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Logistics Information System

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In this presentation, we will discuss the concept of information and how it affects decision making in management, management information system. We will also talk about processing of orders and …

In this presentation, we will discuss the concept of information and how it affects decision making in management, management information system. We will also talk about processing of orders and documents, logistic information system designs and various other aspects.
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  • 1. CHAPTER-2LOGISTIC INFORMATION SYSTEM
  • 2. INFORMATION• i-Information is basic to decision making• ii-Decision making is the essence of management function.• iii-A manager relies on a information system to make decisions pertaining to his function and level of his management.• iv-The information so collected is integrated into a system.• v-The information may be in the form of computer, desk calculator, group of people,filescontainers.etc.
  • 3. INFORMATION(contd.)• vi-Information is a structure of machines and management technology enabling the manager to collect,receive,process and analyze information.• vii-Information is transmitted, stored and retrieved in an information system.• viii-Information is transmitted to create a data base for decision making• ix-The storage function involves filling,retrieving and file maintaining.
  • 4. Management Information System(MIS)• i-An information system which enables the management to make a decision is called MIS.• ii-Lack of information leads to poor decision making.• iii-An information from a particular source must be accepted with caution since every source has its own bias.
  • 5. Elements of Information• i-Sources-Sources must be reliable, authentic and easily available. For Physical distribution, it can be sales orders, accounting data, data from booksperiodicals, from executives and knowledgeable persons.• ii-Collection of information-The system may receive information sales staff,periodicals,publications,letters,telegrams,tel exes from dealers,distributors,customers and research organizations.
  • 6. Elements of Information(contd.)• iii-Storage-The data so collected from various sources in a formmanner which are convenient for storsageuse.The data bank may be registers,files,documents,books etc• iv-Retrieval-The information so collected from data sources, processed and stored has to be retrieved for the purpose of decision making, and should be in a form which is useful in decision making.
  • 7. Elements of Information(contd.)• v-Reports-The data collected, stored and retrieved has to be put to decision maker in specified forms called reports and can be in the form of letters, orders and must get information which is essential for decision making.• It is essential that retrieval of information is without errors, fast and prompt and should be in a form useful to the reader.
  • 8. Computerized Information System• i-Computerized data is rapid, prompt and error free and gives large volume of information for accurate analysis and decision making.• ii-Computer enables us to analyses information in a manner and speed which can not be obtained manually.• iii-Computerization may look to be expensive, because of initial high cost but with the advent of minimicro processors and with the possibility of hiring and leasing the costs are much to the advantage of decision maker.
  • 9. Logistic Information System• i-The function coordinates the function of physical supply of raw materials and distribution of the finished products.• ii-The prime functions performed are movement control and demand supply coordination.• iii-The movement control of raw materials, finished products involves the transportation of goods, warehousing and material handling.• iv-Under demand supply coordination, purchase orders and sales orders are processed.
  • 10. Computerized Information System• Computer data is rapid, prompt and error free• Allows analyzing information with speed, not possible manually• Computerization helps in better coordination between supply of material and demand• Though initially expensive, in the long run saves on space and staff.
  • 11. Computerized Information System(contd.)• Total information system includes mathematical and statistical modeling facilitating analyzing of data.• It is a decision assisting system.• Helps in control systems such as Inventory control, computerized material handling and storage system, order processing system.• Delegates the responsibility to lower levels under rulesregulations, which are made in advance, departure from established rules becomes almost impossible.
  • 12. Logistic Information System• Coordinates the function of supply of raw material as also distributes the finished product.• Prime functions being movement control and demand supply coordination.• On raw material side, involves follow up indent up to issue of raw material, Purchase Order follow up,reciept and warehousing of material, Inventory control, issue etc.• On finished product side ,follow up sales orders, processing, information flow,warehousing,scheduling,allocation of finished products.
  • 13. Four Primary activities of Logistic Inf. System• i-Data flow from external sources• ii-Processing and storage of information within Firm• iii-Communication of data for storageprocessing the decision maker in the form of reports• iv-Communication of decision to customers and their feedback.
  • 14. External Information System• i-Order pattern of the customers- means total numbervolume of products ordered.• ii-Material handling system available with Customers -Can result in saving if material handling system of SupplierCustomer is compatible.• iii-Re-order point of the customers- Computerized order processing can reduce the reordering level• iv-Ordering procedure of customer -requires coordinationcooperation
  • 15. External Information System• Following information is desirable from internal departments.• i-Purchasing –Preference of purchased parts.• ii-Production- Inf. On Product reference, Competitor product performance• iii-Marketing- Sales structure, Customer service requirement.• iv-Finance and control- Sales statistics, credit rating.• v-Physical distribution- Warehousing locationscapacity, reorder pattern etc
  • 16. Internal Information System• Purchasing• i-Logistic costs of purchasing from different suppliers and supply points.• ii-Routing instructions and status for inbound materialssupplies.• iii-Supplier preferences in meeting delivery schedules.• iv-Supplier pricesdiscounts, name adresses,delivery schedule• v-Alternate source of supplyprocess.
  • 17. Internal Inf. System(contd.)• Production• i-Warehouse capacity for raw materialsfinished products.• ii-Production quantitiesScheduling.• iii-Warehousing material handling systems.• iv-Alternate costs of logistics based on different schedules.• v-Delivery requirements from production to warehouse.• vi-Logistic innovations.
  • 18. Internal Inf. System(contd.)• Production (contd.)• vii-Status of inbound movement of suppliesraw materials.• viii-Production capacity.• ix-Alternate methods of production based on different production plans.• x-Revised Partys plans.• xi-Production innovations.• xii-Physical supply requirements and delivery requirements.
  • 19. Internal Inf. System(contd.)• Marketing• i-logistics costs of alternatives levels of customer service.• ii-Performance in meeting regular customer service standards.• iii-Potential changes in logistics which may affect future sales efforts programmes.• iv-Competitor logistics costs.• v-Customer complaints.
  • 20. Internal Inf.System (contd.)• Marketing(contd.)• vi-New Product introduced and sales production plans.• vii-Sales costs.• viii-Customer service norms.• ix-Prices and price adjustments.• x-Special customer service requirements.
  • 21. Internal Inf. System (contd.)• Finance• i-Budget for physical distribution costs.• ii-various estimates of costs.• iii-Projected capital investment requirements.• iv-Order processing system to provide coordination within invoicing and accounts receivable.• v-Freight bill auditing procedure.
  • 22. Internal Inf. System (contd.)• Finance (contd.)• vi-Customer credit rating• vii-Credit procedure.• viii-Corporate financial conditional and performance.• ix-Capital availability.• x-Status of capital requests.
  • 23. Internal Inf. System (contd.)• Service Agencies• i-Proposal for rate adjustments.• ii-Rate information requirements.• iii-Request for quotations for equipment.• iv-Freight rates.• v-Carrier rates, service and availability.• vi-Request for rate adjustments, transportation equipment, transit time standards etc.
  • 24. Order Processing• Order processing cell documentation• Credit check• Inventory check.• Order for dispatch.• Replenishment of inventory.• Intimation to customer.• Dispatch of goods.• Receipt of goods.• Collection of payments.
  • 25. Document Processing• Customer order• Order processing cell (Inventorycredit check, Production schedules coordination)• Customer intimation• Invoicing• Shipping documentation• Warehouse• Transportation• Dispatch to customer
  • 26. Costs• Order processing costs include employee remunerationbenefits, rentelectricity• Once system is established and staff is recruited, no major variation takes place on year to year basis. increase takes place due to inflatory conditions• One universal problem in order processing is bunching of orders during last few days of month because sales staff want to surpass sales targets.• This leads to avoidable expenses and generates errors and pressure of work.
  • 27. Order Cycle Time• This is the time interval between receipt of customer order and actual dispatch of goods.• Orders are generally held up in dispatch section for clarification etc.• The improvements should be effected for better order improvements, thereby improving overall order processing.
  • 28. Order Form• To avoid errors,pre- printed forms are used to book orders.• Can be simplified by coding the standard quantitiesnamesaddresses of customers.• In a departmental store, at the end of the shiftday orders are sent on teleprinter communication of batch processing. presently done on line.• By reducing the number of transcriptions,discrepencies in quantities destination etc can be avoided.• If customer uses his order format, it can be transcribed in form which can be used by suppliermanufacturer.
  • 29. Status Reporting• Customer in placing order, would need an acknowledgement and expected date of delivery.• In case acknowledgements are not given and delivery dates are not adhered to, Customer may resort to various modes of follow up, the costs of are much higher than anticipated, leading to appreciable cost increase in physical distribution.
  • 30. Internal Processing• Order form data are utilized for sales records, such as credit status reports ,billing schedules, manufacturingpurchase schedules.• These have to be routed to all departments.• The sequence must be so determined that the flow of information is expedited and it is ensured that documentation takes place in all relevant departments.
  • 31. Credit checking• Order processing requires checking credit worthiness of customer.• Sales representative ,in order to expedite sales would tend to ignore credit worthiness .• An elaborate credit checking is a necessary activity but it must be performed expeditiously ensuring no delay.
  • 32. Inventory check and Policy• After checking creditworthiness, the available stock of goods have to be checked.• Considering existing stocks may not be adequate to meet present demand, requiring a decision how much to be supplied to customer.• Sales policies have to be framed to offer discount etc.
  • 33. Dispatch Communication• After checking credit, prices etc,the order to be transmitted to warehouse for execution.• Longer is the delay in executing the order, larger is the possibility that customer will cancelamend the order.• Explicit dispatch instructions to be issued to warehouse and customer should be informed about the status of the order.
  • 34. Dispatch• After receipt of order, the warehouse manager have to order for transport,simultenousl;y preparing the documents for dispatch for the purpose of accountal of stocks, billing and advice to the customer, billing of transportation and intimation to all concerned including marketing,production,finance,purchase etc to fulfill the requirements of an integrated system.• An expeditious order processing is required.
  • 35. Logistic Information System Design• Four major considerations are required for an optimal system.• i-The decision to be made at each level of organization.• ii-The requirement of the system.• iii-The requirement of control over the system.• iv-Input and output data.
  • 36. Logistic Information System Design(contd.)• i-Organization decision- While designing information system, it has to be ensured who is entitled to get information for decision making.• ii-A judgment has to be made between tangible and non- tangible costs of collectionprocessing of information.• iii-Closely examine what types of decisions are made and their importance, ensuring quality information for decision making.• iv-While planning Log. Inf. System, the requirement of daily routine information and decisions which are made under exceptional circumstances.
  • 37. Logistic Inf. System Design(contd.)• ii-System requirement-• After arriving on the decision on collecting information, next requirement is identification of source of information, the volume and quality of information• A suitable channel of communication wil have to be designed to satisfy various requirements.• Considering various factors, it is suggested electronic data processing system offers various advantages.
  • 38. Logistic Inf. System Design(contd.)• iii-Control requirements-• a-Based on guidelines given by the management, system should be able to arrive at decisions, minimizing delays and increasing efficiency.• b-Specifying and arranging the parameters of the automatic system and should have the possibility of redesigning id so desirable.• c-Control is required to ensure no errors are made.
  • 39. Logistic Inf. System Design(contd.)• iv-System input and output data• In order to satisfy the demand of a customer, number of activities are undertaken by organization to satisfy it and need proper coordination• Action reports are made for the purpose of undertaking an activity already planned on the basis of generated information
  • 40. Total Inf. System in Logistic• The following costs may be taken into account under the TIS for physical distribution system• A-Transport costs• i-Common carrier• a-Pool freight per ton per km for smalls and wagon loads.• b-Truck freight• c-Air freight• d-Land ,water, sea freight rates.• e-Forwarder and shipping charges.
  • 41. Total Inf. System in Logistcs(contd.)• A-Transport Costs(contd.)• ii-Private Vehicle Capital costs• a-Capital costs, depreciation and interest.• b-Return on capital• c-Cost of transport equipment maintenance.• d-Equipment, tools and structures.
  • 42. Total Inf. System in Log. (contd.)• A-Transport costs(contd.)• iii-Operating costs• a-Maintenance of equipment, replacement of parts.• b-Maintenance of Labour and supervision.• c-Maintenance of tools and equipment structure, fuel oil etc.• d-Transport Labouroverheads• e-Maintenance supervision and overheads.
  • 43. Total Inf. System in Log. (contd.)• B-Warehousing costs• i-Private warehousing costs• a-Landbuilding costs, depreciationinterest• b-Equipment and material.• c-Personneloverhead costs.• d-Fire,safety,security costs.• e-Training of Labourequipment.• f-Insurance and maintenance costs.
  • 44. Total Inf. System in Log. (contd.)• B-Warehousing costs (contd.)• ii-Public warehousing costs• a-Storage charges.• b-Handling charges.• c-Insurance.• d-Fire,theft,loss ,compensation etc• e-Other charges.
  • 45. Total Inf. System in Log. (contd.)C- Distribution AdministrationDistribution management personnel and clerical personnel costs.D-Inventory Costsa-Return on Inventory investment.b-Inventory service costs.c-Cost of space occupied.
  • 46. Total Inf. System in Log. (contd.)• E-Packaging costs• a-Materials• b-Personnel wages• c-Equipment costs.• d-Equipment maintenance.• e-Tare shipping costs.• f-Weight of packaging.• g-Damaged goods.
  • 47. Total Inf. System in Log. (contd.)• F-Material handling costs• i-Equipment• a-Capital cost and return on income.• b-Cost of fork lift, hand truck, conveyor etc.• ii-Labour costs• a-Basic pay and DA etc.• b-Employment insurance scheme.• c-Pension, welfare fund etc.
  • 48. Automated Order Processing• i-Sales order• ii-Check Inventory levels ( if inventory levels above reorder point ,no action.)• iii-Inventory level below reorder point• iv-Decide replenishment of inventory.• v-Determine quantity for replenishment ,based on sales forecasts, lead time, ordering costs etc.• vi-Issue order for replenishment, receive and update inventory
  • 49. Order Processing• Advantages of automated order processing• i-Processing time is reduced, giving lower location inventory, physical distribution costs.• ii-Accuracy reliability of the processing system is enhanced.• iii-Manual system is normally expensive considering manual labour,lower efficiency etc.• iv-Automated system can be more productiveefficient and a wide variety of machines are available.
  • 50. Essential componants of Automated Order Processing• a-Order terminal -receives Sales order through E- telephone, Telex etc.• b-Order display -Requires display for editingadding information.• c-Order modification -Displayed orders are scrutinized and modified if required.• This can be done manually or can be done automatically.
  • 51. Essential componants of auto. order processing(contd.)• d-Internal processing by computer• i-The customer Master Credit File – Gives credit limit data, present credit available.• ii-Inventory Statistics File -Contains data on inventory available on hand and at various locations.• iii-Open orderBatch order File- Contains data on the status of orders on the system.
  • 52. Essential Comp. Of Auto. Order processing (contd.)• d-Internal processing by computer (contd.)• iv-Price File –Contains prices,discounts,taxes,duties etc for each product.• v-Transportation File- Contains data on various modes of transport, gives possibility of grouping orders• vi- History File- Compiles data on logistical aspects required for future reference – forecasting demand, logistical planning.
  • 53. Essential Comp. of Auto. Order Processing(contd.)• e-Physical distribution command- May issue commands in the field of production, materials management,finance,marketing.Depend on the structure of organization, logistic system, capabilities of the equipment.• f-House Keeping –An automated system makes it possible to communicate with outside agencies e.g. customers, transporters, tax authorities.• Makes it more efficient and cheaper than the manual system.
  • 54. Essential Comp. of Auto. Order Processing(contd.)• g- Monitoring and control- It calls for greater skills by Manager to ensure he understandanalyze each aspect of system, ensuring efficient management operations.• h-Corporate data link- Total information on order processing has to be conveyed to top level management. Type and frequency of information can be decided in consultation with corporate office.
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