Order Management and

Customer Service
ORDER MANAGEMENT

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 Order Management
• Order management refers to management of
the various activities associated with the order
cycle

• Order cycle (replenishment cycle or lead time)

refers to the time from when a customer places
an order to when goods are received

• Some organizations include order to cash cycle

in their order management model

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 Order Cycle
• Four stages of the order cycle include:
– Order transmittal
– Order processing
– Order picking and assembly (preparation)
– Order delivery (shipment)

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 Order Transmittal
• Is the time from order placement by the
customer to order receipt by the seller

– Methods of order transmittal

• In person
• Mail
• Telephone
• FAX
• Electronically

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 Order Transmittal
• Is the time from order placement by the
customer to order receipt by the seller

– Methods of order transmittal

• In person
• Mail
• Telephone
• FAX
• Electronically

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 Order Processing
• The time from when the seller receives an
order until an appropriate location (i.e.
warehouse) is authorized to fill the order

• The set of activities necessary to make the

correct goods ready for shipment to
customer

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 Order Processing
• Includes:
– Checking for completeness and accuracy
– Checking customer credit
– Order entry into the computer system
– Marketing department credits salesperson
– Accounting department records transaction
– Inventory department locates the nearest warehouse to
customer and advises them to pick the order
– Transportation department arranges shipping document
for shipment

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 Order Preparation
• Includes all activities from when an appropriate
location is authorized to fill the order until goods
are loaded aboard an outbound carrier

• Begins when the order is given to the warehouse

and ends when the shipment is on the warehouse
dock ready to be transported

• Picking the right product and packaging them for

shipment
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 Order Preparation
• Examples of Order Picking and Assembly
technology:
– Handheld scanners

– Radio-frequency identification (RFID)

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 Order Preparation
• Examples of Order Picking and Assembly
technology:
– Voice-based order picking
– Pick-to-light

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 Order Delivery
• The time from when a carrier picks up the
shipment until it is received by the customer

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Order Cycle Time

© 2008 Prentice Hall 4-13

CUSTOMER SERVICE

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 Customer Service
• The ability of logistics management to
satisfy users in terms of time, dependability,
communication , and convenience.”

Source: Roger A. Kerwin, Steve W. Hartley, and William Rudelius, Marketing, 9th ed.
(Boston, MA: McGraw-Hill/Irwin, 2009), Chapter 16.

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 Customer Service
• Four dimensions of customer service
include:
– Time
– Dependability
– Communication
– Convenience

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 Managing Customer Service
• Four specific customer service
considerations include:
– Customer Profitability Analysis (CPA)
– Establishing customer service objectives
– Measuring customer service
– Service failure and recovery

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 Customer Profitability Analysis
• The allocation of revenues and costs to customer
segments or individual customers to calculate the
profitability of the segments or customers

• Suggests that different customers consume differing

amounts and types of resources

• Recognizes that all customers are not the same and

some customers are more valuable than others to
an organization
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 Customer Profitability Analysis
• Can help to identify when an organization
should pursue different logistical approaches
for different customer groups

• Has been facilitated by the acceptance of

activity-based costing

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 Managing Customer Service
• Establishing Customer Service Objectives
– Specific
– Measurable
– Achievable
– Cost-effective

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 Managing Customer Service
• Measuring Customer Service
– “you can’t manage what you can’t measure”
– Must determine data sources to be used
– Must determine what factors to be measured
– Organizations must resist excessive
measurement

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 Service Failure
• Situations will occur where actual performance
does not meet the customer’s expected
performance (i.e. service failure)

• Examples of order-related service failures include:

• Lost delivery
• Late delivery
• Early delivery
• Damaged delivery
• Incorrect delivery quantity

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 Service Recovery
• Process for returning a customer to a state
of satisfaction after a service or product has
failed to live up to expectations
• Is often costly
• May lead to increase customer loyalty
• Unsatisfactory service recovery magnifies
the initial failure

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THANK YOU

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