Information and Competitiveness: Case of a Logistic Information System

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1 Information and Competitiveness: Case of a Logistic Information System GLÁUCIA APARECIDA PRATES University of Ribeirão Preto, Sao Paulo. Brazil. ROSALINDA CHEDIAN PIMENTEL University of Ribeirão Preto, Sao Paulo. Brazil. MARCO TULIO OSPINA PATINO University of Ribeirão Preto, Sao Paulo. Brazil. DANIELA CÁRNIO COSTA MARASEA University of Ribeirão Preto, São Paulo. Brazil. 1. Introduction Supply Chain management has been became as one of the major strategies to improve organizational performance and generate competitive advantage (Ellram, 1990; Fisher, 1997). A variety of changes in the business environment including time-based competition, fast product cycle, just-in-time production, cost leadership, use of interorganizational systems, and global competition have fueled interest in supply chain management (SCM). The growth in business-to-business (B2B) commerce has highlighted the role of supply chain management in the modern digital economy. Objective: The purpose of the paper is identify the logistic information systems used by Palet Co. in its Supply Chain and to assess them within the degree of satisfaction of yours users. 2 Supply Chain Management Supply chain management encompasses many activities, but for the purposes of this article, it is defined as follows: Supply chain management is the integration of all activities associated with the flow and transformation of goods from new materials, through to the end user, as well as associated information flows, through improved supply chain relationships to achieve a sustainable competitive advantage (Handfeld and Nichols, 1998). This definition clearly identifies the two major flow components of the supply chain: materials and information. The growth in interorganizational systems (IOS) has made it possible to have electronic flow of information across the supply chain. Another definition of supply chain management from a business-process perspective that highlights the role of interorganizational systems is Integration of business processes from end user through original suppliers that provides products, services, and information that add value to customers. Supply chain management reengineers the chain and adds value by exploiting the information in the value chain. A supply chain is a series of linked suppliers and customers that takes a basic raw material at one end and delivers a finished product to the ultimate end user at the other end. The supply chain can be decomposed into many levels. There could be a single-level supply chain that includes only the focal firm s immediate set of suppliers and customers, or one could 1

2 go down n levels to include the raw material supplier on one end and the disposal of used finished product at the other end. Each customer and supplier in the chain has many supply chains with its own suppliers and customers. A small change in any of the partners supply chain, or a weak or broken link in the web, can create a major reaction in the entire chain, (, ) Since most organizations have neither the control nor the resources to monitor the entire web, they normally restrict their focus to one or two levels. There are three components flowing through the supply chain: goods and services in one direction, payments in the other direction, and information in both directions. Sometimes payments are shown as an information flow and not as a separate flow, although the characteristics are different and require different set of entities. To facilitate the movement of these three components, the service of other entities is required. While transportation carriers and logistics firms are used for movement of goods, banks and financial institutions are used for movement of payments. Information flow can occur between the entities directly or through an outsourcer or third party. In recent years, direct links between firms are becoming more popular than thirdparty links. In according to Some of the major objectives of the supply chain management are.. customer service.. cycle time reduction.. inventory turnover.. flexibility and adaptability in the system.. effectiveness of business processes Supply chain management covers a broad area of partnership between two trading partners, including operations and logistics coordination, partnerships in market research and product development, and coordination of customer service. Some of the implementation issues in supply chain management are.. alignment of business interests of partners.. long-term relationship management.. reluctance to share information.. complexity of large-scale supply chain management.. competence of personnel supporting supply chain management..performance measurement and incentive systems to support supply chain management Interorganizational Systems: Information flow between organizations has existed ever since human beings traded their goods and services. What is unique about the current environment is the availability of a communications infrastructure to electronically transfer information, with minimal effort and time lag, resulting in the easy availability of information. Interorganizational systems, also called extranets, are application systems that link various partners in the supply chain using a public or private telecommunications infrastructure. These systems provide the ability for computer-tocomputer communication of business transactions and documents. Interorganizational systems became popular with the introduction of electronic data interchange (EDI). Although EDI has been in existence for more than 20 years, it is only during the past five to ten years that it has been widely used. There are basically two types of interorganizational systems: electronic dyad (i.e., a system that exists between two firms) and electronic networks or multilateral information systems Electronic Integration Issues Electronic integration along with free flow of information among the supply chain partners opens up a wide range of business opportunities (Clark and Lee, 1997). However, implementation is not always easy; there may be resistance, because integration may not provide the same level of benefits to all partners. 2

3 Typically, EDI has been implemented in a husband- spoke arrangement, where the initiator (hub) takes proactive steps to get the smaller firms (spokes), mostly suppliers, to adopt interorganizational systems. They may even coerce the spoke firms into adopting EDI by using veiled threat of loss of business. Studies have found that the initiator tends to gain more at first, but in the long run, all parties benefit from the implementation. A similar situation is found in the implementation of a supply chain, where a firm normally takes a proactive lead to integrate the chain (Handfeld and Nichols, 1998). 2.4.Supply Chains And Strategic Advantage The competitive field in most markets requires well-designed products. However, at the margin, other factors govern the buying decision. For example, most airlines offer clean, modern aircraft and maintain good safety records. This is the price of entry to the club. If an airline did not qualify, we probably would not go near it. The way we view the airline likely depends on flight frequency, prices, frequent flier programs, or the coffee served on flights. Every product occupies a different competitive position. Traditionally, features of the product itself have dominated in determining this position. Now products increasingly compete on the supply chains that deliver them. The variables in airlines are not in the planes they use or the routes they fly, but in supply chain design. Supply chain thinking has untapped potential for maintaining a competitive position or moving a company from an unfavorable to a more advantageous position. 3. Logistic. In 1986, the Council of Logistics Management (CLM ), the leading-edge professional organization with a current membership of over defined logistics management as: The process of planning, implementing, and controlling the efficient, cost-effective flow and storage of raw materials, in-process inventory, finished goods, and related information, flow from point-of-origin to point of-consumption for the purpose of conforming to customer requirements. (Lambert, 1998) Logistics and information technology The application of information technology (IT) to the logistics process (and also to most areas of the companies) is gradually spreading. Today, the key role of logistics information systems is clear when it is realized that: Logistics consumes per cent of systems development and operating budgets. In many companies, over 75 per cent of all payback from applications development comes from logistics-based systems. According to some estimates, by the end of the twentieth century, total expenditure in information systems for logistics by American companies might reach $25,000 million. This development in information related activities has caused a qualitative change in physical distribution. Previously, the only information used was that required for transportation, frequently just because of a legal obligation. Currently, the management of information is conceived as a tool for customer service. As an example of this, order collection has evolved from weekly visits by salesmen to the customers, followed by mailing the orders to the regional warehouse or factory (transmission time therefore being sometimes in excess of ten days) to the current systems of continuous replenishment to distributors. With these systems, the manufacturer can manage, from the company's headquarters, the stock of its products at the shopping centre, thus improving the service level. To achieve this, it can use real demand data, captured by the point-of-sale systems through the optical barcode scanners and transmitted through an electronic data interchange (EDI) system. 3

4 3.2. Technology as Support for Logistic. In according to Laudon & Laudon (2001) there are some logistic information Systems which can support the business, such as : - Eletronic Data Interchange (EDI) - Enterprise resource Planning - ERP - satellite tracking - decision support systems - internet - optimal barcodes Ballou (1993) defined, The logistics information system (LIS), is an subsystem of management information system, that provide specific informations for a logistic management. As others information systems, this has a needs to transfer information. Any Information Systems is composed by 3 basic parts: data input, processing and output. 4. Research Questions : In order to reveal the current practice of usage of LIS in small and medium business and the associated problems, the research focuses on the following questions : the extent of managers'satisfaction with current LIS support for logistics operations. actors that hold small and medium business back from adopting LIS for logistics operations; managers'perception on the effectives of LIS in support logistics operations; and the perceived important logistics activities that require LIS support. 4.1.Research Method he research was conducted in the manufacturing sector in São Paulo State, Brazil. The target population was small and medium manufacturing companies with employee numbers between 2 and 400. This working definition of small business is in line with that used by Sebrae - Brazilian Service For Supporting To Small Companies. Of all São Paulo s companies, manufacturing industry, account for 15 %. Within them, 87 % are small firms, according to definition used. To ensure a reasonable response rate, a follow-up by students of Management School was carried-out. The resultant questionnaire was constructed in three parts: 1. general information on the respondents; 2. general information on the firm; 3. current use of LIS, its use, problems, advantages, potentials, manager's satisfaction with the current LIS and managers' development levels of future LIS support. Questionnaires were sent to 150 firms by first round, and 132 was replied supported by students action, and 5 were counted as invalided. The overall response rate was 88 %. additional evidence was collected from 45 respondents about 30 % of all respondents) who gave their personal comments on different issues related to the survey. The comments cover issues such as : the problem experienced with LIS, factor affecting successful implementation of LIS; advice and help needing for running the LIS. Evaluating content validity is basically a question of judgment (Raymond, 1987 ) The initial questionnaire design was based on the literature analysis and reported case studies. This was tested with external and internal scholars to assess content validity. The revised questionnaire was then sent to 6 companies for a pilot test. Criticism was received about the length of the questionnaire, the terms used, ambiguous questions and the format of the questionnaire, which was duly refined. 4

5 Internal reliability tests on users' perceptions of LIS were undertaken by applying coefficient alpha analysis to the individual items and to the overall measure. The results showed the the coefficient alphas was ranged from 0,81 to 0,8222. The overall reliability coefficient alpha was 0,8322. The internal consistency of a test is deemed acceptable when the reliability coefficient exceeds the 0.80 level (Raymond, 187 ). The logistic operation activity was measured by actual decision activities at different levels operational, tactical and strategic). These are : Closs (1997 )purposed some criterions for evaluation of LIS ( Table 1), such as : Table 1. Criterions for evaluation of LIS 1, Time 2, Exactness 3, Availability 4, Internal Connectivity 5, External Connectivity 6, Trustworthiness 7, Accessibility 8, Easy Use 9, Format On The Basis Of Exceptions 10. Format That It Facilitates The Use. Respondents were encouraged to add to the list where necessary. The LIS support on these activities was measured by a Likert scale of 1 to 5,1 for "none" and 5 for "extensive ". Managers' satisfaction with LIS support on the listed logistic operation activities was measured by a 1 to 5- point scale,1 for "very dissatisfied "and 5 for "very satisfied ". Five factors that may hamper the usage of LIS by small business were drawn from literature and exposed to respondents, and open space was provided for respondents to add more factors that affect their firms. A 5-pont scale was used to measure the perceived effectiveness were 1 s "strongly disagree and 5 s "strongly agree ". A 5 point-scale, for "none "and 5 for "extensive ", measured the desired level of LIS support on the decision activities. Descriptive statistics were used to conduct the data analysis : the frequency, score and the standard deviation. Significant tests were not carried out due to concerns of the small size and the local nature of the sample. 4.2.Survey Result And Discussions a. Profile of Participant Firms and Respondents : The data shows that 67 % of the firms employed 10 to 49 people. 72 % had been in existence for less than 20 years. 62 percent of the respondents were general managers or managing directors, and 38 were managers, such as purchasing managers, IT/IS mangers, and so forth. Those who reported using computers personally had used them on a average for 10 years. Most managers expressed general satisfaction with the computer systems used in the firm, being either satisfied 41 or moderately satisfied 35,only 3 % were dissatisfied with their systems while 10 were very satisfied. This high level of managerial satisfaction with current computer systems may suggest that information technology is supporting these companies effectively, although the satisfaction may also act to prevent managers from seeking further improvement, as one of the computer literacy reported less than 11 % of managers indication "good "or "high "levels) might also suggest that there is limited understanding of the potential benefits to be offered by computing systems, and LIS in particular. 5

6 b. Criterions for evaluation of LIS Table 2 shows the extent of the use of LIS applications in participating firms at the time of the survey, and the managers'reported levels of satisfaction with these systems. As can be seen from the table, the extent of LIS importance is generally limited, ranging from 1,72 little use) for external connectivity to 3,33 moderate use) for user s friendly format. High standard deviations for most applications suggests that the extent of LIS use varies considerably among the use, managers satisfaction was relatively high. The applications with which managers were most satisfied were : exactness 3,44 ), time ( 3,6) and trustworthiness (3,29). Despite the relatively low usage of LIS generally, 82 % of the respondents indicated that they use computers personally to aids business decisions; this suggests that there is, at least, widespread use of desktop computing in manager s offices. It would be interesting to investigate this finding more deeply to establish just what logistics operation tasks are supported, and in what ways. Table 3 presents the results of a question about inhibitors to the greater use of LIS.The lack of staff time to analyze needs and identify solutions in the most significant factor identified. Lack of experience of systems development and lack of information on available LIS packages were other factors commonly cited. Table 2 : The extent of use of LIS applications and managers satisfaction. Criterions for evaluation of LIS Extent of LIS importance ( 1-none, 5- extensive) Managers satisfaction with LIS. ( 1 very dissastified, 5-very satisfied) Std dev. Std dev. 1, time 2,20 3,20 3,61 2,80 2, exactness 2,10 3,80 3,44 2,81 3, availability 2,85 3,23 3,47 2,17 4, internal connectivity 2,72 3,13 3,51 2,14 5, external connectivity 1,72 3,20 2,85 2,52 6, trustworthiness 2,72 3,72 3,29 2,58 7, accessibility 3,10 3,78 3,62 2,63 8, easy use 3,15 3,72 3,75 2,41 9, format on the basis of exceptions 10. format that it facilitates the use. 3,28 3,15 3,89 2,48 3,33 3,28 4,10 2,42 Table 3 : Factors holding a business back from adopting or making further use of LIS Factors Percentage Lack of staff time to analyze needs and identify 60% solutions Lack of experience of systems development 40% Lack of information on available LIS packages 18 % Others 9 % c. User's perception on the Effectiveness of LIS The survey adapted some of the instruments developed by Closs, 1997 to identify LIS users' personal perceptions on the effectiveness of the systems. Among 132 respondents, 51 %, who had personally used LIS for their logistics operations responded to this questions. The results in 6

7 Table 4 shows that the majority of managers agreed, or strongly agreed with statements describing the benefits of LIS. Only a very small number of users less than 3 %) strongly disagreed with these statements. Table 4. End users perceptions on the effectiveness of LIS, in percentage Strongly disagree disagree uncertain agree Strongly agree Std.dev. I have come to rely on LIS in performing my job LIS are extremely useful to the firm Utilization of LIS has enabled me to meke better decisions ,29 1, ,02 0, ,91 1,12 d. The Extent of LIS support Required by Managers. It is believed that no research has attempted to identify the gaps between the current provision of LIS and small business managers desired levels of LIS support. Respondents were asked to indicate their current and desired level off LIS support to each logistic operation activity listed in the survey. A comparison was made between the current usage of LIS and managers' desired level of LIS for logistics operations activities. The result presented in Table 4 shows the 10 criterion for evaluation that have the largest gap in responses between the current LIS provision and the desired LIS provision. Table 5. Criterions for evaluation of LIS which respondents believe need become better. Criterions for evaluation of LIS Current LIS level Desired LIS level Gap between current and desired levels Mean differences ( 1-none, 5- ( 1-none, 5- extensive) extensive) 1, time 2,20 3,30 1,10 2, exactness 2,10 2,85 0,75 3, availability 2,85 4,10 1,25 4, internal connectivity 2,72 3,90 1,18 5, external connectivity 1,72 2,87 1,15 6, trustworthiness 2,72 4,09 1,36 7, accessibility 3,10 3,89 0,79 8, easy use 3,15 4,32 1,17 9, format on the basis of exceptions 10. format that it facilitates the use. 3,28 4,05 0,77 3,33 4,25 0,92 7

8 5. Conclusion : Logistic Information Systems are designed to assist mangers to make more effective operations, Potentially, they could provide great benefits to SME managers and enhance managers' logistics information systems capability. However, this research reveals that current study of the use of logistics support systems in small business is very limited. The purpose was to help small enterprises and their managers make more effective use of IT and LIS. The research reveals that the extent of LIS implementation in small manufacturing business is still low in general, although there is significant variation between different firms. Small business mangers are satisfied with the LIS they are using and are hoping for measuring the quality services in small business, still represents both a challenge and an opportunity for LIS professionals and researchers. Although LIS applications are still relatively few in number, most LIS users report satisfaction with their systems. A high demand is indicated for LIS provision and the managers' indicated needs, a greater focus on small business by LIS researchers and practioners is needed. Systems most likely to appeal to small business managers will have to be appropriate to their sector's needs, and capable of implementation with have minimal user training. Further investigation is indicated by the present study in a range of areas affecting IS usage in small business; the effectiveness of different LIS development methods and the relationship between the extent of LIS utilization and business performance. 6. References Clark, T.H. and Lee, H., EDI Enabled Channel Transformation: Extending Business Process Redesign Beyond the Firm, International Journal of Electronic Commerce, 2(1), Handfield, R.B. and Nichols, E.L., Introduction to Supply Chain Management. Prentice Hall, Englewood Cliffs, NJ. Kalakota, R. and Whinston, A.B., Frontiers of Electronic Commerce. Addison Wesley, Publishing, Reading, MA. Lambert, D.M., Emmelhainz, M.A., and Gardner, J.T., Developing and Implementing Supply Chain Partnerships, International Journal of Logistics Management, 7(2), McLuham, M., The Medium is the Message, Bantam Books, New York, NY, Lambert, D.M., Stock, J.R., Strategic Physical Distribution Management, Richard D. Irwin, Homewood, IL, DeRoulet, D., "Logistics managers should be information architects", Handling and Shipping Management, August

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