The Impact of Information Technology On Logistics
The Impact of Information Technology On Logistics
The Impact of Information Technology On Logistics
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Lucas D. Introna
Lancaster University
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f information technology is not used by systems; information technology is not a coincidental add
I
people at the operational level, then under on, once all the other systems in the business are up and
standing and integration will all be to no running. The process of integrating information technology
avail. into business systems will be covered in the second
section.
Involving
The degree to which operational people support and
The l m pad of
accept information technology will determine its success.
The final part of the article is focused on the important
issue of ''implementing'' information technology.
Information Understanding
The concepts of logistics, management, information and
technology will be defined and then their implications for
Logistics
on Logistics
Logistics is the system designed to add place value and
time value (as defined by the customer) to the product.
There are important aspects that either flow from this
definition or support this definition:
(1) A customer (of a system) is the entity which
Lucas D,Jntrona receives the output of that system.
(2) The customer, and only the customer, defines or
determines place and time value.
International journal of Physical Distribution & Logistics Management. (3) The customer can be either internal or external.
Vol. 21 No. 5. 1991. pp 32-37. © MCB University Press. 0960-0035
(4) Value is the thing for which the customer is
prepared to pay.
Introduction (5) The logistic system will be successful to the degree
Information technology was traditionally, and to a large_ to which it can add place and time value.
degree is still today, seen as the large computer in the (6) The success of the value-adding process will be
basement or some air-conditioned room doing much determined by the level of knowledge of what the
calculation very quickly. However, more and more executives customer needs, i.e. what the customer sees as
are realising that information technology has the potential value.
to give their organisation a competitive advantage.
The focus of this article is "How can we manage the Management
impact of information technology in/on logistics?'' This Management is the improvement of the system to ensure
important question will be covered under the following long-term survival. In order to improve the system
three main sections. management must:
• Create the ability, in the system, to generate the
Understanding variety (desired state) required at any point in time.
A major reason for the current ignorance about information This also can be seen as the ability to "innovate"
technology, or for its ineffective use, is the lack of a clear in the broad sense of the word.
cut understanding of the concepts of information,
• Control the variability or randomness in the system
technology, logistics and management. This problem will
be covered in the first part of this article. in order to achieve an almost regular and, as such,
predictable behaviour pattern.
Integrating There are again some important aspects of the definition
The second aspect of importance is the integration of that need to be highlighted:
information technology into the logistics of business
(1) It is the responsibility of management to create a
system that can generate the required variety, i.e.
Received June 1991 innovate or adapt.
THE IMPACT OF INFORMATION TECHNOLOGY ON LOGISTICS
(2) Management must control the system by reducing The Analogy between the Logistics and
the variability, randomness or risk in the system. Information Systems
(3) Less risk leads to greater certainty that (innovated
variety) objectives will be met.
(4) Risk reduction requires variability reduction.
(5) Management can reduce variability only if it has:
• information about the system's current and Customer
Raw
forecast behaviour compared with the desired
(standard, objective, etc.); material
Information
Information is made up of meaningful data. Important Information = data (processed) + meaning
�� �
factors factors
Integrating Implement t
Design edesign
Determine
1
It follows logically from the above that information information information __ 1nformat1on
systems
systems systems
technology will benefit the organisation only if it forms requir ments
• Effective and accurate decision rules for the • The interaction between these sub-processes
replenishment decision in terms of:
• Well functioning order-placing and follow-up The nature of the information or material
system interchange (format, frequency, etc.);
• Effective and loyal supplier base. the standard of performance required in this
interchange (i.e. the value statements for
(2) For order status and order tracking:
the lower-level systems);
• Accurate on-time updating and reporting
the feedback control mechanisms required
information
to ensure successful interaction.
• Effective well planned documentation procedures
are made up of four The information system requirements and the information
technology requirements can now be determined. The
phases... LJ information system requirements must state what
information systems are required to establish or enhance
the business process in question.
The business process requirement for the statement of
The materials management process can be supported by
inventory availability value could be defined as follows:
information systems such as:
An effective and efficient materials management system
managing all materials (raw materials, work in progress,
• an inventory control system - recording, keeping
finished goods and distribution stock) to ensure maximum and issuing material;
availability of materials to all customers (internal and • an inventory management system determining
-
o�
information echnology
operations technology technology technology trequirements Achieve Determine
+--- +---
+
•
business - business
ob ect;ves ob ect
• information technology.
� j ,
e,m•ne
The process of integrating information technology into the lmplem bus1ness
business
�
Implement processes processes
logistic system (as illustrated in Figure 2) must be seen requirements
as a multidimensional or multilevel process happening at
every level of the business, cascading down to the lowest � DeSJgnhedes;gn
business
processes
level.
Implement
!
Design/redesign
Determme
information
information information systems
systems systems requ1rements
+--- +---
CJ i Determme
Implement Design/redesign mlormatlon
information information
Integrating information technology technology
+----- +----
r!���r�����s
LogiStiCS function
technology into the logistic
system is a complex task o
The framework for integrating information technology into
the logistic system discussed above is a conceptual
It is clear from the discussion above that the process of framework that suggests what needs to be done and not
integrating information technology into the logistic system how it needs to be done. It can be appreciated that there
is a complex task that requires significant commitment are many microprocesses inherent in every process within
from the people involved. To optimise the total system it the framework supplied.
is important to plan this intervention from the top down.
In implementing the framework it may make more sense The important principle that needs to be reiterated is that
to implement from bottom up because: information technology is not an incidental add-on after
or even during the fact. If information technology is not
(1) The corner-stones of the process are learning and designed into the logistics function, it will not add the value
adaptation. The people involved can learn from of which it is potentially capable. It may become only a
implementing less complex processes and then large cost centre, and nothing more.
make a ''technology transfer'' to the next higher
level.
(2) Successful external customer service will result only Involving
from successful internal customer service (i.e. do
A lot can be said about the implementing of information
not commit to external outputs unless there is
technology, but I will concentrate on one very important
commitment to internal outputs).
aspect, that of commitment. Commitment is when the
Figure 3 illustrates the cascade process. In a new people involved in a process are prepared to make personal
organisation it would also be possible to plan and sacrifices to ensure the success of the process. Thus
implement from top down. commitment exists when the individual completely
THE IMPACT OF INFORMATION TECHNOLOGY ON LOGISTICS
identifies him/herself with the goals and objectives of the Creating competence is the responsibility of management.
system, to the point that these goals and objectives One often hears managers complain about their
become his/her own. People will involve themselves with incompetent staff without their realising that it is their
information technology only if they are committed to it. responsibility to correct the situation.
Kinlaw [ 3, p. 101 defines the following key pillars of Influence is the degree to which the people involved
commitment: perceive or experience their personal influence in the
• Clarity direction and success of the project.
• Competence This is a price of commitment which managers are
• Influence reluctant to pay.
• Appreciation.
Appreciation is the degree to which the people involved
To understand the implication of these pillars let us define perceive or experience a sense of appreciation for their
them in some more detail. contribution to the project.
Clarity is the degree to which the objectives and plans When it comes to information technology implementation
to reach those objectives are unambiguous, unclouded and we, more often than not, destroy these pillars of
comprehensible. commitment.
Lucas D. Introna is Senior Lecturer in Information Systems, Department of Informatics, University of Pretoria, Pretoria,
South Africa.