Information is crucial to the performance of a supply chain or logistics because it provides the basis on which supply chain managers make decisions. Information technology consists of the tools used to gain awareness of information, analysis this information, and execute it to increase the performance of the supply chain.
In addition to the internet-based technologies, there are a number of information technologies which are in common use throughout the logistics and supply chain areas:
Information Technologies Used in Supply chain or Logistics
These are briefly discussed in the following section:
1. Barcoding
This represents the most commonly used automatic identification technology. Because there are many bar code technologies, it is necessary to have the consistency of technologies for moving products effectively and efficiently throughout the supply chains.
Barcoding and electronic scanning are identification technologies that facilitate logistics information collection and exchange.
Typical applications include tracking receipts at the warehouse and sales at the grocery stores.
Because of increased competition in the domestic and international markets, shippers, carriers, warehouses, wholesalers, and retailers develop and utilize auto-ID capability in order to compete in today’s market place. Auto-ID enables channel members to quickly track and communicate movement details with minimum error.
Related: Key Importance of Information Technology in Supply Chain.
Barcoding refers to placing computer-readable codes on items, cartons, containers, and even rail cars.
Universal product code (UPC) is present on virtually all consumer products. UPC (bar code) consists of a unique five-digit number for each manufacture and product.
Standaridesd bar codes reduce errors when receiving, handling, or shipping products. For example, package size and flavor can be distinguished by a bar code.
UPC is used extensively in the consumer goods industry for retail checkouts. For shippers and carriers, it is necessary to identify the contents of pallets or containers, Hence, bar codes are used to identify cartons, pallets, or containers of products.
To provide more information, 10 digit codes, multidimensional codes, and container codes are used.
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2. Electronic Data Interchange (EDI)
Electronic data interchange is the electronic, computer to computer transfer of standard business documents and information between organizations.
It involves organizations to the organization, computer to computer exchange of business data in a structured, machine-processable format.
Its purpose is to eliminate duplicate data entry and to improve the speed and accuracy of information flow by linking computer applications between organizations, a EDI specifically replaces more traditional transmission of documents,l such as mail, telephone, and fax.
Components of an EDI System Include:
- A standard form (EDI standards) which include the basic rules of formatting and syntax agreed upon by the in users in the network.
- A transmission capability (EDI software) which translates the company-specific database information into EDI standards format for transmission.
- A mail service (EDI network) which is responsible for the transmission of the document, usually in the form of a direct network or through a third-party provider.
Benefits offered by EDI are:
- Reduced paperwork to be created and filed.
- Improved accuracy due to reduced manual processing.
- Increased speed of order transmission.
- Reduced clerical/administrative effort in data entry, filing, mailing, etc.
- Opportunity for a proactive contribution by purchasing due to reduced clerical risks.
- Reduced costs of order placement and related processing ad handling.
- Improved information available due to the speed of acknowledgment and shipment advice.
- Reduced inventory due to improved accuracy and reduced order cycle time.
3. Extensible Markup Language (XML)
This is a method of packing information for movement on to the internet.
It is a highly efficient way to package information, such that it can be readily accessible to any person or firm having internet or web-based capabilities.
XML has a potential substitute for the use of electronic data interchange.
4. Data Management
Today, handheld devices are used for data management. Also, the use of CD-ROM has emerged as a significant factor in data management today, computer are excellent at managing data.
A database management system allows application programs to retrieve required data stored in a computer system.
A database management system must store data in order for retrieval to be efficient. This is a critical issue in logistics because of the large volume of data generated which may require analysis at a later date.
Relational database structures are popular today because they permit access to and sorting of data by relating the data to other data in many ways. This allows a great deal of flexibility.
Nowadays, firms are using local area networks (LAN) which consist of a minicomputer linked to a number of microcomputers or terminals which allows access to a common database, software, and other systems features. LANs give microcomputer the power of mainframe systems.
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5. Imaging
Image processing technology significantly impacts logistics. It allows a firm to scan or take electronic photographs of essential documents and hence to communicate the images as may be needed or store centrally until their use is necessary.
Transportation firms frequently use this technology to provide proof of delivery by many of their customers.
By having a consignee sign an electronic pad, a facsimile of the signature is automatically digitized and stored for future reference. When needed, a copy of the signature can easily be downloaded to provide proof of delivery.
6. Artificial Intelligence Systems
Artificial intelligence (AI) is concerned with the concepts and methods of inference of a computer and the symbolic representation of the knowledge used in making inferences.
The term intelligence covers many cognitive skills, including the ability to solve problems, to learn, to understand language, and to behave in a way that would be considered intelligent if observed in a human being.
AI encompasses several areas, including computer-aided instruction, voice synthesis and recognition, game playing systems, natural language translators, robotics, and expert systems (ES).
AI used:
- To model response time requirements for customer delivery.
- To model transportation costs and times for various transportation modes, locations, and routings.
- To determine which warehouse should serve which plants with which products and at what inventory levels.
- To model customer service response with various levels of reliability and
- To perform a sensitivity analysis to determine how much inputs can vary without affecting the structure of the optimal solution.
An expert system (ES) is defined as “a computer that uses knowledge and reasoning techniques to solve problems normally requiring the abilities of human experts.
AN experts system is an artificial intelligence program that achieves competence in performing a specialized task by reasoning with a body of knowledge about the task and the domain.”
Expert systems can be applied to a variety of problems in marketing and logistics including interpretation, monitoring, debugging, repair, instruction, and control.
The criteria used by decision-makers in determining whether expert systems should be used to solve a particular logistics problem are:
- The task or problem solution requires the use of human knowledge, judgment, and experience.
- The task requires the use of heuristic or decisions based on incomplete or uncertain information.
- The task primarily requires symbolic reasoning instead of numerical computation.
- The task is neither too easy nor too difficult.
- Substantial variability exists in people’s ability to perform the task.
If an ES is appropriate, then the logistics executive must decide whether the system can be economically justified and if EDI can be combined with other systems such as AI.
Related: Advantages of Logistics or Physical Distribution.
7. Radio Frequency or RF Technology
Radiofrequency or RF technology is particularly useful in the warehouse or distribution center.
It allows users to relay information via electromagnetic energy waves from a terminal to a base station, which is linked in turn to a host computer.
The terminals can be placed at a fixed location, mounted on a forklift truck, or carried in a worker’s hand.
When combined with a bar code inventory system for identifying inventory items, an RF system can update inventory records in ‘real-time‘.
This results in considerable improvement in the quality of order picking and shipping accuracy.
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8. Computer on Board and Satelite Tracking
The principles of RF technology are sometimes translated into “on board” communications and computer capabilities.
A major difference is that communications are facilitated by two orbiting satellites, one that serves as a communications link between driver and dispatcher.
The other serves as a resource to track the vehicle, which provides the dispatcher with continuous knowledge of the location of the vehicle and thus, the ability to determine whether or not a shipment is on time.
Through this some onboard capability, the driver has access to computerized capabilities such as “global positioning system (GPS)” which provides the driver with real-time knowledge of the truck’s current location and directions to intended destinations.
9. Intranet/Extranet
The intranet is a dedicated internet to a firm whose access is protected by a server called a firewall. Since the intranet is an effective platform if implementing web-based workflow, this platform is becoming a standard for the corporate information systems.
An intranet is a corporate local area network (LAN) or wide area network (WAN) that uses internet technology and is secured behind the firm’s firewalls (a kind of access control server). The internet links various servers, clients, databases, and application programs like ERP
Intranets operate as a private network with limited access (only to authorized employees of the firm). Intranets are limited to information pertinent to the firm and contain exclusive and often proprietary and sensitive information. Intranets provide the features for many intra business commerce applications.
An extranet or extended intranet links intranets in different locations. Extranet transmissions are usually conducted over the internet, which offers little privacy or transmission security.
Extranets provide secured connectivity between a corporation’s intranets and the intranets of its business partners, material suppliers, financial servers, government, and customers.
Since an extranet allows connectivity between businesses through the internet, it is an open and flexible platform suitable for the supply chain management.
10. E-Commerce
E-Commerce which uses the internet to facilitate business transactions is an extension of the traditional way warehouses and retail stores conduct business.
Because of the advent of computers and the world wide web, it is becoming quite common for consumers to reach products and services, locate retail outlets, and with the click of a mouse, purchase goods and services, all in the convenience of one’s home.
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E-commerce comprises both businesses to consumer (B2C) and business to business (B2B) transactions.
E-procurement is the application of E-commerce techniques to procurement. Procurement was the business process that made the early application of E-commerce.
Initially, firms utilized electronic data exchange (EDI) technology to connect with their major customers to process purchase orders, send notifications of shipment, and transfer funds. Since EDI technology is costly to implement and the internet is publicly available, EDI technology is now being replaced by E-commerce techniques for procurement.
The most common use of E-commerce today is to research vendor and product information on websites on the internet.
Some firms have advanced online procurement systems that permit a buyer to electronically check available stock, negotiate, issue an order, check on the status of the order, issue an invoice, and receive payment.
The Benefits of E-Commerce are:
- Improved productivity,
- Improved quality,
- Improved customer service,
- Reduced costs,
- Shortened supply chain,
- Faster product development,
- Access to new markets and,
- Improvement in cash flow.
Advantages of E-Procurement Include:
- Lower operating costs due to reduced paperwork, reduced sourcing time, and improved control over inventory and spending.
- Improved procurement efficiency due to finding new supply sources, improved communications, improved use if personnel, and lower cycle times.
- Reduced procurement prices due to improved comparison shopping and reduced overall prices paid.
A significant efficiency factor of E-commerce is improved communication which aids in reducing order cycle time.
However, e-commerce does have some drawbacks. The biggest disadvantage is the lack of security while using the internet for procurement.
Also, there is concern regarding the vulnerability of credit card numbers transmitted over the internet or stored on a vendor’s system to theft by a computer hacker.
Another problem is the lack of face to face contact between the buyers and the seller which reduces the ability to build close supplier relationships.
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Great article on information technologies used in supply chain. Thanks for covering such a helpful content.