Logistical Information System (LIS)

Why Logistics Information System?

Principals of Logistics Information

Information flow is a key element of logistics information. The common forms of logistics information are: Customer and replenishment orders Inventory requirements Warehouse work orders Transportation documentation Invoices.

As technology costs decline, logistics managers are managing information electronically resulting in enhanced services by offering better information to customers.

The specific technologies include electronic data interchange (EDI), personal computers, artificial intelligence/expert systems, wireless communications, bar coding and scanning.

For effective logistics information, timely and accurate information flow is critical because of the following three reasons.

(1) Customers perceive that information about order status, product availability, delivery schedule and invoices is necessary element of total customer service. (2) Information can reduce inventory by minimizing demand uncertainty. (3) Information facilitates allocation of resources for achieving strategic advantage.

Information Functionality

1. 2. 3.

4.

Logistics information system links logistics activities into an integrated process that is built on the following four levels of functionality. Transaction system Management control Decision analysis Strategic planning

Transaction system:

1. 2.

3.
4. 5.

6.

Initiates and records the individual logistics activities in a sequence as given under: Order entry Inventory assignment Order selection Shipping Invoicing Customer inquiry

Customer order receipt

Inventory assigned to the order

Directing material handlers to select the order

Printing of invoice for payment

Movement, loading and delivery of order

Management control

1.

2.
3. 4.

Focuses on performance measurement and reporting.The common performance measures include: Financial Customer service Productivity Quality

A few examples are:

a) Transportation and warehousing cost per kg.Cost measure b) Inventory turnover- Asset measure c) Case fill rate-Customer service measure d) Cases per labour hour-Productivity measure

e) Customer perception-Quality measure.

Decision analysis

Vehicle routing and scheduling Inventory management Facility location Operational trade-offs and arrangements e.g. vertical integration versus third party outsourcing.

Strategic planning

Strategic alliances with various value chain members. Development of firm capabilities and scanning market opportunities. Customer responsiveness to improved services.

Principles of designing LIS applications

1. 2. 3. 4. 5. 6.

The principles underlying the designing of logistics information systems applications are: Availability Accuracy Timeliness Exception-based LIS Flexibility Appropriate format

1. Availability
Customers frequently need quick access to inventory and order status information regardless of managerial, customer, or product order location. Information availability reduces substantially the operating and planning uncertainty.

2. Accuracy
-

Logistics information must accurately reflect both current status and periodic activity for customer orders and inventory levels.

In case of low consistency between physical and information system inventory levels, buffer stock becomes necessary to accommodate the uncertainty.

3. Timeliness
-

Timely information reduces uncertainty and identifies problems, thus reducing inventory requirements and increases decision accuracy. Real time or immediate updates are timelier but result in increased record-keeping efforts.

4. Exception-based LIS
-

LIS should be strongly exception oriented to identify decisions that require management attention, particularly in respect of very large orders, products with little or no inventory, delayed shipments, and declining operating productivity.

5. Flexibility
For example, some customers may want invoices aggregated across certain geographic boundaries or divisions or retailer.
Retailer A may want individual invoices for each store, while Retailer B may desire an aggregated invoice that totals all stores.

6. Appropriate Format
-

An effective format should integrate past and future information regarding on hand inventory, demand forecast, and planned receipts for each single item at a distribution centre.

Application of Information Technology

1.

Electronic Data Interchange Intercompany computer-to-computer exchange of business documents in standard formats. LIS would consist of real time data on inbound material flows, production status, product inventories, customers shipments and incoming orders.

Benefits of EDI are: Increased internal productivity though faster information transmission as well as reduced information redundancy. Better accuracy by reducing the number of times and individuals involved in data entry. Improved channel relationship. Increased ability to compete internationally. Reduced labour cost associated with printing, mailing, and handling paper-based transactions, telephone and other clerical activities.

(a)

(b) (c) (d) (e)

2. Personal computers
Low cost and high portability with a capability of bringing accurate and timely information to the decision maker whether in office, at the warehouse, or on the road. The use of LAN , WAN and Client/server architecture offers benefits of decentralization, responsiveness and flexibility throughout the enterprise.

The decisions are invariably in respect of Which markets to serve? Which product to pick next in the warehouse? Driver reporting and deliver information. Reporting vehicle location Identifying lowest-cost fuel stop.

(a) (b)

(c) (d) (e)

3. Artificial Intelligence

(a) (b) (c)

Aimed at making computers imitate human reasoning and are more concerned about rationalizing rather than numeric processing. The applications are: Carrier selection International marketing & logistics Inventory management

4. Communication technology

Application of radio frequency, satellite communications, and image processing technologies can relate quickly to the product movement and decentralization. Radio frequency: used within relatively smaller areas such as distribution centres to facilitate two-way information exchange Real-time communication with material handlers such as fork lift drivers and order selectors.

(a) -

(b) Satellite communication

Useful for providing a fast and high volume information around the globe. Communication dishes on the top of vehicles allow communication between driver and shippers regarding location and delivery and allows dispatchers to redirect trucks in response to need or traffic congestion. Used by the retail chains to transmit quickly daily sales to headquarters that helps in activating store replenishment and also to provided input to marketing regarding local sales pattern.

(c) Image processing

Relies upon fax and optical scanning technology. Used in transmission of freight bill information Proof of delivery receipt Bills of lading.

Information sharing though geostationary satellite

Geostationary satellite communication technology has facilitated real time information transmission and sharing amongst the company, its transporters, and retail outlets.

5. Bar Coding and Scanning

Typical applications include tracking receipts at the warehouse and sales at the retail stores. These bar codes distinguish package size and flavours and reduce errors when receiving, handling, or shipping product.

The applications of bar code and scanning are: Point-of-sales (POS) in retail stores, receipts, accurate inventory control, tracking of each stock-keeping unit (SKU) sold, replenishment, and providing timely information beneficial to all channel members. Facilitating material handlers track product movement, storage location, shipments and receipts.

(a)

(b)

Enterprise Resource Planning (ERP)

A strategic tool that helps the organization improve operations by integrating business processes and helping to optimize the allocation of available resources. These systems are commercial software packages that facilitate collection and integration of information related to various areas of an organization such as finance, accounting, human resources, inventory, procurement, and customer services.

The systems enable the organization to standardize and improve its business processes to implement best practices for their industry.

The popular ERP packages in the market are SAP, Oracle Financials, BAAN, Peoplesoft, and JD Edwards.

Logistics Information System Characteristics

Interactive

Accuracy

Availability

LIS

Timeliness

Flexibility

Format