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There is a key link between order management and demand forecasting, in that a
firm does not simply wait for orders to arrive in order to learn what is happening.
Forecasts are made of sales and of the inventories that must be stocked so that the
firm can fill orders in a satisfactory manner. There is also a key link between
order management and customer service because many organizations analyze
customer service standards in terms of the four stages of the order cycle.
4. Define and describe the order cycle. Why is it considered an important aspect of
customer service?
The order cycle is the elapsed time from when a customer places an order until
the customer receives the order. It is an important aspect of customer service in
part because the order cycle is frequently used to determine the parameters of
customer service goals and objectives. The order cycle is also being used by some
firms as a competitive weapon (generally the shorter the better), and technological
advances now make it extremely easy (and fast) for customers to determine the
exact status of their order(s).
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5. What are some causes of order cycle variability? What are the consequences of
order cycle variability?
Order cycle variability can occur in each stage of the order cycle. For example,
order transmittal by mail sometimes results in the mailed item never reaching its
intended destination; variability, in the form of unreliable transit times, can occur
during order delivery. One consequence of order cycle variability might be an
increase in inventory levels to guard against stockouts. If inventory levels are not
increased, then stockouts could occur because of order cycle variability, or a
company might be forced to use expedited transportation to make sure orders
arrive on time.
6. List and discuss the three elements of the dependability dimension of customer
service.
The three elements are consistent order cycles, safe delivery, and complete
delivery. As pointed out earlier, inconsistent order cycles necessitate higher
inventory requirements. Safe delivery brings loss and damage considerations into
play; lost or damaged product can cause a variety of negative ramifications for a
customer, such as an out of stock situation. One way of measuring the
completeness of delivery involves the order fill rate or the percentage of orders
that can be completely and immediately filled from existing stock; incomplete
deliveries generally translate into unhappy customers.
7. Describe some of the key issues associated with measuring customer service.
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Multiple Choice Questions
1. The creation across the supply chain and its markets of a coordinated flow of demand
is the definition of:
a. order cycle
b. order management
c. demand management
d. supply chain management
(c; p. 113)
a. exponential smoothing
b. cause and effect
c. judgmental
d. time series
e. all are basis types of forecasting models
(a; p. 113)
a. exponential smoothing
b. judgmental
c. time series
d. cause and effect
(b; p. 114)
5. ____ refers to the management of various activities associated with the order cycle.
a. Logistics
b. Order processing
c. Demand management
d. Order management
(d; p. 115)
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6. The order cycle is:
a. six
b. five
c. four
d. three
(b; p. 116)
a. in-person
b. mail
c. fax
d. electronic
e. all are methods of order transmittal
(e; p. 116)
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11. Ordering by ____ can be fast and convenient, but order errors are generally not
detected until the order is delivered.
a. telephone
b. mail
c. fax
d. electronic
(a; p. 116)
12. ____ refers to the time from when the seller receives an order until an appropriate
location is authorized to fill the order.
a. Order processing
b. Order cycle
c. Order management
d. Order transmittal
(a; p. 116)
13. Order processing typically involves each of the following activities except:
a. order management
b. order processing
c. order triage
d. ABC analysis
(c; p. 118)
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16. The final phase of the order cycle is called order ____________.
a. time
b. convenience
c. dependability
d. communication
e. all of the above are dimensions
(e; p. 121)
18. The percentage of orders that can be completely and immediately filled from existing
stock is the ____ rate.
a. order cycle
b. perfect order
c. order fill
d. optimal inventory
(c; p. 121)
19. What component of customer service focuses on the ease of doing business with a
seller?
a. convenience
b. dependability
c. time
d. communication
(a; p. 122)
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True-False Questions
1. Demand management is important because effective and efficient supply chains have
learned to match both supply and demand. (True; p. 112)
5. Each possible method of order transmittal has advantages and disadvantages, and
each performs differently with respect to the cost of ordering and the time to order.
(True; p. 116)
6. Order information is checked for completeness and accuracy in the order processing
component of the order cycle. (True; pp. 116-118)
7. Order picking and assembly follows the order processing component of the order
cycle. (True; p. 118)
8. Order processing often represents the best opportunity to improve the effectiveness
and efficiency of the order cycle. (False; pp. 118-119)
10. Companies today will not accept slower order cycles in exchange for higher order
cycle consistency. (False; p. 121)
11. Order fill rate is the percentage of orders that can be completely and immediately
filled from existing stock. (True; p. 121)
12. Text messaging and the Internet have lessened the need for telephone interaction and
face-to-face contact between seller and customer. (False; p. 122)
13. The convenience component of customer service focuses on the ease of doing
business with a seller. (True; p. 122)