2.4.1 Understanding logistics

What happens when you buy something when you place an order online for example.

Have you ever wondered what has to take place to get that order delivered to you.

Well actually there is a specific series of activities that must take place to make that happen.

Let’s go through those steps.

The first thing that happens is the seller checks his amatory to make sure he has enough of this item

in stock to fill your order.

If not the order is canceled.

Or perhaps the seller might ask if you want to place the order on hold called the back order until he

has enough inventory in stock.

If your order can be filled of course the seller is now going to ask for a payment.

So far so good.

Now the seller will process your order along with any paperwork that may be required.

Normally this means an invoice an order request and shipping documents will be prepared and sent to

the warehouse next.

A warehouse worker will find the item you ordered and package it for shipment.

Then your order is placed on a truck to begin the delivery process.

Lastly this truck or some other truck arrives at your door with your order.

Pretty straightforward process don’t you think.

And this straightforward process applies just as well to filling your business orders no matter how

complex your orders may be whether you are buying office supplies a new machine for your factory or

packing material for your distribution center.

These processes are the same.

One key difference however might be in the payment process.

In business the business transactions most often you are extended credit for the value of the order

and you make a payment sometime after delivery.

Your Order impacts many business functions not just in your company but also in the seller’s company

and the manufacturer’s company accounting warehouse transportation production and finance people are

all impact that along the way.

Although the processes may seem simple there are also plenty of opportunities for problems.

That is why business owners and managers should take special care to help make the order fulfillment

process run as smoothly as possible.

After all it’s very important to you that your orders arrive on time in the correct amount and at the

right location.

There are a few things you can do in your business that can help make things go smoothly.

First and foremost order of what you need now you’re probably thinking well that’s silly.

Of course I will order what I need as a business manager.

You know that for some items you need small batches delivered just in time and for other items you want

to order a larger volume so that you can save on shipping costs.

You have to make the decisions that are right for your company on a day to day basis.

Because of course things change.

Secondly know the seller know your suppliers and their capabilities.

Plan ahead and place your orders at the right time based on those capabilities and the capabilities

of the delivery system.

Rush orders are much more expensive to fill and cause many more headaches along the way.

If you do have to place a rush order recognize that it may have a slightly different order fulfillment

process and you must take the time to understand what you can expect from that process.

This way you can amend your schedule accordingly.

Next you should study alternatives to your current suppliers.

International orders are much more complex due to customs requirements additional distances involved

and transportation delays.

You should constantly balance this trade off with the low cost savings you gain.

Finally consider the environment.

Smaller orders delivered throughout the week put more trucks on the road and contribute more to pollution

for example larger orders certainly can increase your inventory holding costs but do consider the tradeoff.

So what about your business.

Do you have good relationships with your suppliers.

What about your buyers.

From my experience these relationships play a huge part in your overall success.

What about rush orders.

Do you plan ahead so that you can hold your costs down.

If you’re not considering all of these steps don’t be too worried.

A lot of businesses could use help in these areas considering these factors is a key to become a logistics


If you are anything like me when you buy something you expect everything to be perfect.

You’re expecting a product that works and you are expecting it to be where you need it when you need


Things are no different in the business world.

The buyer wants to place the perfect order.

And believe me the seller also wants to deliver that perfect order.

Have you ever thought about what it takes to deliver an order to you perfectly.

Let’s take a look at this process from the perspective of a seller who is managing the order you just

placed when describing a perfect order.

Think of it as a series of rights.

There are many variations on this theme but let’s agree that a perfect order is the right item delivered

to the right place at the right time.

These three metrics can help me measure my performance another component of a perfect order is high

quality meaning the product is free of defects and that it is accompanied by all the required supporting

paperwork like instructions and specifications and invoices as appropriate.

So we have a series of rights that characterize the perfect order.

This is a measure of my reliability as a seller or supplier and this is my first performance measurement

as a seller if I have successfully completed all these rights then I will quickly establish a reputation

as a reliable seller to accomplish this.

I certainly must ensure a high level of accuracy throughout my business.

The item must be manufactured within specifications whether I make it or I have someone else make it

for me.

I must pick the proper item from the warehouse and I must package it in a manner that will protect it

during shipping.

Then I must make sure all delivery instructions are correct.

Again whether I deliver the package or I have someone else to do it for me.

Many things must be managed.

And clearly many things can go wrong.

In today’s logistics operations I rely heavily on productivity software and automation to make sure

I get these things right.

Timing is also very important.

So I want to make sure that I deliver this product in a timely manner.

If you think about the personal electronics industry for example delivering quickly is not just a competitive

advantage it is a necessity.

Customers want their cell phones and laptops and tablets right away.

Suppliers definitely don’t want to hold them and Torri that might quickly become out of date or have

a lower sales price.

Fast delivery is very important on both ends of the transaction but fast delivery is much more than

just the delivery process itself.

Our second metric is cycle time.

The time from when the customer places an order and when the order is received by the customer.

Most companies refer to this as order cycle time or order fulfillment cycle time and this is a measurement

of my responsiveness as a seller supplier cycle time includes the actual transportation delivery time

of course but it also includes the time it took me to process the order and the time needed to get the

item out of my available inventory and the time to prepare the item and all the paperwork for shipment.

And if I did not have the item in stock right now it may include the time required to actually manufacture

the product with custom products.

Of course the production time has always included so you can see that again there is a lot to do.

To be perfectly responsive and there are lots of opportunities for issues along the way.

As a seller managing the perfect order also includes managing my costs and that’s the third performance


Simply put if I can hold my shipping and handling costs down I am more appealing to the customer and

that customer should be willing to buy more products from me.

This is good for both of us because my efficiency leads the cost savings that I can pass along to my

customers and those customers become repeat customers.

When you look at order management in your business you must remember to find the right balance among.

Order fulfillment order cycle time and order management costs.

That is the key to success here.

So what about you.

Do you manage your orders to your customers.

Do you strive for that perfect order every time.

How do you measure your performance on this.

Do you have a system in place to help you keep track of your cycle time.

Think about your favorite company that you order from regularly.

Maybe Amazon or Costco.

The list goes on and on.

All of these companies have a system of measurements to help understand how their orders are being managed.

Applying these concepts can help your company become best in class.

Jim Rohn Sứ mệnh khởi nghiệp