

10. Order Processing
Order processing refers to the time from when the seller receives an order until an appropriate location (i.e. warehouse) is authorized to fill the order
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11. Order Processing Order processing includes:
Checking for completeness and accuracy
A customer credit check
Order entry into the computer system
Marketing department credits salesperson
Accounting department records transaction
Inventory department locates nearest warehouse to customer and advises them to pick the order
Transportation department arranges for shipment
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12. Typical Elements of Order Processing
Order Preparation
Requesting product
and services
Order Transmission
Transfer order information to supplier
Order Entry
Stock checking
Accuracy checking
Credit checking
Back ordering/order cancelling
Transcripting
Billing
Order Filling
Product retrieval, production or purchase
Packing
Scheduling for delivery
Shipping document preparation
Order Shipment
Order Status Reporting
Tracing and tracking
Communicating with
customer on order status.
Order Delivery 12

14. Flowchart of Order Processing System
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15. Order Preparation Products and services information Determining vendor
Filling out an order form
Determining stock availability
Communicating order information 15

16. Order Transmission
Transfering the order request from origin to the destination.
Order transmission is the series of events that occur between the time a customer places or sends an order and the time the seller receives the order
Methods of order transmittal (manually or electronically)
In person, Mail, Telephone, FAX, EDI 16

17. Order Entry Checking the accuracy of the order information
Checking the availability of the requested items
Preparing back-order or cancellation order
Checking customer’s credit status
Billing 17

18. Order Picking and Assembly
Order picking and assembly includes all activities from when an appropriate location is authorized to fill the order until goods are loaded aboard an outbound carrier
Often represents the best opportunity to improve the effectiveness and efficiency of an order cycle
Can account for up to 2/3 of a facility’s operating cost and time
Examples of Order Picking and Assembly technology: Handheld scanners, RFID, Voice-based order picking, pick-to-light

19. The 800,000 sq ft DC is one the largest of Amazon's six in the UK
Amazon distribution center in Swansea, south Wales

20. Monday will be the UK's busiest online shopping day of the year with over 2 million orders expected to be made

21. Order Status Reporting
Ensures good customer services
Customer informated of any delay or delivery of the order
Tracing and tracking the order
Communicating with the customer about where the order may be in the order cycle and when it may be delivered. 21

23. Order Delivery
Order delivery is the time from when a carrier picks up the shipment until it is received by the customer.

24. Main Flows Materials Services Information
(Cash-Payment) Not main but supporting)

25. Materials and Services
Supply Chain
Manufacturers
Customers
Retailers
Wholesalers/
Distributors
Supplier
Materials and Services
Payments
Information 25

26. The Five Major Supply Chain Drivers1.
PRODUCTION
What, how, and when to produce 4.
TRANSPORTATION
How, and when to move product 3.
LOCATION
Where best to do what activity 2.
INVENTORY
How much to make and how much to store 5.
INFORMATION
The bests for making
these decisions. 26

27. all logistical activities
Information about ...
Purchasing order information
Forecast/POS data
Advance ship notice
Bill of lading
Shipment status
Invoice
Freight details
Production planning
Customers
Return goods
Parts, service and support
Packaging
Transportation
Purchasing
all logistical activities 27

29. Data
Raw facts about people, places, events, and things that are of importance in an organization. Each fact is, by itself, relatively meaningless. 29

31. IT & Logistics IT will affect the growth and development of logistics
Computers are used to support logistics activities

32. Data Quality Factors Accuracy Timeliness Consistency
Whether the value of each item of data is correct
Timeliness
Whether the data are up-to-date
Consistency
Whether the data in one part of the database have a common, appropriate set of controls to related concepts stored elsewhere 32

33. Data Quality Factors Transparency of meaning Availability
Whether the context for the data is clearly and commonly understood by all those with a legitimate interest
Availability
Whether the people who need the data can actually access it 33

34. Information
Data that has been processed or reorganized into a more meaningful form for someone.
Information is formed from combinations of data that hopefully have meaning to the recipient. 34

35. Sources of Information35

36. System
A set of elements considered to act as a single goal-oriented entity.
Components
Boundary
Purpose
Environment
Interfaces
Constraints
Input
Output 36

37. The System and Its Environment
Customers
Vendors
Goverment
Input
Raw
materials
Costs
Resources
Processes
Procedures
Programs
Tools
Activities
Decisions
Outputs
Performances
Consequences
Finished products
Services delivered
Supplier
Weather Conditions
Decision Maker
Feedback
System
boundary
Stockholders
Banks
Competitors
The System and Its Environment 37
Turban, Decision Support Systems and Intelligent Systems, 7/E

38. Decision Support System (DSS)
DSS is an integrative system of subsystems that has the purpose of providing information to aid a decision maker in making better choices than would otherwise possible

39. Decision Support Systems in Logistics
To assist logistics executives in their decision process.
To support, but not replace, managerial judgment.
To improve the effectiveness of logistics decision.

40. Logistics Information System
An interacting structure of people, equipment, and procedures which together make relevant information available to the logistics manager for the purposes of planing, implementing and control.
Information flow makes a logistical system dynamic. Quality and timeliness of information are key factors in logistical operations.
Bowersox and Closs 40

41. How Information Systems Facilitate Logistics Management
Decide when, what to produce, store, move
Rapidly communicate orders
Communicate orders, track order status
Check inventory availability, monitor levels
Track shipments
Plan production based on actual demand
Rapidly communicate product design change
Provide product specifications
Share information about defect rates, returns 41

42. Logistics Information System
LIS combine hardware and software to manage, control, and measure logistics activities.
Computers
Servers
Internet technologies
Input and output devices
Communication channels
Barcode, RF, storage media
System and application programs 42

43. Logistics Information System
LIS perform three vital roles in business firms.
Logistics processes and operations,
Logistics decision making; and
Strategic competitive advantage
Major application categories of information systems include:
Operations Support Systems; and
Management Support Systems 43

44. Logistics Information System
LIS Benefits
Increased product visibility and control
Improved knowledge of key logistics network component capabilities and capacity
Enhanced economic value
Cost reductions
Sales increases
Creation of competitive advantage
Direct linkages to customers 44

45. Overview of Logistics Information System
LIS
Internal
Finance/Accounting
Marketing
Logistics
Manufacturing
Purchasing
External
Customers
Vendors
Carriers
Supply chain partners
Order Management
System
Contact with customer
Stock availability
Crediting checking
Invoicing
Product allocation to
customer
Fulfillment location
Warehouse Management
Stock level management
Order picking
Picker routing
Picker assignments and
work loading
Product availability
estimating
Transportation
Management System
Shipment consolidation
Routing and scheduling
Claims
Tracking
Bill payment
Freight bill auditing 45

46. Logistics Database Order processing system Customer location
Order history
Salesperson
Revenues
Order status
Industry/external data
Market share
Product offering
Demographic trends
Economic trends
Management
Competitive reactions
Sales forecasts
Future trends
New markets
Company records
Cost of capital
Cost of logistics
activities
Standart costs
Operating data
Freight payment
Transportation history
Inventory
Credit files
Product movement
Report generation
Order performance
Shipment performance
Damages and returns
Logistics Database
Product traking and
forecasting
Performace and cost
reports

47. Technologies in LIS
Bar code
Point-of-Sale ( POS)
EDI
RF-RFID

48. Contemporary Logistics Information Technologies
Bar Coding
barcodes stored data in series of parallel black and white bars of various widths and spacing. They can be read by optical scanners called barcode readers or scanned from an image by special software. 48

49. Bar Coding
The Universal Product Code (UPC) is a specific type of barcode, that is widely used in the United States and Canada for tracking trade items in stores.
Turkey code: 869
Code 128, Code 39
EAN Code(International Article Number)-Europe and Turkey
TOBB, Milli Mal Numaralandırma Merkezi

50. Barcode Types
Country code
Firm code
Product code
Control digit
3 digits
4 digits (can change)
5 digits(can change)
1 digit
Exp:
869
9567
90009 4

52. Contemporary Logistics Information Technologies
Point of Sales Data
Technology that allows firms, in real time, to know what and where an item is being sold through scanning of individual barcodes when an item purchased at the retail level.
Using this information, product forecasting, make better purchase decision and customization, and reduce the chance that an item will be out of stock.
Zara-POS usage 52

53. RFID
RFID system consists of an antenna and a transceiver, which read the radio frequency and transfer the information to a processing device, and a transponder, or tag, which is an integrated circuit containing the RF circuitry and information to be transmitted.
RFID systems can be used just about anywhere, from clothing tags to missiles to pet tags to food -- anywhere that a unique identification system is needed.

54. Contemporary Logistics Information Technologies
Radio Frequency Identification
(RFID)
Yard, Warehouse & Factory Management, Transportation Management
Item-level tracking
Automatic Non-Line-of-Sight Scanning 54

55. RFID tags come in three general varieties: passive, active, or semi-passive (also known as battery-assisted).
Passive tags require no internal power source-only active when a reader is nearby to power them, whereas semi-passive and active tags require a power source, usually a small battery.
Passive tags have practical read distances ranging from about 10 cm (4 in.)

56. Active Tags
Active tags typically have much longer range and larger memories than passive tags, as well as the ability to store additional information sent by the transceiver.
Some active RFID tags include sensors such as temperature logging which have been used to monitor the temperature of fresh produce or certain pharmaceutical products.
Other sensors that have been married with active RFID include humidity, shock/vibration, light, radiation, temperature, and atmospherics like ethylene.

57. Semi-passive Tags
Semi-passive tags are similar to active tags in that they have their own power source, but the battery only powers the microchip and does not broadcast a signal.
The RF energy is reflected back to the reader like a passive tag. An alternative use for the battery is to store energy from the reader to emit a response in the future.
Greater sensitivity than passive tags, typically 100 times more.

58. Contemporary Logistics Information Technologies
Radio Frequency (RF)
Relay information via electromagnetic energy waves from a terminal to a base station, which is linked in turn to a host computer.
Typically used in a warehouse or distribution center, RF technologies provide the communications capability between operating personel (e.g. Fork lift drivers, loading dock personnel, etc.) and centralized computer capabilities. 58

59. Definition of EDI
Inter organizational, computer-to-computer exchange of business data in a standard, machine-processable format.
Unstructured
Structured
Fax EDI
Order entry
Person-to-person Computer-to-computer

60. Definition of EDI The purpose of EDI is to eliminate
dublicate data entry and to improve the
speed and accuracy of information flow
by linking computer applications
between companies.
Levi’s-integrated its customer order processing system using a QR(quick response)-EDI: LeviLink

61. Definition of EDI
Transfer of structured data, by agreed message standards from one computer system to another without human intervention.
Cheques, bill of lading

62. Types of EDIs
Proprietary Systems (One to Many) involve an EDI system which is owned, managed, and maintained by a single company
Value-added Networks (Many to Many) includes a third party firm that acts as a central clearinghouse
Industry Associations have their own EDI standards

63. EDI Standarts
For EDI to function properly, computer language compatibility is required.
Users must have common communication standards.
Trading partners must have common definition words, codes and symbols; and a common format and order of transmission.

64. EDI Versus Traditional Methods
BUYER'S PURCHASING
APPLICATION
SELLER'S ORDER
ENTRY APPLICATION
PURCHASING
POST OFFICE
BUYER'S
EDI FLOW P O
SELLER'S
COMPUTER
ORDER
ENTRY
COMPUTER
PURCHASING
Source: Margaret A. Emmelhainz, Electronic Data Interchange: A Total Management Guide (New York: Van Nostrand Reinhold, 1990), p. 5.

65. Comparing with non-electronic communication
The Benefits of EDI
Comparing with non-electronic communication
Quick access to information,
Better customer services,
Reduced paperwork,
Better communications,
Increased productivity,
Improved tracing and tracing,
Cost efficiency,
Competitive advantage,
Improved billing. 65

66. DSS Modeling-simulation( what if games)
Artificial intelligence(AI): an comprehensive term that involves voice synthesis and recognition, game playing systems, robotics, natural language translators and expert systems(ES)
Benetton-POS-EDI-AI

67. Expert Systems
Natural language recognition
Neural networks