Page 143 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Logistics and Supply Chain Management

Notes purchase orders are (1) order processing, (2) order assignment, (3) distribution operations, (4)
transportation, and (5) procurement.

Order Processing

Order processing is the entry point for customer orders and inquiries. It allows entry and
maintenance of customer orders by using communication technologies such as mail, phone, fax,
EDE and the Internet. As orders or inquiries are received, order processing enters and retrieves
required information, edits for appropriate values, and retains acceptable orders for assignment.
Order processing can also offer information regarding inventory availability and delivery
dates to establish and confirm customer expectations. Order processing, in conjunction with
customer service representatives, forms the primary interface between the customer and the
ERP or legacy system.
Order Assignment

Order assignment allocates available inventory to open customer and replenishment orders.
Assignment may take place in real time, as orders are received, or in a batch mode. Batch mode
means that orders are grouped for periodic processing such as by day or shift. While real time
allocation is more responsive, a batch process provides the firm with more control over situations
when inventory is low. For example, in a batch process, order assignment can be designed to
allocate stock from current inventory only or from scheduled production capacity. The operational
system is more responsive if it allows inventory assignment from scheduled production quantities
or capacity. Assignment of production quantities is referred to as using available to promise
inventory, while assignment of production capacity refers to capable to promise inventory.
However, there is a trade-off since assigning scheduled production capacity reduces the firm’s
ability to reschedule production.

Distribution Operations

Distribution operations incorporate processes to guide distribution centre physical activities,
including product receipt, material movement and storage, and order selection. For this reason,
they are often termed inventory control or warehouse management systems and sometimes
warehouse locator systems, referring to the capability to track inventory storage locations in
warehouses. Distribution operations direct all activities within distribution centres using a
combination of batch and real time assignments. In a batch environment, the distribution
operations system develops a “to do” list of instructions or tasks to guide each material handler
in the warehouse.

Transportation and Shipping

Transportation and shipping processes, often referred to as the Transportation Management
System (TMS), plan, execute, and manage transport and movement functions. The TMS includes
shipment planning and scheduling, shipment consolidation, shipment notification, transport
documentation generation, and carrier management. These processes facilitate efficient transport
resource utilization as well as effective carrier management.
A unique characteristic of the TMS is that it often involves three parties – shipper, carrier, and
consignee (recipient). To effectively manage the process, a basic level of information integration
must exist. Information sharing requires standardized data formats for transport documents. In
the United States, the Transportation Data Coordinating Committee (TDCC) and VICS have
initiated and refined the standardization of transport document formats.

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