ICT & Logistics – an overview

1. ICT & Logistics – an overview Rommert Dekker Erasmus School of Economics

2. Contents • Introduction – relation ICT & Logistics • Information systems – ERP • Decision support systems • Examples

3. What is logistics? • Right (type and number of) products at right time at the right place • Thinking about customer needs • Plan, control and check execution • Apart from products also services & information • Apart from forward also reverse logistics

4. Start with customer – marketing interface • Who is the customer? • Through which channel does he / she buy? • When does he / she wants what? • What are the right product characteristics • What are the right delivery conditions?

5. 1. What are my products?(source P. de Wit - HIDC) 46.13

6. Product coding • Pictures are misleading • It is all about standardized product codingwho defines and maintains the code (costly). • Major problem: products have short lifecycles, moreover they are changed often during their lifes. • Example: do you buy Aspirin, or acetyl salicyl acid (workable substance) from a generic brand. A major issue in pharmacies.

7. 2. What is my sales channel? Distributors Wholesaler ? Branch office Consumers E-commerce VAR

8. Problem • Each organisation in the supply chain is likely to treat data in their own way • Each organisation has own objectives • Each organisation is likely to distort information to others.

9. 3.Where are my customers ? Shaded Areas Indicate Economic Activity Helsinki Oslo Stockholm Copenhagen London Netherlands Brussels Bonn Paris Vienna Berne Rome Madrid Lisbon

10. Location code • Knowing addresses of customers is a major logistical issue. • Postal codes are not standardized in Europe and are also not unique (several addresses, backhouses, living boats etc). • Distinction between delivery address, office addresses, billing address

11. 4.What are my requested customer response times? 48/72/96 or more hours < 1 hours

12. Desired and actual Response / lead times • There is a trade-off between speed and costs. Longest acceptable times are not registered. • Major issue for industrial customers: what is the actual leadtime. ERP systems contain for every product a leadtime, but how did they ever enter 150.000 leadtimes in a package? Info is likely to be outdated. • Difference between: original leadtime, supplier accepted leadtime and actual leadtime. In fact it is a negotiation process.

13. What are main logistic drivers? • Transportationships, planes, trucks, trains • Facilitiesports, airports, stations, sorting centers, warehouses • Products – inventoriesin factories, pipeline, warehouses, shops, customer

14. Elicit demand, plan delivery and control execution • Register customer orders (and preferably also the unsatisfied demand)in a shop is different from a website • Make sure the products arrive at the customer at the right time and placeoptions: customer pickup or delivery at home • Check whether the right products arrive in the right quality • Take care of after-sales support (where is the product)

15. Contents • Introduction – relation ICT & Logistics • Information systems – ERP • ICT and reverse logistics • Decision support systems

16. Example of an IT system (based on MRP)

17. Information components Supplier info: what products can be purchased, what price, with what lead time, and where can they be delivered. Manufacturing info: what products can be made, how many, by what facilities, with what lead time, with what trade-offs, at what cost and in what batch size. Distribution and retailing information: what is to be transported where, in what quantity, by what mode, at what price, how much is stored at each site, and with what lead time. Demand information: who is buying what, at what price, where and in what quantity. Info includes forecasts?

18. Distribution/retailing system

19. Information should be • accurate(it should give a right picture of the supply chain) • accessible in a timely manner (often information comes available too late) • of the right kind(no overflow with non-informative details) Good Decisions Supply Chain Success Global Scope Information

20. Examples of not good info • ProRail – platform lengths of stations in spreadsheet vs official construction drawings • University – students following courses (background, year class, etc) • OTIS getting information on every elevator movement, instead of a matrix of people wanting to move from i to floor j.

21. The very Past - Legacy systems - older IT systems based on mainframe technology that usually work at an operational level on only one stage or even one function within a stage of the supply chain. - they have seen many updates and exist beyond original life span. • they can cover a variety of functions. • examples: Amadeus: airline ticket booking system: indicates nr of empty seats per fare class (9 means no limit)

22. IT systems -legacy systems

23. IT systems -legacy systems Advantages - are able to get the operation done - take less incremental investment Disadvantages - focus on only a small part of a stage in the supply chain - usually have only transactional capabilities - based on mainframe technology which is difficult to modify

24. Example legacy systems - GDS • A GDS (global distribution system) is a system that keeps track of the number of free seats in an airplane flight. • Typically it uses booking classes and digits to keep track:B9, C5, … • Database structure is difficult to change and not really modern

25. IT systems -the present: ERP systems Enterprise resource planning (ERP) systems are operational IT systems that gather information across all of a company’s functions, resulting in a common database of all a company’s data. Functions - finance - logistics - manufacturing - order fulfillment - human resources - supplier management

26. IT systems -the present: ERP systems Advantages ERP systems - ERP systems provide a wider scope to managers of supply chains - ERP systems are fairly good at giving real-time information - ERP systems are better at using enabling technology like Internet Disadvantages - weak analytical capabilities in providing decision support - very expensive and difficult to implement

27. IT systems -ERP players SAP - 30% market share, German Oracle - based on a general database language Peoplesoft - JD Edwards -

28. Track and tracing tools • RFID, Barcode and other auto-id • Container portals: INTTRA, GTNexus booking tool over several shipping lines • Port Community Systems: link and exchange information over several parties in a port e.g. Portinfolink • General tracking systems: link several computer systems (e.g TNT’s Matrix)

29. RFID and Barcode • Standards maintained by GS1 (earlier EAN) which allows exchange of data over several companies • Barcode took many years to become established • RFID is upcoming fast but will take also some time.

30. Logistics, SCM and IT systems – a vision Consider a company Maurice Philips, importer of home textile and soft furnishing products in UK It would like to concentrate on its core competences- knowing what type products of customers want- buying them / letting them make at the right (cheap / quality) place It would like to leave all logistics issues to a fourth party logistic provider!Yet it needs to know where its orders are and when it can be in its shops.

31. Issues in tracking and tracing? • The 4PL has to face many parties in the supply chain and accommodate messages from very many parties. • Demo Matrix • Consider e.g. the messages just in the port of Rotterdam! • Shipping lines have also developed their internet booking systems (INTTRA, GTNexus, CargoSmart), which do not match the alliances by the way.

32. The transport chain consists of players who accompany goodflows and the related document and information flows (source vd Zande PWC)

33. High efficiency gains can be made through optimisation of information streams • Large number of players and goods results in a very large information exchange • The same information is exchanged in several documents • A use of information systems will result in optimisation because of • Less administrative work; • Better planning by faster and more accurate information • (Source: vdZande PWC)

34. Several ports developed already a ‘Port Community System’ • Several ports in the world have already developed ïntegrated port community systems. • Port community Systems differ in content, structure and architecture, but all intend to optimise the chain by streamlining information and document streams • Although the Port of Rotterdam does not have a PCS, several applications for specific problems have already been developed.

35. Contents • Introduction – relation ICT & Logistics • Information systems – ERP • IT and reverse logistics • Decision support systems • Examples

36. Decision support systems • What are they?Interactive computer systems that help decision makers utilize data and models to solve (unstructured) problems (Sprague and Carlson 1989) • DSS Generatorsaimed at general problems, like Excel, Aimms, SAS • Specific DSS – aimed at particular problemslike personnel planning, Vehicle Routing • DSS Tools – special languages to create a DSS • Read article in wikipedia.org (english)

37. DSS Generators – Examples • Aimms, CPLEX / ILOG – aiming at LP solver • SAS – oriented around a statistical analyzer • Matlab – oriented at facilitating mathematical computation • Arena, ED – oriented around simulation

38. IT systems present - Analytical Applications Advantage of analytical application lies in use for planning and strategic decisions. Procurement and content cataloging applications focus on relationship between manufacturer and supplier and the procurement process. They allow comparisons of suppliers and part vs part. Advanced Planning and Scheduling (APS) produce schedules for what to make, where and when, while taking plant availability, capacity and business objectives into account.

39. IT systems present - Analytical Applications • Transportation Planning and Content Systemsvehicle routing systems • Demand Planning and Revenue Management • Customer Relationship Management and Sales Force Automation (Siebel Systems) • Supply Chain Management • Inventory Management • Manufacturing Execution Systems • Transportation Execution Systems • Warehouse Management Systems

40. Overview Business Software (source IT and Logistiek)

41. Assignment – write an essay about • Compare Ortec’s Transport and Distribution planning software with that of competitors (e.g Descartes Routing and Scheduling, Direct Route). Write a short summary in your own words (DO NOT COPY). • Which quantitative models are likely to be present in these software? • Sketch the relation / interface with an ERP system like SAP • Sketch the relation with TomTom’s navigation software • What is the relation with a Truck board computer? • How would it relate to an Truck appointment system? • What do you foresee in the future (which extra functionality do you think is useful); will it be integrated in SAP? Will it be combined with other software?

42. Assignment cont. • Consider a truck company (called G) transporting containers within The Netherlands, Belgium and Germany upon demand. • G receives orders during a day and makes aplanning for the next day. Orders are typically- pick up container 453l71 at ECT Terminalsand transport it to the warehouse of C1000 in Amersfoort to arrive between 10h-12h next dayand when the container has been unloaded, move the empty container to the depot of Maerskshipping line in Houten (between 9h – 20h) • What information systems / decision support systems would play a role in this case / or alternatively, do you consider to be presently available / available in the near future. Considerorder intake / acceptance, transfer information to trucker / contact ECT / inform C1000, allocate job to trucker, check execution and take care of payments.

43. Help • Search the web for help, e.gsearch on vehicle routing software survey (from Lionheart publishing) Informs • Search at Ortec’s website (www.ortec.com or .nl) • Info on a Truck Appointment system can be obtained from blackboard. • State in your report always the sources of your statements: either from a reference or from your own inferences.