The order-to-delivery cycle

1 The order-to-delivery cycle

From a marketing point of view the time taken from receipt of a cus- tomer’s order through to delivery (sometimes referred to as order cycle time (OCT)) is critical. In today’s just-in-time environment short lead times are a major source of competitive advantage. Equally important, however, is the reliability or consistency of that lead time. It can actu- ally be argued that reliability of delivery is more important than the length of the order cycle – at least up to a point – because the impact of

a failure to deliver on time is more severe than the need to order further in advance. However, because, as we have seen, long lead times require longer-term forecasts, then the pressure from the customer will con- tinue to be for deliveries to be made in ever-shorter time-frames.

What are the components of order cycle time? Figure 5.5 highlights the major elements.

Customer Order

Transport Order places

Order

Order

received order

entry

processing assembly

Fig. 5.5 The order cycle

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Each of these steps in the chain will consume time. Because of bottle- necks, inefficient processes and fluctuations in the volume of orders handled there will often be considerable variation in the time taken for these various activities to be completed. The overall effect can lead to a substantial reduction in the reliability of delivery. As an example, Figure

5.6 shows the cumulative effect of variations in an order cycle which results in a range of possible cycle times from five days to 25 days.

1. Order communication

2. Order entry and processing

3 Time range 1 to 5 days

3. Order picking or production

2 Time range 1 to 3 days

4. Transportation 5 Time range 1 to 9 days 5. Customer receiving

3 Time range 1 to 5 days

Total

2 Time range 1 to 3 days

5 days

15 25 days

Fig. 5.6 Total order cycle with variability

Source: Stock, J.R. and Lambert, D.M., Strategic Logistics Management, 2nd edition, Irwin, 1987.

In those situations where orders are not met from stock but may have to be manufactured, assembled or sourced from external vendors, then clearly lead times will be even further extended, with the possibility of still greater variations in total order-to-delivery time. Figure 5.7 high- lights typical activities in such extended lead times.

L O G I S T I C S A N D S U P P LY C H A I N M A N A G E M E N T

Order reception lead time

Processing lead time Commercial and planning lead times

Planning lead time Materials planning and

purchase lead time

Supplier lead time

Transport lead time Materials lead times

Reception and inspection lead time

Assembly release and order picking

Waiting times

Assembly Processing times

lead times

Transport time to next stage (e.g. to inventory assembly)

Despatch preparation time (documents, packages)

Distribution lead times

Transportation time to customer

Installation lead times

Fig. 5.7 Lead-time components

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