14

Technology: A Pervasive Factor in Logistics Fulfilment

After reading the chapter, the students should be able to understand:

• Role of technology in logistics
• Automatic identification technology (Bar Code and RFID)
• EDI standards, applications and benefits
• Automated material handling system
• Warehouse simulation, satellite tracking, ERP, DRP and AITS

Technology is a means to enhance business competitiveness and performance. It is an enabler to create wealth, which depends on the capability of an organization to adopt technology through the change process and deploy it for integrating business process. Technology has become the key factor in defining the competitive advantage in today’s business world. It is playing a major role in the success of the supply chain by enhancing the overall effectiveness and efficiency of the logistics system.

“It has become appallingly obvious that our technology has exceeded our humanity”

—Albert Einstein

14.1 ROLE OF TECHNOLOGY

Technology is playing a major role in the operational effectiveness and efficiency of various functional areas of the management. Information technology helps in real-time information processing and analysis. Due to robotics and automation technologies repetitive operations can be done with great speed and accuracy. On the communication front, the ease and speed in connectivity across the globe has changed the way transactions are done. As a result, the accuracy, reliability and speed in material and information flow in the supply chain has increased manifold leading to productivity, effectiveness and efficiency in logistics operations today. Many new technologies in logistics are in use in the developed countries, while in India the adoption process is a bit slower. However, owing to liberalization of the Indian economy, competitive pressure is building up and the only option for competitiveness is to go in for technology-enabled operations. The latest technologies being used in logistics are in the areas of:

• Automatic identification
• Communication
• Material handling
• Facility design

14.2 AUTOMATIC IDENTIFICATION TECHNOLOGY

Automatic Identification (Auto-ID) is the term used to describe the direct entry of data or information in the computer system, programmable logic controllers or any microprocessor-controlled device, without operating a keyboard. Auto-ID includes such technologies as bar coding, radio frequency identification (RFID), data communication, magnetic strip, and voice recognition. The usage of these technologies is based on the applications and the benefits derived. Auto-ID can be used for tracking railcars, a carton moving on the conveyor at a speed of100 feet per minute, or a truck carrying goods on time-bound dispatches to the customers. The benefits of the Auto-ID are many, such as:

Accuracy. Error-free data entry is possible, as there is no human involvement.

Cost Saving. Reliable and correct information is made available to reduce the risk element in decision making on resource allocations. The technology also facilitates economies of scale for voluminous, repetitive operations.

• Speed. Voluminous data can be stored, retrieved and transferred within a fraction of a second.
• Convenience. These technologies are user-friendly and provide ease in connectivity to a wider range of processing and controlling equipment.

Some of the popular Auto-ID technologies that are commonly used in logistics are given below.

Bar Coding

Bar codes are used for identification, handling, retrieval and storage of goods in warehouses and stores. It is the most popular identification technology in many applications. Individual inventory items, cartons or unitized packages are affixed with a bar code that can be read by a bar code scanner attached to an online computer system. Bar code is assigned to a particular inventory item to show its identity during storage, retrieval and dispatch. Bar codes are further used for communication of dispatched items for the preparation of bills by accounts departments and making periodic reports on inventory status and sales. The bar codes facilitate the tracking of specific items in the warehouse during inventory audit or material pick up. They also help in tracking a consignment during transportation/inspection at the customer end. The information that may be required generally relates to the country code, manufacturer’s name, product details, date of manufacture, material content, and so on. These details are required at the user’s end for inventory management and are in machine-readable codes in the form of bars and spaces.

Bar codes are seen on all types of goods today. It is a sequence of parallel lines of different thickness with spaces in between. These bars are nothing but items of information in codified form, which can be decodified or read with the help of a scanner. In other words, bar code is a type of Morse code to put information of an item in code language. The bar code facilitates data accuracy, real-time data availability, uniformity and easy usage, which are recognized universally.

The history of the bar code can be traced back to its first application in the U.S. supermarkets in 1952. This system was developed for automatic capture of product information at billing counters in supermarkets. In 1960, it was used in food stores in the United States on a trial basis. However, due to the advancement in electronics and the formulation of the universal product coding (UPC) system, bar coding gained widespread acceptance in all supermarkets in the United States by 1974. Its usage in the manufacturing and service industries rapidly spread from 1980 onwards. In India, bar codes are used for limited applications by the limited companies. The pioneers in their use in India are Bajaj Auto Ltd. and Maruti Udyog Ltd., both of whom are using bar coding at their manufacturing plants for the past many years (Figure 14.1).

The bar codes have found applications in such diverse areas as the automobile industry, logistics, retail chains, electronics, defence, pharmaceutical industry, banking, consumer goods, libraries, airlines, passports, and so on. Today, the bar code is invariably used in practically all industries. Bar codes increase productivity in three ways: (1) speed, (2) accuracy and (3) reliability. Besides, they offer the following advantages:

• Facilitate easy identification of inventory items during storage, retrieval, pickup, packing, dispatch, transit and inspection
• Reduce paper work and processing time leading to cost reduction
• Eliminate human error
• Increase the productivity of the warehouse
• Facilitate system automation

The bar codes are described by the symbologies used. Symbology means the pattern of lines and spaces used within the bar code to represent a number or an alphabet. There are 260 symbologies available for different applications for product recognition depending on the industry, business sector and products. Several factors play a role in the selection of the bar code suitable for your operations. Most industries have defined their bar code symbologies based on the following factors:

• Ease in usage of symbology in a particular product-industry
• Nature and type of data to be encoded
• Information fields to be encoded
• Feasibility of universal acceptability
• Location and size of the code on the product/item

The various bar code symbologies differ both in the way they represent data and in the type of data they can encode. Some symbologies can encode numbers, while others both numbers and letters, and some can encode letters, numbers as well as characters, that is, ASCII codes. The latest symbologies include multiple language options. Bar code symbologies can be divided into three broad categories:

1. Linear. Linear symbologies consist of a single row of bars and can be read by a single-line scanner.
2. Stacked. A stacked symbology consists of several rows of bars and spaces and can be read by a multiple ID scanner with moving laser beam.
3. Matrix. These symbologies are in a polygonal array of data cells and are read from a 2D image scanner. Bar codes are also one-, two- or three-dimensional types depending on the symbology and its application. Various popular symbologies in use with their areas of application are indicated in Table 14.1.

 

 

The methodology in deciding the bar code is to study the requirements of the customer. The cost factor plays a major role in deciding what symbology to use. The typical application areas of pre-printed bar code labels are high-volume industries such as retail chains, FMCG, automobile spare parts and consumer durables industries. The second type of bar code label is prepared on demand in accordance with the needs. This is invariably used in order processing wherein a bar code is assigned to a particular order received from the customer. Orders from different customers are unique in variety and volume of the product items. During the entire processing, the order is recognized with the bar code assigned to it. On demand bar codes are flexible but the cost is high.

Scanners are used for automatic identification of the bar code. The pattern of bars and spaces reflects the light pattern, which is converted into electronic signals to be decoded by the computer with reference to the memory file in the computer system. The choice of scanner is not dependent on the type of symbology in use. Two types of scanners are in use:

1. Contact scanner
2. Non-contact scanner

Scanning devices operate at different distances (called depth of field) from bar code labels. Scanners with zero depth of field are called contact scanners. Also available are remote scanners with depth of field of several feet. The scanners are used in retail stores at the billing counters. Bills will be prepared and inventory updates will be done automatically for the items identified. This allows precise tracking of stock keeping unit (SKU) sold and facilitates the quick replenishment of the same for communication to the suppliers. Thus, online tracking and replenishment of any number of SKUs, without error, is facilitated.

In stores where the volume of inventory handled is low, the contact scanner is in use. In libraries, for example, when books are issued and returned, the contact scanner is used for identification of the book title, author, subject, date of issue, and so on. For handling large volumes of inventory, the non-contact scanners are used. However, the condition here is that the stock/consignment has to pass through a fixed point on the conveyor. Say, if 1,00,000 packs are to be handled per day, the non-contact scanner will be ideal to sort or consolidate the various inventory items for packing and dispatching region-wise or customerwise.

EDI and bar coding can be linked together for improving the effectiveness of the system. For example, in the case of an electronic order from the customer, the supplier can assign a bar code for that order, which will include the product, quantity, price, delivery, and so on. This information on bar code label can be scanned at the time of dispatch to generate such documents as the packing list, invoice, bill of lading, excise gate pass and advanced shipping instruction to buyer.

Invariably, the bar code technology is used in procurement, processing and distribution operations in all industries. For system productivity improvement, bar code technology is widely used in modern warehousing and distribution operations in all industries. Today, the automobile industry and retail chains, where a wider variety of items with large volumes are handled under time constraints, are widely using the bar code technology.

When parts and components are bought from suppliers, they are assigned bar codes, which contain information on the item’s name, batch number, date of manufacture, order no., serial no. and so on. This information in bar code form helps in identifying and tracking the part/item during its processing and further when it is in transit, as a finished product, to the customer. When goods enter through the conveyor in the warehouse, they are scanned either by a hand-held or non-contact scanner fixed alongside the conveyor. The information decoded by the scanner is immediately logged in the central computer. This helps in real-time update of the inventory records. Automatic sorting of the items on the conveyor can also be done for directing them to the assigned storage place in the warehouse or to the packing area for further dispatch to customers located in different geographical areas.

During order processing, the warehouse operator can prepare the order pickup slip, confirming the location of the items to be picked up for packing to the forklift operator. The bar code will help in identifying the items based on their date of entry into the warehouse or store. This will ease material storage, retrieval and dispatch in first-in-and-first-out (FIFO) inventory management system.

In the case of box containers or pallets with bar code labels, it becomes easier to identify the contents and check packed quantities, without breaking open the carton.

In logistics, bar coding makes identification of a particular item/part meant for a particular customer easier. It is very helpful for the export units where detailed information on items has to be maintained for the excise department, customs, sales tax department and export inspecting agencies. Bar coding eliminates a massive amount of paperwork and can avoid procedural delays in clearing the consignments. During the production process, the identification of in-process and finished items becomes easer because of bar coding. The various batches at different stages of manufacture can be easily tracked.

Radio Frequency Identification

RFID is currently one of the preferred forms of auto-identification of goods in the manufacturing, retailing and logistics industries. Such identification relies on storing and remotely retrieving data using a device called an RFID tag or transponder. The tag is an object that can be applied to or incorporated into a product, animal, or person for the purpose of identification using radio waves.

Most Radio Frequency Identification (RFID) tags contain at least two parts. One part consists of an integrated circuit for sorting and processing information, modulating and demodulating RF signals, and other specialized functions. The second one is an antenna for receiving and transmitting the signal. These are being used in passports—the first RFID passport was issued in Malaysia in 1998. It is also used in transportation payments. The payment card can be recharged with cash at an add-value machine or in the shop and can be read several centimetres from the reader. Delhi Metro uses this technology. High-frequency RFID tags are used on books in libraries and bookstores for jewellery or pallet tracking, building access control, airline baggage tracking and apparel and pharma items tracking.

Memory Buttons

These are used to supplant the common means such as bar coding to identify the goods. Memory buttons contain an encapsulated microprocessor. Several pages of information can be stored on a button that the reader can physically touch to extract the information. The buttons are suitable as a portable database for product identification in a harsh environment. These are also suitable for identification of storage retrieval and movement of large-size unit load containing a large number of items. The information regarding the contents of the package is stored in the microprocessor encapsulated in the button that is attached to the package. The information can be read with an electronic device, without touching the package. During order pickup, the forkliftman can easily identify the package with the reading device that is connected to the centralized computer. In the case of overseas dispatches, the memory buttons are keyed in with information required by various agencies, such as customs, inspection, shipping and forwarding, which facilitates speedy clearing of the consignment.

Radio Frequency Tags (RFT)

RFTs are used as an alternative to bar codes for communicating inventory data to the reader via radio waves. The reader is connected to the central computer. RFTs are pieces of silicon chip to store data in the microcircuit. They are programmable and have an erasable memory. Data is stored in coded form and communicated to the reader through radio waves. RFTs are available in “passive” or “active” form. The passive tags depend on energy from the reader to initiate communication. The active tags can directly communicate data to the reader at the centralized computer. Data are loaded in encrypted form on “read only” tags, which can be read but not altered. However, data on the read-write version can be erased or modified. The latter are priced higher than the read only tags. The reading range of these tags varies from 1 to 15 feet.

RFTs consist of two key components, namely, tags that act as data carrier and reader or antenna, which transfers information to and from the tag. The basic principle of the tag is that the antenna emits radio signals. RFTs are very useful accompaniments to truck shipments. The tag contains information on consigner, consignee, inventory items, quantity and value. RFTs can be helpful for quick clearances at octroi or customs posts. They do away with a lot of paperwork. In the warehouse bar codes can be applied to individual inventory items, while the RFTs can be used on pallets, containers, and so on. RFTs are more commonly mounted on the forklift or pallet truck or containers. They allow the staff to directly communicate with the warehouse computer within the effective communication range.

Voice Interactive System

Voice interactive system technology was developed for space travel application in the 1980s. However, the usage has now extended to various other fields such as legal, medical, manufacturing, warehousing, and so on. In warehouse application, it allows the worker or operator to communicate the data to the central computer without using the keyboard. It keeps the warehouse worker’s hands free to pick up, pack and inspect the goods. The forklift operator can read the part number, while driving the forklift or picking the inventory and move from one pallet to another. Due to online data transmission to the central computer real-time data updating is now possible.

The voice interactive system consists of a voice synthesizer and a headset. The operator creates a voice template for each word he utters during the dialogue with the computer. The system stores this template in the memory for use in future. Usage of this technology in warehouses will allow low-skilled workers to interact with computers, which will increase the speed of material picking and receiving and thereby raise warehouse productivity. As the speed of voice processing and memory capability increases, accuracy of spoken word conversion and speed of transmission of electronic signal will increase, enabling real-time data storage, processing and transmission required for productivity in logistics operations.

14.3 COMMUNICATION TECHNOLOGY

Communication, either oral or written, has a very crucial role in business success. Here are a few emerging communication technologies which, through speed and accuracy in communication, are enablers to superior customer service leading to competitiveness.

Electronic Data Interchange

EDI is a new emerging technology used for transfer of business documents from one computer to another. Traditionally, business documents such as invoices, challans, cheques and drawings are sent through mail, fax or courier. However, with EDI these documents are transferred electronically from one organization to another. In short, EDI is a drive toward paperless document transfer or transactions. EDI will emerge in strategic areas such as the provision of better levels of customer service and improved marketing competitiveness. The benefits of EDI include the following (see Table 14.2).

EDI is a computer-to-computer communication using the same language. This cannot be accomplished unless the two computers have the same communication standard. The standard includes:

• Matching of data transmission speed
• Data coding and decoding system
• Matching of hardware of the computers

 

Table 14.2 EDI Benefits

Strategic	Operational	Opportunity
• Faster transactions—real-time document transfer	• Reduction in business transaction costs due to paperless operations	• Enhanced image
• Just-in-time manufacturing techniques can be adopted	• Improved cash flow	• Competitive edge
• Improvements in business efficiency	• Error reduction	• I mproved corporate trading relationships
• High-level responsiveness in highly competitive markets	• Security in transactions
	• Improvement in system productivity

 

The different industries have developed their own communication and message standards for use. However, for large-scale usage of EDI in business, a uniform standard has to be developed. EDI operates through four layers of architecture as shown in Table 14.3.

 

Table 14.3 EDI Architecture

EDI layers	Description	Illustrations
Semantic	Business application-level service	Applications in the areas of purchase, inventory, distribution, sales and finance
Standard	Standard business forms	ANSI-X12, TRADACOM,EDI-FACT
Transmission	Exchange of forms between two companies through electronic network	email, World Wild Web (www)
Physical	Network infrastructure	Internet, Information super highway (I-way)

A semantic layer is specific to the company and the software it is using. A company may use the formats it has developed for inviting quotations, preparing purchase orders, preparing invoices, making payment advices. The software developed for the purpose will be specific for those buyer-seller firms.

In the universal standard layer, company-specific forms are translated to a universal or generic form as developed by ANSI (American National Standards Institute). This is called X.12 standards. Another EDI format developed by United Nations Economic Commission for Europe is EDIFACT (see Figure 14.2). TRADACOM is yet another standardized format.

The transmission layer transmits business documents from one company to another, either electronically or non-electronically (fax, post mail). The difference between the e-mail and EDI messages is that the e-mail is composed and interpreted manually, while the EDI message is composed and interpreted using same software. Email data are not structured, while EDI data or messages are structured. An EDI message has legal standing in the court of law. The EDI system for logistics application is described in Figure 14.3.

Usage of EDI in the area of inbound logistics between the manufacturer and supplier will ensure substantial saving on transaction cost for both the parties. Similarly, using EDI between the manufacturer and the customer will ensure reduction in order cycle time and inventory, which will help the customer to enhance his competitiveness. Thus, the sharing of the benefits of EDI by both seller and buyer will result in creation of a partnership spirit leading to high switching cost for the customer and creating barriers for competitors. Today, EDI is widely used in banks, marketing, customs, logistics and finance companies, as well as in international trade in the developed countries. Table 14.3 shows the different applications in various functional areas of management.

 

Table 14.3 EDI applications in management functional areas

Document number	Document name	Description
SALES
832	Price sales catalogue	Communicates information about the price of goods or services
840	Request for quotation	Solicits potential supplies of goods or services. Provides price, delivery terms and other information
843	Response to request for quotation	Communicates to potential buyers the price, delivery terms, and other information in response to request for quotation
864	Text	General-purpose transaction. Can be used to communicate promotional messages
FINANCE
810	Invoice	Used for the billing of goods and services
820	Payment order/remittance advice	To provide information to a seller about the application of a specific payment by a buyer
822	Customer account analysis	Primarily used by banks to transmit account information to its corporate customers
823	Lockbox	Used to transmit lockbox data regarding incoming payments from a bank to its corporate customers
INVENTORY
830	Planning schedule with release capability	Communication from a customer to a supplier—a forecast of materials and labour to be used. It can also authorize the release of material to begin the manufactory process.
844	Product transfer and Account adjustment	Communicates credit/debit information regarding authorized transfer of goods
846	Inventory inquiry/advice	Communicates inventory information to a prospective purchaser, to representative agent, or from one location to another
849	Response to project trader account adjustment	Communicate a response to a company that is requesting an account adjustment
DISTRIBUTION
856	Ship notice/manifest	Communicates the contents of a shipment, the carrier and the configuration of the shipment
858	Shipment information	Communicates detailed shipping information such as bill-of-lading data
862	Shipping schedule	Used by the customer to communicate a specific shipping schedule to a supplier
PURCHASE
850	Purchase	Communicates a standard purchase order document to a supplier
855	Purchase order acknowledgement	Acknowledges that a supplier has received a purchase order or a group of purchase orders
860	Purchase order change	Communicates a change in the original purchase order to a supplier
865	Purchase order change acknowledgement	Acknowledges that a supplier has received a change to the original purchase orders
869	Order status inquiry	Requests information regarding the status of an order from a supplier
870	Order status report	Communicates to the purchaser the status of an order in response to the order status

 

EDI usage in India is very limited. Logistics companies of foreign origin that offer logistics services to the multinational companies in India use EDI. Adoption of the system leads to savings by way of inventory control, reduction in clerical activities and processing errors, reduction in transaction cost, and so on. Wal-mart started using EDI in their retail chains and have achieved a reduction in the order cycle time from 21 days to 9 days, resulting in a 17 per cent reduction in inventory. In India Dynamic Logistics (a logistics service provider) use the EDI system for their outbound logistics operation for auto spare parts of Telco. As a result, the order cycle time has reduced by 50 per cent and inventory to 15/18 days. The Indian customs department is using EDI on a limited scale for export/import documentation transfer.

E-Tracking

The track and trace system is commonly used by couriers for air and sea cargo. But in the trucking sector in India, its usage is miniscule. Fleet owners often experience a problem when vehicles are not returned to the depot on the stipulated time. It is often difficult for owners to trace a loaded truck en route. They are worried about en route delay, accident, highway robbery, the truck’s detention by traffic police, and so on. Tracking vehicle is a crucial factor for providing effective transportation service. In the JIT inventory system, tracking is done online so that the options can be immediately exercised in case of any unforeseen eventuality.

Effective tracking ensures two things: (i) it leads to higher productivity of the vehicle, and (ii) the timely delivery of the cargo.

There are around 2.5 million trucks plying on Indian roads, transporting goods from the place of production to the place of consumption. Because of the poor road infrastructure in India, about 10 per cent of the trucks hit a snag en route. Of the total trucks registered with the transportation authority, 85 per cent fall in the category of single-vehicle outfit. The next category comprises of small fleet owners having not more than 10 vehicles; leaving only about 5 per cent large fleet owners. Normally, Indian trucks cover a distance of 250–300 kilometres per day as against 550–600 kilometres per day by their counterparts in the developed countries.

The most common tracking method used by the large fleet owners is to make the driver of the vehicle telephonically call their office at regular intervals. This is a costly and unreliable method, if updates on goods whereabouts are to be conveyed to the consigner and consignee. The system costs about INR 7000 per vehicle per month.

Very Small Aperture Terminal (VSAT) Communication

VSAT is a two-way satellite ground station with a small dish antenna. It represents a cost-effective solution for those who want an independent communication network to connect a large number of geographically dispersed sites, especially where any other connectivity options are economically unviable. The system offers value-added satellite-based services capable of supporting the Internet, data, local area network (LAN), voice and fax communications.

Satellite communication channels are playing a major role in real-time data collection and its exchange, which is vital for customer service. To trace and track a goods carrier, a dish antenna is fixed on the vehicle. This allows for communication between the driver, consigner and consignee. The real-time interaction helps obtain up to date information on the location of the truck and the delivery position. In the United States, Wal-Mart has been using this system for quite some time to control inventory movement across its warehouse hubs and retail stores connected through electronic network. The real-time information helps in inventory replenishment, knowing the sales pattern in various stores and planning future procurement activities. In India too, a few transport companies such as TCI and Patel Roadways use V-SAT for their fleet movement.

Geographical Positioning System (GPS)

A more accurate system in use in the developed countries is based on the global positioning system or geographical positioning system (GPS), wherein a vehicle can be traced accurately with the help of geostationary satellites.

There are twelve stationary satellites in three layers (four in each) orbiting the earth. These will determine the latitude and longitude to an accuracy of one metre. Mountaineers are already using these devices. Once the position of the vehicle is known, it can be transmitted to other centres, viz. the consigner or consignee. The transmission network will be a mobile telephone or Internet. In GPS, a voice-over facility for the driver to speak and hear instruction, and an LCD (Liquid Crystal Display), with keyboard (to receive and transmit text messages)are available. In India, such systems are used at limited places. This system costs about INR 25,000 per truck and the operating cost is around INR 1000–1200 per month. The other system in use is the dual-mode wireless vehicle system, but its usage is restricted to small geographical areas.

Geographical Information System (GIS)

GIS consists of software tools for the visualization of spatial features and databases relating to geography. Data relating to the specific location of an entity on the earth are stored in databases. GIS then integrates the different types of data in the databases to create a detailed, clear visualization of data relating to that entity. This could be in terms of physical maps of the surface of earth, layout of the inner surface of the earth or a layout of streets or roads. Data can be collected and used through different tools such as demographics, market research, physical measurements, aerial photography, satellite imagery, and so on. The data collected can be fed into a GIS and then visualized according to the needs of the user. GIS integrated with GPS is used in logistical operations for tracking and tracing consignment locations on a road or street of a particular city.

Highway Automation System

For monitoring a two-way communication, highway automation systems are in use in some parts of India. The system has proved very effective for the small fleet owners who do not have any branch offices on a route. The system is operated through a chain of “kiosks” set up on highways, which records movement of passing trucks. The trucks are fitted with an electronic monitoring device (called vehicle set), each having a unique code. A kiosk picks up the radio frequency signal from a passing truck and relays the code number (of the truck) to all the networked kiosks across the country. Information on the movement of particular vehicles can be accessed at any of the kiosks across the country.

Web-Based Tracking

Logistics service providers operating in India are extending the web-based consignment-tracking service to their clients. Through Internet, they provide an option on their website to enter the consignment number and ask for the status. Further, logistics service providers such as AFL, FedEx and Blue Dart provide status reports of consignments to their clients. Clients, at their end, can download the reports through the Internet. This information helps in planning the dispatch schedule and follow-up action with clients for payment collections.

Expert System

This information-based technology, also called “artificial intelligent system” is widely used in logistics for inventory control, transport selection, warehousing decision, and so on. The system uses the expert’s knowledge, rules, policies, procedures and checklist as guidelines for those making decisions under the given operating conditions. It helps in uniformity in decision while avoiding errors that creep in due to the individual factor. The system works in the form of a software programme that puts questions to the operator asking him to feed the required information for making a decision. The software then compares the situation with the one that is inbuilt and gives the solution. Expert system aims at making the computer imitate human reasoning. The system consists of three components:

• Information base or data warehouse
• Logic software
• User interface

For example, a logistics expert, based on his/her experience, develops a guideline for the selection of material-handling equipments for the movement of specific products under varying load conditions in a given warehouse layout. This is fed into the computer. Using the software programme, it now becomes easier for the layman to decide on the configuration and features of the required equipment, which will ensure maximum productivity and increase the firm’s return on assets. The expert system can be used in a number of situations such as transporter selection, warehouse location, and so on.

14.4 AUTOMATED MATERIAL HANDLING

The warehouse is the major area of material handling in logistics and also a prime consumer of labour. The labour force is required for loading, unloading, storing, picking and packing of materials. This is a major cost component in the warehouse expenses. Hence, there is scope for automation in material handling, which reduces the intensity of labour and increases labour productivity in the system. In large warehouses with high throughputs, manual material handling will increase the order performance cycle time and ultimately lead to customer dissatisfaction and loss of competitiveness in the market. In these circumstances, automation is a must. Another area for automation is where handling of hazardous material or handling of material in a hostile atmosphere where there is a great risk to human life. The following systems are in use for such applications:

Automated Guided Vehicle System (AGVS)

This system makes use of the magnetic or optical guidance system. The magnetic system uses an energized wire laid on the warehouse floor for guiding material-handling equipment. In the case of the optical system, the light beam focusing on the guide path propells and guides the equipment. In AGVS the role of operator is eliminated. The new-generation AGVS are guided by video and do not follow the fixed path. They are smaller in size and flexible in operations.

The AGVS can perform all material-handling operations without any human involvement. The robot coupled with AGVS is used to pick up precisely the material required for a customer order. The robot is a human-like machine that can perform a variety of tasks. The robots can be programmed by a built-in microprocessor for performing many different tasks in the warehouse. The material-handling complexity in terms of load and variety depends on the capability to incorporate artificial intelligence in the system. In high-rise or multi-storey warehouses, the automated high-rise storage and retrieval systems (ASRS) are in use because of the greater attention to automated unit load handling in high-rise warehouses. This equipment operates at a speed range of 300–400 ft/min horizontally and 100 ft/min vertically.

Information Directed System

This system keeps all equipments in the warehouse under the control of a centralized computer. The required movements are fed into the computer for analysis and it assigns the jobs to the individual equipments, considering their maximum loading capacity and handling speed. The communication between the equipment and the computer is through radio frequency. These systems can perform a variety of complex material-handling jobs such as multiple order picking or multiple vehicles loading by the same material-handling equipment. This system ensures a substantial enhancement in warehouse productivity and flexibility in handling a variety ofjobs. However, this concept is a recent development and is still in the testing stage.

14.5 WAREHOUSE SIMULATION

The decision on warehouse design and material-handling equipment to be installed are strategic in nature. If an organization is committing resources to build a warehouse of a specific design with automatic material-handling facility, it is necessary to define the most suitable design configuration. With the warehouse simulation model, the different scenarios can be tested to define the most suitable configuration. The interactions of different material-handling systems and subsystems can be visually seen, using computer graphics to produce a continuous moving representation of the material flow. The simulation models will help in finding out the reason for bottlenecks and material hold-ups in the system. The use of simulation technology is justified in view of the substantial investments involved in warehouse automation.

14.6 INFORMATION TECHNOLOGY

Many corporations are looking to improve their investment returns by finding new ways to cut cost and increase profitability. With IT coming out with new products every now and then, corporations are finding it easier to implement programmes to fulfil their objectives. The two most recent IT tools that are supporting logistics are ERP and DRP.

Enterprise Resource Planning (ERP)

ERP is an integrated software encompassing all business operations meant to bring about a significant cultural change in the way people work. ERP is a business solution. Corporations install ERP to address certain business issues that have to be identified. ERP is a very expensive, large and complex exercise requiring a sufficient amount of planning. One of the crucial areas where ERPs are in vogue is the supply chain management (SCM). SCM solutions always focus on optimizing order fulfilment and movement of goods through the logistic system of the enterprise. In India, the major ERPs in use are System Application Product (SAP), BaaN, Oracle, J.B. Edward and Peoplesoft which have been developed by foreign companies and are suitable for the business environment prevailing in those countries. However, some Indian companies such as Ramco Systems have developed ERP to suit the Indian business environment.

ERP helps in optimization of the SCM process to develop competitiveness by ensuring the following advantages:

• Quicker response to customer requirement
• Reduction in inventory costs
• Improvement in service levels—internal and external
• Improvement in inventory turnover rate
• Reduction in logistical cost

Indian companies such as Hindustan Lever, Colgate and Nestle have implemented ERP in their supply chain systems, which has helped them to maintain a minimum inventory of raw materials and finished goods, resulting in considerable cost reduction.

Distribution Requirement Planning (DRP)

It is another IT tool and also a sophisticated planning approach that takes into consideration the multiple distribution stages and their characteristics in the distribution system. DRP is the logical extension of manufacturing requirement planning (MRP). However, DRP is guided by customer demand, while MRP is controlled by the production schedule. The finished goods inventory requirement is determined by DRP, considering the variables at multiple distribution centres located in different markets. DRP helps in consolidating shipments to multiple locations spread over a vast geographical area, and thus helps in reducing freight cost. It also helps reduce the inventory level, resulting in the reduction of warehouse space requirement. This system improves inventory visibility in the logistic supply chain.

Automated Inventory Tracking System (AITS)

This IT tool is quite popular in retail chains in the United States. AITS is designed to control inventory flow in the supply chain and involves the use of computerized material planning and the EDI system. The system gives real-time status of the inventory levels of all items at retail stores, feeder and mother warehouses. For replenishment of items sold, information is conveyed directly to the supplier after an item’s inventory level is checked at distribution and mother warehouses. The supplier initiates action to replenish the inventory item, depending on the item’s offtake rate at the retail stores, its safety stock, inventory in transit, and so on. The U.S. retail chain giant, Wal-Mart, controls inventory investments throughout its entire supply chain with the help of AITS.

SUMMARY

The emerging new technologies are creating strategic opportunities for the progressive organizations to build competitive advantage in various functional areas of the management. For building competitiveness, cost reduction and customer satisfaction are the two polemic objectives today’s organizations have to achieve. The emerging technologies will help them achieve these goals. However, the degree of success depends on the selection of the right technology for the application; availability of proper organizational infrastructure; and the culture and management philosophy and policies.

In logistics, information, communication and automation technologies have substantially increased the speed of identification, data gathering, processing, analysis and transmission, with high levels of accuracy and reliability. Automatic identification technologies such as bar coding, RFID and voice interactive system have increased productivity, effectiveness and efficiency in logistic operations.

EDI has totally eliminated paperwork and facilitated real-time transmission of business documents, resulting in a tremendous reduction in transaction cost, performance cycle, delivery time and payment realization.

Tracking of goods during transit has become easier with V-Sat, GPS and HAS. The installation of these systems by logistics service providers has enhanced the reliability factor in their service offerings. By knowing the whereabouts of the goods, the consignee can immediately switch over to other options, depending on the expected delivery times of the inbound consignment rather than groping in the dark.

Automation technology in material handling enhances the productivity level of the warehousing system and creates the opportunity for economies of scale. For the strategic decision on automated warehouse, the use of warehouse simulation models to test different material movement scenarios is quite common in the developed countries. The simulation models assist in diagnosing the points of material hold-ups in the automated material flow system and subsystems and help to configure the equipments to remove the problems. IT is playing a vital role in bringing out new tools to help enterprises to re-engineer their business process in order to make it more efficient and effective. ERP and DRP are the two recent IT tools being used by corporations to create opportunities to develop the competitive advantage.

REVIEW QUESTIONS

1. Review the various technologies used in logistics in general for an efficient and effective supply chain operation.
2. As a consultant, which technologies will you recommend for a retail chain having a network of 100 stores with four warehouse hubs and 10 satellite distribution centres across the country.
3. Discuss the various automatic identification systems used in logistics.
4. How does bar coding help in enhancing the efficiency and effectiveness of the logistic system?
5. What is EDI? Explain how it helps in reducing transaction cost and time.
6. Discuss the various systems used for tracking a consignment, along with their relative merits and demerits.
7. “Information technology is a major source of improved productivity and competitiveness in logistics.” Discuss.
8. Usage of new technologies will help in effective asset utilization in the logistics supply chain. Explain.

INTERNET EXERCISES

1. In the technology-enabled logistics supply chain, the role of RFID is becoming more crucial. For more information, read “RFID-Enabled Logistics Asset Management” at website http://www.aberdeen.com/summary/report/other/rfid lam.asp
2. To learn how technology supports logistics on enhancing operational efficiency and cost effectiveness, log on to http://www.scdigest.com

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