Knowledge management in logistics

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1 Krzysztof Wilk Katedra Systemów Sztucznej Inteligencji Akademia Ekonomiczna im. Oskara Langego we Wrocławiu Knowledge management in logistics Summary The organizations aim at improving system of knowledge management, thus methods of artificial intelligence are used more often. The article is concerned with the topic of applying artificial intelligence in the Supply Chain Management (SCM) systems area, that is IT systems which are helpful in distribution management. We can identify numerous IT tools which operate particular stages of supply chain. These are programs useful in identifying goods and transferred data, which let exchange information in real time, thus accelerating the flow of materials and improving the level of customer care. These are also systems serving the storing process (e.g. Synaptic Stock) which optimize storing management as well as integrated logistic and transport systems (ILS/ITLS). Synaptic Stock system is the example of implementing AI algorithms in SCM. It is the first intelligent storing system in Poland. Synaptic Stock system plays various functions: it leads to automacity of goods identification according to RFID technology, constant following the product flow, the process of controlling stock workers and it leads to automacity of the process of task giving to stock workers. Programs using AI algorithms should be adapted to particular IT systems of SCM needs. SCM systems operate some stages of supply 1

2 chain: planning (creating strategies of managing resources which are essential to fulfill needs on particular goods and services), identifying sources of resources, fixing prices, deliveries and payments, managing resources and storing process, production, the stage of delivery and goods return. Tools created on the basis of AI lead to improvement of logistic systems and maximizing effectiveness of companies. 1. Introduction Knowledge can be defined as an ability to use information. Information is a set of well-ordered data, which is reached from massmedia such as television, newspapers and radio. Knowledge allows achieving significant and needed goods. It facilitates solving everyday problems. Knowledge contribute to implementing changes in lifestyles of each generation. It is on the one hand the result of civilization changes, and on the other hand it generates progress. The expansion of new technologies and appliances is wildly visible. These fruits of knowledge change the world, human beings, their lifestyles and models of work. The progress that we observe in almost each branch of life is connected with better access to information and knowledge, which is based on information technologies development. Such conditions make the civilization progress more and more quick. These rapid changes are visible especially in industry and such new branches as logistics. 1 Knowledge management in logistics aims at improving the effectiveness of enterprises by raising the standards of efficacy of economic processes. The main purpose of implementing knowledge 1 M. Nycz, Generating knowledge for enterprises: methods and techniques (Generowanie wiedzy dla przedsiębiorstwa metody i techniki). Wydawnictwo Akademii Ekonomicznej, Wrocław

3 management solutions in logistics is to reduce costs and improve customer care and service. Logistics puts into practice appropriate strategies within knowledge systems. It is essential to create adequate IT tools in order to implement artificial intelligence propositions. The article presents tools of AI implementation in new management concepts. 2. Knowledge and logistics Logistics is the process of planning, making and controlling efficient and fluent turnover and storing of not only raw materials, workin process things and products but also services and adequate information from the source of raw materials extraction to clients according to their expectations. 2 The role of logistics within an organization developed for a long time before it obtained nowadays standard. First, transport was under control of production department. Departments of marketing, finance and production were responsible for stock keeping. Orders were realized by departments of accounting and selling. Such transport, stock and orders management created competitive goals and conflicts among each organization departments. Thus, decisions connected with logistics processes were not optimal. With time logistics was isolated as a separate department of an organization in order to increase efficacy of company management. 3 Recently an era of significant dominance of knowledge management in logistic has begun. Process and strategic approach played 2 E. Gołembska, Compendium of knowledge on logistics (Kompendium wiedzy o logistyce), II edition, Wydawnictwo Naukowe PWN, Warszawa-Poznań P.Polak, Process orientation In management and tools of systems integration (Orientacja procesowa w zarządzaniu a narzędzia integracji systemów). Prace naukowe, Akademia Ekonomiczna

4 important role in logistic management. Mainly within organizational, inter organizational processes and information systems led to rapid growth of this area of business. Nowadays logistics is one of the core parts of a modern organization. H.-Ch. Pfohl distinguished logistic processes, which tell a lot about its place within an organization. Among main logistic processes Pfohl classified: 4 Processes connected with transport Processes connected with reloading Processes connected with store-keeping There are also processes classified by Pfohl as additional, which are as follows: Processes connected with goods wrapping Processes connected with goods signing Fluent course of goods production and distribution needs controlling and information exchange. These are much complex processes, thus in order to facilitate their managing they are divided into basic processes. C. Skowronek and Z. Sariusz-Wolski distinguished several components of logistic processes: 5 Information-decisional processes; Logistic costs; Infrastructure of logistic processes; 4 H.-Ch Pfohl, Logistic systems (Systemy logistyczne). Biblioteka logistyka, Poznań Cz. Skowronek, Z. Sariusz-Wolski, Logistics in an enterprise (Logistyka w przedsiębiorstwie). Polskie Wydawnictwo Ekonomiczne, Warszawa

5 Main goals of logistics (adequate level of customer care provision, strengthening of position on the market, coping with the competition, costs reduction); Real turnover of goods; Storing and maintaining of stock. As we can see logistics plays an important role in an organization. Blaik points out essential connections of logistics with other areas in an organization: 6 Logistics and goods distribution, Logistics and the system, Logistics and company management, Logistics and marketing, Logistics and efficacy, Logistics and organizational structure of an enterprise. Recently much more complex and integrated information systems are being created, such as SCM (Supply Chain Management) and CRM (Customer Relationship Management). Within organizational integrated information systems like ERP (Enterprise Resource Planning) are responsible for implementing SCM and CRM systems 7. Inter organizational information systems are based on settled randomly obligatory structures of exchanged documents, that is on standards of electronic data exchange - Electronic Data Interchange (EDI). EDIFACT standard is used up till now. Majority of the most important inter organizational information systems implementations have 6 P. Blaik, Logistics (Logistyka), II edition, Polskie Wydawnictwo Ekonomiczne, Warszawa E. Gołembska, Compendium of knowledge on logistics (Kompendium wiedzy o logistyce), II edition, Wydawnictwo Naukowe PWN, Warszawa-Poznań

6 used this standard, for instance TradeNet has been used in Singapore, Elixir in Poland. Recently there have appeared initiatives which facilitate structures of EDI communicators, like LiteEDI or Open Buyig on Internet (OBI) for small and average companies needs. 3. Supply Chain Management SCM, that is IT systems helping controlling chains of deliveries, is interpreted as a number of solutions enabling organizations to plan strategically and do tasks connected with processes of purchasing, producing, stock-keeping, selling and servicing within a chain of supply. SCM integrates key business processes of all of logistic chain links, that is suppliers, producer and receiver in order to achieve maximum profitability. Among main SCM processes we can distinguish aiming at optimize orders, purchases, production, incomes and profits and logistic tasks 8. Among various advantages derived from SCM there are reducing costs of transport and costs of storing and reloading goods. SCM implementation functions of planning and supply chain realizing are treated in every detail as working out a model of whole delivery network with anticipation of all its limitations becomes possible. Next, by means of this model an organization can synchronize activities and plan the flow of materials within whole supply chain. On such basis supply is adjusted to demand and thus possible to accomplish plans connected with provision, production, stock and transport are created. Thanks to SCM customer care is significantly improved, costs and time of planning are reduced and therefore company s turnover and profits are increased. 8 J. Majewski, Informatics for logistics (Informatyka dla logistyki), II edition, Instytut Logistyki i Magazynowania, Poznań

7 SCM s solutions allow integrating inner and outside company s business processes by using Internet. Moreover, SCM systems influence on augmentation of efficiency of each employee s work. Owing to e- orders system organizations may provide their workers Internet access to ratified materials and orders from both individual deliverers and from online market or stock exchange with authorization to realize transactions worth not more than limits given earlier. The choice of products and payment conditions are settled earlier in the central scheme of purchases. 9 Within SCM systems that are assigned for managing processes occurring in supply chain we can distinguish numerous information tools operating particular stages and aspects of this chain. These are programs which serve to identify goods and transferred data (e.g. EAN-UCC system). They permit exchanging data in real time, thus they help hasten the flow of materials and increase the level of customer care. Systems operating stocking processes (e.g. Synaptic Stock) are also part of SCM. These systems optimize storing economy. Other integrated logistic and transport systems (ILS/ITLS) and intelligent transport systems may be ranked among systems operating stocking processes. 10 The essence of the changes resulting from implementing information tools in SCM is providing such service of these tools that it is consistent with economical indices of functioning industrial subjects assessment. Therefore there arise a problem of coordination. Artificial 9 Ibidem 10 Within SCM apart from tools various types of strategies coordinating cooperation between business and information tools can be distinguished (e.g. strategies of quick client service, such as quick response or efficient customer response), ISP. S.A. Institute of Programming Studies (Instytut Studiów Programistycznych), ( ); Logistyka.net.pl, ( ). 7

8 Intelligence (AI) methods and techniques more and more randomly used in business are helpful here. 4. Artificial Intelligence solutions in logistics The essence of implementing AI solutions is the endeavor to make the processed in business processes data automatical in a way that enables making accurate managerial decisions according to analyses of particular data basis done by business programs. Moreover, AI programs start replacing workers. Even assessments of particular workers (stock workers) are generated by a program. Programs using AI algorithms should be adapted to needs of existing IT systems like SCM. SCM information systems serve following stages of supply chain: The stage of planning strategies of managing resources essential to satisfy supply for certain goods or services are created. The stage of defining resource sources (deliverers) on this stage procedures of price, deliveries and payment settling should be worked out. The stage of stock and storing processes management such activities as stock management, procedures of receipt realization and delivery checking, transfer of the delivery to production department, ratifying certain deliverers payments are realized. The stage of production on this stage activities necessary to producing, wrapping, preparing to send goods are planned; measures of quality, magnitude of production and employees work efficacy are done. 8

9 The stage of delivery actions connected with receiving orders from clients, creating stock network, choosing transporters who provide goods to clients and working out invoice system are concerned on this stage. The last stage of returns actions like creating network of claims and faulty products return points and arranging points aiming at giving customers care and support when they have problems with purchased goods are taken on this stage 11. It must be noticed that on nowadays level of AI programs development systems which could operate each stage of the chain and which would generate information about qualitative features based on received data are scarce. AI applications being created now operate on particular stages. One of such solutions will be described here. Synaptic Stock system is an example of using artificial intelligence algorithms in supply chain management. Synaptic Stock is called by its inventors as the first intelligent stocking system in Poland. Information analysis imparted by program s inventors indicate that the main feature of this program is that it automates stock economy. This is why it is called an intelligent system. The process of automacity and optimizing proceeds on following, characteristic for storing processes, levels: Synaptic Stock automats identification of goods according to RFID technology, 11 M. Maternowska, Analysis of logistic costs supports decision making process in distribution area case study (Analiza kosztów logistycznych wspomaga proces podejmowania decyzji w sferze dystrybucji studium przypadku). In: Logistics (Logistyka) 2002, No 4. 9

10 It enables constant following of the process of products flow, that is the system allows to observe currently where an item or a portion of goods is in a certain moment, The system permits to control stock employees work on the basis of two indices: speed and efficacy of tasks done and the index of losses in the store, Synaptic Stock optimizes goods distribution within the store in a way that it decreases to minimum time of work, It automats the process of giving tasks to particular stock workers. 12 Apart from these main functions Synaptic Stock system allows realizing other functions that improve servicing a stock, e.g. managing goods movement according to FIFO and LIFO methods, servicing several stocks at the same time, managing PZ, WZ and MM documents, servicing goods sticking, making possible to print transport documents or doing stock cataloguing Conclusions XXI century brings new challenges to all society. Dynamic development of technology and market helps logistics to evolve too. It is the century of knowledge and its future depends on appropriate knowledge management and modern information technologies using. 14 Literature Cited 12 Based on: ISP. S.A. Institute of Programming Studies (Instytut Studiów Programistycznych), ( ). 13 Ibidem. 14 M.Nycz, B.Smok, Modern information technologies in management (Nowoczesne technologie informacyjne w zarządzaniu). Akademia Ekonomiczna, Wrocław

11 Blaik P., Logistics (Logistyka), II edition, Polskie Wydawnictwo Ekonomiczne, Warszawa Gołembska E., Compendium of knowledge on logistics (Kompendium wiedzy o logistyce), II edition, Wydawnictwo Naukowe PWN, Warszawa-Poznań Majewski J., Informatics for logistics (Informatyka dla logistyki), II edition, Instytut Logistyki i Magazynowania, Poznań Martenowska M., Analysis of logistic costs supports decision making process in distribution area case study (Analiza kosztów logistycznych wspomaga proces podejmowania decyzji w sferze dystrybucji studium przypadku). In: Logistics (Logistyka). 2002, No 4. Nycz M., Generating knowledge for enterprises: methods and techniques (Generowanie wiedzy dla przedsiębiorstwa metody i techniki). Wydawnictwo Akademii Ekonomicznej, Wrocław Nycz M., Smok B., Modern information technologies in management (Nowoczesne technologie informacyjne w zarządzaniu). Akademia Ekonomiczna, Wrocław Pfohl H.-Ch, Logistic systems (Systemy logistyczne). Biblioteka logistyka, Poznań Polak P., Process orientation In management and tools of systems integration (Orientacja procesowa w zarządzaniu a narzędzia integracji systemów). Prace naukowe, Akademia Ekonomiczna Skowronek Cz., Sariusz-Wolski Z., Logistics in an enterprise (Logistyka w przedsiębiorstwie). Polskie Wydawnictwo Ekonomiczne, Warszawa Internet sites ISP. SA. Institute of Programming Studies (Instytut Studiów Programistycznych), ( ) Logistyka.net.pl, ( ). 11

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