Chapter 4 1 Order Processing Logistics Information

Chapter 4 1 Order Processing & Logistics Information Systems 1

Total Order Cycle: A Customer's Perspective 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 Key: 1. Order preparation and transmittal 2. Order received and entered into system 3. Order processed 4. Order picking/production and packing 5. Transit time 6. Warehouse receiving and placing into storage Total order cycle time 2 days 1 day 5 days 3 days 1 day 13 days 2

Total 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 3

Total 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 2 days 2. Order received and entered into system 1 day 3. Order processed 1 day 4. Order picking/production and packing 5 days 5. Transit time 3 days 6. Warehouse receiving and placing into storage 1 day Total order cycle time 13 days Manufacturer’s control 7 days 4

Total 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 2 days 2. Order received and entered into system 1 day 3. Order processed 1 day 4. Order picking/production and packing 5 days 5. Transit time 3 days 6. Warehouse receiving and placing into storage 1 day Total order cycle time 13 days Not directly under the Manufacturer’s control 6 days 5

Total Order Cycle with Variability 1. Order preparation and transmittal 2. Order entry 3. Order processing 4. Order picking or packing production Frequency: 1 2 3 . 5 1 5. Transit time Frequency: . 5 6. Customer receiving Frequency: 1. 5 1 3 5 . 5 1 1 1. 5 1 5 9 TOTAL Frequency: 1. 5 4. 5 days 13 21. 5 days 6

Typical Elements of Order Processing Order Preparation • Requesting product and services Order Status Reporting • Tracing and tracking • Communicating with customer on order status. Order Transmission Order Entry • Transfer order information • Stock checking • Accuracy checking • Credit checking • Back ordering/order cancelling • Transcripting • Billing to supplier Order Shipment Order Filling • Product retrieval, production or purchase • Packing • Scheduling for delivery • Shipping document preparation 7

THERE IS A DIRECT TRADE-OFF BETWEEN INVENTORY CARRYING COST AND COMMUNICATION COST 8

Order Preparation § § § Products and services information Determining vendor Filling out an order form Determining stock availability Communicating order information 9

Order Transmission § Transfering the order request from origin to the destination. § Manually § Mailing, physical carrying § Electronically § Tool free phone, data phones, internet, EDI, fax, 10

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 11

Order Filling § Physical activities § Acquire the items through stock retrieval, production, or purchasing § Pack the items for shipment § Schedule the shipment for delivery § Prepare the shipment documentation 12

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. 13

Main Flows • • Materials Services Information (Cash-Payment) Not main but supporting) 14

The Five Major Supply Chain Drivers 2. INVENTORY 1. PRODUCTION How much to make and how much to store What, how, and when to produce 5. INFORMATION The bests for making these decisions. 4. TRANSPORTATION 3. LOCATION How, and when to move product Where best to do what activity 15

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 16

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 17

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 18

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 § Major application categories of information systems include: § Operations Support Systems; § Management Support Systems 19

Overview of Logistics Information System Internal Finance/Accounting Marketing Logistics Manufacturing Purchasing Order Management System • Contact with customer • Stock availability • Crediting checking • Invoicing • Product allocation to customer • Fulfillment location LIS Warehouse Management System ·Stock level management ·Order picking ·Picker routing ·Picker assignments and work loading ·Product availability estimating External Customers Vendors Carriers Supply chain partners Transportation Management System ·Shipment consolidation ·Routing and scheduling ·Claims ·Tracking ·Bill payment ·Freight bill auditing 20

Order processing system • Customer location • Order history • Salesperson • Revenues • Order status Management • Competitive reactions • Sales forecasts • Future trends • New markets Operating data • Freight payment • Transportation history • Inventory • Credit files • Product movement Industry/external data • Market share • Product offering • Demographic trends • Economic trends Company records • Cost of capital • Cost of logistics activities • Standart costs Logistics Database Report generation • Order performance • Shipment performance • Damages and returns • Product traking and forecasting • Performace and cost reports 21

Technologies in LIS Bar code n Point-of-Sale ( POS) n EDI n RF-RFID n 22

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. 23

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 24

Barcode Types Fundamentals of LOGISTICS MANAGEMENT Lambert Stock Ellram 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 25

26

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 27

RFID n 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. n 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. 28

Contemporary Logistics Information Technologies Radio Frequency Identification (RFID) § Yard, Warehouse & Factory Management, Transportation Management § Item-level tracking § Automatic Non-Line-of-Sight Scanning 29

n RFID tags come in three general varieties: passive, active, or semi-passive (also known as battery-assisted). n Passive tags require no internal power source-only active when a reader is nearby to power them, whereas semipassive and active tags require a power source, usually a small battery. n Passive tags have practical read distances ranging from about 10 cm (4 in. ) 30

Active Tags n 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. n 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. n Other sensors that have been married with active RFID include humidity, shock/vibration, light, radiation, temperature, and atmospherics like 31 ethylene.

Semi-passive Tags n 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. n 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. n Greater sensitivity than passive tags, typically 32 100 times more.

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. 33

Definition of EDI § Inter organizational, computer-tocomputer exchange of business data in a standard, machine-processable format. Unstructured Fax E-Mail Person-to-person Structured EDI Order entry Computer-to-computer 34

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: Levi. Link 35

Definition of EDI Transfer of structured data, by agreed message standards from one computer system to another without human intervention. n Cheques, bill of lading n 36

Types of EDIs n n n 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 37

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. 38

EDI Versus Traditional Methods BUYER'S COMPUTER PO POST OFFICE ORDER ENTRY PO SELLER'S COMPUTER EDI FLOW PURCHASING BUYER'S PURCHASING APPLICATION SELLER'S ORDER ENTRY APPLICATION 39 Source: Margaret A. Emmelhainz, Electronic Data Interchange: A Total Management Guide (New York: Van Nostrand Reinhold, 1990), p. 5.

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. 40

Decision Support Systems (DSS) in Logistics an integrative system of subsystems that has the purpose of providing information to § assist logistics executives in their decision process. § support, but not replace, managerial judgment. § improve the effectiveness of logistics decision. 41

DSS Modeling-simulation( what if games) n Artificial intelligence(AI): an comprehensive term that involves voice synthesis and recognition, game playing systems, robotics, natural language translators and expert systems(ES) n Benetton-POS-EDI-AI n 42