Demand Management, Order Management, and Customer Service
Demand Management, Order Management, and Customer Service
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Order Management and Customer
Service
Key Terms Key Terms
Customer service Order delivery
Efficient Consumer Order entry
Response (ECR) Order handling
Load planning Order management
Order cycle Order picking and
Quick Response (QR) Assembly
Replenishment cycle Order processing
Order transmittal
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Demand Management in Logistics
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Demand Management Objectives
Gathering and analyzing knowledge about consumers, their
problems, and their unmet needs.
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Demand Management Objectives
Sharing with other supply chain members knowledge about
consumers and customers, available technology, and logistics
challenges and opportunities.
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Demand Management Issues
Lack of communication between departments results in little
or no coordinated response to demand information.
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Demand Management Issues
Primary emphasis should be on using demand information to
create likely scenarios of the future as they relate to product
supply alternatives.
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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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Order Management
1) Order Planning
Needs an efficient order handling system to prevent
bunching
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Order Management
2) Order transmittal
The series of events that occur between the time a
customer places or sends an order and the time the seller
receives the order
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Order Management
3) Order processing
It includes such activities as follows:
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Figure 4-3: Flowchart of Order
Handling (Order Processing) System
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Order Management
3) Order processing
If there is a stockout
Notify the customer as soon as possible of stockout
Notify when shipment will occur
Give the customer the option of accepting in-stock, similar
products
Export orders
Need a letter of credit
International freight forwarders prepare documents and arrange
shipment
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Order Management
4) Order picking and assembly
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Order Management
5) Order delivery
The time from when a carrier picks up the shipment until it is
delivered to the customer’s receiving dock
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Order Management
Importance of the order cycle
◦ Short cycle time used as a marketing and sales tool
◦ Monitoring the order cycle can increase firm efficiency
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Customer Services
Customer services (CS) represents logistics’ role in fulfilling
marketing objectives
Comprehensive evaluation
must be done before adopting
any strategy, whether it
represents sound investment
or not!
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Cost Versus Customer Service
Reducing inventories, manufacturing cost and transportation cost
typically comes at the expense of customer services
Centralized
Warehouse
Cost / Inventory Customer
Service
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Customer Service
Establishing Objectives
Firms needs to identify some specific objectives to
achieve their company’s goals.
◦ Specific
◦ Measurable
◦ Achievable
◦ Consistent with broader firm goals
◦ Must consider competitor’s objectives
◦ Provide guidance to operating personnel
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Role of Logistics in Establishing
Customer Service Levels
Advisor to marketing
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Customer Service: Logistics/Marketing
Interface
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Customer Service: Logistics/Marketing
Interface
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Value-adding Activities in Logistics
Customer Service
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Performance Measurement of Customer
Services in Logistics
1. Availability
◦ Capacity to have inventory when it is required by customer
◦ To ensure availability, organizations have stocked products
◦ Goal is to achieve high availability levels while keeping low investments
◦ Performance measures of availability are:
Stockout Frequency
Fill Rate
Orders Shipped Complete
a) Stockout Frequency
Term usually refers when firm has no product available to fulfill demand
Approx. 5% of items at super markets are out of stocks when they are
planned to be on shelves
Products wise inventory availability must be critically reviewed
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Performance Measurement of
Customer Services in Logistics
1. Availability
b) Fill Rate
Fill rate measures the magnitude or impact of stockouts over
time
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Performance Measurement of
Customer Services in Logistics
1. Availability
Fill Rate (Example)
100 products order by customer Critical for customer 97% of fill rate
results in a situation of stockout…
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Performance Measurement of
Customer Services in Logistics
1. Availability
The 3 measures of availability combine to establish the extent to which a
firm's inventory strategy is accommodating customer demand
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Performance Measurement of
Customer Services in Logistics
2.Operational Performance
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Performance Measurement of
Customer Services in Logistics
2. Operational Performance
a) Speed
Time elapsed from customer order placement until the product is delivered
& is ready to use
Logistical system design determines the elapsed time for completion of the
process
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Performance Measurement of
Customer Services in Logistics
2. Operational Performance
b) Consistency
Order cycle consistency is measured by the number of times that
actual cycles meet the time planned for completion
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Performance Measurement of Customer
Services in Logistics
2. Operational Performance
c) Flexibility
A firm's ability to accommodate special situations and unusual or unexpected
customer requests.
For example,
If a stockout of an essential item occurs at a distribution facility that
normally services a customer, the item may be obtained from an
alternative facility utilizing some form of expedited transportation.
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Customer Satisfaction
If customer expectations are met or exceeded by the supplier, the
customer will be Satisfied. When building a customer service
platform in logistics, the following must be considered:
1. Customer Expectations
2. Customer Success
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Customer Satisfaction
1. Customer Expectations
One important way that many firms have responded to the challenge
of customer success is through the development of value-added
services.
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Customer Satisfaction
Customer Success
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