Role of Information Technology in Logistics and Supply

Chain Management

What Is Information Technology

Information technology is simple the processing of data via computer: the use of technologies
from computing, electronics, and telecommunications to process and distribute information in
digital and other forms.

Information Technology, or IT, is the study, design, creation, utilization, support, and
management of computer-based information systems, especially software applications and
computer hardware.

IT is not limited solely to computers though. With technologies quickly developing in the fields
of cell phones, PDAs and other handheld devices, the field of IT is quickly moving from
compartmentalized computer-focused areas to other forms of mobile technology.

IT and Supply Chain Integration

Supply chain management (SCM) is concerned with the flow of products and information
between supply chain members’ organizations. Recent development in technologies enables the
organization to avail information easily in their premises. These technologies are helpful to
coordinates the activities to manage the supply chain. The cost of information is decreased due
to the increasing rate of technologies. In an integrated supply chain where materials and
information flow in a bi-directional, Manager needs to understand that information technology
is more than just computers.
At the earliest stage of Supply Chain (the late80s) the information flow between functional
areas within an organization and between supply chain member organizations were paper based.
The paper based transaction and communication was slow. During this period, information was
often over looked as a critical competitive resource because its value to supply chain members
was not clearly understood. An IT infrastructure capability provides a competitive positioning
of business initiatives like cycle time reduction, implementation, implementing redesigned
cross-functional processes. Several well know organizations that are involved in supply chain
relationship through information technology have ripe huge gain through integration.

Three factors have strongly impacted this change in the importance of information. First,
satisfying and pleasing customer has become something of a corporate obsession. Serving the
customer in the best, most efficient and effective manner has become critical. Second
information is a crucial factor in the managers’ abilities to reduce inventory and human resource
requirement to a competitive level and finally, information flows plays a crucial role in strategic
planning.

Information and Technology: Application In Supply Chain

Management

In the development and maintenance of Supply chain’s information systems both software and
hardware must be addressed. Hardware includes computer’s input/output devices and storage
media. Software includes the entire system and application programme used for processing
transactions management control, decision-making and strategic planning.
Recent development in Supply chain management software

1. Base Rate, Carrier select & match pay (version 2.0) developed by Distribution Sciences Inc.
which is useful for computing freight costs, compares transportation mode rates, analyze cost
and service effectiveness of carrier.

2. A new software programme developed by Ross systems Inc. called Supply Chain planning
which is used for demand forecasting, replenishment & manufacturing tools for accurate
planning and scheduling of activities.

3. P&G distributing company and Saber decision Technologies resulted in a software system
called Transportation Network optimization for streamlining the bidding and award process.

4. Logitility planning solution was recently introduced to provide a programme capable

managing the entire supply chain.

How IT can be applied in Supply Chain Management

Electronic Commerce: It is the term used to describe the wide range of tools and
techniques utilized to conduct business in a paperless environment. Electronic commerce
therefore includes electronic data interchange, e-mail, electronic fund transfers, electronic
publishing, image processing, electronic bulletin boards, shared databases and magnetic/optical
data capture. Companies are able to automate the process of moving documents electronically
between suppliers and customers.

Electronic Data Interchange: Electronic Data Interchange (EDI) refers to computer-

to-computer exchange of business documents in a standard format. EDI describe both the
capability and practice of communicating information between two organizations electronically
instead of traditional form of mail, courier, & fax. The benefits of EDI are:

1. Quick process to information.

2. Better customer service.

3. Reduced paper work.

4. Increased productivity.

5. Improved tracing and expediting.

6. Cost efficiency.

7. Competitive advantage.

8. Improved billing.

Though the use of EDI supply chain partners can overcome the distortions and exaggeration in
supply and demand information by improving technologies to facilitate real time sharing of
actual demand and supply information.

1.Bar coding and Scanner: Bar code scanners are most visible in the check out
counter of super market. This code specifies name of product and its manufacturer. Other
applications are tracking the moving items such as components in PC assembly operations,
automobiles in assembly plants.
2.Data warehouse: Data warehouse is a consolidated database maintained separately
from an organization’s production system database. Many organizations have multiple
databases. A data warehouse is organized around informational subjects rather than specific
business processes. Data held in data warehouses are time dependent, historical data may also
be aggregated.

3.Enterprise Resource planning (ERP) tools: Many companies now view

ERP system (eg. Baan, SAP, People soft, etc.) as the core of their IT infrastructure. ERP system
have become enterprise wide transaction processing tools which capture the data and reduce the
manual activities and task associated with processing financial, inventory and customer order
information. ERP system achieve a high level of integration by utilizing a single data model,
developing a common understanding of what the shared data represents and establishing a set of
rules for accessing data.
Benefits of IT application in Supply Chain Management

1.Streamlining—Communicate and collaborate more effectively with suppliers

worldwide.

2.Connecting—Make the connection between what your customers want and what you
produce.

3.Analyzing—Analyze your supply chain and manufacturing options and choose the plan
that makes best use of your assets.
4.Synchronizing—Synchronize the flow of your batch production by managing the
capacity of vessels, tanks, and lines-and the flow between them.

5.Communicating—Improve your communication and collaboration with suppliers

worldwide.

6.Designing—Create the optimal supply chain network and adapt the network to keep pace
with changes in your business.

7.Transforming—Transform processes inside the warehouse and across the supply chain
to meet demands for new efficiencies.

8.Understanding—Get a better understanding of your warehouse labor activities and

implement the changes you need to optimize worker performance.

9.Maximizing—Maximize warehouse profits by using advanced costing, billing, and

invoicing capabilities.

10.Optimizing—Optimize your day-to-day fleet performance to reduce costs and improve

customer satisfaction.
Basic Benefits of Information Technology Systems
Implementation From the perspective of logistics

1.Reduction in Stock - saves your business carrying costs, storage costs,

and transportation costs between warehouse facilities. Inventory
reduction eliminates obsolete stock, which if not sold under dire circumstances,
will go to complete waste and cash flow down the drain.

2.Reduction of Documentation - The Goods and Services Tax (GST)

is likely to result in a reduction of documentation for logistics companies, helping
them improve their turnaround time and client outreach. The removal of various
federal tax barriers and creation of a common market will also improve supply
chain efficiency and attract more foreign direct investment. The GST will make
doing business in India tax neutral, irrespective of location. For a warehousing
operator, investment decisions will no longer be dictated by the comparative tax
advantages of various states, thereby enabling them to make decisions based on
supply chain efficiencies," said Jasmine Singh, head – industrial & logistics
services, CBRE South Asia Pvt. Ltd., in his article.

3.Cost Reducing of Transportation and Storage - It goes

without saying that shipping goods in FCL (full container loads) is preferable to
LCL (less than a container load); it’s safer and more cost-effective. Also, your
goods are loaded according to your specifications in a space that is not shared with
other vendor goods. Otherwise, you may experience customs delays through no
fault of your own.
This being said, there are circumstances when LCL is the preferred and more
economical option. Namely, for transporting a relatively small freight, a good way
to reduce logistics costs is by consolidating shipments.

This involves a combination of several smaller shipments from multiple suppliers

sharing the same destination into one consolidated shipment.

Additionally, logistics providers constantly importing less than a full load from a
certain country can partner up with another similar importer and combine their
shipments as a more cost effective solution.

4. Stock Reduction - saves your business carrying costs, storage costs, and
transportation costs between warehouse facilities. Inventory reduction eliminates
obsolete stock, which if not sold under dire circumstances, will go to complete
waste and cash flow down the drain.