Glossary
Order Management Costs
Tags: Glossary
One of the elements comprising a company's total supply chain management costs are as follows: 1. New Product Release Phase-In and Maintenance: Costs associated with releasing new products to the field, maintaining released products, assigning product IDs, defining configurations and packaging, publishing availability schedules, release letters and updates, and maintaining product databases. 2. Create Customer Order: Costs associated with creating and pricing configurations for orders and preparing customer order documents. 3. Order Entry and Maintenance: Costs associated with maintaining the customer database, conducting credit checks, accepting new orders, adding them to the order system, and making later order modifications. 3. Contract/Program and Channel Management: Costs related to contract negotiation, monitoring progress, and reporting against the customer's contract, including administration of performance or warranty-related issues. 5. Installation Planning: Costs associated with installation engineering, scheduling and modification, handling cancellations, and planning the installation. 6. Order Fulfillment: Costs associated with order processing, inventory allocation, ordering from internal or external suppliers, shipment scheduling, order status reporting, and shipment initiation. 7. Distribution: Costs associated with warehouse space and management, receiving and stocking finished goods, processing shipments, picking and consolidating items, selecting carriers, and staging products/systems. 8. Transportation, Outbound Freight, and Duties: Costs associated with all company-paid freight duties from the point of manufacture to the end customer or channel. 9. Installation: Costs associated with verification of site preparation, installation, certification, and authorization of billing. 10. Customer Invoicing/Accounting: Costs associated with invoicing, processing customer payments, and verifying customer receipt.
What is Order Management Costs?
Order management costs are an essential component of a company's overall supply chain management expenses. These costs encompass various activities involved in managing customer orders and ensuring their successful fulfillment. Understanding these costs is crucial for beginners in logistics to comprehend the financial implications of order management.
The first element of order management costs is the New Product Release Phase-In and Maintenance. This includes expenses associated with introducing new products to the market, maintaining existing products, assigning unique product IDs, defining configurations and packaging, publishing availability schedules, release letters, and updates, as well as managing product databases. These activities are necessary to ensure that products are properly launched and maintained throughout their lifecycle.
The second element is Create Customer Order costs. These costs involve creating and pricing configurations for customer orders and preparing the necessary order documents. It is essential to accurately determine the pricing and configuration of each order to ensure profitability and customer satisfaction.
The third element is Order Entry and Maintenance costs. This includes maintaining the customer database, conducting credit checks, accepting new orders, adding them to the order system, and making any necessary modifications to existing orders. These activities are crucial for maintaining accurate and up-to-date order information and ensuring smooth order processing.
The fourth element is Contract/Program and Channel Management costs. These costs are associated with negotiating contracts with customers, monitoring the progress of these contracts, and reporting against the agreed-upon terms. Additionally, these costs cover the administration of performance or warranty-related issues, ensuring that contractual obligations are met.
The fifth element is Installation Planning costs. These costs involve activities such as installation engineering, scheduling and modification, handling cancellations, and planning the installation process. Proper planning and coordination are necessary to ensure that installations are carried out efficiently and meet customer requirements.
The sixth element is Order Fulfillment costs. These costs encompass order processing, inventory allocation, ordering from internal or external suppliers, scheduling shipments, providing order status updates, and initiating the shipment process. Efficient order fulfillment is crucial for timely delivery and customer satisfaction.
The seventh element is Distribution costs. These costs include expenses related to warehouse space and management, receiving and stocking finished goods, processing shipments, picking and consolidating items, selecting carriers, and staging products/systems. Effective distribution management is essential for optimizing inventory levels and ensuring timely and accurate order fulfillment.
The eighth element is Transportation, Outbound Freight, and Duties costs. These costs cover all expenses associated with transporting goods from the point of manufacture to the end customer or channel. This includes freight charges, customs duties, and any other transportation-related costs incurred by the company.
The ninth element is Installation costs. These costs involve activities such as verifying site preparation, carrying out the installation process, certifying the installed products/systems, and authorizing billing. Proper installation is crucial for ensuring that products are functioning correctly and meeting customer expectations.
The tenth and final element is Customer Invoicing/Accounting costs. These costs include activities such as generating and sending invoices to customers, processing customer payments, and verifying customer receipt. Accurate and timely invoicing and accounting are essential for maintaining healthy financial operations.
Understanding and managing these various order management costs is vital for companies to optimize their supply chain operations and maintain profitability. By effectively controlling these costs, companies can enhance customer satisfaction, streamline their order management processes, and ultimately achieve success in the competitive marketplace.