Chapter 2
Logistics Information Systems
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Learning Outcomes
After reading this chapter you should be able to:
2.1-Identify the basic need for logistic information system (LIS)
2.2- list the Functions of LIS
2.3- Determine the Building Blocks of LIS
2.4- Discuss Comprehensive Information System Integration
2.5- Recognize the Forms of communication technology
applications in LIS
2.6- Understand the Principles of LIS
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The basic need for logistic information
system (LIS)
Logistics management information system is necessary to provide
management with the ability to perform a variety of tasks, including
the following:
• Penetrate new markets.
• Make changes in packaging design.
• Increase or decrease inventory.
• Determine the profitability of customers.
• Establish profitable customer service levels.
• Choose between public and private warehousing.
• Determine the number of field warehouses and the extend to which
the order processing system should be automated.
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Functions of a Logistics Information
System
Functions of a Logistics Information System are as
follows:
• Planning
• Co-ordination
• Customer Service and communication
• Control
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Figure
5 1 function of logistics information system
Building Blocks of LIS
Logistics information systems are the threads, which link the
various logistics activities into an integrated process. The system
builds on four levels of functionality as follows :
(I) Transaction systems
(2) Management control
(3) Decision analysis
(4) Strategic planning
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Figure
7 2 building blocks of LIS
1-A transaction system is characterized by formalized rules,
procedures, and standardized communications; a large volume of
transactions; and an operational, day-today focus. transaction systems
initiate and record individual logistics activities and functions.
Transaction activities include order entry, inventory assignment,
order selection, shipping, pricing, invoicing, and customer inquiry.
For example, customer order entry represents a transaction that enters
a customer request for product into the information system. The order
entry transaction initiates a second transaction as inventory is
assigned to the order. A third transaction is then generated to direct
warehouse operations to select or pick the order from the warehouse
storage location. A fourth transaction initiates transport of the order to
the customer. The final transaction develops the invoice and records
an account receivable. Thus. The customer order performance cycle
is completed through a series of information system transactions.'
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2- Management control focuses on performance measurement and
reporting. Performance measurement is necessary to provide
management feedback regarding supply chain performance and
resource utilization. Common performance measures include cost,
customer service, productivity, quality, and asset management
measures. As an example, specific performance measures include
transportation and warehousing cost per pound, inventory turnover,
cases per labour hour, and customer perception.
3- Decision analysis focuses on software tools to assist managers in
identifying, evaluating, and comparing logistics strategic and
tactical alternatives for improved effectiveness. Typical analyses
include inventory management, resource allocation and vehicle
routing and scheduling, facility location cost – benefit analysis etc .
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4- Strategic Planning focus is on information support to develop
and refine the logistics strategy. Decisions are typically more
abstract in nature, are lesser structured and have a long-term focus.
This level requires incorporating lower-level data collection into a
range of business planning as well as decision-making models,
which help in evaluating the probabilities and payoffs of strategies.
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Comprehensive Information System
Integration
A comprehensive information system initiates, monitors, assists in
decision making, and reports on activities required to complete
logistics operations and planning. There are many components that
must be combined to form an integrated information system, and there
are many ways to organize and illustrate the combined components.
The major system components include: (1) Enterprise Resource
Planning (ERP) or legacy systems, (2) communication systems,
(3) execution systems, and (4) planning systems.
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1-ERP or Legacy Systems
I
During the 1990s, many firms began to replace legacy systems with
ERP systems.
ERP systems facilitated integrated operations and reporting to
initiate, monitor, and track critical activities such as order fulfilment
and replenishment processing.
ERP system design includes the central database and application
modules to facilitate supply chain, financial, and human resource
management.
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Figure 3 ERP system design
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Figure 4 Capabilities of ERP Systems
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2- Communication Systems
The communication module facilitates information flow
between functional area within the firm and between supply
chain partners. Typical supply chain and logistics
communication technologies include bar coding, scanning,
Electronic Data Interchange (EDI), satellite communication,
radio frequency, and the Internet.
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3-Execution Systems
Enterprise execution systems work in conjunction with the firm's
ERP to provide specific functionality to support logistics
operations. Lots of execution system such as :
-Warehouse Management Systems (WMS) typically include
management reporting, support for value-added services, and
decision support capability.
-The Transportation Management System (TMS) typically
includes routing, load building, consolidation, and management
of reverse logistics activities as well as scheduling and
documentation.
-Yard Management Systems (YMS) track inventory in vehicles
stored in facility yards.
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4- Planning Systems
The final information system components are the planning
systems. Planning systems can generally be grouped into two
categories, strategic and tactical. Strategic planning systems are
designed to assist in analyses where there is a large number of
alternatives and data outside the range of current history is
required. Tactical planning focuses on operational issues as
constrained by short-term resource constraints such as
production, facility, or vehicle capacity.
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Forms of communication technology
applications in LIS
1-Satellite Technology
Satellite technology allows communication across a wide
geographic area such as a region or even the world. The technology
is similar to microwave dishes used for home television in areas
outside the reach of cable.
Satellite communication provides a fast and high-volume channel
for information movement around the globe.
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2-Electronic Data Interchange: ED1 is defined as intercompany
computer-to-computer exchange of business documents in
standard formats to facilitate high-volume transactions. It
involves both the capability and practice of communicating
information between two organizations electronically instead of
via the traditional forms of mail, courier, or even fax.
The main advantages of using EDI are:
Ø information needs to be entered on to the computer system
only once;
Ø speed of transactions;
Ø reduced error rates;
Ø reduced labour and material cost associated with printing,
mailing, and handling paper-based transactions.
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3- Bar Coding and Scanning
A bar code is the representation of a number or code in a form
suitable for reading by machines. Bar codes are widely used
throughout the supply chain to identify and track goods at all
stages in the process. The use of bar codes can speed up
operations significantly. Problems can occur if bar codes are
defaced or the labels fall off in transit.
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4- Radio frequency identification (RFID)
RFID is a rapidly developing technology that allows objects to be tagged
with a device that contains a memory chip. The chip has a read-and-write
facility that is currently executed using a variety of radio frequencies.
This means that a pallet of goods can have an RFID tag attached that
contains a large amount of information regarding the pallet. This might
include product details, the number of cartons, stock-keeping unit
number, the origin and the destination of the goods, the location in a
warehouse and so on.
The main advantages of using RFID
Ø One of the advantages over bar codes is that the information contained in
the tag can be updated or changed.
Ø the tags are less vulnerable to damage, as unlike the barcode label they are
not easily defaced.
Ø tags may be read from a distance and in some cases do not require ‘line of
sight’ visibility.
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Principles of Logistics Information
Six principles to be incorporated to ensure that management
information needs are adequately met.
Figure 5 Principles of LIS
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n Accuracy -The logistics information must accurately reflect
both the current status as well as the periodic activity for
measures such as customer orders as well as levels of
inventory.
n Availability - Logistics information must be readily
available when required.
The decentralization of logistics operations makes in necessary
to access information from anywhere and update them, which
the information system must enable to do.
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n Timeliness – Refers to the time lapse between when an
activity occurs and when the activity becomes visible in the
information system. It is essential that timely information be
provided for quicker management feedback. Corrective action
can be taken and loss can be minimized with timely
management controls. Thus, timely information reduces
uncertainty and identifies problems, reduces inventory
requirements and increases decision accuracy.
n Exception-based Logistics Information System – LIS needs
to be exception-based in order to highlight problems and
opportunities. The information system must identify exception
situations, which require attention of management and
decision-making. Managers can then focus on situations,
which require maximum attention and offer opportunity to
improve service or reduce cost.
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n Appropriate Format – Logistics reports and screens need to
contain the right information in the proper structure and must
follow a logical sequence.
n Flexibility – LIS must be flexible to meet the requirements of
both system users and customers. Within the organization,
information systems must be capable of upgrading to meet
future requirements of the enterprise without incurring huge
costs or time.
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Thanks for listening
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