Order Processing in Physical Distribution Process:

Order processing is intended to take the consumer orders and execute the particulars the consumer has purchased. In a typical buyer-seller relationship order placement is the first step. Products flow from manufacturers to customers via channel members while orders flow in the reverse direction, from customers to the manufacturers.

A good physical distribution arrangement should provide for an accurate and speedy processing of orders, in the absence of which goods would reach the customers late or in wrong quantity or specifications. The business is concerned with this function because it directly relates to how the customer is serviced and attaining the customer service goals. If the order processing system is efficient, then the business can avoid other costs in other functions, such as transportation or inventory control. For example, if the handbag business has an error in the processing of a customer order, the business has to turn to premium transportation modes, such as next day air or overnight, to meet the customer service standard set out, which will increase the transportation cost.

The Order Processing phase begins when the sales order is entered and includes important steps from allocating inventory through warehouse processing. This would result in customer dissatisfaction, with the danger of loss of business and goodwill.

Order processing mainly includes:

  1. Receiving order
  2. Recording order
  3. Filing order
  4. Executing order or assembling of products for dispatch
  5. Credit and collection.