Page 46 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 2: Introduction to Logistic

The overall purpose of information planning/coordination flow is to integrate specific activities Notes
within a firm and to facilitate overall integrated performance. Unless a high level of coordination
is achieved, the potential exists for operating inefficiencies and excessive inventory. Planning/
coordination is illustrated in the health care business by the sidebar discussing how hospitals
use information to improve efficiency and customer service.
2.4.7 Operational Requirements

The second aspect of information requirements is concerned with directing operations to receive,
process, and ship inventory as required supporting customer and purchasing orders. Operational
information requirements deal with (1) order management, (2) order processing, (3) distribution
operations, (4) inventory management, (5) transportation and shipping, and (6) procurement.
Order management refers to the transmission of requirement information between value chains
members involved in finished product distribution. The primary activity of order management
is accurate entry and qualification of customer orders. This transfer of requirements between
value chain participants is typically achieved by phone, mail, facsimile (fax), or electronic data
interchange. The impact of information technology on order management is extensive. The
availability of low-cost information transfer has revolutionized the order management process.
Order processing allocates inventory and assigns responsibility to satisfy customer requirements.
The traditional approach has been to assign available inventory or planned manufacturing to
customers according to predetermined priorities. In technology-rich order processing systems,
two-way communication linkage is maintained with customers to generate a negotiated order
that satisfies customers within the constraints of planned logistical operations.
Distribution operations involve information flows required to facilitate and coordinate
performance within logistics facilities. The primary purpose of a logistical facility is to provide
material or product assortments to satisfy order requirements. Emphasis is placed on scheduled
availability of the desired assortment with minimal duplication and redundant work effort. The
key to distribution operations is to store and handle specific inventory as little as possible while
still meeting customer order requirements.

Inventory management is concerned with using information to implement the logistics plan as
specified. Using a combination of human resources and information technology, inventory is
deployed and then managed to satisfy planned requirements. The work of inventory management
is to make sure that the overall logistical system has appropriate resources to perform as planned.
Transportation and shipping information directs the movement of inventory. To achieve
efficiency, it is important to consolidate orders so as to fully utilize transportation capacity. It is
also necessary to ensure that the required transportation equipment is available when needed.
Finally, because ownership transfer often results from transportation, supporting documentation
is required.
Procurement is concerned with the information necessary to complete purchase order
preparation, modification, and release while ensuring overall supplier compliance. In many
ways, information related to procurement is similar to that involved in order processing. Both
forms of information exchange serve to facilitate operations that link a firm with its customers
and suppliers. The primary difference between procurement and order processing is the type of
operation that results from requirements transfer.
The overall purpose of operational information is to provide the detailed data required for
integrated performance of physical distribution, manufacturing support, and procurement
operations. Whereas planning/coordination flows provide information concerning planned
activities, operational requirements are needed to direct the day-to-day logistics work. Within
the context of information and inventory flows, the managers within an enterprise must achieve
some specific objectives to fully exploit logistical competency.

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