Logistics and Information

Technology

Logistics and Information Technology

Key Terms
Application specific
software
Big Data
Cloud computing
Data mining
Data warehouse
Electronic data
interchange (EDI)

Electronic
procurement
(e-procurement)
Enterprise resource
planning (ERP) system
Global positioning
systems (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-frequency
identification (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 Internets 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 leadtimes

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Figure 2.1:
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

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General Types of Information

Management Systems
Office automation systems:

Include general software packages

Word processing
Spreadsheet (most relevant for logisticians)
Presentation
Database management applications

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General Types of Information

Management Systems
Office automation systems:

Spreadsheet (most relevant for logisticians)

Able to solve for basic logistic optimization models
through add-in packages such as Whats Best

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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
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General Types of Information

Management Systems
Communication system
Examples of logistics information technology
Electronic data interchange (EDI)
Viewed as the measuring stick in the 1990s

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 Apples 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) (continued)
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
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General Types of Information

Management Systems
Transaction Processing System (TPS) (continued)
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
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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

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General Types of Information

Management Systems
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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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 systems 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 companys 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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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

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

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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

Alter, Information Systems, Chapter 5.

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General Types of Information

Management Systems
Enterprise Systems
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 environment1

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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General Types of Information

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 Internets Influence on Logistics

Approximately 35% of the worlds 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 Internets Influence on Logistics

Similarities between online retailing and in-store retailing
Logistical Functions and
Activities
Transportation
Warehousing
Materials handling
Order management

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Equipment and Materials

Bar coding
WMSs

The Internets Influence on Logistics

Differences between online retailing and in-store retailing
Online Retailing

In-store 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
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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

The Internets Influence on Logistics

Differences between online retailing and in-store retailing
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

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Variety of materials
handling equipment used
Packaging generally
cartons that hold large
volume orders

The Internets Influence on Logistics

Differences between online retailing and in-store retailing
Online Retailing

In-store 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
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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

The Internets 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

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

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The Internets Influence on Logistics

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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The Internets 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

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The Internets Influence on Logistics

Cloud Computing
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 Internets 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

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The Internets Influence on Logistics

Electronic Procurement, or e-procurement
Benefits realized from e-procurement include:
Transactional benefits
Measures the benefits of enhanced
transactional efficiency associated with eprocurement

Compliance benefits
Focus on the savings that come from
adherence to established procurement
policies
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The Internets 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 Internets 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

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Information Technology Challenges

IT is a tool that can help manage
organizational problems, but it is not a beall/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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