Integral Logistics Management — Operations Management and Supply Chain Management Within and Across Companies

1.2.1 Business-Partner, and Order-Related Business Objects

Intended learning outcomes: Present in detail the order as a business object. Produce an overview on terms such as business partner, due date, order promising, order confirmation, order status. Differentiate between order positions for items (to be) delivered and labor (to be) performed.


The order serves as an instrument both in the legal sense and with regard to process organization, within and across companies. The following business objects are basic for the definition of an order.

A business partner of a company is a general term for a customer, recei­v­ing a good or service, or a supplier, selling or providing a good or service. 
A date is a fixed point in time at which an event occurs. It is normally expressed as day and time of day ([MeWe18]). 
A due date is a date on which something is sche­duled, i.e., expected in the prescribed, normal, or logical course of events ([MeWe18]). 
A time period is a period on the time axis. The start date is the beginning, and the end date is the end of the time period. In a logistics environment, it is mostly a completion date.

An order as a business object is rather complex. It contains all the information required for planning & control of the flow of goods.

An order as a business object consists at minimum of a business partner (in addition to the company itself) and a date and sets binding obligations with regard to:   
- Who the business partners are: the customer and the supplier   When the order is issued, or what the order validity date is   
- Within what time period the order is fulfilled (order start date and order completion date or order end date — in general the order due date). 

Depending on the purpose, the order, with a number of order positions, also sets binding obligations with regard to   
- The products (identification, quantity, due date) that must be manufactured or procured. 
- The components (identification, quantity, due date) that must be ready for use or building in. 
- The tasks that must be performed and in what sequence; this also includes transport, inspection, and other similar tasks. 
- Whether and how order tasks are linked to other orders. 

These definitions hold for all kinds of orders, both in industry and the service sector.

The kind of order classifies an order according to its business partners. 
- A customer order or a sales order is an order from an external custo­mer (i.e., a customer that is not part of the company) to the company.
- A procurement order or a purchase order is an order from the company to an external supplier.
- A production order or a manufacturing order or a job order or a shop order is an internal order, or order from an internal customer (i.e., a customer that is part of the company) to manufacture a good.
- An overhead order or a work order is a company internal order, e.g., for R&D, for items to be manufactured (such as tools) or for services that concern the infrastructure of the company (such as equipment maintenance and repair).

An order becomes legally binding by order promising and confirmation.

Order promising is the process of making a delivery commitment, i.e., answering the question: When can you ship how much ([APIC16])? 
An order confirmation is the result of order promising.

An order runs through several phases.

Order status is a phase in the carrying out of the order. We can distinguish among four phases: 
1. Planning or bid status
2. Order confirmation status
3. Order execution status
4. Billing status (calculation or invoice)

In the first status (planning or bid), the order data represent projections. In the second and third status, they are projections (budgets or cost estimations) that will be replaced gradually with real data. In the fourth status (billing), we find the effective data associated with a concrete order, tapped through some kind of recording of shop floor data.

Figure 1.2.1.1 shows an example of a simple sales order, an order form used by an Internet company. This order is a typical example of a sales order or also simple purchase order in all areas of business.

  • The upper portion, the heading, contains customer data and suppli­er, that is, company data. Order validity date in this case is under­stood implicitly as the date the order is received by the company.
  • The main body of the sales order represents its positions and lists the items to be delivered, that is, their identification and quantities.
  • Finally, the footer contains the delivery address.

Fig. 1.2.1.1        Simple sales order form used by an Internet company: status “order.”

Here, the delivery due date is under­stood to be “as soon as possible.” Thus, with little data a practical order comes about. Because the company usually has the items in stock, this sales order serves as distribution control to the customer. The invoice is usually produced — follo­wing delivery — within the same struc­ture. Billing information, in most cases, will corres­pond to order infor­mation. Deviations might occur due to delayed deliveries or backorders.

Figure 1.2.1.2 shows a more complicated example from the service industry, an invoice for auto repair. This invoice is the result of an order that was placed previously within the same structure: usually in verbal, sometimes in written form.

  • The heading contains company and customer data, complemented by the delivery date and the characteristic object related to the ser­vice (the car). As this is an invoice, the billing date is also given.
  • The main body includes order positions for labor performed. The (spare) parts list lists the items used to complete the labor. These items may be listed as in-stock shop supplies or items orde­red specially for the job. Quantity and price relate to definite defi­ned units, such as pieces and hourly labor rates. Comments on the in­voice aid communication between customer and service provider.
  • The footer of the invoice contains specific billing information, such as the total amount, broken down into the various charges, conditions of sales, and sales tax. Bids and order confirmations, or, in other words, the first and second statuses that preceded the billing status, would contain similar data.

Fig. 1.2.1.2        Example of a complex sales order at an auto garage: status “billing.”



Course section 1.2: Subsections and their intended learning outcomes

  • 1.2 Business Objects

    Intended learning outcomes: Present business-partner, and order-related business objects in detail. Explain product-related, process-related, and resource-related business objects. Produce an overview on rough-cut business objects.

  • 1.2.1 Business-Partner, and Order-Related Business Objects

    Intended learning outcomes: Present in detail the order as a business object. Produce an overview on terms such as business partner, due date, order promising, order confirmation, order status. Differentiate between order positions for items (to be) delivered and labor (to be) performed.

  • 1.2.2 Product-Related Objects

    Intended learning outcomes: Produce an overview on business objects such as item, specializations thereof (particularly part and component), and item family. Explain the product structure and the bill of material. Differentiate between a convergent and a divergent product structure. Describe the concepts of product family, variant, option and commonality.

  • 1.2.3 Process-Related Business Objects

    Intended learning outcomes: Present in detail business objects such as operation, setup and run time. Explain the routing sheet, the critical path, interoperation time and the production lead time. Describe the product module, the production structure, and the cumulative lead time. Disclose the process plan. and the lead time offset.

  • 1.2.4 Resource-Related Business Objects

    Intended learning outcomes: Produce an overview on terms such as facilities, workstations, production equipment, work center, capacity, load, work-center load. Explain the load profile of a work center. Differentiate between standard load and actual load. Disclose capacity utilization and work center efficiency. Differentiate between rated capacity and theoretical capacity.

  • 1.2.5 Rough-Cut Business Objects

    Intended learning outcomes: Identify reasons and principles for defining rough-cut business objects. Disclose the rough-cut product structure and the rough-cut process plan. Explain a way to derive a rough-cut resource requirement plan from a detailed resource requirement plan. Describe a way to establish the rough-cut process plan and the product load profile.

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