See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/235290663

The Impact of Information Technology on Logistics

Article  in  International Journal of Physical Distribution & Logistics Management · December 1991

DOI: 10.1108/EUM0000000000387

CITATIONS READS

35 18,848

1 author:

Lucas D. Introna
Lancaster University
133 PUBLICATIONS   2,845 CITATIONS   

SEE PROFILE

Some of the authors of this publication are also working on these related projects:

Sociology of algorithms View project

Mobile-Age View project

All content following this page was uploaded by Lucas D. Introna on 02 March 2017.

The user has requested enhancement of the downloaded file.

 IJPD & LM 21,5

f information technology is not used by systems; information technology is not a coincidental add­

I
people at the operational level, then under­ on, once all the other systems in the business are up and
standing and integration will all be to no running. The process of integrating information technology
avail. into business systems will be covered in the second
section.

Involving
The degree to which operational people support and

The l m pad of
accept information technology will determine its success.
The final part of the article is focused on the important
issue of ''implementing'' information technology.

Information Understanding
The concepts of logistics, management, information and
technology will be defined and then their implications for

Technology logistics management will be interpreted.

Logistics

on Logistics
Lucas D,Jntrona
International journal of Physical Distribution & Logistics Management.
Vol. 21 No. 5. 1991. pp 32-37. © MCB University Press.
Introduction
Information technology was traditionally, and to a large_
degree is still today, seen as the large computer in the
basement or some air-conditioned room doing much
calculation very quickly. However, more and more executives
are realising that information technology has the potential
to give their organisation a competitive advantage.
The focus of this article is "How can we manage the
impact of information technology in/on logistics?'' This
important question will be covered under the following
three main sections.
Understanding
A major reason for the current ignorance about information
technology, or for its ineffective use, is the lack of a clear­
cut understanding of the concepts of information,
technology, logistics and management. This problem will
be covered in the first part of this article.
Integrating
The second aspect of importance is the integration of
information technology into the logistics of business
Received June 1991
Logistics is the system designed to add place value and
time value (as defined by the customer) to the product.
There are important aspects that either flow from this
definition or support this definition:
(1) A customer (of a system) is the entity which
receives the output of that system.
(2) The customer, and only the customer, defines or
determines place and time value.
(3) The customer can be either internal or external.
0960-0035
(4) Value is the thing for which the customer is
prepared to pay.
(5) The logistic system will be successful to the degree
to which it can add place and time value.
(6) The success of the value-adding process will be
determined by the level of knowledge of what the
customer needs, i.e. what the customer sees as
value.
Management
Management is the improvement of the system to ensure
long-term survival. In order to improve the system
management must:
• Create the ability, in the system, to generate the
variety (desired state) required at any point in time.
This also can be seen as the ability to "innovate"
in the broad sense of the word.
• Control the variability or randomness in the system
in order to achieve an almost regular and, as such,
predictable behaviour pattern.
There are again some important aspects of the definition
that need to be highlighted:
(1) It is the responsibility of management to create a
system that can generate the required variety, i.e.
innovate or adapt.
 THE IMPACT OF INFORMATION TECHNOLOGY ON LOGISTICS
(2) Management must control the system by reducing
the variability, randomness or risk in the system.
(3) Less risk leads to greater certainty that (innovated
variety) objectives will be met.
(4) Risk reduction requires variability reduction.
(5) Management can reduce variability only if it has:
• information about the system's current and
forecast behaviour compared with the desired
(standard, objective, etc.);
• knowledge of the true cause-and-effect
relationship network that exists within the
system;
• the ability to effect and ''control'' change in the
system.
Information
Information is made up of meaningful data. Important
aspects of this definition are:
(1) Meaning converts data into information; without
meaning data remain data.
(2) The user defines or determines meaning based on
his or her frame of reference.
(3) Meaning is the result of the user relating the data
to his or her cognitive structure or frame of
reference.
(4) The inability to relate can be the result of:
• contextless data, i.e. the manner of presenting
or encoding the data - this will require the
information system to be re-engineered (with the
receiver in mind);
• ill-developed cognitive structure, i.e. a lack of
understanding of the true nature/behaviour of the
real world by the receiver - this will require
''re-engineering'' of the receiver via education
and training (with the information system in
mind).
(5) Thus the essence of information is the successful
result of the machine-man communication process
and ultimately the man-man communication
process.
To establish a clear understanding of the concept of
information I have drawn an analogy between a logistic
system and an information system (see Figure 1). The
logistic system converts material into products that are
of value to a customer, and similarly the information system
converts data into information that is meaningful to the
user.
Tethnology
Technology comprises structured systems (knowledge,
skills, tools, machines, etc.) designed to achieve a defined
The Analogy between the Logistics and
Information Systems
Customer
Raw
material
Product = material (processed) + value
User
Data
Information = data (processed) + meaning
set of goals, within a defined system, through a well
defined, structured set of processes and interfaces. The
purpose of technology is the creation of utility or value.
Important aspects of this definition are:
(1) The application or use of technology is the focus
of the definition.
(2) Technology is a structured system; without
structure ''technology'' is potentially useless or
of limited use.
(3) Adding value within a defined system, or set of
systems, is the purpose of technology. Technology
will only add its full potential value within the
system(s) for which it was designed.
(4) The interfaces in the technology and in the system
(in which the technology is applied) must be well
understood and continuously managed.
(5) Technology embedded in an unstructured or ill­
defined system with ill-defined interfaces may add
chaos rather than value.
Key lmplitations lor l.ogistits
(1) The logistic system must be designed to meet the
customer's needs. The decision to add information
technology to the logistic system must be based
on, and justified by, the value-adding criteria alone.
(2) Information technology has the potential to increase
and limit the management and organisational
systems equivalent to the ability of those systems
to innovate and control randomness.
(3) Intimate knowledge of the logistic and infor­
mation systems is a prerequisite for successful
 IJPD & LM 21,5

management of the logistic system and the effective

use of information technology in this management.
(4) Information systems will add meaning (and, as such,
value) only if the users (and designers) fully Customer

understand the systems (logistic and information)

�
involved.
t
rmine
A
----- value
(5) To add value, information technology must be va ue
requi ments

embedded in a stable (but not static) well J

functioning logistic system. Continuous man­ Achieve Determine
critical success -- critical success
agement of the system interfaces (technology-man,

�� �
factors factors

technology-technology, etc.) is essential for

maximum value to be added. Implement
� � ermine
buslness
·

(6) The age-old principle of risk and return is very business

proc "
processes

relevant when it comes to information technology. requirements

Through active management of risk, information

technology can potentially realise large returns. D"lgol<ed"lgo
busmess
processes

Integrating Implement t
Design edesign
Determine

1
It follows logically from the above that information information information __ 1nformat1on
systems
systems systems
technology will benefit the organisation only if it forms requir ments

an integral part of the business planning, business process

design and business process operation. Before the i
Implement
!
Design/redesign
Determine
information
framework for integrating information technology (see information +----- information -
technology
technology technology
Figure 2) is discussed, a few concepts will be defined: requirements

• Customer: any entity that receives the output of

a business process.
• Value requirements: those attributes of the product
that customers see as of value to them, and for (2) Transaction elements:
which they are prepared to pay. • Order status
• Critical success factors: those results that must be • Order tracing
achieved in order to achieve the value requirements.
• Back-order status
• Business process: a set of work activities that cuts
across functional boundaries to realise a business • Shipment shortages
objective[!, p. 6]. • Product substitutions.
• Information systems: those application systems that
actively support or enhance the business process. (3) Post-transaction elements:
• Information technology: the informatio11 technology • Actual delivery dates
infrastructure required to realise the information • Returns/adjustments.
systems.
With these concepts in mind let us consider the framework It is obvious that the customer(s) want to maximise value
in Figure 2. The framework begins with the customers; at minimum cost to themselves and the logistic system
the customer is the only valid starting-point and the driving wants to maximise value at minimum cost to itself. This
force in the logistic system, as it is the customer and only negotiating process will result in a statement of value
the customer who can decide what output is required to requirements. The negotiations may be explicit and formal
add value. The management of the logistic system and or implicit and informal but will always take place.
the customer must negotiate the value requirements.
A set of Critical Success Factors (CSF) must be
The value requirements can be negotiated on the basis of determined that will result in the fulfilment of the value
a set of performance measures, such as those defined by statement.
Stock and Lambert[2, p. 141]. These include:
(1) Pre-transaction elements: Examples of these CSF may include the following:
• Inventory availability (1) For inventory availability:
• Target delivery dates. • Accurate inventory records
 THE IMPACT OF INFORMATION TECHNOLOGY ON LOGISTICS
• Effective and accurate decision rules for the
replenishment decision
• Well functioning order-placing and follow-up
system
• Effective and loyal supplier base.
(2) For order status and order tracking:
• Accurate on-time updating and reporting
information
• Effective well planned documentation procedures
• Traceability via sound operating and flow
procedures.
From these CSF the business process (not the functions)
requirements can be determined. (It may also be possible
to deduce the business processes requirements directly
from the value statement.)
Business processes
are made up of four
phases... LJ
The business process requirement for the statement of
inventory availability value could be defined as follows:
An effective and efficient materials management system
managing all materials (raw materials, work in progress,
finished goods and distribution stock) to ensure maximum
availability of materials to all customers (internal and
external).
This business process requirement clearly shows the need
for multifunction involvement.
Business processes can be considered as made up of the
following four phases:
(1) Identify
(2) Define
(3) Integrate
(4) Support.
The steps or activities under each phase are:
(1) Identify:
• The functions involved in achieving the critical
success factors and, as such, the value
requirements.
• The subprocesses within each function that form
part of the total business process.
(2) Define:
• The inputs, processes, output and customers of
each of these subprocesses.
• The interaction between these sub-processes
in terms of:
The nature of the information or material
interchange (format, frequency, etc.);
the standard of performance required in this
interchange (i.e. the value statements for
the lower-level systems);
the feedback control mechanisms required
to ensure successful interaction.
(3) Integrate:
• The total process by:
appointing a process manager;
appointing a task force (quality circle) for
the process to ensure continual improve­
ment;
establishing operating procedures (required
for integration) for the process.
(4) Support:
• The process by integrated information systems.
The information system requirements and the information
technology requirements can now be determined. The
information system requirements must state what
information systems are required to establish or enhance
the business process in question.
The materials management process can be supported by
information systems such as:
• an inventory control system - recording, keeping
and issuing material;
• an inventory management system determining
-
optimisation levels, making replenishment
decisions;
• a materials requirement-planning system -
managing low-level materials requirements;
• a materials-handling system packing, conveying,
-
handling;
• a scheduling system - scheduling, rescheduling;
• a transport system - scheduling, transporting.
Given the information system requirements, the
information technology requirements can be deduced.
These information technology requirements will depend
on factors such as:
• Information system distribution;
• Volumes of transactions;
• Sophistication of processing required;
• Physical distribution of operating processes;
• Level of integration required.
The information technology requirements will suggest how
the technology framework or architecture should be struc­
tured to create the information technology infrastructure.
 IJPD & LM 21,5

The requirements will then form the base line, in terms

of which the business processes, the information systems,
Ill! !I) lj El Integrating IT into the Total Logistic System

and the information technology infrastructure can be

Logistics orgnaisation
designed. It is important to note that the design processes
Customer
are interactive processes. New information technology may
influence the design or redesign of information systems /�
Add Determme
va 1ue �alue
requ•rements
-

and business processes and vice versa.

i
o�
�
Achieve Determme
business - business
Another important aspect of the framework is its
continuing nature. The principle of continual improvement � ob ec ves
j ti
ob ec
j
e,m;ne Plan
and flexibility requires perpetual redesign or review. In lmple bus•ness
business s
a continually changing environment there is no one-time processes r:;�i�=� ::ts
design of systems. Obviously, the higher the rate of change
in the environment, the more often the need for redesign � Des;gnhedesogn
busmess /�I
processes
or review. The total system must continually adapt to the
changes in the environment, changes such as in: ! 1
Determine
Implement Designfredesign information
informat•on - information systems Customer
the customer base systems systems requirements
•
� .
• the competitive position i
Implement Designtredesign Determi�e
Add Determme
value
value- requ•rements
Information •nformat•on

o�
information echnology
operations technology technology technology trequirements Achieve Determine
+--- +---
+
•
business - business
ob ect;ves ob ect
• information technology.
� j ,
e,m•ne
The process of integrating information technology into the lmplem bus1ness
business

�
Implement processes processes
logistic system (as illustrated in Figure 2) must be seen requirements
as a multidimensional or multilevel process happening at
every level of the business, cascading down to the lowest � DeSJgnhedes;gn
business
processes
level.
Implement
!
Design/redesign
Determme
information
information information systems
systems systems requ1rements
+--- +---

CJ i Determme
Implement Design/redesign mlormatlon
information information
Integrating information technology technology
+----- +----

technology into the logistic
system is a complex task o
It is clear from the discussion above that the process of
integrating information technology into the logistic system
is a complex task that requires significant commitment
from the people involved. To optimise the total system it
is important to plan this intervention from the top down.
In implementing the framework it may make more sense
to implement from bottom up because:
(1) The corner-stones of the process are learning and
adaptation. The people involved can learn from
implementing less complex processes and then
make a ''technology transfer'' to the next higher
level.
(2) Successful external customer service will result only
from successful internal customer service (i.e. do
not commit to external outputs unless there is
commitment to internal outputs).
Figure 3 illustrates the cascade process. In a new
organisation it would also be possible to plan and
implement from top down.
r!���r�����s
LogiStiCS function
The framework for integrating information technology into
the logistic system discussed above is a conceptual
framework that suggests what needs to be done and not
how it needs to be done. It can be appreciated that there
are many microprocesses inherent in every process within
the framework supplied.
The important principle that needs to be reiterated is that
information technology is not an incidental add-on after
or even during the fact. If information technology is not
designed into the logistics function, it will not add the value
of which it is potentially capable. It may become only a
large cost centre, and nothing more.
Involving
A lot can be said about the implementing of information
technology, but I will concentrate on one very important
aspect, that of commitment. Commitment is when the
people involved in a process are prepared to make personal
sacrifices to ensure the success of the process. Thus
commitment exists when the individual completely
 THE IMPACT OF INFORMATION TECHNOLOGY ON LOGISTICS

identifies him/herself with the goals and objectives of the Creating competence is the responsibility of management.
system, to the point that these goals and objectives One often hears managers complain about their
become his/her own. People will involve themselves with incompetent staff without their realising that it is their
information technology only if they are committed to it. responsibility to correct the situation.

Kinlaw [ 3, p. 101 defines the following key pillars of Influence is the degree to which the people involved
commitment: perceive or experience their personal influence in the
• Clarity direction and success of the project.
• Competence This is a price of commitment which managers are
• Influence reluctant to pay.
• Appreciation.
Appreciation is the degree to which the people involved
To understand the implication of these pillars let us define perceive or experience a sense of appreciation for their
them in some more detail. contribution to the project.
Clarity is the degree to which the objectives and plans When it comes to information technology implementation
to reach those objectives are unambiguous, unclouded and we, more often than not, destroy these pillars of
comprehensible. commitment.

If information technology is not used and exploited by the

people at the operational level of an organisation, then
Creating competence understanding and integrating will all be to no avail; that
is the bottom line.
is the responsibility
of management o
References
1. T he Role of Information Technology in Transforming the
In most management situations clarity is more the Business, Research Report 79, Butler Cox Foundation,
exception than the rule. This is not always due to bad London, January 1991.
management, but more often to management's inability 2. Stock, ].R . and Lambert, D.M., Strategic Logistics
to cope with complexity. Management, 2nd ed., Irwin, Homewood, Illinois, 1987,
p. 142.
Competence is the degree to which the people involved 3. Kinlaw, D., Coaching for Commitment, University
are skilled and equipped to do the job. Associates Inc., San Diego, California, 1989, p. 10.

Lucas D. Introna is Senior Lecturer in Information Systems, Department of Informatics, University of Pretoria, Pretoria,
South Africa.

View publication stats