Chapter 11 Information Management and Technology

Chapter 11

Information Management and

Technology

CHAPTER OVERVIEW

• The use of technology to collect and convey information is not new to the transportation industry.

• What is new is the integration of this technology among carriers, shippers, receivers, and third parties to efficiently and effectively manage the supply chain.

CHAPTER OVERVIEW

• Many companies have found that using information technology has allowed them to significantly reduce assets (inventories or equipment) and better manage information, product, and cash flows among all supply chain partners.

INFORMATION SYSTEMS

• Information systems are designed to use the available data to portray meaningful information to decision makers.

• Some type of information system integration is necessary to link all of the players in the supply chain.

• Decisions regarding inventories, warehousing, manufacturing, and transportation are linked to a common database. This is the basis for enterprise resource planning (ERP) systems.

INFORMATION SYSTEMS

• The information required to make the transportation process work can be classified into pretransaction, transaction, and posttransaction information.

• Pretransaction information includes all information necessary to plan the carrier movement,

INFORMATION SYSTEMS

• Transaction information includes all information necessary while the shipment is in motion with the carrier, and

• Posttransaction information includes all information necessary after the shipment has been delivered.

INFORMATION SYSTEMS

• Table11.1 does show that information flows must be linked among all 3 parties to make the shipment arrive as promised.

• In the pretransaction phase, the shipper needs purchase order information and possibly forecast and point-of-sale (POS) data to help plan carrier capacity and selection decisions.

• The shipper also needs information from the carrier as to equipment availability and scheduled pickup time.

• Strategically, the carrier needs volume forecast data from the shipper to plan capacity appropriately.

• Transactionally, the carrier also needs bill of lading (BOL) information as well as desired pickup and delivery times from the shipper.

• The receiver requires an advance shipment notice (ASN) from the shipper as well as a scheduled delivery time from the carrier (or from the shipper in the ASN).

INFORMATION SYSTEMS

• The posttransaction phase requires a freight bill from the carrier, as well as a proof of delivery (POD) and other verification of carrier performance, such as damage or claims information.

• The carrier requires payment information (when and how much) from the shipper as well as claims information, if necessary, from the receiver.

• The receiver might require carrier performance information (on-time, damage-free) from the carrier as well as POD from the shipper or carrier to initiate the payment process to the shipper for the product. FIG11.2

INFORMATION SOURCES

• Traditionally, transportation information has come from various documents which could include bills of lading, waybills, manifests and freight bills.

• Many of these transactions have been replaced by paperless exchanges under the term Electronic Data Interchange (EDI).

• EDI has increased the speed of the flow of information while reducing errors.

INFORMATION SOURCES

Bill of Lading• The Bill of Lading (BOL) is the document used

to initiate the request for a transportation movement.

• Most important transportation document because it provides information necessary for the carrier to plan for and perform the transportation service.

• The BOL serves five legal purposes: • 1) It is a receipt for the goods; • 2) it contains a description of the shipment; • 3) it can be evidence of title; • 4) it is an operating document; and • 5) it defines the terms of the contract

between a shipper and a carrier.

The minimum requirements for BOL information:

• Origin/destination of the shipment• Carrier designation• Special operating instructions• Shipment description• Billing(Invoice) instructions

• There are two types of BOLs, 1. a straight or nonnegotiable version and 2. order or negotiable.1. Straight BOL• The title to a shipment cannot be transferred to

another party with a straight BOL, it is used as the basic transportation contract between the shipper and the carrier, providing the information necessary to move the shipment to the destination.

2. Order BOL• An order BOL not only serves the contract function,

it can be used as evidence of ownership and can be used in banking areas.

• The order BOL is sent to a bank and the consignee pays the bank the invoice value of the shipment and the bank releases the BOL.

• The original copy of order BOL must be presented to the carrier before the shipment can be released.

Other Information Sources

• The waybill is the document generated by a railroad to control the movement of railcar or intermodal shipment.

• It is the operating document that governs the movement of the car as well as the descriptive document of the car’s contents.


• The manifest is the operating and descriptive document for motor carriers and serves many of the same internal operating functions as does the waybill.


• The freight bill is the carrier’s invoice for transportation related charges and carries the same information as the BOL, such as origin/destination and commodity description.

• notifying the buyer of the charges and how they were assessed.

• proof of delivery.


• Many buyers will not begin payment process until a proof of delivery (signed freight bill) is matched with a BOL. Old methods of generating hard copies as proof of payments can be lengthy processes.

• Efforts to shorten the freight bill payment cycle is through electronic signature capture that has reduced the time necessary to prove delivery by the carrier and has improved the carrier’s ability to collect payment quickly.

INFORMATION TECHNOLOGY

• Two issues arise when deciding to implement IT in a transportation or logistics setting:1) where to start, and 2) how to integrate the different systems.

• The main purpose is to introduce the concept of IT and the various aspects of its implementation for carriers and their customers.

Areas of Application for IT

• The biggest area where companies would like to make their IT investments is connecting to customers, suppliers and partners.

• Four reasons push this investment in the supply chain:

• REASON 1, information can be a substitute for supply chain assets, costs, and even services.

• Making inventory visible through information allows firms in the supply chain to reduce or, in some cases, eliminate safety stock inventories.

• This ultimately takes costs out of the supply chain, rather than pushing costs back to suppliers or carriers.

• E.G. satellite technology (where and when)

• Reason 2, the cost of information continues to fall.

• E.G. ????• So as processing and storage technology

declines in price, so will the cost of information.

• Reason 3, demands for information from supply chain partners are increasing.

• The availability and effectiveness of information regarding supply chain operations are causing firms to need more information to manage their processes.

• Initiatives such as collaborative planning, forecasting, and replenishment (CPFR) in the retail industry are requiring not only more information but also the sharing of that information with all relevant supply chain partners.

• Reason 4, in supply chain management, managing information flows is as important as managing product and cash flows.

• These three flows are inseparable; one cannot work without the other two.

• An argument might even be made that managing information might be the most important because it can be used to manage product and cash flows.

Types of Information Technology

THE BASICS—COMPREHENSIVE, QUALITY ELECTRONIC DATA INTERCHANGE (EDI)

• Oldest forms of technology used in logistics and transportation.

• Requires a standard format so that the data being exchanged can be understood by both the originator and receiver.

• Has become a basic requirement of doing business with many firms.


• Eliminates human intervention which reduces errors while removing the labor cost is preparing the BOL, freight bill or other transportation related document.

• Improves customer service by alerting them to the status of their shipments which reduces their cost.


• Most popular use of EDI transactions is for receiving customer orders and for sending orders to suppliers.

• Other growing uses include ASNs (advanced shipment notes) and electronic funds transfer (EFT).


Barriers to implementing EDI:• hardware/software compatibility, • consistent formats, • security, • investments, • management support• Solution? - outside service provider, often called

value added networks (VAN). • Future: EDI replaced by internet sites?

THE BASICS- AUTOMATIC ID: BAR CODE BASICS

• Bar codes can be seen in grocery stores, retail stores, warehouses, manufacturing plants, and carrier terminals.

• Coupled with EDI, bar codes provide a powerful tool for providing information about product movement throughout the supply chain.


• How barcodes work:• Consists of spaces and bars arranged in a

pattern. • When a scanning device is passed over the bar

code, light waves are reflected off of the code and read by the scanner.


• These waves are converted to a frequency and assigned a “0” or a “1” (this is called a binary code) based on whether light is reflected or absorbed by the code.

• A dark bar would absorb light; a light space would reflect light.

• The relative width of bars and spaces is important in basic bar codes, not the absolute width.

• The method used to assign the 0 or 1 to the reflections is called the primary algorithm.


• The most common bar code in use today is called Code 39 which uses five bars and four spaces.

• Two bars and one space are wide (three wide) and the remaining six spaces and bars are narrow.

• The three wide elements out of the nine in total is where the name Code 39 comes from.


• A key to the effective use of bar code technology is linking it to other types of technology to allow for inventory visibility. One of these technologies is called track and trace, which is the focus of the next section.

• END

THE BASCS: TRACK AND TRACE

• Full visibility of a shipment in the supply chain requires the ability to know where it is in a warehouse or terminal as well as knowing where it is in transit.

• Bar codes provide an important source of information to be able to provide both types of visibility.


• In a warehouse or carrier’s terminal, bar codes can track a shipment from when it arrives until it leaves, providing status updates along the way.

• Normal bar code readers store data on product movements and then periodically download this data to a host computer.


• A technology called radio frequency (RF) can provide real-time data.

• When the bar code is scanned using an RF reader, the data are transmitted immediately using RFs to the host computer.

• The smart tag is another application where RF technology can be used.


• Developments in tracking technology have allowed carriers to communicate with their vehicles in transit as well as determine their location.

• Major breakthrough – satellite technology• Coupled with onboard computers, this

satellite communication has allowed carriers to know the position of their vehicles, freight and better manage their asset base.


• This two-way communication between driver/vehicle and dispatcher has actually allowed carriers to reduce their fleet size while improving utilization.

• These updates, along with RF data from warehouses and terminals, can help provide total supply chain visibility for freight.

• Composed of multiple satellites in various orbits above the Earth, the GPS can not only track vehicles but also provide directions to a destination for a vehicle.

EPC TAGS (electronic product code)

• Bar codes were developed to allow for quick data capture as packages move through the supply chain.

• They require some type of reader and contain static information.

• A new technology developed by Texas Instruments, called the “tag-it,” is a revolutionary way to identify packages and manage inventory.


• Called a “smart tag,’ this new technology rakes the place of a bar code and uses radio frequency to make it work.

• An advantage of the smart tag is the capability to update its information anywhere along the supply chain.


• The smart tag can be manufactured into shipping labels or other types of documentation following a shipment.

• This technology will allow shippers and carriers to manage inventories through distribution centers as well as break-bulk terminals.


• These electronic product code (EPC) tags work in conjunction with RFID to transmit information to computers.

• These tags carry significantly more data than even the new 14-digit bar codes and transmit their information via radio waves.

• They can provide real-time data on inventory visibility in the supply chain, from source to shelf.

• However, three issues must be resolved before their acceptance is universal:

1. First is the issue of cost. Because volumes are not large right now, the cost per tag is about 50 cents. To be realistic for universal use, their cost needs to come down to a fraction of a penny.


2. Second is the issue of standards, Global standards for EPC tags do not currently exist.

3.Finally is the issue of compatibility with existing software. These tags need to be compatible with ERP systems as well as with inventory, transportation, and warehousing software.

THE INTERNET EMERGES

• The three major uses of the Internet are for information resources, communications, and transactions.

• Companies developed Internet sites to provide potential customers with product and price information.

THE INTERNET EMERGES

• Many carriers have developed Internet sites to allow customers to track their shipments.

• Once on a carrier’s site, the customer enters a customer code and shipment identifier to find the status of a shipment.

Current Internet Uses:

1. Information resource• Companies are beginning to use Internet-

based systems to share demand and production forecasts.

• This concept, called collaborative planning, forecasting, and replenishment (CPFR).


2.Communications purposes• Some shippers and carriers use the Internet in

place of a broker. • Available shipments are posted on an Internet

site, and interested carriers can respond with a price quote for the move.

• A shipper can then either accept or reject the offer.


• If the offer is accepted, a confirmation message is generated and the transaction is completed.

• This concept is called a reverse auction.


3.To accomplish transactions• Finally, the use of the Internet for cash

transactions is growing. • Because of the increased security offered by

firms to protect credit card numbers and bank account numbers on the Internet, buyers and sellers can consummate sales through an Internet site, with cash flow occurring through a credit card or a bank.

Challenges with use of Internet in transportation transactions:

1. First is the issue of capacity. • Because no single entity owns the Internet,

capacity decisions are not the responsibility of a central organization.

• As usage on the Internet goes up, response times can go down.

• This is a major consideration for companies who have time-sensitive transmissions.

2. Second is the issue of security. • Although protection of confidential

information on the Internet has improved, no guarantee can be given that information transmitted will not be available to the public domain.

Future applications of the Internet:

1. Sales interface• Information such as service offerings, routing

guides, fleet availability, and pricing schedules would be easily accessible and maintained through the Internet.


2. Customer service utility.• Basic requests such as shipment status and

arrival times can be accessed through the Internet, allowing carriers to utilize human customer service personnel more effectively.

• As security improves and capacity increases, firms with no need for dedicated links with their customers could use the Internet to provide a viable alternative to EDI.


3. Load-matching services. • The firms serve the same purpose as a broker by

linking the carrier and the shipper. • One of the differences is that in some cases the

shipper can post their loads and respond to offers by carriers directly without the use of a “middleman.”

• Many of these firms charge a fee for their services and leave the negotiation of the transportation details to the shipper and carrier.

EMERGING: TRANSPORTATION REQUIREMENTS PLANNING

• Transportation requirements planning (TRP) systems allow shippers and carriers to share information regarding transportation movements and to improve the efficiency and effectiveness of freight flows.

• TRP systems can be stand-alone systems or they can be connected to enterprise resource planning (ERP) systems.

Documents

Chapter 11 Information Management and Technology