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After this unit you should be able to answer following questions

A. Concept Questions & B. Short notes


1. Management Information System
2. Logistical Information System
3. Logistical Information Functionality
4. Exception based LIS
5. Differentiate between internal and external information system.
6. External information system
C. Section II descriptive questions [10 marks each]
1. Explain the principles for logistical information system design
2. Comment on the statement ‘Logistical Competency is competitive Logistical
Information System’
3. Detail the importance of information in logistics
4. Design an information system suitable for logistics objectives catering to order
processing
5. Explain the importance and significant features of Logistical Information System

6. What are the primary activities of LIS?


7. Explain Logistical information functionality
8. Explain the four levels of information functionality

LOGISTICAL INFORMATION SYSTEM


MIS [Management Information System] is a structure of machines and management
technology that enables management to receive, collect, store, transmit and analyze
information. Transmission of information involves its movement to and from
processing center. Order transmitted from customer to the order-processing unit in a
firm is an example of transmission activities.

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Logistics management is concerned with the functions of storage, handling, moving of
materials and information. So MIS performs logistics of information in an
organization.
Logistical Information System [LIS] handles information related to Logistics
Management. Hence it is a structure of machines and management technology that
enables management to receive, collect, store, transmit and analyze information which
has an immensely important role in achieving business goals.
Importance of logistical information system
1. Key element to develop logistical competence
2. Integrates various activities of logistics
3. One of the three pipelines managed by logistical management
4. Important to customer service
5. Underwent revolutionary change due to changes in technology
Primary activities of LIS
a. Data flow from external sources
b. Processing and storage of information within the firm
c. Communication to the decision maker in the form of reports
d. Communication to customers and suppliers and their feedback
Logistical information functionality
[ref. Bowersox page#185 onwards]
Logistical information functionality is enabling appropriate decision-making at
different levels of hierarchy. Information is required in different form and shape at
different levels adequate to the requirements of decision-making. Importance of
information cannot be over emphasized.
Information integrates logistical functions to deliver customer expectations. Logistical
information links logistical activities into an integrated process

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Four levels of information functionality

• STRATEGIC ALLIANCE FORMULATION


STRATEGIC • DEVELOPMENT & REFINEMENT OF
PLANNING CAPABILITIES AND OPPORTUNITIES
• FOCUSED/PROIFIT BASED CUSTOMER
SERVICE ANALYSIS

• FINANCIAL MEASUREMENT, COST, ASSET


DECISION MANAGEMENT
ANALYSIS • CUSTOMER SERVICE MEASUREMENT
• PRODUCTIVITY MEASUREMENT
• QUALITY MEASUREMENT

• VEHICLES ROUTING & SCHEDULING


• INVENTORY LEVELS AND MANAGEMENT
MANAGE-
• NETWORK/FACILITY LOCATION
MENT CONFIGURATION
-CONTRO • VERTICAL INTEGRATION Vs THIRD
L PARTY/OUT SOURCING

• ORDER ENTRY • SHIPPING


• INVENTORY • PRICING &
TRANSA INVOICING
-CTION ASSIGNMENT
• CUSTOMER
SYSTEM • ORDER ENQUIRY
SELECTION

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Four levels of information functionality

Four levels of information functionality are transaction, management control,


decision analysis and strategic planning systems
Transaction level: The most basic level of information. Customer order triggers a
series of transactions from order entry to invoicing. These grass root level logistical
activities are called transactions. Information needed for operational decisions is
gathered at this level called Transaction level.
• Information about all these transactions that take place during a customer order
performance cycle facilitate decision-making.
• Information of this level is needed to satisfy some of the customer queries.
• Main features of transactions are formalized rules inter functional communications,
large volume of transactions exist and decision-making focus is on day-to-day
efficiency.
• Rest of the information pyramid with respect to management hierarchy is built on the
base of transaction level. Information gathered at this level is processed and analyzed
to make it friendly to other higher levels in the hierarchy.
Management control level
• At this level logistical performance measurement and reporting.
• Customer service level and resource utilization is the information for facilitating
evaluation of necessary action.
Decision level
Information at this level
• Helps managers identify logistical strategic alternatives
• Focus is on effectiveness, choosing right alternative
• Decision-making is less structured and flexible. Managerial judgment is the focus
Strategic planning level
Information at this level should satisfy decision-making needs of this level in the
hierarchy.
• Decision making focus is on developing refinement to logistical strategy

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• More unstructured, focus is in long term. Hence more judgmental.

Principles of logistical information system:


A logistical information system should include some principles to make it competitive.
Incorporating these principles is a cost. But these principles when incorporated
provide cutting edge to logistics. These principles are availability, accuracy,
timeliness, exception based LIS, flexibility, appropriate format.
Availability:
• Rapid availability is vital for responding to customer needs and management
decisions.
• Quick access to information even in decentralized system from anywhere
Accuracy:
Principle of accuracy is ensuring that there is no gap between information available
and reality. Eg. Inventory levels as per LIS Vs. Physical stock levels.
Timeliness:
• Time gap between event taking place and information appearing in LIS is a problem.
Principle of timeliness says that this gap should be minimum.
• An item moving from WIP status to finished goods status has major significance
• If LIS is not updated in real time, information leads to wrong decisions
Exception-based LIS:
• Highlighting problems and opportunities for management action
• Raising questions on actions on exception
• Handling exceptions, LIS should take structured decisions where managerial
discretion is not warranted, making manager free for judgmental decision-making
Flexibility:
• Informational needs are diverse depending on the perspective of the user of the
system. A good LIS should be able to provide information as per user’s need.
• Perspective of organization is operational improvement and perspective of customer
is availability of a particular product.
• Different customers can have different perspectives.

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Appropriate format:
• LIS should structure information in right sequence.
• Decisions like locating the inventory for order processing or inventory planning is
possible when information is structured adequately in right sequence.
Logistical information system functionality
• Logistical information system integrates the logistical operating system to provide
the organization competitive edge.
 Logistical information system keeps the necessary information at the fingertips of
the manager.
• LIS functionality areas should be reviewed to identify and eliminate bottlenecks.
Logistical information system functionality areas are mentioned below.
Order management:
• Entry of the order into the system
• Edit for acceptable orders, find out acceptability of the orders checking against
quantity, lead times and quality conformance standard.
• Check inventory availability, delivery dates
• Based on the above checks confirmation of customer’s requirements is done.
• Primary interface between customer service representative and logistical operating
system
Order processing:
• Allocation of inventory on real time or in batch mode is a policy decision. Order
processing is done based on this policy.
• Back-order creation: at this stage backlogging of orders is done keeping the benefits
of backlogging and cost of customer dissatisfaction in mind.
• Conflict resolution to match customer requirement by doing necessary modification
to the order.
• Order selection [direct distribution function to draw the inventory from which DC]
Distribution operation
• Directing all activities in a distribution center to meet customer order requirement.
This includes receiving, handling, storing, order selecting etc.

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Transportation and shipping:
• Plan execute and manage all transportation activities like shipment planning,
scheduling, shipment consolidation, shipment notification, document generation and
carrier management.
• LIS for transportation and shipping involves shipper, consignee and carrier.
Procurement:
• Purchase order preparation, modification and release
• Track and coordinate shipping and receiving activities for consolidation