Communication Technology in Logistics

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.

1. 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

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.

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 14.4 shows the different applications in various functional areas of management.

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.

2. 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 7 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.

3. 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.

4. 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. The other system in use is the dual-mode wireless vehicle system, but its usage is restricted to small geographical areas.

5. 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.

6. 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.

7. 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.

8. 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.

Source: Sople V.V (2013), Logistics Management, Pearson Education India; Third edition.