Impact of IT on Transport and Logistics - Essay Example

 Introduction The importance of transport systems has always been demand-led issue ever since its creation and its usage has given a rise to many aspects to be considered. With the passage of time communications and transportation networks have improved so dramatically over the last few decades, that even faraway regions and nations around the globe are now within the reach of a mere Internet connection. Strategic supply base reduction has become a major tool used by leading firms to reduce costs and improve quality, responsiveness, flexibility, and other key dimensions of performance. For this they use services offered by 3PL. (Moore, Nancy Y., Laura H. Baldwin, Frank Camm, and Cynthia R. Cook, Implementing Best Purchasing and Supply Management Practices, Lessons from Innovative Commercial Firms, Santa Monica, Calif.: RAND, DB334, 2002). As a result, companies have jumped into international markets and outsourced their manufacturing and procurement operations to cheaper overseas manufacturers and suppliers, while some have established subsidiaries around the world. (Why Integrated Transport Systems Thomas Andersson, Patrick Hasson Journal Title: OECD Observer. Volume: a. Issue: 211. 1998. Page Number: 27). What this Essay is all about? In this essay I have briefly discussed the concept of modern logistics as in the opinion of a customer as well as supplier, the era of third party logistics and the augmenting expectations of a customer on the way to logistics which escorts towards the introduction of new approaches like ‘Service oriented architecture’. The case studies discussed includes the UPS solutions, FedEx and TNT in which one can see different variations due to the variety of networking technologies like Alcatel, Matrix and different wireless solutions in which a glance is there of the concerned management objectives. At some places I have added illustrations to make the topic more clear, interesting and understandable. In modern logistics, the use of information technology systems is as common as forklifts. But the best companies have gone beyond puffing bar codes on their containers and tracking shipments by computer. According to a survey of more than 100 logistics services providers (LSPs) companies that primarily offer shipping and warehousing services and of manufacturers and retailers using their services, the best performers are investing in highly integrated systems across internal and external supply chains (The performance of these companies was measured by the quality and efficiency of logistics. The key criteria for quality were transport times, punctuality, correctness, and flexibility. For manufacturers and retailers, efficiency was measured through logistics costs. For LSPs, it was measured directly through criteria such as utilization and employee productivity). Basic operational IT applications are no longer a competitive advantage for LSPs or their customers. About 75 percent of all shippers surveyed use planning and scheduling software known as enterprise resource-planning (ERP) systems (Darien James and Malcolm L. Wolf, "A second wind for ERR," The McKinsey Quarterly, 2000 Number 2, pp.100-7.), and most have warehouse-management systems as well. LSPs that operate warehouses almost all use bar codes and warehouse administration systems. Even among the low-performing logistics providers, 80 percent use tracking and tracing systems for their transportation networks. The basic functional components of International trade are trade documentation generation and transmission. This would then include a complex exchange of information between multiple entities, including suppliers, carriers, freight forwarders, customs brokers, banking institutions, and other third party transportation and storage providers. As there is a requirement that goods should be shipped across borders in a multimode transportation manner, still many international shippers have not e-logistics software that provides the necessary visibility and flexibility to e-businesses that want to automate their global supply chains. The supply management tasks also become tedious if the e-procurement software (analyze the total landed cost which includes costs of sourcing, shipping a product internationally, including customs management, tariffs, transportation, cost of goods, etc.) is not in use. Although several Internet-based logistics tools are available in this high technology era, which are helping companies to analyze and reduce costs by automating the processes of booking shipments, keeping customers informed, and making sure goods arrive on time. (Customer-Centric E-Business, Magazine article by James Herman; Business Communications Review, Vol. 30, August 2000). (Courtesy: http://www.it-quest.bz) The economic theories assume that every agent involve in a transaction must be self-interested, have their own utility function, and can behave opportunistically, and deliver on contractual obligations. (Vijay Gurbaxani, Computers and Coordination in Manufacturing, Journal of Organizational Computing, Volume: 2. Issue: 1, 1992). But nowadays in order to make delivery timings efficient and perfect businesses and customer demands the need of the third-party logistics (3PL) or ‘contract logistics’ in which customer’s expectation is to get competitive advantage. 3PL ensures customer to deliver their products on time and at a higher level of accuracy. The highly competitive 3PL market includes diverse group of companies like UPS Logistics, TNT Logistics, FedEx Logistics, i2 etc. They move product over ground, air, and sea, from point-to-point for just about every industry. In recent years the ERP market has undergone major changes. The business environment is moving more toward E-commerce and the Internet, smart business applications are evolving and adapting to these new directions. (James J. Hoctor, Robert J. Thierauf, Praeger, Smart Business Systems for the Optimized Organization, Westport, CT. 2003). The businesses whether medium level or enterprise level are using high end accounting software like Carillon, Microsoft Great Plains, Epicor Software etc, so the 3PL must have the technology ability to integrate with the diverse systems of the clients. (Roberta Ann Jones, Spotlight on Midlevel ERP Software: Accounting Products Put to the Test, Journal of Accountancy, Volume: 193. Issue: 5. 2002). As it was wisely quoted: “Enterprise Resource Planning (ERP) can be a blessing or a curse.” (Dilip Wagle, The Case for ERP Systems, The McKinsey Quarterly. Issue: 2, 1998) Efficient 3PLs have a significant inventory of applications to host business process warehousing, pick-pack-ship operations, inventory control, kitting, light assembly, transportation, consolidation, international trade logistics, reverse logistics, and many other functions for requesting clients and prospects. They use the different software applications like Descartes, Lyra, Matrix, etc. to deal with every aspect of Supply Chain Management. Supply chain executives need to focus on inefficiencies of the current system in order to reduce costs else activities would be costly. Supplier Chain Management (SCM) can minimize their operational inefficiencies through improved supplier logistics management and cost reduction. Customers are becoming more demanding and want to receive the perceived benefits from their logistics service providers. SCM staffs are reassessing the value of 3PL providers and their ability to lower costs and maintain service levels. Logistics management within enterprises is also requiring 3PL providers to be flexible, innovative, and to make use of newer, more efficient technology. Research on logistics services indicates the long-term trend toward outsourcing the management of entire business processes, such as dynamic business processes including order assembly and order delivery, which are subject to considerable change over time. (From Raw Materials to Customers: Supply chain Management in the Service Industry, Journal article by Jack S. Cook, Kathy Debree, Amie Feroleto; SAM Advanced Management Journal, Vol. 66, 2001). (eyeForTransport Global Research,The next generation TransportationManagement System, Publisher: eyeForTransport, London, UK, March 2004.) Today’s customer is expectation is much higher with the 3PL, as they expect their 3PL providers to be more than just delivery mechanisms now; so they evaluate a 3PL on the basis of the following criteria: Order fulfillment International supply chain management Procurement / sourcing processes Customer service and support Facility location Warehousing and distribution center operations Inventory management Reverse Logistics (FedEx Center for Supply Chain Management: Fogelman College of Business and Economics, Magazine article by Ernest L. Nichols; Business Perspectives, Vol. 15, Spring 2003) To manage business tasks and business processes, Service Oriented Architecture (SOA) approach is introduced which uses flexible connectivity with well-defined standards-based interfaces. Components of SOA include Web services, portals, application servers, security and analytics frameworks, business process management (BPM), and master data management. SOA is a guide companies can use for the strategic management of their business. SOA is the concept that business applications must implement to base on internal and external business processes, including outsourced ones. Serving as a blueprint for the next generation of collaborative systems and business practices, SOA ties together a company’s systems of record, process, and venture, so that the technologies within each system work toward supporting collaborative services. The SOA model must be applied to internal and external systems, particularly those in support of whole business process outsourcing. Major technology vendors, which uses SOA as well as are the pioneers of SOA development are IBM with WebSphere Live for SOA, Oracle’s Service Oriented Enterprise (SOE) and Fusion, and SAP’s NetWeaver with Enterprise Services Architecture (ESA). (A New Model for Evaluating Third Party Logistics Providers: Enter Service Oriented Architecture, Michael Bittner, E-Insider, Oct 18, 2005) The following are some of the case studies highlighting the impact of IT technologies in the current 3PL: UPS Supply Chain Solutions Alcatel is one of the world’s major players in the areas of telecommunications and the Internet, building next generation networks and delivering integrated end-to-end voice and data networking solutions to telecommunications carriers, enterprises and consumers. They take UPS as their partner so that they can get the help from the efficient supply chain services of UPS in order to go compete in the Global market. On the basis of its extensive track record, UPS Supply Chain Solutions was the organization able to convince Alcatel eND of its expertise in the telecommunications industry and in the high-tech arena. UPS Supply Chain solutions are now the sole contact point between customers and suppliers and acts as Lead Logistics Provider by managing all supply chain activities at strategic, tactical and operational levels. UPS Supply Chain Solutions services go far beyond the management of Alcatel’s IP server delivery. It coordinates its own logistics organization’s resources and information technologies with those of complementary service partners. Using its innovative transaction tracking and supply chain monitoring tool, UPS Supply Chain Solutions optimizes Alcatel eND’s logistics on a European scale. Its key asset is the capacity to integrate IT systems into the global organization of the supply chain, allowing users to organize and plan all delivery flows by means of an interface with Alcatel eND’s IT system. (http://www.ups-scs.com/solutions/case_studies/cs_alcatel.pdf) (Courtesy: http://www.pressroom.ups.com/multimedia/images/operations/0,1414,,00.html) FedEx Technology FedEx technology enables customers, couriers and contract delivery personnel to access the company's information system networks anytime through wireless communications, anywhere. In fact, FedEx was the first transportation company to embrace wireless technology more than two decades ago, and continues to be a leader in the use of innovative wireless solutions. Package Tracking Customers can track the status of FedEx Express, FedEx Ground and FedEx Freight shipments or find the nearest FedEx Express drop off location via Web-enabled devices such as WAP phones, Personal Digital Assistants and pagers. Package Scanning FedEx also uses wireless data collection devices to scan bar codes on shipments. These “magic wands” are a key part of what makes it possible for customers to find out where packages are in transit, whether on a FedEx Express jet speeding across the Atlantic Ocean or a FedEx Ground tractor-trailer on the Pennsylvania Turnpike. On average, FedEx Express and FedEx Ground packages are scanned at least a dozen times from pickup to delivery. At pickup, each package’s shipping label bar code is immediately scanned to record the pickup time, destination and delivery commitment. The scanned information is uploaded to the FedEx mainframe. Bar codes are scanned again at every key step of the shipping process, allowing customers to follow the status of their shipments throughout the journey. FedEx’s newest data collection device for couriers incorporates a micro-radio for hands-free communication with a printer and mobile computer in the courier's delivery vehicle. Called the PowerPad, the devices use Blue tooth wireless technology that allows FedEx couriers to communicate with each other within 30 feet of their vehicle. Wi-Fi Internet Access Wireless, high-speed Internet access is available at more than 1,100 FedEx Kinko’s stores nationwide. Walk in; turn on your laptop and go. TNT Logistics Impact of IT in TNT Logistics has helped in its advancement in five ways: 1. Achieving ‘Network Innovator’ status, which means that TNT Logistics is an industry leader in selected sectors. We do this by creating superior value for customers in target sectors through new and additional services and by optimizing costs.   2. By overseeing the total supply chain, coupled with control over assets and expertise in managing operations, we can both capitalize on economies of scale and optimize the utilization of assets and networks to the benefits of our customers.     3. Serving specific target industry chains, including inbound automotive and spare parts, fast-moving consumer goods/retail, computing spare parts, inbound customer electronics, tires and media and publishing. A core element of this approach is our focus on global key account management.    4. Expanding our areas of operation to those parts of the globe, which our key customers consider important to the growth of their business.  5. Implementing a standard global information technology infrastructure based on our Matrix™ Supply Chain technologies. ( http://group.tnt.com/pocketguide/en/mn-8/) (Courtesy: http://www.tntlogistics.com/EN/about_tnt/strategy/) Matrix           TNT Logistics’ Matrix™ is a centrally hosted, integrated suite of supply chain technologies that enables us to manage complex domestic and global supply chains.  It provides a link between TNT Logistics and our trading partners. Matrix™ supports inbound just-in-time logistics, outbound logistics and reverse logistics across multiple industry verticals and integrates transportation, inventory management, order fulfillment, financial settlement and e-commerce applications that enable global collaboration.   The major modules of Matrix™ include:  Matrix™ Designer - strategic network design. Matrix™ Router - real-time routing based on demand from shipping or manufacturing points. Matrix™ Centralized Logistics Manager - event engine that manages the status of all parts, routes and assets. Matrix™ Yard Management and Cross-Docking - using radio-frequency-based communications to direct material handlers. Advanced Warehouse Management - all warehousing functionality Financial Settlement - all transactional activity from the operating systems is used by our financial back office system. (Courtesy: http://www.tntlogistics.com/EN/services_technology/technology/matrix/) i2 i2 is one of the advanced and sophisticated Logistics company and it provides end to end supply chain including products in: Supplier Relationship Management Supply Chain Management Demand Chain Management Service Parts Management and Transportation Its main focus is to address technology and data related solution Delivery needs, from initial Technology / Data Assessment to Technology / Data Management for the deployed solution, by leveraging existing technology. (http://www.i2.com/services/index.cfm) Conclusion Hence we can see from the above reviews how IT has helped in the maintenance and up gradation of transport and logistics, which could otherwise have not been possible. Whether implemented as a database, software or in the form of e-commerce, it is because of IT that today’s logistics has emerged as a complete solution provider that is now capable of meeting all its customers’ expectations. Bibliography Thomas Andersson, Patrick Hasson , Why Integrated Transport Systems, Journal Title: OECD Observer. Volume: a. Issue: 211. 1998. Darien James, Malcolm L. Wolf, A second wind for ERR, The McKinsey Quarterly, 2000 Number 2. http://www.ups-scs.com/solutions/case_studies/cs_alcatel.pdf James Herman, Customer-Centric E-Business, Magazine article, Business Communications Review, Vol. 30, August 2000. Jack S. Cook, Kathy Debree, Amie Feroleto, From Raw Materials to Customers: Supply chain Management in the Service Industry, Journal article, SAM Advanced Management Journal, Vol. 66, 2001. Ernest L. Nichols, FedEx Center for Supply Chain Management, Fogelman College of Business and Economics, Magazine article by; Business Perspectives, Vol. 15, Spring 2003. Michael Bittner, A New Model for Evaluating Third Party Logistics Providers: Enter Service Oriented Architecture, E-Insider, Oct 18, 2005. http://group.tnt.com/pocketguide/en/mn-8/ Vijay Gurbaxani, Computers and Coordination in Manufacturing, Journal of Organizational Computing, Volume: 2. Issue: 1, 1992. Roberta Ann Jones, Spotlight on Midlevel ERP Software: Accounting Products Put to the Test, Journal of Accountancy, Volume: 193. Issue: 5. 2002. Dilip Wagle, The Case for ERP Systems, The McKinsey Quarterly. Issue: 2, 1998. James J. Hoctor, Robert J. Thierauf, Praeger, Smart Business Systems for the Optimized Organization, Westport, CT. 2003. i2 The Supply Chain Company, Supply Chain Management from i2 Technologies, http://www.i2.com/company/index.cfm Moore, Nancy Y., Laura H. Baldwin, Frank Camm, and Cynthia R. Cook, Implementing Best Purchasing and Supply Management Practices, Lessons from Innovative Commercial Firms, Santa Monica, Calif.: RAND, DB334, 2002. Read More