The receipt of order and transmission of sales order information is an important function of physical distribution. In developed and developing countries, computerized order processing furnishes a database for all channel members to increase their productive efficiency. Efficient order processing contributes to customer satisfaction, reduces costs and time-cycle, and increase profits.
Order entry starts when customers or sales people place purchase order by telephone, computer, or mail. Electronic ordering system reduces procurement costs. After receiving an order, it is passed on electronically or by whatever system is in place to warehouse to verify product availability, to credit department for checking prices, terms, and customer’s credit rating. After credit department’s approval, warehouse personnel assembles the order. If the product is out of stock, a production order is sent for manufacturing or the customer is offered a substitute.
After assembling the order and packing for shipment, the warehouse arranges delivery through an appropriate carrier. The customer is sent an invoice, inventory records are updated, and order is delivered.
Order processing can be manual or electronic depending on which approach offers more speed and accuracy within cost limits. In India, so far electronic order processing is not very common with many smaller businesses. Manual processing is suitable for smaller volumes. Electronic Data Interchange (EDI) is very suitable for integrating order processing with production, inventory, accounting, and shipping. It links marketing channel members, facilitators, and provides convenience to the member to cut down paperwork and sharing information on invoices, orders, payments, inquiries, and scheduling among all members.