How to Use Internet to Support Logistics Activities 

INTRODUCTION

Logistics refers to the management of the flow of resources between the place of origin and the place of their final utilization with the intention of meeting some purposes. Smooth operation of logistics function is important for the proper working of a firm. Effective logistics management is more important for large businesses which source a large part of their components from component suppliers. Improper or ineffective logistics management can even end up having a fatal effect on the businesses in the long-term. The proliferation of Internet had given a great impetus to the efficient handling of logistics operations of businesses. New technologies made possible by Internet had presented with new ways to handle the movement of information related to logistics. Internet as a facilitating tool can both augment the proficiency and reduce the costs that are involved.

Logistics and Internet

Literature on logistics is full of examples where Internet had been successfully used to enhance the effectiveness of logistics operations (Stenger 1986). Below are the ways in which Internet can be used to support logistics services:

Internet and the Management of Transportation

The most widely practised use of the web in logistics management is in the administration of transportation. Transportation is generally the 2nd top cost section in logistics management occupying nearly 25 percent of the entire operating costs (Lancioni, Smith, and Oliva 2000). Research in logistics had showed that checking of pickup trucks at the local delivery centres by transporters is the most popular utilization of Internet in the transportation part of logistics. For E.g. the France based transportation giant, Alstom Transport uses Internet to keep a track of all its trucks, and rail cargos. This is particularly useful for companies as the proper tracking of shipments to regional depots proves the credibility of the carriers it is engaged with. This further makes sure that the motor transporters they are using meet the guaranteed arrival times. Some of the aspects related to transportation in logistics management that are smoothly managed with the use of Internet-based tracking softwares are claims reporting, claims processing and settlement, information relating to shipping delays, etc.

Internet and Management of Order Processing

The second highest utilization of Internet in logistics management is in the area of order processing. The highest usage of Internet in order processing is in the areas of order placement and checking the current order status. Use of Internet for order management related issues had significantly reduced the costs incurred for the processing of orders (Lancioni, Schau, and Smith 2003). For E.g. Maruti Suzuki, the Indian subsidiary of the Suzuki Motor Corporation had substantially reduced its order processing charges with the use of Internet. A significant part of the reduction of cost is in the fall of paperwork used in the old-fashioned order management systems. Another major advantage of the use of Internet is the speed with which orders can be handled. Over the time, order-cycle time had been reduced by nearly half after the use of Internet. Reduction of errors in order processing is very important for the smooth functioning of the logistics activities of a firm. Use of Internet had resulted in the significant fall of errors which creep up in order processing. Even minor errors which can creep in because of human involvement can be noticed more effortlessly and modified more swiftly. Past research in the area of logistics had showed that the best recurrent use of Internet in order processing is in the handling of returns which is seconded by the out-of-stock notification to the vendors. Automated out-of-stock notifications sent to vendors reduce the inventory carrying costs and reduce the risk of running out of crucial inventory resulting in production losses (Lancioni, Smith, and Oliva 2000).

 Internet and Purchasing

The use of Internet in managing the purchasing activity involved in logistics management has developed quickly over the past decade. Past research (both academic and industry centred) shows that Internet is used in varied number of purchasing applications like checking the price quotes given by suppliers, communicating with the vendors, and making the actual purchases from the supplier catalogues (Raskob 2000). The purchasing function in many US corporates was modernised by using the Internet efficiently. For E.g. General Electric had reduced its staff in the purchasing department by nearly 50 percent after the use of Internet (Lancioni, Smith, and Oliva 2000). The duration of order-cycle times (time taken between the placement of order and the receipt of goods) too had fallen drastically. The use of Internet also facilitated the restructuring of the supplier negotiation process (Ellram and Cooper 1990). Internet made it possible to do away with face-to-face negotiations and conduct all the negotiation activity through the Internet. Financial aspects of returned goods, warranty issues, and issues related to product-damages in logistics can also be better managed because to the use of Internet.

 Logistics Information System (LIS)

Logistics Information System (LIS) denotes the application part of the information technology related to logistics. It forms a subset of the business firm’s total information system and is intended to solve particular problems of decision making related to logistics. LIS facilitates the smooth and unhindered flow of information between warehouses, inventory, and transportation services to achieve a good level of customer support and service. The capabilities of business organizations to reduce their logistics cost and service quality levels offered to their customers is greatly affected by LIS. For E.g. Chevron, one of the world’s top energy firms effectively used LIS to look into the issues related to logistics. Business firms which can provide superior logistics services over other businesses in the industry can have a competitive advantage in the market (Bardi et al. 1994). Two important types of LIS are mentioned in the literature: Logistics Operating Systems (LOS) and Logistics Planning Systems (LPS). While LOS includes transactional applications like entry of orders, processing of orders, warehouse administration, transportation, etc., LPS includes applications useful for coordination like inventory management, forecasting, distribution planning, etc.

 EDI

Electronic Data Interchange (EDI) had successfully improved the communication channels between companies that was vital for logistics. EDI involves the automatic transfer of structured data by pre agreed standards from one firm to the other without any human intervention through the Internet (Hewitt 1994). This not so new technology requires the use of common data formatting and transmission protocols to be used by the business firms involved. Some of the kinds of logistics related information that are carried by EDI are advanced shipping notices, purchase orders, bills, bills of lading, etc. EDI makes it possible to get access to timely and accurate information which is important for taking decisions regarding intricate problems involved in logistics management. Japan Airlines effectively used EDI to handle intircate supply chain systems required for their operations like quick supply of aircraft fuel, food catering, repair of airplane components, etc. The competitive advantage enjoyed by firms implementing EDI over the other firms is well recognized in logistics literature. For example, businesses using EDI were well equipped to offer more number of facilities to their customers (Rogers et al. 1992).

 Bar Coding and RFID

Bar coding and RFID are the most important IT enablers in the area of logistics till date and had a significant impact on its practice (Rahman 2003). With the origins of its use in the rail road cars in the 1960s, bar codes are now ubiquitously used to identify and track almost anything. The retailing giant Amazon mostly relies on Bar Code and RFID technology to keep a track of its shipments to customers. There are different types of bar codes available in the market which are commonly known as ‘symbologies’. By making it easy to track anything with ease, bar codes provide with a simple system for the integration of corporate logistics and supply chain activities (Closs & Kefeng 2000). RFID is a more sophisticated technology than the Bar Coding, and helps in the automatic identifying, tracking, and locating of items. RFID technology includes tags, transponders which can detect the objects, antennas which make it possible for tags to communicate and respond, and the software that controls all the RFID system (Srivastava 2004). Some of the areas in logistics management where RFID is widely used is in asset tracking, theft detection, in-process inventory tracking, and handling of mobile payments. RFID technology has lot of potentiality in the perfection of the supply chain process and reduction of wastage. For E.g. efficiency in inventory management can be greatly increased with the automated updation of inventory management system when products attached with RFID tags are transferred from lorries and sent to warehouses. Some of the advantages of RFID over the traditional barcodes are: longer range, ability to collect data from multiple sources, ability to stock higher data, and no requirement to have RFID tag and the reader close to each other (Asif & Mandviwalla 2005).

Conclusion

The use of Internet in Logistics is of recent origin. Its main usages were mostly in the areas of arrangement of transportation, tracking of trucks, improving the quality of customer support, and purchases management. It is beyond doubt that the use of Internet in logistics management had brought innumerable prospects for businesses and their logistics management systems. While there were some noteworthy opportunities for the reduction of costs due to the increased use of Internet, companies now enjoy lot of other benefits like better management of their inventory, ability to easily contact suppliers or buyers, ability to pay invoices, etc. In future, businesses should strive to better use the Internet for improving their logistics operations.

 

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