Information flows in Logistics

Logistics is about efficient management of information and material flowsTherefore what information is necessary to:Plan an efficient and effective Logistics systemEstablish appropriate operating standardsOperate the actual operations of the system against these standardsPromote user satisfaction

Creating and integrating information systems in Logistics

A number of broad phases in computing:• Batch processing of large volume of data• Operational planning & work scheduling usually

performed separately from the operation itself• Automated or robotics materials handling• Networked communications between sub-functions• An interactive communications network between

organisational functions to promote integrated environment within the organisation and beyond the organisation to suppliers and clients (EDI)

Electronic Data Interchange (EDI) defined as:

“the computer-to-computer exchange of inter and intra company business and technical data, based on the use of agreed standards”

It involves the direct routing of information from one computer to another, without interpretation or transaction by people.

EDI definition cont...

“......as the transfer of structured data by agreed message standards between two or more computers by electronic means”

most of the information transferred is ‘trading data’

these are immediately processed without the need for ‘manual keying’

used widely across the business sector NOT the same as E-mail!

The EDI triangle

EDI

Standard

Software Communication

The EDI triangle - Software & Standards

• Software presents the greatest number of variables & must be carefully selected

• messages sent in common standards between trading partners use of stds decreases the EDI implementation costs however many stds available most common: Tradacoms (82%) and EDIFACT

(32%) others include: Odette (motor industry); ABI

(insurance); ANSI (American National Std)

The EDI triangle - Communications

• usually by a dedicated network or VAN (Value Added Network)

• a dedicated network is securer & faster but more expensive than using VAN

• the cheapest choice is transferring EDI messages via the internet

The EDI triangle - Communications cont..

• Internet - often likened to a ‘wild jungle’ where no laws exist

• internet problems are related to security & lack of network availability

• solved by establishing extranets and intranets (company based internal networks)

• extranets - a restricted internet based network where communication occurs between intranets

The most common business transactions

Purchase Orders

Amendments

Acknowledgement

Despatch Advice

InvoiceCU

STO

MER

SU

PPLI

ER

EDI broadly falls into four application areas:

• Trade Data Interchange (TDI) - trade documents, purchase orders, invoices

• Electronic Funds Transfer (EFT) - Payment, point of sale transactions, Banking clearing systems

• Technical Data Interchange - ie drawings, CAD/CAM data

• Interactive transactions, ticket sales, cash management services

EDI encompasses many activities, including:

• airline ticket reservations• computer generated fax• online product sourcing databases• free format electronic mail

Comparison between different communication methods in EDI environment

Security Cost Speed Easy toImplement

User baseavailable

DedicatedNetwork

+++ - - - +++ - - - -

VAN ++ - - - +++ ++

Intranet ++ ++ +++ + - - -

Internet - - - +++ - ++ +++

Extranet + + ++ + +

Information Age (JB Morgan (CE-IBM, Management

Today)

• Business essentially about information & communication

• Important to communicate effectively with customers and suppliers

• Important to understand how technology- driven changes relate to business fundamentals i.e.. delighting customers with quality products and services; competing on cost and innovation; motivating and training workforce

Information Age cont... (JB Morgan (CE-IBM, Management Today)

• Computer telephony systems and www offer new means of reaching customers (inc. info on your competitors)

• Networked computing is based on the premise that the info systems of a company must facilitate not inhibit relationship between partners

• Increasingly systems connected via e-mail, EDI, video conferencing, desk top video conferencing etc.…

• Common stds essential to facilitate inter-company connections

e-Purchasing Versus Traditional Business Models(Giunipero & Sawchuk, “e-Purchasing Plus – Changing the Way Corporations Buy”, 2000)

Comparing the Traditional and New Business ModelsTraditional Business Models New Business Models

1. Based on traditional technologies andpersonal contacts

Based on electronically based communicationsand relationships

2. High investment in assets Lower investment in assets3. Standardised products in large volumes Made to order based on customers demands4. High transaction costs in informationacquisitions, cross-organisationalcommunications, purchase orders, crossingnational boundaries

Low transaction costs in informationacquisitions, cross-organisationalcommunications, purchase orders, crossingnational boundaries

5. High inventories in the supply chain Rapid information flow replaces inventories6. Supply base managed but large Focused and flexible supply base7. Numerous levels of management Few levels of management8. Inter-organisational information flowrestricted

Free flow of inter-organisational information

9. Focus on profits Focus on growth, cash returns and profits

Logistics Management SystemsChallenges - How do we …..???

• Support geographical distributed systems/applications in a multi-site environment

• Heterogeneity (SW/HW, networks, systems)• Autonomous systems in different enterprises • Security concerning non authorised access to systems and

data• Real-time operation mode of integrated systems (e.g... CE,

machine data collection)• Data conversion and representation• Electronic data interchange (commercial, planning,

technical and managerial)

Thus challenges facing are…..

• How do we move from relatively loosely coupled “Virtual Enterprises” ???

• to……..• ….Tightly coupled “Virtual Enterprises”

using the available decision support technology

IT & Tools Maturity Levels

• Networked: tools exist but are mainly individual oriented

• Distributed: information is integrated & automatically distributed

• Interactive: Interactions are fully supported in both directions

EDI

• changes in competitive behaviour (global sourcing)

• emphasis on speed & accuracy of information increasing

• EDI growing rapidly (200% annually)• on-line communication system to interchange

trading information - instant updating• promotes “paperless” trading

EDI

• EDI gaining importance in an inter-organisational context

• number of “Value Added Networks” increasing in Britain

• trends towards 2nd generation EDI (cars configured to customer specification within say 2 weeks)

Examples include:

Retail:• Marks & Spencers, Sainsburys, B&Q,

Littlewoods, Argos, Tesco etc...• Majority of their suppliers connected via EDIManufacturing:• ICI, Rover, GKN, IBM, Procter & Gamble,

Lucas --- insisting that key suppliers link up through EDI

EDI Transactions

For EDI transactions to be executed, certain components have to be in place. These are:

• controlled application interfaces• message standards• conversion facilities• communication management

IBM

IBM

USA Europe,Middle East,

Africa(EMEA)

Asia Pacific

IBM

• 87 companies in 87 countries• supplied by 12 product manufacturing and

supplies plant - located in 6 countries• each plant specialises in manufacture of a defined

product range• each product manufactured only once within the

group• IBM’s overall mission to satisfy customer’s

information system requirements

IBM cont..

• IBM products/services configured to provide individual solutions to customer needs or problems

• Manufacturing plants do not interface directly with customers. This is done by the marketing office in each country.

• each company markets the full range of IBM products

• Products supply generated by 12 plants but centrally co-ordinated

• Distribution managed via 87 marketing offices

Direct Benefits of EDI

• reduced cost of inter company information delivery• reduced time of information delivery• reduced inventory levels• reduced lead time• improved accuracy of information• availability of staff for other assignments• improved efficiency in the areas of:

• order processing• order placement• accounts payable/receivable

Intangible Benefits of EDI

• improved trading relationship• a new spirit of working together• easier communication

• faster, better informed management decisions

• increased span of control• improved project management

Direct Costs of EDI

• high costs to fully integrate application systems• need to modify existing systems• need to modify/establish procedures• requires effort/resources to work with trading

partners• potential loss of transaction security• co-ordinating internal efforts in time consuming

Indirect Costs of EDI

• disorganisation and lower productivity• need to build/maintain redundant systems• few managers/staff able to understand the

technology• task forces relatively unproductive• need new security procedures and products

Advantages of EDI

• Improved accuracy of information• Reduction of data entry• Faster trading cycle• Reduction in inventory holding costs• Enhanced relationship with trading partners• Increased productivity• Reduction in paper flows• Strategic advantage

Limitations of EDI

• Requires high level of management commitment to be successful

• Often difficult to quantify the ROI• Often lack of common understanding and

limited existence of educational support• Often relatively high initial capital expense• EDI requires high volumes before the

benefits are attained

Snags with EDI

• The issue of service standards• What qualities do customers expect from EDI?• Do they get them?• What can they do if unhappy?

• Purchaser and supplier relationship?• is increased supplier dependence on larger

purchasers a necessary consequence of EDI system?

• should some information be excluded from EDI systems imposed on them by suppliers?

Snags with EDI cont..

• The issue of standardising “Protocols” of computer system operation so as to promote EDI linkages:• what can be done to improve co-ordination

between EDI systems?• who should do this?• what are the legal implications?

Standard and issues for the virtual

enterprise -- Business drivers• A number of common business objectives can be identified for

manufacturing enterprises in today’s global trading environment:

• improved time to market, coupled with reduced manufacturing cycle times for series production

• ability to build alliances rapidly, throughout the supplier chain, in order to respond to market pressures and opportunities

• improved product quality and reliability, to reduce life-cycle support costs

• delivery to improved customer satisfaction, through effective product customisation and more comprehensive and integrated support

• reduced cost of production and support (logistics, predictive maintenance)

Impact of E-business on Supply chain performance (Chopra & Meindl 2001

Revenue-enhancing Opportunities Offering direct sales to customers

Providing 24hour access from any

location

Aggregating personalised and

customisation of information

Speeding up time to market

Implementing flexible pricing

Allowing process and service

discrimination

Facilitating efficient fund transfer

Cost Reduction Opportunities

Reducing product handling with a

shorter supply chain

Postponing product differentiation

until after an order is placed

Decreasing delivery cost and time

with downloadable product

Reducing facility and processing costs

Decreasing inventory costs through

centralisation

Improving supply chain co-ordination

through information sharing

Some definitions of E-business

Source Archer & Yuan,

2000

Chopra & Meindl, 2001

Gartner Group, 2001(gartnergroup.com) Ptak, 2001

Roelofs, 1998

Definition Technologies that provide effective and efficient ways in which

corporate buyers can gather information rapidly about available products & services, evaluate and negotiate with suppliers, implement order fulfilment over communication links and access post-sales services

The execution of business transactions over the Internet

A combination of: electronic commerce, technology-enabled relationship management and SCM

An organisation that connects critical business systems directly to their critical constituencies (e.g. customers, employees, vendors and suppliers) via Internet, Extranet and www

The streamlining of all business processes in the value chain using Internet technology to improve the efficiency and effectivity of the complete supply chain

Information SocietyInformation SocietyNew Economic ProspectsNew Economic Prospects

Information SocietyInformation SocietyNew Economic ProspectsNew Economic Prospects

Digital Economy

intangible assets uncertainty, highly dynamic new skills value based on ‘abundance’ mass-customisation enhanced products

& processes

TraditionalTraditionalBusinessBusiness

E-BusinessE-Business

Industrial economy

tangible assets certainty, little change traditional skills value based on ‘scarcity’ mass markets simple products

& processes

Information SocietyInformation SocietyTechnological DriversTechnological DriversInformation SocietyInformation Society

Technological DriversTechnological Drivers

virtual product technologies

virtual product technologies(product modeling, STEP, virtual prototyping,

(product modeling, STEP, virtual prototyping,digital mock-up, 3D-modeling, FEM, etc)

digital mock-up, 3D-modeling, FEM, etc)

microelectronics, mechatro

nics

microelectronics, m

echatronics

& real-tim

e systems

& real-tim

e systems

knowledge technologies

knowledge technologies

(agents, decision support techniques,

(agents, decision support techniques,

neural networks, voice recognition,

neural networks, voice recognition,

language engineering)

language engineering)

collaborative platforms

collaborative platforms

(CSCW, internet-based

(CSCW, internet-based

communication tools,

communication tools,

groupware)

groupware)

object-oriented technologies & middleware

object-oriented technologies & middleware

enterprise integration tools

enterprise integration tools

((ERP systems, scheduling tools)

ERP systems, scheduling tools)

internet

internet

technologies

technologies

(TCP-IP, X

ML, VRML, Java, Jini etc.)

(TCP-IP, X

ML, VRML, Java, Jini etc.)

Simulation techniques

Simulation techniques

Process modelingProcess modeling(workflow management, configuration (workflow management, configuration control, business process modeling)control, business process modeling)

Players in the New Economy

- corporations- corporations- value - value networksnetworks- alliances- alliances- SMEs- SMEs

BusinessBusinessorganisationsorganisations

increaseincreasecompetitivenesscompetitiveness

DynamicDynamicmarket playersmarket players

- individual consumers- individual consumers- corporate consumers- corporate consumers- users/consumers - users/consumers groupsgroups- commercial partners- commercial partnersincreaseincrease

optionsoptions

Not-for-Not-for-profitprofitorganisatioorganisationsns

- - administrationsadministrations- associations- associations- interest - interest groupsgroups- charities- charitiesincrease increase

respon-respon-sivenesssiveness

TheTheelectronicelectronic

marketplacemarketplace

-- opportunities for new opportunities for new businessbusiness

- - new forms of product new forms of product tradingtrading

- commercial digital - commercial digital interactions & brokerageinteractions & brokerage

The SmartThe SmartOrganisationOrganisation

•accounting•procurement•inventory•order entry•MRP•shipping•fullfilment

appli- cations

•accounting•procurement•asset management

networkservices

fullfilment

other sharedservices

planning/scheduling

tariffs/taxes portal

shipping

The Traditional OrganisationThe Traditional Organisation(4 walls)(4 walls)

Digital Age OrganisationsDigital Age OrganisationsThe The internetinternetworked enterpriseworked enterprise

Digital Age OrganisationsDigital Age OrganisationsThe The internetinternetworked enterpriseworked enterprise

TechnologyTechnologyThe

OrganisationThe

Organisation

PeoplePeople

• knowledge basesknowledge bases• intelligent accessintelligent access• collaborative collaborative

platformsplatforms• strategiesstrategies• decision makingdecision making• relationships managementrelationships management• guidelines, rulesguidelines, rules

• teamsteams• learninglearning• sharing culturesharing culture• communities of practicecommunities of practice

Digital Age OrganisationsDigital Age OrganisationsKnowledge is an assetKnowledge is an asset

Digital Age OrganisationsDigital Age OrganisationsKnowledge is an assetKnowledge is an asset

knowledge technologiesknowledge technologies(agents, decision support techniques,neural networks, voice recognition,

language engineering)

collaborative collaborative platformsplatforms

(CSCW, internet-based communication tools,

groupware, middleware)

internetinternettechnologiestechnologies

(TCP-IP, XML, VRML, Java, Jini etc.)

++

Digital Age OrganisationsDigital Age OrganisationsManaging knowledgeManaging knowledge

Digital Age OrganisationsDigital Age OrganisationsManaging knowledgeManaging knowledge

Digital Age OrganisationsBusiness restructuring...

1970 1980 1990 2000 2010

Re-structureindustries

Re-engineerprocesses

Automate

ICTimpact

Year

CIMBPR

e-Business

Source: EITO 2000

Business Paradigms in a Digital Economy

Business Trends• From CIM to• BP Re-engineering, to• Re-structuring of industries

(e.g. virtual business environments) Organisational Trends

• internetworked organisations• from value chains to value networks

Product Trends• The extended product (tangible &

intangible)

From Freelancing to e-LancingFrom Freelancing to e-Lancing

Portfolio work• the end of lifetime jobs• knowledge workers• lifelong learning

Mobility• ubiquitous technologies• mobile individuals

Teamwork and eWork• remote working• collaborative/knowledge sharing

environments