Page 121 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes 6.1.1 Transaction

Transaction activities include order entry, inventory assignment, order selection, shipping,
pricing, invoicing, and customer inquiry. The customer order performance cycle order starts
with an entry transaction on the receipt customer order. This initiates the next transaction i.e.
assign inventory to the order. A third transaction is then generated to direct the material handlers
to select the order. This is followed by a transaction directing the movement, loading, and
delivery of the order. The final transaction prints or transmits the invoice for payment. Thus, the
customer order performance cycle is completed through a series of information system
transactions. The process also enables order status information to be available to customers as
and when they desire such information.
The transaction system is characterized by formalized rules, inter-functional communications, a
large volume of transactions, and an operational day-to-day focus. Because of the large number
of system users, heavy communication demands, high transaction volume, and significant
software complexity transaction system costs can be relatively high. In the transactions system,
the major emphasis is on information system efficiency. However, as the processes are highly
structured, the system costs are relatively well-defined and benefits or returns can be easily
computed.

6.1.2 Management Control

Management Control is characterized by an evaluative, tactical, intermediate-term focus that
evaluates past performance and identifies alternatives. Information on common performance
measures includes financial, customer service, productivity, and quality indicators.

Example: Some measures could be: transportation and warehousing cost per kilogram
(cost measure), inventory turnover (asset measure), order fill rate (customer service measure),
cases per labour hour (productivity measure), and customer perception (quality measure).
While some management control measures, such as cost, are very well-defined, other measures
such as customer service are less specific.

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Caution The Supply Chain Information System (SCIS) should be proactive and capable of
predicting future issues that need management attention.

It should have the capability for measurement of competitive capability and addition of potential
improvement areas. This is accomplished through exception reporting as information is being
processed. Information provided through exception reporting is often useful to identify potential
customer or order problems, inventory shortages on the basis of forecasted requirements and
anticipated receipts, or a firm’s ability to leverage price etc.

6.1.3 Decision Analysis

This focuses on decision applications to identify, evaluate, and compare logistics strategic and
tactical alternatives for managerial decisions. There are a number of analytical tools that are
commonly available in most supply chain application packages. Some of the common ones
include inventory planning and management, forecasting, vendor scheduling, vehicle routing,
and cost-benefit analysis of operational trade-offs and arrangements. Similar to the management
control, decision analysis is characterized by a tactical, evaluative focus. However, unlike
management control, decision analysis focuses on evaluating future tactical alternatives.

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