Contemporary Logistics

Twelfth Edition, Global Edition

Chapter 2
Logistics and
Information Technology

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Learning Objectives (1 of 2)
2.1 To explain the importance of effective and efficient
utilization of information for logistics management
2.2 To distinguish between the general types of
information systems and their logistical applications
2.3 To review how logistics supports on-line retailing
2.4 To illustrate how cloud computing is being used to
support logistics software usage

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Learning Objectives (2 of 2)
2.5 To report how companies are using electronic
procurement to drive purchasing efficiency
2.6 To explain how the Internet of things is affecting the
information available to logistics managers
2.7 To identify contemporary information technology
issues

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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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Figure 2.1: General Types of Information
Management Systems

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General Types of Information
Management Systems (1 of 20)
• Office automation systems
 Provide effective ways to:
o Process personal and organizational business data
o Perform calculations
o Create documents

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General Types of Information
Management Systems (2 of 20)
• Office automation systems
 Include general software packages
o Word processing
o Spreadsheet (most relevant for logisticians)
o Presentation
o Database management applications

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General Types of Information
Management Systems (3 of 20)
• Office automation systems
 Spreadsheet (most relevant for logisticians)
o Able to solve for basic logistic optimization models
through add-in packages such as “What’s Best”
o Enables “what-if analyses”

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General Types of Information
Management Systems (4 of 20)
• Communication systems
 Help stakeholders work together by interacting and
sharing information in many different forms
 Examples of telecommunication technologies
o Fax machines
o Personal computers
o Electronic mail
o Cellular phones
o Tablets
o Smart phones

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General Types of Information
Management Systems (5 of 20)
• Communication systems
 Examples of logistics information technology
o Electronic data interchange (EDI)
 Viewed as the measuring stick in the 1990s
o 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 (6 of 20)
• Transaction processing systems (TPS)
 Collect and store information about transactions
 Efficient processing of transactions with a choice of
either:
o Real-time processing
o Batch processing

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General Types of Information
Management Systems (7 of 20)
• Transaction processing systems (TPS)
 Examples include:
o Electronic data interchange (EDI)
o Automatic identification technologies
 Essential component of point-of-sale (POS)
systems

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General Types of Information
Management Systems (8 of 20)
• Transaction processing systems (TPS)
 Automatic identification technologies
o Examples include:
 Optical character recognition
 Machine vision
 Voice-data entry
 Magnetic strips
 Radio-frequency identification (RFID)

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General Types of Information
Management Systems (9 of 20)
• Transaction processing systems (TPS)
 RFID consists of:
o A scanning antenna
o An RFID tag (chip) that conveys relevant data
o A transceiver that interprets the data

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General Types of Information
Management Systems (10 of 20)
• Transaction processing systems (TPS)
 Compared to bar codes, RFID
o Does not require clear line of sight between an
object and RFID hardware
o Can store much larger quantities of data
o Can offer both read and write capabilities

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General Types of Information
Management Systems (11 of 20)
• Management information systems (MIS) and
executive information systems (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

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General Types of Information
Management Systems (12 of 20)
• Management information systems (MIS) and
executive information systems (EIS)
 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

Adapted from a definition of “marketing information system” provided by Philip Kotler and Gary Armstrong in
1

Principles of Marketing, 11th ed. (Upper Saddle River, NJ: Prentice Hall, 2006), Chapter 4.

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Figure 2.2: Structure and Function of a
Logistics Information System

Source: Adapted from Michael Etzel, Bruce Walker, and William Stanton, Marketing, 14th ed. (New York:
McGraw-Hill Irwin,
2007), p. 172.

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General Types of Information
Management Systems (13 of 20)
• Decision support systems (DSS)
 Help managers make decisions by providing
information, models, or analysis tools
 Examples of specific uses include:
o Vehicle routing issues
o Inventory control decisions
o Developing automatic order picking systems
o Optimization models for buyer–seller negotiations

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General Types of Information
Management Systems (14 of 20)
• Decision support systems (DSS)
 Types of techniques include:
o Simulation
 Technique that models a real-world system, typically
using mathematical equations to represent the
relationships among the system’s components
o 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 (15 of 20)
• Decision support systems (DSS)
 Examples of logistics-related application-specific
software
o Transportation management systems (TMS)
 Software package that automates the process
of building orders, tending loads, tacking
shipments, audits, and payments2

Amy Zuckerman, “Transportation Management Systems Give Shippers Power to Make Smarter Trucking
2

Choices,” World Trade, January 2008, 34–38.

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General Types of Information
Management Systems (16 of 20)
• Decision support systems (DSS)
 Examples of logistics-related application-specific
software
o Warehouse management systems (WMS)
 Software package that provides oversight of
the storage and flow of materials within a
company’s operations3

Dave Piasecki, “Warehouse Management Systems,” www.inventoryops.com.

3

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Table 2.1: Transportation Management
Systems Task Capabilities

Source: “Transportation Management Systems Solution Selector,” Logistics Today, September

2004, 76–80

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General Types of Information
Management Systems (17 of 20)
• Decision support systems (DSS)
 Types of techniques include:
o Data mining
 Is the application of mathematical tools to
large bodies of data in order to extract
correlations and rules4
 Dependent on data warehouses
— Central repository for all relevant data
collected by an organization

Sam Joseph and Daniel Scuka, “AI,” Japan Inc., November 2001, 20–28.
4

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General Types of Information
Management Systems (18 of 20)
• Enterprise systems
 Create and maintain consistent data processing
methods and an integrated database across
multiple business functions5

Steven Alter, Information Systems, 4th ed. Chapter 5. (Upper Saddle River, NJ: Prentice Hall, 2002)
5

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General Types of Information
Management Systems (19 of 20)
• Enterprise systems
 Enterprise systems example:
o 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”6

Joel D. Wisner, G. Keong Leong, and Keah-Choon Tan, Principles of Supply Chain Management: A Balanced
6

Approach, 2nd ed. (Mason, OH: South-Western Cengage Learning, 2008), p. 507.

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General Types of Information
Management Systems (20 of 20)
• Enterprise systems
 Shortcomings of ERP
o Costs of installation
o Time-consuming installation process
o Initially lacked strong application-specific
logistical capabilities such as TMS or WMS

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The Internet’s Influence on Logistics (1 of 19)
• Approximately 35 percent of the world’s population
uses the Internet—up from
5 percent at the beginning of the
twenty-first century
• Three specific influences on logistics include:
 Online retailing
 Cloud computing
 Electronic procurement

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The Internet’s Influence on Logistics (2 of 19)
• Similarities between online retailing and
in-store retailing include:
 Logistical functions and activities
o Transportation
o Warehousing
o Materials handling
o Order management

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The Internet’s Influence on Logistics (1 of 19)
• Similarities between online retailing and
in-store retailing include:
 Equipment and materials
o Bar coding
o Warehouse management systems

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The Internet’s Influence on Logistics (4 of 19)
• Differences between online retailing and
in-store retailing
 Online retailing
o More, smaller orders
o Order management systems must handle large
volumes of orders
o Information management systems capable of
correctly transmitting each order so it can be
filled in a timely fashion
o Smaller orders dictate open-case picking

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The Internet’s Influence on Logistics (5 of 19)
• Differences between online retailing and
in-store retailing
 Online retailing
o Products slotted to facilitate picking smaller
orders
o Totes and push carts used
o Packaging is small cartons, envelopes, and
bags suited to holding small quantities

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The Internet’s Influence on Logistics (6 of 19)
• Differences between online retailing and
in-store retailing
 Online retailing
o Transportation companies used with extensive
delivery networks; experience in parcel
shipments
o Outbound shipments usually picked up by vans
o Return rates much higher and from ultimate
consumers

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The Internet’s Influence on Logistics (7 of 19)
• Differences between online retailing and
in-store retailing
 In-store retailing
o Fewer, larger orders
o Order management system is set up to handle
orders from resellers, not consumers
o Full-case picking
o Warehouse set up to handle large volume
orders

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The Internet’s Influence on Logistics (8 of 19)
• Differences between online retailing and
in-store retailing
 In-store retailing
o Variety of materials handling equipment used
o Packaging generally cartons that hold large
volume orders

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The Internet’s Influence on Logistics (9 of 19)
• Differences between online retailing and
in-store retailing
 In-store retailing
o Transportation methods and companies vary by
request of buyer
o Outbound shipments may be picked up by
tractor trailers or railcars
o Return rates lower and from resellers

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The Internet’s Influence on Logistics (10 of 19)
• 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
percent between 2011 and 20127

Bridget McCrea, “Cloud Breakthrough,” Logistics Management 51, no. 11 (2012): 36–40.
7

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The Internet’s Influence on Logistics (11 of 19)
• Cloud computing
 Advantages of cloud computing (1 of 2)
o Pay-per-use allows firms to avoid high capital
investment, which speeds up ROI for the software
o Because 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
o Due to the economic slowdown of 2007, many firms
were forced to slash IT expenditures, thus
benefitting cloud-based applications

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The Internet’s Influence on Logistics (12 of 19)
• Cloud computing
 Advantages of cloud computing (2 of 2)
o Faster and less costly installation
o Smaller IT staff
o Regular upgrades and updates from the
software provider

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The Internet’s Influence on Logistics (13 of 19)
• Cloud computing
 Drawbacks of cloud computing
o Upgrades and updates can be too numerous
and too frequent
o Limited amount of customization
o Security issues

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The Internet’s Influence on Logistics (14 of 19)
• Electronic procurement, or e-procurement
 Uses the Internet to make it easier, faster, and
less expensive for an organization to purchase
goods and services

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The Internet’s Influence on Logistics (15 of 19)
• Electronic procurement, or e-procurement
 Benefits realized from e-procurement include:
o Transactional benefits
 Measures the benefits of enhanced
transactional efficiency associated with
e-procurement
o Compliance benefits
 Focus on the savings that come from
adherence to established procurement policies

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The Internet’s Influence on Logistics (16 of 19)
• Electronic procurement, or e-procurement
 Benefits realized from e-procurement include:
o Management information benefits
 Encompass those that result from
management information, customer
satisfaction, and supplier satisfaction levels
after implementation of e-procurement
o Price benefits
 Are those that are given as a result of
adopting e-procurement

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The Internet’s Influence on Logistics (17 of 19)
• Electronic procurement, or e-procurement
 Drawbacks of using e-procurement
o Security risk of transmitted information
o Impersonal as human interaction is replaced by
computer transactions

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The Internet’s Influence on Logistics (18 of 19)
• Internet of things (IoT)
 Refers to the sensors and data communication
technology that is built into physical objects that
enables them to be tracked and controlled over the
Internet.8

8
Lew Manci, “7 Technology Trends Shaping the Future of Material Handling,” Supply Chain Quarterly 8, no. 4
(2014): 30–36.

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The Internet’s Influence on Logistics (19 of 19)
• Internet of things (IoT)
 Potential benefits extend across various types of
logistics activities, including areas such as:
o Warehousing
o Transportation
o Last-mile delivery

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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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Key Terms (1 of 3)
• Application-specific software procurement)
• Big data • Enterprise resource
planning (ERP) systems
• Cloud computing
• Global positioning systems
• Data (GPS)
• Data mining
• Data warehouse
• Electronic data interchange
(EDI)
• Electronic procurement (e-

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Key Terms (2 of 3)
• Information identification (RFID)
• Internet of things (IoT) • Reverse auction
• Logistics information • Simulation
system (LIS)
• Logistics optimization
models
• Machine learning
• On-demand software
(software-as-a-service)
• Radio-frequency

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Key Terms (3 of 3)
• Transportation
management system (TMS)
• Warehouse management
system (WMS)
• Wireless communication

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