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E-ENABLED LOGISTICS MANAGEMENT AND TRACKING SYSTEMS
In the present era of cut thought competition there is a price war amongst the manufacturers in various industries. Therefore appropriate inventory management is the most hot area. It extends a great deal of help if the supplies are received in the right time. It helps the buyers in maintaining inventories at just the right level so that they do not run out inventory or order too much of it. It results into savings due to reduce stock requirements. The application of Internet technology has propelled the SCM concept to a new dimension. Originating as a management method to optimize internal costs and productivities, SCM has evolved through the application of e-business technologies into a powerful strategic function capable of engendering radically new customer value propositions through the architecting of external, Internet enabled collaborative channel partnerships. The emerging strategic capabilities of SCM and the empowering technologies to be found in the Internet provide the concept of logistics. These days carrier‘s use of Internet based technologies in their operations is increasing. As organizations realizethe benefits of using the Internet for various business processes, they are demanding greater visibility and flexibility in their logistics operations. Carriers are working to turn that demand to their advantage, leveraging the Itnernet to reduce overhead, increase integration with partners and enhance customer service in a highly competitive logistics industry. With the development of RFID and other related technologies, the electronic enabled supply chain will become part of every organization. A supplier‘s/manufacturer‘s logistics system directly affects the middlement‘s ability to control costs and services to end users/customers. If a manufacturer/supplier provides erratic delivery service to distributor‘s manufacture‘s representatives, they are forced to carry higher inventory in order to provide a satisfactory level of product availability to end users. The inefficient logistics service results in increasing costs i.e. larger inventories for the distributors. This is also likely to create stockouts of the supplier‘s products at the distributor level. Neither result is beneficial, because
distributor loyalty and marketing efforts will surely suffer and secondly, end users will eventually change suppliers.
LOGISTICS MANAGEMENT Logistics management involves the integration of transportation, inventory, facilities, and communications to provide a level of logistics service desired by customers and middlemen at the lowest possible cost. A framework for selecting the optimum logistics system has been portrayed in Figure 5.1 below.
Figure 5. Framework for Selecting the Optimum Logistic System
Desired/ Required service levels
According to Kotler, ―Physical distribution involves planning,
implementing and controlling the physical flows of materials and final goods
from points of use to meet customer requirements at a profit‖. 2
According to perreault and McCarthy, ―Physical distribution concept the requires that transporting, storing and product handling activities of a business and a whole channel system should be co-ordinated as one system that seeks to minimize the cost of distribution for a given service level‖. 3 From the various definitions, it can be said that physical distribution
relates to the physical flow of goods from the manufacturers to the consumers and also between the producers to the marketing middlemen. In the present day industrial set up there is the need for an efficient logistics system, which should enable quick deliveries and also be capable of easy tracing of inventory.
- Saxena Rajan, ―Marketing Management‖, Tata McGraw Hill Publishing Company Ltd., New Delhi, 2002, p.413.
- Kotler Philip, ―Marketing Management – Analysis, Planning, Implementation and Control‖, Prentice Hall of India, New Delhi, 1994, p.585.
- Perreault William D. and McCarthy Jerome E., ―Basic Marketing‖, Tata McGraw Hill Publishing Company Ltd., New Delhi, 2005, p.323.
According to Taff, ―The main activity centers of physical distribution are transportation, inventory warehousing, unitization and order processing‖. 4 According to Agrawal, ―Physical distribution function refers to the movement of finished goods from the last point of production to consumers or end users. In other words, this function of logistics facilitates marketing and sales performance of the enterprise by means of timely and economical product availability‖. 5 Thus the various physical distribution considerations are important in the
design of new channels of distribution and in the modification of existing systems because channel arrangements become physical distribution operating parameters. Importance of Physical Distribution Management
Physical distribution provides place-utility and time-utility to a product. In other words, it is physical distribution that makes the product available at the right place and at the right time, thereby maximizing the company‘s chance to sell the product and strengthening its competitive position. Physical Distribution Costs
The costs of physical distribution rank third in the total cost of goods and are exceeded only by costs of raw materials and labour. Economies achieved in physical distribution of goods will go a long way in reducing the total logistics costs.
According to Ramaswamy and Namakumari, ―Physical distribution is a fertile area for cost savings. Over the years, in most businesses, physical distribution costs have grown into a sizable chunk of the total costs and now
- Taff Charley C., ―Management of Physical Distribution and Transportation‖, Richard D. Irwin Homewood, 1972, pp.3-20.
- Agrawal, D.K., ―Logistics and Supply Chain Management‖, Macmillan India Ltd., New Delhi, 2003, p.36.
ranks second among all cost elements, next only to material costs. And
surprisingly, it has remained one of the neglected areas of cost control‖. 6
Till recently, cost reduction has been being adopted in the production and the marketing functions. Now, it is being adopted even in physical distribution management. Savings effected thereby lead to a healthy bottom line. Physical distribution efficiency is closely related to customer service. Inventory Management
Inventory management is the ―buffer‖ in the logistic system. It is another important elements of physical distribution management. Inventories are needed in industrial channels because of three important reasons. First, production and demand for industrial products are not perfectly matched. Secondly, operating deficiencies in the logistics system often would result in product unavailability e.g. delayed shipments, inconsistent carriers‘ performance. Thirdly, industrial customers cannot predict their product needs with certainty e.g. a machine breakdown or a sudden need to expand production. Inventory is an alternative method for providing the level of service required by industrial users. The level of inventory is determined on the basis of cost, investment and revenue. Customers Services Level The service level and physical distribution system (PDS) design, that
yield the highest contribution of sales minus physical distribution costs must be identified. The principal constraint in doing this is the difficulty of measuring customer service and estimating sales response to service level. A predetermined customer service level is selected as a minimum, and the system is designed to meet this level with a minimum of cost. Several possible measures of customer service can be glanced from Fig.5.2. The choice of an appropriate measure or measures is situation specific and is based on the service factor(s) most closely linked to customer satisfaction.
- Ramaswamy V.S. and Namakumari S., ―Marketing Management‖, MacMillan India Ltd., New Delhi, 202, p.373.
The pre-transaction elements use measures that designate service capability before it is provided. A target delivery data indicates the planned time of delivery. The transaction elements gauge service performance for various components of buyer-seller transactions. The post-transaction elements measure customer service based on results or outcomes. (David W. Cravens et al. Marketing Management, Homewood, Illinois, Richard D. Irwin, INC. 1988, p.444). It must not be lost sight of that establishing communications between buyers and sellers is an important factor in customer service. Figure 5. Possible Measures of Customer Service Performance
on cost plus basis. Using fourth party logistics as the base, e- Logistics has developed `eTrack' — an innovative GSM based tracking system for tracking mobile assets such as trucks, buses and vans, trailers, containers as well as personal and public utility transport. The device along with applicable software tools would enable truckers and shippers to exactly pinpoint the location of their vehicles To begin with, e- Logistics industry had signed up with various truck owners and shippers for installing, maintaining and providing web-enabled information on the location of the trucks. Companies such as HLL, Castrol, Maruti, Ford, Hyundai and the like had already finalized the alliance with e-Logistics industry for supply of tracking devices to their transporters.
E-enabled Tracking System The need for tracking is necessary for knowing about the exact location of the inventories and to take some decisions on the basis of this information. The term ‗tracking‘ in logistics management means getting information about the status of inventory and the location of inventory carrying vehicles etc. When this information or tracking system uses some electronic devices for it then it is called e-enabled tracking system. The orders can be tracked by order number, waybill number, customer's name or telephone number. Status information includes inventory on hand, delivery information, purchase order validation, shipment transit information, EDD (estimated delivery dates) and other information that enhances product visibility through the supply chain. As part of ongoing commitment to develop supply chain applications, new advances to increase velocity of critical information include: 1) An Order Management System that improves ability to manage the product procurement process on a global scale, 2) A
Transportation/Operation Planning System that offers the dynamic capability to manage inbound and outbound orders, 3) A central managed inventory that provides a global view of inventory across the network, either by product or location, 4) Integration applications that allow connectivity across trading partners, 5) Merge-in-transit that allows for single source consolidation of multiple orders into a single delivery. An e-enabled tracking system enables the company to provide a wide variety of information such as the precise location of a truck, idle time and estimated time of arrival at destination. The tracking solution does not require any intervention of the truck driver and data gets automatically transferred to E-Logistics as the truck passes through a cellular tower. Two-way communication between the truck owner and driver can be provided through telemetric services. RADIO FREQUENCY IDENTIFICATION DEVICE (RFID)
Radio Frequency Identification Device (RFID) is the technology that is associated with tracking wildlife or enabling drivers to speed past electronic tollbooths on the highway. Its working is simple. A radio frequency transponder that contains a microchip (RFID tag) is placed on something being tracked and it will emit or reflect a signal whenever it passes under a scanner. Decreasing chip prices have made RFID technology cost effective for the supply chain. RFID Technology and Tracking Systems
RFID Technology has an improvement over the bar-code technology. Bar- code technology requires the forklift driver or warehouse operator to scan the label on each carton manually to track what's being moved. RFID technology would enable the same tracking by equipping an archway or doorway with an RFID scanner that registers what's in the load when the forklift drives through. The scanner simply reads the signals of tags within radio
IOC is launching real-time truck tracking solution with the help of BSNL and Chennai-based E-Logistics, which has brought out a patented vehicle tracking system called e-Track. The truck tracking solution operates on GSM technology, which involves mounting a tracking device on the truck. The device operates on the mobile network through auto generation of SMS messages at pre-determined intervals, which are captured by BSNL's towers and communicated to the central server of E-Logistics. HPCL is also planning to launch vehicle tracking systems, having recently completed a pilot project. BPCL is studying the vehicle tracking devices market, while initiating dialogues with some of the manufacturing companies and cellular service providers. With the concept of fleet management through e-logistics solutions gaining brisk grounds in the country, industry observers are of the opinion that new players would enter the market, bring out new tracking devices. When Wal-Mart required suppliers to track inventories with bar codes over a decade ago, the results revolutionized supply chain management practices. At the time, the goal of Wal-Mart's program was to track the flow of product from dock to stock automatically. With the start of Wal-Mart‘s use of radio frequency identification (RFID) it is about to make history again. Need of IT in Supply Chain Integration
Owing to the need of increased control and visibility, it is becoming very necessary to keep track of orders and get visibility into the inventory at each step in the supply chain. IT based e-enabled logistic and tracking system can prove a great help to the distributors as they perform many value-added functions. These functions can be broadly characterized as:
a) Transactional b) Logistical
a) TRANSACTIONAL FUNCTIONS Transactional functions refer to making contact with buyers and using
marketing communication strategies to make them aware of products. They also include matching product to buyer needs, negotiating price, and processing transactions. Contact with Buyers
The Internet provides a new channel for making contact with buyers. The Internet channel adds value to the contact process in several ways. First, contact can be customized to the buyer‘s needs. For example, the Honda site ( www.honda.com) allows customers to find a dealer in their area where they can buy Honda vehicles. Second, the Internet provides a wide range of referral sources such as search engines, shopping agents, newsgroups, chat rooms, e- mail, Web pages, and affiliate programs. Third, the Internet is always open for business, 24 hours a day, seven days a week. Marketing Promotion and Communications
The Internet enhances promotional coordination among intermediaries. Firms e-mail ads and other material to each other, and all firms may view current promotions on a Web site at any time. In contrast, companies in the brick-and-mortar world would sometimes run promotions that retailers would not know about it until consumers begin asking for the special deals. The Internet adds value to the marketing communications function in several ways. First, functions that previously required manual labor can be now automated. Secondly, communications can be closely monitored and altered minute by minute. Third, software for tracking a user‘s behavior can be used to direct highly targeted communications to individuals. Matching Product to Buyer’s Needs
The Web excels at matching product to buyer‘s needs. Given a general description of the buyer‘s requirements, shopping agents can produce a list of
CD, or a diskette. The medium must then be packaged and shipped to the consumer, further increasing costs. Aggregating Product
In general, suppliers operate more efficiently when they produce a high volume of a narrow range of products. Consumers, on the other hand, prefer to purchase small quantities of a wide range of products. Channel intermediaries perform the essential function of aggregating product from multiple suppliers so that the consumer can have more choices in one location. Third-Party Logistics – Outsourced Logistics
A major logistics problem in the business to business (B2B) market is reconciling the conflicting goals of timely delivery and minimal inventory. One solution for many companies is to place inventory with a third-party logistics provider. Taking logistics one step further, third parties can also manage the company‘s supply chain and provide value-added services such as product configuration and subassembly. The logistics providers will even handle the order processes, replenish stock when needed, and assign tracking numbers so customers can find their orders. Summary
Logistics management involves the integration of transportation, inventory, facilities, and communications to provide a level of logistics service desired by customers and middlemen at the lowest possible cost. An appropriate logistics system requires an appropriate physical distribution design, efficient inventory management and an excellent customer service level. The costs of physical distribution rank third in the total cost of goods and are exceeded only by costs of raw materials and labour. Economies achieved in physical distribution of goods will go a long way in reducing the total logistics costs.
The logistics industry is undergoing a transformation as it is becoming more and more e-enabled. It is becoming more dependent on information technology to optimise storage and movement of inventory. This has provided many an opportunity for software, hardware and services organisations targeting the logistics
segment. To meet these demands, the general tendency has been to outsource service providers like third party service. The need for tracking is necessary for knowing about the exact location of the inventories and to take some decisions on the basis of this information. The term ‗tracking‘ in logistics management means getting information about the status of inventory and the location of inventory carrying vehicles etc. When this information or tracking system uses some electronic devices for it then it is called e-enabled tracking system. An e-enabled tracking system enables the company to provide a wide variety of information such as the precise location of a truck, idle time and estimated time of arrival at destination. Radio Frequency Identification Device (RFID) is the technology that is associated with tracking wildlife or enabling drivers to speed past electronic tollbooths on the highway. Its working is simple. A radio frequency transponder that contains a microchip (RFID tag) is placed on something being tracked and it will emit or reflect a signal whenever it passes under a scanner. Decreasing chip prices have made RFID technology cost effective for the supply chain. RFID is an automated form of bar-code tracking. Though both are used for tracking the movement of goods, RFID can provide much more detailed information on what the product is, where it's going, and how to handle it. RFID tags have far greater capacity than bar-code labels for storing information. Significant business opportunities await cellular service providers and manufacturers of e-logistics devices for vehicle tracking from the public sector oil companies in India.
Owing to the need of increased control and visibility, it is becoming very necessary to keep track of orders and get visibility into the inventory at each step in the supply chain. IT based e-enabled logistic and tracking system can prove a great help to the distributors as they perform many value-added functions. The Internet enhances promotional coordination among intermediaries. Firms e-mail ads and other material to each other, and all firms may view current promotions on a Web site at any time. In contrast, companies in the brick-and- mortar world would sometimes run promotions that retailers would not know about it until consumers begin asking for the special deals.
