Basics of Logistics
Chapter 2
Demand Management, Order Management, and Customer
Service
Dr. Maha Morssi
Demand Management
Demand management can be defined as “the
creation across the supply chain and its markets
of a coordinated flow of demand.”
Demand (sales) forecasting
• Refers to an effort to project future demand
• Is a key component in demand management
• Is helpful in make-to-stock situations
• Is helpful in make-to-order situations
Three basic types of demand forecasting models:
Judgmental
Time series
Cause and effect (associative Judgemental
Demand Management
Judgmental demand forecasting model:
Involves using judgment or intuition
Preferred in situations where there is limited or no historical data
Techniques include surveys, the analog technique, and others
Surveys used to learn about customer preferences and intentions
An analog (similar item to that being forecasted) is used as the basis for
demand history
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Demand Management
Time series forecasting model:
Underlying assumption is that future demand is solely dependent on past
demand
Some techniques include:
Simple moving averages
Weighted moving averages
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Demand Management
Cause-and-effect forecasting model:
Also referred to as associative forecasting
Assumes that one or more factors are related to demand and that the
relationship between cause and effect can be used to estimate future
demand
Some techniques include:
Simple regression
Multiple regression
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Demand Management
Demand forecasting issues:
Selection of forecasting technique(s) depends on many factors
Selecting an inappropriate technique will reduce forecast accuracy
Forecast accuracy can have important logistical implications
Computer forecasting software unable to completely eliminate forecast
errors
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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 Management
Four stages of the order cycle include:
• Order transmittal
• Order processing
• Order picking and assembly
• Order delivery
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Order Management
Order transmittal refers to the time from when the customer places
an order until the seller receives the order
Methods of order transmittal
• In person
• Mail
• Telephone
• FAX
• Electronically
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Order Management
Order processing refers to the time from when the seller receives an order until an
appropriate location (i.e. warehouse) is authorized to fill the order..
Order processing includes:
• Checking for completeness and accuracy
• A customer credit check
• Order entry into the computer system
• Crediting salesperson with the sale
• Recording the transaction
• Determining inventory location
• Arranging for outbound transportation
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Order Management
Order picking and assembly includes all activities from when an appropriate location
is authorized to fill the order until goods are loaded aboard an outbound carrier
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Order Management
Order picking and assembly
Often represents the best opportunity to improve the effectiveness and efficiency of an
order cycle
Can account for up to 2/3 of a facility’s operating cost and time
Examples of Order Picking and Assembly technology:
Handheld scanners
Radio-frequency identification (RFID)
Voice-based order picking
Pick-to-light
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Order Management
Order delivery is the time from when a transportation carrier picks up the shipment
until it is received by the customer.
Three key order delivery issues:
Variety of options in terms of transit time are now available such as delivery by 12
noon and delivery by 4:30 P.M.
A number of shippers are emphasizing both elapsed transit time as well as transit time
reliability.
Transportation carriers are revamping their operations to provide faster transit times
to customers.
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