IBS3002 Logistics & International Trade

Chapter 2
Logistics & information technology

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Contemporary logistics, Murphy (2015)
Topic areas

 Benefits of effective and efficient use of information for logistics management

 Types of information systems and their logistical applications
 The Internet’s influence on logistics
 Information technology challenges

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Benefits of effective and efficient use of information

 Greater knowledge and visibility across the supply chain

 Greater awareness of customer demand via point-of-sale data
 Better coordination of manufacturing, marketing, and distribution
 Streamlined order processing and reduced lead-times

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General types of information management systems

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General Types of Information Management Systems

 Office automation systems

Provide effective ways to
Process personal and organizational business data
Perform calculations
Create documents
Include general software packages
Word processing
Spreadsheet (most relevant for logisticians)
Presentation
Database management applications
Spreadsheet (most relevant for logisticians)
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Able to solve for basic logistic optimization models through add-in packages such as “What’s Best”
General Types of Information Management Systems

 Communication system
Help stakeholders work together by interacting and sharing information in many
different forms
Examples of telecommunication technologies:
Fax machines
Personal computers
Electronic mail
Cellular phones
Tablets
Smart phones 6
General Types of Information Management Systems

 Communication system
Examples of logistics information technology
Electronic data interchange (EDI)
Viewed as the measuring stick in the 1990’s
Wireless communication
Emerged as the measuring stick during the first decade of the twenty-first century
Device examples include
Global positioning systems (GPS)
Tablets (such as Apple’s iPad)
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General Types of Information Management Systems

 Transaction Processing System (TPS)

Collects and stores information about transactions
Efficient processing of transactions with a choice of
Real-time processing or
Batch processing
Examples include
Electronic data interchange (EDI)
Automatic identification technologies
Essential component in point-of-sale (POS) systems
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General Types of Information Management Systems

 Transaction Processing System (TPS)

Benefits of EDI
Reduced document preparation and Increased cash flow
processing time
Reduced inventory carrying costs Increased billing accuracy
Reduced personnel costs Increased productivity
Reduced Information float Increase customer satisfaction
Reduced shipping errors
Reduced lead times
Reduced order cycle times
Reduced ordering costs
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General Types of Information Management Systems

 Transaction Processing System (TPS)

Benefits of EDI
Reduced document preparation and Increased cash flow
processing time
Reduced inventory carrying costs Increased billing accuracy
Reduced personnel costs Increased productivity
Reduced Information float Increase customer satisfaction
Reduced shipping errors
Reduced lead times
Reduced order cycle times
Reduced ordering costs
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General Types of Information Management Systems

 Transaction Processing System (TPS)

Examples of automatic identification technologies
Optical character recognition
Machine vision
Voice-data entry
Magnetic strips
Bar code scanners
Radio-frequency identification (RFID)

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General Types of Information Management Systems

 Transaction Processing System (TPS)

RFID Consists of:
1. A scanning antenna
2. An RFID tag (chip) that conveys relevant data
3. A receiver that interprets the data
Compared to bar codes, RFID
1. Does not require clear line of sight between an object and RFID hardware
2. Can store much larger quantities of data
3. Can offer both read and write capabilities
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General Types of Information Management Systems

 Management Information System (MIS) and Executive Information System (EIS)

- Convert TPS data into information for monitoring performance and managing an organization
- Objective is to provide managers and executives the information they really need
- A logistics information system (LIS) can be defined as “the people, equipment, and procedures
to gather, sort, analyze, evaluate, and distribute needed, timely, and accurate information to
logistics decision makers.”1

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General Types of Information Management Systems

 Management Information System (MIS) and Executive Information System (EIS)

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General Types of Information Management Systems

 Decision Support Systems (DSS)

Help managers make decisions by providing information, models, or analysis tools
Examples of specific uses include
Vehicle routing issues
Inventory control decisions
Developing automatic order picking systems
Optimization models for buyer-seller negotiations

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General Types of Information Management Systems

 Decision Support Systems (DSS)

Several prominent DSS techniques include:
Simulation
Technique that models a real-world system, typically using mathematical equations
to represent the relationships among the system’s components
Application specific software
Technique developed to help managers deal with specific logistics processes or
activities
Popular option includes on-demand software (also referred to as software-as-a-
service or cloud computing)
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General Types of Information Management Systems

 Decision Support Systems (DSS)

Examples of logistics-related application-specific software:
Transportation management systems (TMS)
Software package that automates the process of building orders, tending loads,
tacking shipments, audits, and payments1
Warehouse management systems (WMS)
Software package that provides oversight of the storage and flow of materials within
a company’s operations2

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General Types of Information Management Systems

 Decision Support Systems (DSS)

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General Types of Information Management Systems

 Decision Support Systems (DSS)

Data mining – a DSS technique
Is the application of mathematical tools to large bodies of data in order to extract
correlations and rules1
Dependent on data warehouses
Central repository for all relevant data collected by an organization

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General Types of Information Management Systems

 Enterprise Systems
Create and maintain consistent data processing methods and an integrated database across
multiple business functions1
Enterprise Systems example:
Enterprise resource planning (ERP)
“lets a company automate and integrate the majority of its business processes, share common data and
practices across the enterprise, and produce and access information in a real-time environment” 1
Shortcomings of Enterprise resource planning (ERP)
Costs of installation
Time-consuming installation process
Initially lacked strong application-specific logistical capabilities such as TMS or WMS
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The Internet’s Influence on Logistics

Approximately 35% of the world’s population uses the internet – up from 5% at the
beginning of the 21st century

3 Specific Influences on Logistics Include:

1. Online retailing
2. Cloud computing
3. Electronic procurement

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The Internet’s Influence on Logistics

Similarities between online retailing and in-store retailing

Logistical Functions and Equipment and Materials

Activities • Bar coding
•Transportation • WMSs
•Warehousing
•Materials handling
•Order management

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The Internet’s Influence on Logistics
Differences between online retailing and in-store retailing
Online Retailing
•More, smaller orders
•Order management systems
must handle large volumes of
orders
•Information management
systems capable of correctly
transmitting each order so it can
be filled in a timely fashion
•Smaller orders dictate open-
case picking
In-store Retailing
• Fewer, larger orders
• Order management system
is set up to handle orders
from resellers, not
consumers
• Full-case picking
• Warehouse set up to handle
large volume orders
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The Internet’s Influence on Logistics
Differences between online retailing and in-store retailing
Online Retailing
•Products slotted to facilitate
picking smaller orders
•Totes and push carts used
•Packaging is small cartons,
envelopes, bags suited to holding
small quantities
In-Store Retailing
• Variety of materials handling
equipment used
• Packaging generally cartons
that hold large volume orders
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The Internet’s Influence on Logistics
Differences between online retailing and in-store retailing
Online Retailing
•Transportation companies used
with extensive delivery
networks; experience in parcel
shipments
•Outbound shipments usually
picked up by vans
•Return rates much higher and
from ultimate consumers
In-store Retailing
• Transportation methods and
companies vary by request of
buyer
• Outbound shipments may be
picked up by tractor trailers or
railcars
• Return rates lower and from
resellers
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The Internet’s Influence on Logistics

Cloud Computing
Worldwide public cloud services market – where software, services, or information are shared
via the Internet without the users having control over the technology infrastructure – grew
almost 20% between 2011 and 20121
Advantages of Cloud Computing
Pay-per-use allows firms to avoid high capital investment which speeds up ROI for the
software
Since it involves operational as opposed to capital expenditures, it is a viable option for
firms that could not afford to purchase, install, and maintain application-specific
software such as TMS and WMS
Due to the economic slowdown of 2007, many firms were forced to slash IT
expenditures, thus benefitting cloud-based applications 26
The Internet’s Influence on Logistics

Cloud Computing
Advantages of Cloud Computing continued
Faster and less costly installation
Smaller IT staff
Regular upgrades and updates from the software provider
Drawbacks of Cloud Computing
Upgrades and updates can be too numerous and too frequent
Limited amount of customization
Security issues
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The Internet’s Influence on Logistics

• Electronic Procurement, or e-procurement

- Uses the internet to make it easier, faster, and less expensive for an organization to
purchase goods and services
Benefits realized from e-procurement include:
Transactional benefits
Measures the benefits of enhanced transactional efficiency associated with e-
procurement
Compliance benefits
Focus on the savings that come from adherence to established procurement
policies
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The Internet’s Influence on Logistics

Electronic Procurement, or e-procurement

Benefits realized from e-procurement include:
Management information benefits
Encompass those that result from management information, customer
satisfaction, and supplier satisfaction levels after implementation of e-
procurement
Price benefits
Are those that are given as a result of adopting e-procurement

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The Internet’s Influence on Logistics

Electronic Procurement, or e-procurement

- Drawbacks of using e-procurement
Security risk of transmitted information
Impersonal as human interaction is replaced by computer transactions
- Drawbacks of using e-procurement
Security risk of transmitted information
Impersonal as human interaction is replaced by computer transactions

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Information Technology Challenges

IT is a tool that can help manage organizational problems, but it is not a be-all/end-all
solution for organizational problems
Theft of proprietary information
Websites protected from viruses and hackers
Decreasing size and increasing portability of technology devices
Employee resistance to IT implementations

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