Impacts of Information Technology on Logistics Industry

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Introduction

Logistics management refers to a business function that deals with the movement of tangible and intangible business resources from one place to another. One of the major elements characterizing the practice of logistics management stems from the necessity to develop, implement, and maintain accurate and up to date logistical records with the aim of facilitating business’s assets and resources monitoring. Logistics also seeks to create and sustain cost effective supply chains, both internally and externally. The introduction of information technology in logistics management has contributed towards the achievement of effective supply chains.

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Prior to the onset of information technology, small, medium sized, and global business establishments relied heavily on paper files and hard copy archival rooms to fulfill this all crucial role of logistics. However, this is not the case nowadays. Information technology has firmly intertwined itself into each and every business function, and the logistics function has been one of the most influenced business processes, thus leading to firm wide and global paradigms shifts in logistics management. The influence of information and communication technology on logistics has also led to the development of new practices and caused others to be phased out.

Impacts of Information Technology on Logistics Industry

The concept of logistics management has evolved from just-in-case (JIC) basis to just-in-time (JIT) basis since the introduction of information technology. This implies that logistics has shifted from being inert and has instead assumed a largely adaptable nature, with material cost being the only lingering overhead that is truly alterable. Consequently, information technology has and continues to increase the flexibility of logistics management to the extent that a required resource is obtainable all the time. Conventional logistics could neither guarantee such kind of resources availability nor accentuate the capability of implementing and nurturing lasting multi-function supply chains.

The influence of information technology on logistics spans across all the major fields of its practice. These fields include but not limited to disposal logistics, distribution logistics, procurement logistics, production logistics and reverse logistics. Modern trends in information and communication technologies have also impacted heavily on specialized military logistics to such an extent that new and revolutionary practices have redefined the entire process of logistics management.

Impacts of Information Technology on Procurement Logistics

Procurement logistics is a sub-function of business logistics management. It deals with the constraints specification and planning process, purveyor management, market exploration and production or purchasing assessments of a business enterprise. In the past, the aforementioned business processes used to be conducted manually. Requirements identification was one of the most difficult processes and used to be assigned a lot of business resources in terms of human workforce and operational finances. In most cases, the requirements identified in this manner were not a true representative of the business’s needs.

Purveyor management is a key attribute towards the attainment of effective logistics. Traditional logistics management practices offered little or no room for the growth and exploration of new ideas related to administrative management. Logisticians were limited to a predefined format of logistics which restricted their entrepreneurial and management exploration. Nowadays, the integration of information and communications technologies into logistics allows logisticians to explore new trends in logistics fields which present potential opportunities for the reduction of operational costs.

Similarly, the above scenario of poor requirements specification has now become extinct. Information technology has introduced new methods and techniques of identifying, documenting and analyzing immediate requirements as well as projecting possible future needs. For instance, software development companies utilize computer aided software engineering tools (CASE) to discern immediate and future requirements which are then passed on to the logistics department. Logisticians need not spend much time perusing receipts and travelling to various business outposts in a bid to gather reliable market research data. This is because they can easily and effectively access the data by utilizing information technology resources at their disposal.

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Impacts of Information Technology on Distribution Logistics

The primary purpose of business logistics is to deliver products, services and information. Distribution logistics incorporates key business practices such as warehousing, order processing, and product delivery. Warehousing involves product storage and inventory management. One of the major impacts of information technology on distribution logistics nowadays has been the increased necessity to ensure that an information flow accompanies a physical flow of goods. As such, the resultant supply chain will involve multiple distribution functions. For instance, an order request will trigger a warehouse inquiry which will then lead to product delivery. This entire process will involve instantaneous movement of information back and forth across the supply chain.

Information technology has created new channels through which customers can place their orders easily and effectively. The internet has been the principal effector of these channels. In order to accommodate these changes, distribution logistics is forced to review its’ order management policies. The major response applied by most companies involves integrating online ordering systems with their in-house product ordering and delivery system. This leads to the creation of complex supply chains, a fact that can cause a pile up of unprocessed orders if the company does not have the capacity required to maintain computerized logistics.

Initially, logistics management used to deal with tangible or physical movement of resources. However, the rapid assimilation of modern information technologies over the last couple of decades heralded a new entrant in the function of logistics. This new entrant took the form of virtual storefronts whereby resources need not be physically moved since they can be converted into digital format and delivered to their intended destinations faster than the later conventional method of drop shipping. Virtual store fronts expanded the concept of distribution logistics and increased the number of active as well as potential clients. Consequently, the supply chain also increased proportionally.

Information technology has facilitated communication between warehouses and distributors. In the past, shipment of products and materials followed a rigid and often cumbersome schedule. In addition, shipment tracking was next to impossible. Information technology has availed communication devices such as two way satellite radios which facilitate communication between suppliers and their drivers. With the aid of modern tracking devices, manufacturing firms can be able to track their products as well as develop quick response protocols in case of late deliveries or accidents.

Impacts of Information Technology on Production Logistics

Research has explicitly shown that Information technology is indeed a pervasive facility. The enormity of global activities and transactions in trade and commerce is inconceivable without the application of information and communications technologies. Manufacturing companies have turned to information technology in order to effectively conduct their daily production routines. Modern production logistics intertwines with information technology in almost every single process of product development. Computers and networks interface the production logistics with procurement logistics, thus enabling the production department to adjust the rate of production according to the current demand.

Production logistics plays a vital role in ensuring a smooth transition from procurement logistics to distribution logistics. Production logistics deals with manufacturing of new products. Before the advent of information technology, manufacturing firms used to produce products in bulk and then have them shipped to their clientele in various outlets. Most often than not, the companies’ encountered huge losses due to ill-conceived demand curves. Modern technology has enabled companies to only produce what is necessary, thus reducing the chances of encountering losses as a result of overproduction.

Logistics management has and continues to undergo unprecedented changes, more so because of the uptake of logistics information systems. Computerization of key logistics functions such as information and materials flow has led to a more sophisticated but efficient chain of command from the top managerial levels to the technical level. Consequently, activities such as inventory management and warehousing are now occurring on a real time basis. In addition, different managerial levels can effectively and efficiently access data and information that has been specifically tailored according to their needs.

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Impacts of Information Technology on Disposal Logistics

Another major impact of information technology on logistics industry is increased cost effectiveness. Major advances in communications; especially in fiber optics and satellite technology has facilitated electronic data interchange (EDI) between businesses located in different geographical localities with little to no lapse time. Electronic data interchange facilitates instantaneous communication of vital business information on a real time basis. Information on current inventory and possible warehouse fluctuations enables businesses to plan ahead, thus manufacturing or transporting resources that are needed as opposed to moving bulk resources in the hope that their need will arise.

Electronic data interchange has also contributed to less expensive disposal logistics practices in various ways, principal among them being enhanced service delivery attributable to effective quick response systems. The entire process of logistics management used to tie up a company’s or a firm’s financial resources. This is because logistics affects the whole organization. If one part of the process developed a bottleneck, then the entire organization would be incapacitated. The introduction of QR (quick response) systems and computerized economic order quantity (EQN) management systems has reduced the rate of financial resources deadlocks in disposal logistics. The immediate impact of the aforementioned paradigm shift has been the realization of profits in the long run and increased efficiency of resource utilization.

Impacts of Information Technology on Reverse Logistics

Reverse logistics is a subcategory of industrial and business logistics. Its main purpose is to ensure practical and profitable reuse or resale of surplus materials and products. Before the onset of the digital era, manufacturing companies and distribution businesses encountered a lot of hurdles when trying to predict the then not so obvious demand curves. Consequently, most of these companies ended up producing more than they were selling, which in turn led to warehouse overstocking. In most cases, the surplus products ended up in stock clearance sales. The proceeds obtained through stock clearance sales are normally a fraction of the total costs of production and inventory management.

Nowadays, reverse logistics uses technological devices such as computers to design and implement new ways of surplus clearance. Reverse logistics achieves profits by creating marketing incentives aimed at enticing potential buyers to purchase a particular item/s based on the prevailing circumstances. This process ascertains the business’s capability to retain profits even if the targeted sales capacity has not been realized.

The introduction of intelligent data capturing devices, especially the barcode readers, has had a tremendous impact on the reverse logistics industry. Research has shown that by practicing and maintaining some certain production norms, barcode scanners are capable of relegating the complications innate in the application of manifold regulations. As a result, they are considered capable of providing a robust infrastructure useful in the amalgamation of concerted logistics and effective management of diacritic supply chains. The end result of integrating these two business functions enhances the usability of reverse logistics management systems thereby increasing the process’s reliance on information technology while at the same time maintaining concise inventory records vital for surplus products and materials management.

Information Technology and Global Logistics

Globalization has and rapidly continues to obligate manufacturing companies and business firms to expound on enhanced, economical and expeditious itineraries to their respective markets. This approach has created new markets and increased business outreach opportunities. However, it has also led to the emergence of negative spin offs in logistics management. Budding and evolving markets have embarked on transformational logistics, a modern logistical management practice that relies heavily on information and communication technologies.

The global reach of modern information technologies have enabled businesses and manufacturing firms to develop global logistics management practices aimed at maximizing profits while at the same time reducing operational costs. As a result, business enterprises are posting impressive marketing results in terms of profits. However, the increased number of concerns on the exact manner being employed by companies so as to achieve their heightened profit levels raises new and alarming logistical issues.

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These new issues are attributable to the spontaneous and rapid uptake of information technology by small and medium sized enterprises. For instance, information technology and its related derivatives have contributed to an increase in the number of cases associate or directed attributable to unethical logistics practices. This argument stems from the realization that logistics practitioners have access to a myriad of detailed information obtained from extensive market research and from point of sale terminals. This fact is further worsened by the lack of substantial protocols governing access to logistical data and information.

In most cases, the information may contain sensitive attributes relating to customer’s spending habits. But where does this information come from? Modern logistics rely on information technology. One of the major components of technology is the application of computers. Point of sale terminals are computers in their own right, that is, they are capable of handling financial data and performing basic calculations. Initially, only large and medium sized enterprises could afford POS (point of sale) terminals. Nowadays, virtually every business dealing with the sale of products and/or services utilizes at least one point of sale terminal.

Computerized points of sale terminals maintain tabs on each and every product that goes through the system. At the end of the day, the logistics manager is availed with a comprehensive sales report indicating the products with the highest and lowest rates of purchase. In some cases, credit card and associated billing information can be captured by intelligent point of sale terminals. Unscrupulous logistic managers may decide to pro-file this information in a bid to target specific groups of consumers or with the aim of skewing the firm’s or company’s logistics.

This practice is considered illegal and most importantly, un-ethical. Illegal pro-filing of personal or confidential data is a criminal offence and can cost the firm a large amount of money in fines and damages. However, as a result of the ambiguous nature of information and communication technologies, most logisticians fail to distinct ethical and un-ethical practices. Logistics in developing economies exemplify the aforementioned problem perfectly. As such, information technology has been seen as a deterrent to the development of ethical logistics.

Logistics information systems (LOS) rely on computerized networks. In the world of information technology, data and information are considered pivotal and most important resource. Once the practice of logistics went from manual to digital, the absolute importance of logistical data changed course and became a vital necessity. A disgraced logistician may use the data as a bargaining chip against the company, or sell it to competing firms. The possibility of other employees accessing and using the data to their own advantage is also very possible, especially considering the fact that information technology has availed cheap tools capable of accessing protected data.

As logistics continues to become electronic, the need for paperwork increasingly becomes a thing of the past. Logistics encompasses massive sources of data and information. Once these sets of data are computerized, they become vulnerable to most of the security breaches associated with information technology. Consequently, business establishments are being forced to adjust their operational costs in order to implement secure measures for protecting the integrity and authenticity of logistical data. Consequently, business enterprises are dedicating more finances towards protecting data as compared to the funds provisioned for logistical purposes. However, instances of data corruption cannot be ruled out entirely.

Experienced logisticians understand the necessity of data accuracy and consistency in logistics practice. Information technology has impacted on this particular aspect two fold. On the positive side, information systems can be able to note discrepancies in the keyed in data and alert the logistician, who then proceeds to make the necessary amends. On the other hand, logistics information systems can cripple the entire logistics process. For instance, a data entry staff or a faulty bar code reader may input logically incorrect but syntactically correct data. Such kind of error won’t be detected by the system; instead, the system will consider the input as valid. As a result, all the resulting inferences will be misleading.

Another major impact of information technology on logistics industry has been the entrant of supply chain logisticians. As businesses expand their markets, their individual supply chains expand proportionally. Information technology tripled this growth by presenting a global market platform to businesses. The ensuing supply chains became so complicated to the extent that the possibility of crippling the entire company’s logistics practices was inevitable. In response, businesses have implemented logistical avenues specifically targeting global supply chains. This has increased logistics overheads and caused an increase in business operational expenses.

Companies and businesses firms engaging in homogenous employment of appurtenant information and communication technologies in their entire logistics function tend to exemplify docked product loop intervals as well as detruded production exertion. The aforementioned point has been a key proponent for technological based logistics. In this case, appropriate information technology refers to dedicated systems such enterprise resource planning (ERP), management information systems (MIS), and decision support systems (DSS). Such kind of information systems allows logisticians and managers to prioritize delivery schedules and critically analyze data without delaying product shipment.

The success or failure of a business is assessed by how it conducts its internal and external logistics. In their bid to increase their chances of market penetration, logisticians and company managers turn to computerized logistics. In most cases, this move works out in their favor and thus the company or firm is able to realize maximum profits. However, inter-corporate competition increases since the very same move is being adopted by other businesses in similar markets. As such, the adoption of information technology in logistics allows potentially explosive competition to develop. Consequently, the possibility of industrial espionage increases.

Information technology has contributed to instances of employee layoffs and general company downsizing. For instance, a business operating on a global scale usually employs workers in thousands. The logistics department used to take most of them due to the fact that, as a process, logistics encompasses the entire organization. After the introduction of computers and point of sale terminals, a company’s management is left with no option but to downsize its’ workforce. One point of sale terminal can handle the work of five or more combined counter clerks. Computerized record keeping reduces the necessity of manpower and as result causes job displacement and reallocation.

E-Logistics

Electronic logistics is changing logistics. Modern logistics has been characterized by rapid digitization. Consequently, a new form of logistics referred to as e-logistics has blossomed into mainstream logistics industry. E-logistics uses paperless systems which in turn use digital methods to integrate all logistics activities electronically. This new form of logistics relies on databases to carry out its logistical processes. Distribution logistics has taken on a new technique of delivery, a timeless and omnipresent channel of disbarment that surpasses ever geographical border; the internet. Businesses and manufacturing companies can now advertise and sell their products or services worldwide at a fraction of the cost used by earlier logistics practices.

In e-logistics, managerial decisions are being influenced or entirely handled by decision support systems capable of spooling and analyzing huge amounts of data from various sources in little to no time. Information technology has also enhanced integrated supply chains and distribution methods, especially for companies and business firms implementing the concept of e-logistics. Another major impact of electronic logistics has been the increased necessity and demand for skilled labor. Integrated packages used in trade forecasting such as systems applications and products (SAP) requires extensive training and advanced skills sets. As a result, digital logistics has become more expensive as compared to manual and conventional logistics.

This radical shift from traditional logistics to electronic logistics induces huge capital investments. For instance, a firm that has been using ordinary logistics practices must set aside a certain amount of capital dedicated towards the implementation of electronic logistics. This implies that information technology has changed logistics into a business asset. Moreover, the rapid development of new technologies possess more financial investments since new electronic logistics devices can become obsolete depending on the rate of development.

An electronic logistics system is capable of increasing the viability and success of modern logistics. However, adoption of e-logistics can also cause financial losses to the company. This is because computers, being the principal technological devices used in electronic logistics, are vulnerable to malicious intrusions or component failure. Failure of the logistic information systems possess dire consequences for the entire firm, and the bigger the firm, the more the risks.

Military Logistics

Military logistics is a subsidiary of logistics industry. It involves strategic planning and movement as well as maintenance of military forces. Apart from business firms and manufacturing companies, the military is considered as a chief practitioner of logistics, and just like in business logistics, information technology has influenced military logistics extensively. Logistical failure is tantamount to defeat in times of war, and as such, the military has invested heavily in computerized logistics.

Impacts of Information Technology on Military Logistics

Incorporation of information and communication technologies in today’s military logistics practices has led to a total overhaul of the design, enhancement, procurement, disbursement, stowage, continuance, removal, and temperament of goods and materials. Recent breakthroughs in information technology have spawned major improvements in the design of military consumables. For instance, the introduction of food preservatives has enabled military suppliers to produce canned food that can be stored and safely transported over long distances without risk of contamination.

One of the key functions of military logistics is to ensure adequate provision of medical and health services. Computerized inventory logistics has assisted military logisticians to develop and maintain clear cut procedures for supplying adequate medical and health services. In addition to that, information technology, in form of computerized inventory management, has enabled the military to reserve medical related services and capable of being deployed immediately when their necessity arises. The reserving procedure is also used to maintain emergency troops. These processes require a robust logistics system which has been made possible through the application of modern information technology.

Information technology has influenced the phasing out of troops and weapons deployment methods that were contingent on diesel and steam powered engines. In fact, modern military distribution logistics recommends nuclear powered engines in order to enhance and effectively manage its’ overly demanding supply chain. Modern technology has also affected military warring mechanisms. For instances, processes such as missiles and projectiles propulsion and payload delivery have been incorporated into military logistics.

Conclusion

Modern trends in information technology have extensively influenced the logistics industry. Computers and point of sale terminals (POS) have led to paradigm shifts in production, procurement, distribution, reverse and disposal logistical practices. Although the resulting changes have to a large extent proved to be profitable, they have also contributed to instances of unethical practices and deterioration of business values.

The influence of modern information and communication technology spans across the major fields of logistics. These fields include but not limited to, procurement logistics, production logistics, distribution logistics, disposal logistics and reverse logistics. Each of these fields has its own observable technological impacts. Most of these impacts have been propagated by logistical information systems (LOS) which encompasses enterprise resource planning (ERP) and management information systems (MIS).

One of the negative impacts of information technology on logistics industry is increased threats to data authenticity and security. Misuse of logistical data can easily lead to financial losses in terms of fines and/or market competition. The tradition of maintaining paper based logistics record is long gone since logisticians prefer digital storage. Electronic data interchange and logistics information systems have increased the efficiency of modern logistical practices.

Companies and business enterprises are being forced to set aside finances meant for the implementation of electronic logistics. The acquisition of the necessary materials and devices (hardware and software) can be quite costly. The maintenance of new logistics systems also incurs and creates unexpected overheads and can be expensive in the long run.

Military logistics have also been affected by modern trends in information technology. New ways of material storage and subsequent movements that are technological dependent are being appraised in place of the old fashioned methods of distribution logistics. The application of information technology in military logistics has led to the phasing out of obsolete logistics practices. Information technology has become part and parcel of modern logistics industry.

References

Anthony, Raj & Sudalaimuthu. Logistics Management for International Business: Text and Cases. PHI Learning, New Delhi, 2009.

Closs, David, and Kefeng Xu. “Logistics Information Technology Practice in Manufacturing and Merchandising Firms,” International Journal of Physical Distribution & Logistics Management, vol. 30, no. 10, (2000), pp. 869-86.

Gurung, Anil. A Survey of Information Technologies in Logistics Management, University of Texas, (2006), Web.

Voortman, Craig. Global Logistics: Management. Juta Academic, Cape Town, 2004.

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