Information Management and Technology

Chapter 11

Information Management and Technology

CHAPTER OVERVIEW

The use of technology to collect and convey information is not new to the transportation industry. What is new is the integration of this technology among carriers, shippers, receivers, and third parties to efficiently and effectively manage the supply chain.

Many companies have found that using information technology has allowed them to significantly reduce assets (inventories or equipment) and better manage information, product, and cash flows among all supply chain partners. The cost of information technology has also decreased significantly over the past 10 years.

This chapter will examine information systems and technology from a supply chain perspective; it will look at both topics from the perspectives of the shipper, carrier, and receiver as carriers and their customers to be able to integrate the flow of information.

INFORMATION SYSTEMS

Information systems are designed to use the available data to portray meaningful information to decision makers. Decisions are made at various organizational levels within carrier firms and their customers’ firms.

Some type of information system integration is necessary to link all of the players in the supply chain. The diagram in Figure 11.1 can be used as a mechanism to help link the different types of information systems in a shipper or receiver organization. The importance of this diagram is its ability to link database files with transactional decisions and strategic decisions. This diagram also identifies the types of data necessary to make these decisions. Decisions regarding inventories, warehousing, manufacturing, and transportation are linked to a common database. This is the basis for enterprise resource planning (ERP) systems. The sources of data necessary to manage the transportation process will also be discussed in more detail later in this chapter.

Table 11.1 shows the requirements for all 3 types of information for the shipper, carrier and receiver. The table does show that information flows must be linked among all 3 parties to make the shipment arrive as promised.

The information required to make the transportation process work can be classified into pretransaction, transaction, and posttransaction information.

• Pretransaction information includes all information necessary to plan the carrier movement,
• Transaction information includes all information necessary while the shipment is in motion with the carrier, and
• Posttransaction information includes all information necessary after the shipment has been delivered.

In the pretransaction phase, the shipper needs purchase order information and possibly forecast and point-of-sale (POS) data to help plan carrier capacity and selection decisions. The shipper also needs information from the carrier as to equipment availability and scheduled pickup time. Strategically, the carrier needs volume forecast data from the shipper to plan capacity appropriately.

Transactionally, the carrier also needs bill of lading (BOL) information as well as desired pickup and delivery times from the shipper. The receiver requires an advance shipment notice (ASN) from the shipper as well as a scheduled delivery time from the carrier (or from the shipper in the ASN).

The posttransaction phase requires a freight bill from the carrier if the shipment is free onboard (FOB) destination, as well as a proof of delivery (POD) and other verification of carrier performance, such as damage or claims information. The carrier requires payment information (when and how much) from the shipper as well as claims information, if necessary, from the receiver. The receiver might require carrier performance information (on-time, damage-free) from the carrier as well as POD from the shipper or carrier to initiate the payment process to the shipper for the product. These various types of information and their flows are captured in Figure 11.2.

INFORMATION SOURCES

The previous section identified the various types of information needed to

manage the transportation process. This section will identify the sources of this information.

Traditionally, transportation information has come from various documents which could include bills of lading, waybills, manifests and freight bills. Many of these transactions have been replaced by paperless exchanges under the term Electronic Data Interchange (EDI). EDI has increased the speed of the flow of information while reducing errors.

Bill of Lading

The Bill of Lading (BOL) is the document used to initiate the request for a transportation movement. This is probably the most important transportation document because it provides information necessary for the carrier to plan for and perform the transportation service.

The BOL serves five legal purposes: 1) It is a receipt for the goods; 2) it contains a description of the shipment; 3) it can be evidence of title; 4) it is an operating document; and 5) it defines the terms of the contract between a shipper and a carrier.

The following represents the minimum requirements for BOL information:

1. Origin/destination of the shipment. This information is used by the carrier to identify the freight lane that will be used for the shipment. It also allows the carrier to identify the availability of equipment and personnel to provide the transportation, or to begin to position capacity to move the shipment. This might not be the same as the billing location. This can also be used by the carrier to determine pickup and delivery times.
2. Carrier designation. Shippers will generally integrate their BOL-generation process with their carrier-routing process. This allows the shipping location to comply with its contracts and/or routing guides and helps identify the initial contact with the pickup carrier.
3. Special operating instructions. This information allows the carrier to perform the transportation service in compliance with the needs of the shipper. Special instructions might include temperature control, loading/unloading requirements, blocking/bracing, pickup or delivery requirements, and so on. The point of this information is to make the carrier fully aware of the nature of the shipment and what might be necessary, above and beyond normal transportation service, to deliver the shipment in compliance with the demands of the shipper.
4. Shipment description. This information includes not only a description of the commodity but also the quantity and weight of the commodity or commodities. The carrier will use this for equipment selection, pickup, and rating/billing decisions. This section can also alert the carrier of any hazardous materials that might be in the shipment.
5. Billing(Invoice) instructions. If not the same as the origin identified above, this provides the carrier the information concerning the identity of the party responsible for paying for the transportation service.

There are two types of BOLs,

1. a straight or nonnegotiable version and
2. order or negotiable.

The title to a shipment cannot be transferred to another party with a straightBOL, it is used as the basic transportation contract between the shipper and the carrier, providing the information necessary to move the shipment to the destination.

An order BOL not only serves the contract function, it can be used as evidence of ownership and can be used in banking areas. The order BOL is sent to a bank and the consignee pays the bank the invoice value of the shipment and the bank releases the BOL. The original copy of order BOL must be presented to the carrier before the shipment can be released.

Other Information Sources

The waybill is the document generated by a railroad to control the movement of railcar or intermodal shipment. It is the operating document that governs the movement of the car as well as the descriptive document of the car’s contents.

The manifest is the operating and descriptive document for motor carriers and serves many of the same internal operating functions as does the waybill.

The freight bill is the carrier’s invoice for transportation related charges and carries the same information as the BOL, such as origin/destination and commodity description. The freight bill also serves the purpose of notifying the buyer of the charges and how they were assessed. It also serves as proof of delivery.

Many buyers will not begin payment process until a proof of delivery (signed freight bill) is matched with a BOL. Old methods of generating hard copies as proof of payments can be lengthy processes.

Efforts to shorten the freight bill payment cycle is through electronic signature capture that has reduced the time necessary to prove delivery by the carrier and has improved the carrier’s ability to collect payment quickly.

INFORMATION TECHNOLOGY

Two issues arise when deciding to implement IT in a transportation or logistics setting:1) where to start, and 2) how to integrate the different systems. The purpose of this discussion is not to answer these two questions. The main purpose is to introduce the concept of IT and the various aspects of its implementation for carriers and their customers.

Areas of Application

The biggest area where companies would like to make their IT investments is connecting to customers, suppliers and partners.

Four reasons push this investment in the supply chain.

1. First, information can be a substitute for supply chain assets, costs, and even services. Making inventory visible through information allows firms in the supply chain to reduce or, in some cases, eliminate safety stock inventories. This ultimately takes costs out of the supply chain, rather than pushing costs back to suppliers or carriers. For example, satellite technology for carriers has allowed them to know exactly where a shipment is and whether it will meet its scheduled delivery time. If a delay is expected, the receiver is notified so proper actions can be taken. This allows firms to reduce the uncertainty of late deliveries and the necessity of extra inventories.
2. Second, the cost of information continues to fall. This trend has been accelerated by the decreasing cost of technology. For example, desktop personal computers today can be purchased for less than 10 years ago. So as processing and storage technology declines in price, so will the cost of information.
3. Third, demands for information from supply chain partners are increasing. The availability and effectiveness of information regarding supply chain operations are causing firms to need more information to manage their processes. Initiatives such as collaborative planning, forecasting, and replenishment (CPFR) in the retail industry are requiring not only more information but also the sharing of that information with all relevant supply chain partners. Sharing demand forecasts with carriers allows them to better manage and position capacity. An important point to be made here is that the information shared must be relevant to the supply chain partner.
4. Finally, in supply chain management, managing information flows is as important as managing product and cash flows. Chapter 1, “Transportation, the Supply Chain, and the Economy,” included all three flows in its description of the supply chain. These three flows are inseparable; one cannot work without the other two. An argument might even be made that managing information might be the most important because it can be used to manage product and cash flows. The point, however, is that information flows are critical in managing the relationships that exist among all members of a supply chain.

Types of Information Technology

THE BASICS—COMPREHENSIVE, QUALITY ELECTRONIC DATA INTERCHANGE (EDI)

EDI is probably one of the oldest forms of technology used in logistics and transportation. It requires a standard format so that the data being exchanged can be understood by both the originator and receiver. EDI has become a basic requirement of doing business with many firms.

EDI eliminates human intervention which reduces errors while removing the labor cost is preparing the BOL, freight bill or other transportation related document.

EDI also improves customer service by alerting them to the status of their shipments which reduces their cost.

The most popular use of EDI transactions is for receiving customer orders and for sending orders to suppliers. Other growing uses include ASNs and electronic funds transfer (EFT).

There are many barriers to implementing EDI which include hardware/software compatibility, consistent formats, security, investments, management support and MIS departments versus operating departments. One method to circumvent these issues is to use an outside service provider, often called value added networks (VAN). A VAN for EDI transactions can be compared to a wholesaler for product transactions. These firms handle most of these issues for a fee and provide most firms with their first entry into EDI applications.

What does the future hold for EDI? Speculation has grown concerning the use of the Internet to replace dedicated EDI networks. Internet sites currently exist that can be used to transmit EDI documents.

THE BASICS- AUTOMATIC ID: BAR CODE BASICS

Bar coding is another technology that has been in use for quite a while. Bar codes can be seen in grocery stores, retail stores, warehouses, manufacturing plants, and carrier terminals. Coupled with EDI, bar codes provide a powerful tool for providing information about product movement throughout the supply chain.

Bar codes are rather simple in their design, consisting of spaces and bars arranged in a pattern. When a scanning device is passed over the bar code, light waves are reflected off of the code and read by the scanner. These waves are converted to a frequency and assigned a “0” or a “1” (this is called a binary code) based on whether light is reflected or absorbed by the code. A dark bar would absorb light; a light space would reflect light. The relative width of bars and spaces is important in basic bar codes, not the absolute width. The method used to assign the 0 or 1 to the reflections is called the primary algorithm. This algorithm describes the combinations of bars and spaces that result in a 0 or 1.

The most common bar code in use today is called Code 39 which uses five bars and four spaces. Two bars and one space are wide (three wide) and the remaining six spaces and bars are narrow. The three wide elements out of the nine in total is where the name Code 39 comes from.

A key to the effective use of bar code technology is linking it to other types of technology to allow for inventory visibility. One of these technologies is called track and trace, which is the focus of the next section.

THE BASICS: TRACK AND TRACE

Full visibility of a shipment in the supply chain requires the ability to know where it is in a warehouse or terminal as well as knowing where it is in transit. Bar codes provide an important source of information to be able to provide both types of visibility.

In a warehouse or carrier’s terminal, bar codes can track a shipment from when it arrives until it leaves, providing status updates along the way. Normal bar code readers store data on product movements and then periodically download this data to a host computer. A technology called radio frequency (RF) can provide real-time data. When the bar code is scanned using an RF reader, the data are transmitted immediately using RFs to the host computer. The smart tag is another application where RF technology can be used.

Developments in tracking technology have allowed carriers to communicate with their vehicles in transit as well as determine their location. The major breakthrough in making this visibility a reality is the use of satellite technology. Coupled with onboard computers, this satellite communication has allowed carriers to not only know the position of their vehicles and their freight but also better manage their asset base. This two-way communication between driver/vehicle and dispatcher has actually allowed carriers to reduce their fleet size while improving utilization. These updates, along with RF data from warehouses and terminals, can help provide total supply chain visibility for freight.

Composed of multiple satellites in various orbits above the Earth, the GPS can not only track vehicles but also provide directions to a destination for a vehicle.

EPC TAGS (electronic product code)

Bar codes were developed to allow for quick data capture as packages move through the supply chain. They require some type of reader and contain static information. A new technology developed by Texas Instruments, called the “tag-it,” is a revolutionary way to identify packages and manage inventory. Called a “smart tag,’ this new technology rakes the place of a bar code and uses radio frequency to make it work. An advantage of the smart tag is the capability to update its information anywhere along the supply chain. The smart tag can be manufactured into shipping labels or other types of documentation following a shipment. This technology will allow shippers and carriers to manage inventories through distribution centers as well as break-bulk terminals.

These electronic product code (EPC) tags work in conjunction with RFID to transmit information to computers. These tags carry significantly more data than even the new 14-digit bar codes and transmit their information via radio waves. They can provide real-time data on inventory visibility in the supply chain, from source to shelf. However, three issues must be resolved before their acceptance is universal:

1. First is the issue of cost. Because volumes are not large right now, the cost per tag is about 50 cents. To be realistic for universal use, their cost needs to come down to a fraction of a penny.
2. Second is the issue of standards, Global standards for EPC tags do not currently exist. F
3. Finally is the issue of compatibility with existing software. These tags need to be compatible with ERP systems as well as with inventory, transportation, and warehousing software.

THE INTERNET EMERGES