Chapter 2 - Logistics and Information Technology.pdf

7/23/2019 Chapter 2 - Logistics and Information Technology.pdf

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Logistics and InformationTechnology



Logistics and Information Technology

Key Terms• Application specific

software

• Big Data

• Cloud computing

• Data mining

• Data warehouse

• Electronic datainterchange (EDI)

• Electronicprocurement(e-procurement)

• Enterprise resourceplanning (ERP) system

• Global positioningsystems (GPS)

• Information

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Logistics and Information Technology

Key Terms

• Logistics information

system (LIS)

• Logistics optimization

models

• On-demand software

(software-as-a-service)

• Radio-frequencyidentification (RFID)

• Reverse auction

• Simulation

• Transportation

Management System

(TMS)• Warehouse

Management System

(WMS)• Wireless

communication

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Learning Objectives

• To explain the importance of effective and

efficient utilization of information for logistics

management

• To elaborate general types of information

systems and their logistical applications

• To explain the Internet’s influence on logistics

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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 Typesof

Information

ManagementSystems

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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

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Management Systems


• Include general software packages

– Word processing – Spreadsheet (most relevant for logisticians)

– Presentation

–

Database management applications

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Management Systems


• Spreadsheet (most relevant for logisticians)

– Able to solve for basic logistic optimization modelsthrough add-in packages such as “What’s Best”

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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

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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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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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Management Systems

Transaction Processing System (TPS) (continued)

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Benefits of EDI

Reduced document preparation and

processing time

Increased cash flow

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




Management Systems

Transaction Processing System (TPS) (continued)

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Drawbacks of EDI

Lack of awareness of the benefits of EDI

High setup costs

Lack of standard formats

Incompatibility of computer hardware and software

Reduced shipping errors

Reduced lead times

Reduced order cycle times

Reduced ordering costs




Management Systems


– 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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Management Systems


– 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 objectand RFID hardware

2. Can store much larger quantities of data

3. Can offer both read and write capabilities

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Management Systems

Management Information System (MIS) andExecutive Information System (EIS)

• Convert TPS data into information for

monitoring performance and managing anorganization

• Objective is to provide managers and executives

the information they really need

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Management Information System (MIS) and

Executive Information System (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

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

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

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Management Systems



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General Types of InformationManagement Systems

Management Information System (MIS) and

Executive Information System (EIS)




Management Systems

Decision Support Systems (DSS)

• Help managers make decisions by providinginformation, 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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Management Systems


• Several prominent DSS techniques include:

– Simulation•

Technique that models a real-world system, typically usingmathematical equations to represent the relationshipsamong 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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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

1 Amy Zucherman, “Transportation Management Systems Give Shippers Power to Make Smarter Trucking Choices,”World Trade, January 2008, 34-38.

2Dave Piasecki, “Warehouse Management Systems,” www.inventoryops.com.

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Management Systems


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Management Systems


• Data mining – a DSS technique

– Is the application of mathematical tools to large

bodies of data in order to extract correlations andrules1

– Dependent on data warehouses

• Central repository for all relevant data collected by an

organization

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

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Management Systems

Enterprise Systems

• Create and maintain consistent data processingmethods and an integrated database across

multiple business functions1

1 Alter, Information Systems, Chapter 5.

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Management Systems

Enterprise Systems

• Enterprise Systems example:

– Enterprise resource planning (ERP)

• “lets a company automate and integrate the majority ofits business processes, share common data and practicesacross the enterprise, and produce and accessinformation in a real-time environment”1

1 Joel D. Wisner, G. Keong Leong, and Keah-Choon Tan, Principles of Supply Chain Management: A Balanced Approach, 2nd ed. (Mason, OH: South-Western Cengage Learning, 2008), p. 507.

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Management Systems

Enterprise Systems

• 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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Logistical Functions and

Activities• Transportation

• Warehousing

• Materials handling

• Order management

Equipment and Materials

•Bar coding

• WMSs

Similarities between online retailing and in-store retailing

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Online Retailing

• More, smaller orders

• Order managementsystems must handle largevolumes of orders

• Information managementsystems capable ofcorrectly transmitting eachorder so it can be filled in atimely fashion

• Smaller orders dictateopen-case picking

In-store Retailing• Fewer, larger orders

• Order managementsystem is set up to handleorders from resellers, notconsumers

• Full-case picking

• Warehouse set up to

handle large volumeorders

Differences between online retailing and in-store retailing

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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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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 andfrom resellers


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– Worldwide public cloud services market – where

software, services, or information are shared via

the Internet without the users having controlover the technology infrastructure – grew almost

20% between 2011 and 20121

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


• Cloud Computing

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• Cloud Computing

– 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

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• Electronic Procurement, or e-procurement

– 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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– 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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• 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 oftechnology devices

• Employee resistance to IT implementations

Information Technology Challenges

Chapter 2 - Logistics and Information Technology.pdf

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