LOGISTICS DEVELOPMENT IN CONDITIONS OF E-ECONOMY
Material is published with the kind permission of Natalia Ivanovna Chuhray. Short version. Source: Chuhray N. I. Logistics development in conditions of e-economy / N. Chuhray, O. B. Girna / / Logistics. -L. : Type of Nat. University "Lviv Polytechnic" 2008 - S. 272-278.
Today we can confidently say, that the global economy is under the influence of new scientific and technological revolution (STR)... Changes, carried by this revolution, are so deep, that experts started to use special terms, such as "new economy" or "E-economy". The challenges, which are put forward to the entities by new economy optimizes many business processes. But at the same time this poses a threat to traditional ways of doing business. Logistics and market participants also face specific challenges. This applies especially to logistics operators.
Logistics constantly faces new challenges, so changes much faster than ever before. Perhaps the most obvious change is the application of new technologies. Some of these technologies are associated with the movement of goods, such as electronic identification of packages, satellite tracking of the location of trucks and automatic control systems, but the most significant changes are related to communication and information transfer between members of the supply chain...
...Over the past few years e-economy has become more perfect and widely used. Rapid spread of e-mail was followed by various versions of e-business, e-commerce and soon the "electronic anything." Effective transfer of information is especially useful during purchasing, that allowed to transform this activity into electronic purchasing (E-purchasing) or into electronic delivery (E-procurement). These lines of business can be done in various ways, but in any case they are based is the direct exchange of data between supplier's and customer's computers.
Active processes of integration, globalization, development of distribution networks, reduction of product life cycles, the growth of "deliveries on time" causes the necessity of the use of modern logistics approaches to address important economic problems. Intensive growth of the competitive environment also contributes to this. It encourages most companies to seek new technologies, which control the key processes of business. And the priority belongs to the concept of supply chain management, based on usage of modern information technologies in the new economy. Effective information management is the cooperation between all participants in the supply chain, based on rapid and complete transmission of the information flow. It helps to reduce expenses and time, to respond quickly to customer needs, to improve their level of service, and generally to improve the competitiveness of the supply chain. The development of this concept towards a New Economy is caused by such things as electronic data interchange, electronic money transfer, coding of goods, informatization of selling point, functioning of logistics operators of different levels at the market and the use of outsourcing processes by many enterprises. Under these conditions lets consider the main level of the logistics concept in E-economy.
The first level of the logistics concept in e-economy is internal optimization process, which is characterized by communication and optimization of processes between the individual members of the supply chain between supplier and manufacturer or between producer and consumer. At this level short-term sale transactions arise between business entities. These transactions do not require long-term commitment with continuous replenishment of stocks. The work of managers is characterized by the implementation of individual logistics functions, which lead to the appearance of "bureaucratic pits"...
Aggravation of global crisis, shortening of the production process, increasing of intensity and complexity of the material and information flows, reduction of product life cycles phase have caused the transition to the next level of logistics – management of supply chain. This level is characterized by long-term relationships between all members of the supply chain through the effective use of "just-in-time" system and electronic data interchange (EDI). Increased usage of new technologies, increased competition, the need for reducing the amount of spending in supply chain and improving of the level of customer service led to the development of the next level of logistics concept - the E-Logistics. Environment E-functioning logistics can be submitted on the basis of the following three components:
- logistics industry,
- Logistics trade enterprises
- logistic operators, each of which performs such important functions as logistics warehousing, transportation, packaging, labeling, etc.
Lets consider the details of the last component - logistics operator (Third Party Logistics Provider - 3 PL)...
...Model of chain management, proposed by Aldin and Star consists of three main elements:
- logistics infrastructure, which includes entities, that implement logistics processes, distribution and storage centers, warehousing inventory items;
- logistics processes, which cover the supply and sale orders, demand management, managing the customer relationship, customer service;
- information and reporting systems, that serve as the integrator action (of aforementioned items) in the supply chain. Covers the design and planning of information systems, control and coordination of logistics processes.
In general, e-logistics is the effective management of information and cooperation of all members of the chain on the basis of rapid and detailed transfer of information flow from retail outlets, which sends the data in a consistent information standards to the supplier - producer of raw materials...
Implementation of information systems and electronic communication allows manufacturers to plan production better, to adapt its size and structure to the needs of retailers. Despite the fact that manufacturers and retailers reduce inventory levels, the risk of stocks in stock lack does not increase and the level of logistics service may improve. Thus, reducing of stocks gives benefits to both parties in reduced costs, storage and aging. The introduction of modern information and communication technologies enables logistics solutions with a significantly higher efficiency and speed...
...M. Castells gave the definition of e-economy environment under which the researcher specifies any logistical activities, the key task of which is related to logistics management, financing, innovation, sold on the Internet or through other tools of computer networks, regardless of the type of relationship between firms.
The development of e-economy contributed to the formation of a logistics operator of the fourth level (Fourth Party Logistics Provider - 4 PL), the essence of which is in transformation of value logistics operator into virtual logistics integrator. Logistics Integrator, the partner of providers of logistics services, takes the value of integrator in supply chain without having the basic means of logistic infrastructure. According to the Accenture definition, 4PL — is the integrator, combining its own facilities, opportunities and technology tools, capabilities and technologies of other organizations to design, create and implement comprehensive solutions for the entire supply chain.
This means firstly, the formation of the optimal composition of integrated tools, technologies, experience, knowledge, secondly — the coordination of logistics processes along the supply chain, and thirdly — the management of changes in the structure of the whole supply chain, including changing of architecture.
One of the first technology that has made a breakthrough, was the system of electronic data interchange (English - electronic data interchange, EDI), which allowed the introduction of remote apart computers to exchange data without using of any intermediate devices. First users of this system were stores, that connected their systems of inventory control directly with systems of suppliers, who processed the orders. For example, in the domestic market the pioneer of this system became «METRO" with "cash and carry" format. In supermarkets all sales are separated into different types of goods, and when stocks reach a certain level, the system automatically sends a message to the supplier, ordering the following consignment of a specific type of products. Using of EPOS system (electronic point-of-sale data) — data, transmitted electronically from cash terminals. It allowed to reduced the amount of paper documentation, to lower the cost of operations and the speed of communication, to reduce errors, to make systems more integrated and relationship in business closer.
In order to support EDI two related technologies were developed. First - Coding (item coding), that allows you to assign the identification label to each package of transported material. This label is usually performed as a bar code or magnetic strip information, which can be read systematically when the package moves along a given route. As a result, logistics system knows the location of each package at any moment, so it can move, sort, merge, pack and deliver needed supplies.
Another technology - EFT (electronic funds transfer). When comes the confirmation of delivery, EFT automatically debits the customer's bank account and credits the vendor. This completes the entire process, while EDI places orders, coding tracks their movements, and EFT is responsible for payments.
...There is also a system, which improves the functioning of accounting in the enterprise is TMS (Transportation Management System). According to its main provisions, logistics operator or forwarder donates some of his authority (control of accounting transactions) to the carrier, paying him a certain price for the service. Today this system effectively operates in the U.S. and its producers seek to expand market in Europe and Asia.
Another system of financial calculations that promotes eliminating of prepayments and enables to generate reports on expenses directly related to goods in a continuous growth of transport costs, is on-line system. With this system, companies can continually monitor their costs, to conduct the initial conversion of price, which can adjust the rates for the transportation and the amount of additional payments. The creation of new products by GT Nexus TradeDevelopment contributed to creative financial strategies. It allowed logistics operators and financial institutions to track the movement of orders. GXS company, a market leader in logistics solutions, proposed the service of shipping documentation delivery according to individual principles, which increased the rate of financial flows.
Using of RFID (radio frequenciesautomatic identification) contributed to increasing of productivity and transparency in the supply chain. Research related to the introduction of RFID in Western Europe, Asia and the United States realized American experts argue that the costs of implementation, Purpose and scale utilities (receiving or waiting) is differentiated and depend mainly on the region. Research, related to the introduction of RFID in Western Europe, Asia and the United States, are realized by American experts. They show, that the cost of system implementation, aim of the project and the scale of advantage are differentiated and depend mainly on the region.
According to the RFID system, we can perform the following classification of companies:
- manufacturers and retailers;
- 3PL operators;
- information and electrical industry enterprises.
RFID technology offers significant advantages for enterprises. They include faster response to customer requests, reduce of labor costs and the value of stocks...
Annually organized congresses are valuable source of information about new functional solutions within the RFID system. In 2007 DNL company received a prestigious award "RFID Journal Award" in "Best usage of RFID in services" category. I was called “Temperature-monitored Pharmaceutical Logistics with RFID”. During the implementation of this measure there was established close cooperation with partners, such as IBM and Infratab.
Today pharmaceutical products primarily consist of components that are sensitive to temperature. These products lose their properties in unsuitable temperature conditions. The “DHL Innovation Initiative” company adopted innovative solutions regarding to monitoring of pharmaceutical products, which are sensitive to temperature, throughout logistics process. Sensors, produced by Infratab, are placed in packs of medicines. Using of radio waves made it was possible to measure cargo data. Thanks to the new service, pharmaceutical companies are able to influence the temperature that exceeded allowable limits, even during transporting. Services, offered in the future will enable fast withdraw medicines, which has expired. Monitoring of cargo, which is based on RFID system, provides customers with the pharmaceutical industry a chance for a quick response in case of traffic problems. In addition, this company developed technology, which can be used not only in the pharmaceutical industry, but also in other industries, which needs the temperature control...
...Among European scientists there are many different opinions about the effectiveness of the "virtual logistics provider" in future. In general it can be expected that logistic integrators, guided by the strategy of price leadership, will be able to choose the most relevant and effective supply. Logistics providers with their own facilities try to get leadership in quality, because they are able to perform direct service and have more information about improving quality of services, than virtual operator.
©Chuhray N.I., Girna O.B., 2008
National University "Lviv Polytechnic"
Department of Marketing and Logistics
