The first section of this article discusses how management information can influence the direction of a business. The section that follows describes how a specific logistics-related information technology affects both the company and the department operating it.
The Influence of Management Information
Management information is a significant influence on the direction of the business. Logistical processes are assisted by use of a management information system that provides data on the availability and location of items. Such a system can be improved if it can be designed to incorporate data from both the demand and the supply side. The systems I worked with did not feature this level of sophistication. However, a track/trace system did provide the following management capabilities:
- Location of items nationally and internationally.
- Real time updates on the progress of items in transit (inward, outward, and facility internal).
- Automated estimation of the time required to obtain, process, and despatch items - regardless of where an item is currently.
- Items could be requested at the push of a button
- All relevant processes (production, despatch, and receipt) and necessary documentation could be prepared instantaneously.
- Retail and business customers could receive real time updates on the location of their orders, any changes to plan, driver identity (good for security-sensitive businesses and high value orders), and estimated time of delivery.
The Impact of Real-Time Information
Impact on the company
Probably the key advantage provided by the track/trace information system is transparency and the market differentiation this offers in terms of service. In short, the company is able to market the transparency (constant visibility of its logistics processes, including trackability/traceability of items). This stimulates custom from businesses, especially businesses and customers to whom time and security are high priorities. Transparency enhances B2B relationships in particular, because managers see shared information as unifying and representative of trust. The buyer regards the supplying company no longer as a separate entity motivated by profit alone, but as a partner with mutual interests. If orders are completed correctly and the customer is satisfied with both product and service, the likelihood of the customer’s switching to another supplier diminishes. Loyalty and long-term cooperation also reduce the uncertainty that is intrinsic to the demand-supply dichotomy. A known client has known needs and predictable consumption rates, and for this reason can be served more effectively. Reputation is also generated by efficient order fulfilment. A company can achieve differentiation from its competitors by offering superior service.
All customers benefit from this system since they no longer have to call the company. Instead of calling, customers today are inclined to use the track/trace intranet, which they access via a webpage. Once they have accessed the intranet, customers are able to see all the relevant information available to the supplier. Customers can also receive updates on mobile devices if they wish. (Customers are still provided with a query telephone number but they can obtain from it no information that the intranet cannot offer. This is because the customer service person who receives the call has access only to the same track/trace system available to all.)
Impact on the department
The implementation of a real-time information track/trace system has had numerous effects on the warehousing and inventory section of the business. So far, all these effects have been positive.
- Despatch section personnel are far less frequently interrupted from their work to handle queries relating to delays. Ad hoc interruption of duties puts stress on scheduling. Persistent interruption can potentially undermine process efficiency, resulting in delays or mistakes. The majority of warehouse staff are not trained in customer service (whether those customers are internal or external is irrelevant) and high volumes of query phone calls place stress on personnel.
- When active RFID tags are eventually incorporated into the system, the degree of trackability/traceability will increase dramatically. Currently, the system operates using barcode labels, so the possibility for loss of items exists between scanning stages. Items are not yet truly real-time and location traceable. Estimations of an item’s location and delivery time are based on speed/time metrics, but prove generally reliable.
- Prior to the introduction of the current system, incidence of loss and location failure of inventory inside the warehouse was high (Fewer than 10% of losses occurred at transportation stages, for example). Delays, losses, and location failures were largely internal events. That is, they occurred inside the distribution centres/warehouses. Since the current system obviates the need for arduous amounts of paperwork (which was the most frequent cause of these failures), efficiency increases have been tangible. Such gains have reduced the need for safety stock and time and money spent on compensating dissatisfied customers. These savings are eventually invested in the distribution centre in the form of improved technologies and personnel training.
- As efficiencies improve, the distribution centre becomes capable of handling higher volumes, since long-term storage and waste is reduced. This achieves economies of scale that can be translated into product pricing, increasing the market competitiveness of the company’s products.
- The department’s role as a force of differentiation/competitiveness increases the significance of the department’s contribution to corporate strategy. This elevated profile means the department’s management is able to acquire improved resources and command a growing degree of strategic influence.