Chapter 2 – Technology and Logistics

2.1 Changing Times

Believe it or not, the typewriter was being used to prepare what we refer to today as a bill of lading 150 years ago. Technology evolved from the 1800s when the telegraph transmitted Morse code. Next came the telephone, then the radio. In 1950 computers entered the scene, and the internet surfaced in the 1990s. Today the Internet of Things, blockchain, GPS tracking, and the electronic transmission of data provide advanced technological advantages to the logistics industry. This chapter explores how technology is being used to improve logistics processes.

How Does Amazon Do It?

Tech Vision. (2020). Inside Amazon’s Smart Warehouse [Video]. YouTube. https://www.youtube.com/watch?v=IMPbKVb8y8s.

2.3 Pre-Assessment

2. What are the barriers to the widespread application of RFID?
3. How have Drivers’ log books changed?
4. What are the two areas of technology applications?

2.4 Technology in Logistics

The pandemic has highlighted the need for a robust supply chain, and one of the integral elements of an efficiently functioning supply network is the logistics link. In 2021, part shortages, backlogged ocean freight, closed borders, and driver shortages emphasized the importance of logistics in supply chain networks operating effectively. The logistics market in North America is estimated to expand to more than $12 trillion by 2023. (Bohdan, 2021) Logistics operators are looking to technology to gain operational advantages to meet the market demand. According to the Supply and Demand Chain Executive (Bodhan, 2021), six technological trends are leading the way in the transportation industry:

• Blockchain
• Big data analytics
• Artificial intelligence
• Automating warehouses
• Autonomous vehicles
• Sustainability through technology

Although we will not be exploring all of the recent evolving technological trends, it is crucial to understand that technology adoption in the transportation industry is a dynamic process requiring agile management practices. When looking to technology for an operational advantage, we look to two areas of application: hardware applications and software applications.

Technology generally falls into one or more categories in the logistics world, as outlined in the table below.

The ultimate goal of technology in the Logistics Information Structure (LIS) is to provide real-time information to management. The LIS collects, analyzes, stores, retrieves, and disseminates data. It provides regular and customized reports. The sole purpose of all this data is to enable data-based decision-making. When failures occur in the supply chain, the first step is to find a solution to keep the freight moving. Once that is completed, root cause analysis routinely follows. One type of technology assisting in the root-cause analysis arena is blockchain technology.

2.5 Blockchain

The rise of blockchain technology provides solutions for dispute resolution, order tracking, and administrative efficiency.

What is Blockchain?

“Blockchain technology is based on the concept of a distributed ledger. Instead of a centralized authority, power is distributed across participants on a network” (Shoukry, 2020).

What is a Distributed Ledger?

According to Majaski (2021), a distributed ledger can be described as a ledger (collection of accounts or other financial information) of any transactions or contracts maintained in a decentralized form. It is a synchronized database accessible across different locations by a multitude of participants. This type of decentralized information is less prone to cyber attack, fraud, and other manipulation since there is no single point or central authority required. A distributed ledger is a record-keeping of everything that happens in a transaction, and it is stored in sequential order. The information is recorded as it happens and is stored by many participants. Since the ledger storage is decentralized, changing it is nearly impossible.

How does Blockchain Work?

There are six steps in a typical blockchain transaction (PricewaterhouseCoopers, 2020):

1. A transaction is requested.
2. The request is broadcast to a network of nodes that validate the transaction and the users’ status using known algorithms.
3. A verified transaction might involve records or other information.
4. Once verified, the transaction becomes a block of data for the ledger.
5. The block is added to the existing blockchain, becoming permanent and unalterable.
6. The transaction is complete.

Blockchain technology provides excellent opportunities for supply chains and logistics. Blockchain technology improves the traceability and visibility of freight along the supply chain. Processes can be automated, and any issues or bottlenecks can be seen, allowing participants to resolve the issue immediately (Ceulemans et al., 2020).

Blockchain operates within a network, and no one server holds the data. Instead, all the participants in the network each hold the data. This methodology empowers all network participants and prevents data from being altered. The data remains secure because it exists on many servers, not at a single point. This, in turn, improves data integrity and security. Blockchain is not yet universally adopted in the logistics community, but networks are being developed, and the interest in blockchain is gaining momentum.

Blockchain in 7 Minutes

Simplilearn. (2019, February 27). Blockchain in 7 minutes [Video]. YouTube. https://www.youtube.com/watch?v=yubzJw0uiE4&t=2s.

2.6 GPS and Telematics

GPS technology allows fleet managers to track trucks, trailers, and drivers. Through Global Positioning Systems (GPS), companies can harvest real-time data and improve their supply chain visibility. However, GPS used in isolation limits a fleet manager. Companies need a complete Transportation Management System (TMS) to enable the use of GPS as an input into the logistics of the TMS. TMSs refer to the “category of software that deals with the planning and execution of the physical movement of goods across the supply chain” (Gartner, 2022). These systems focus on aspects of shipping like freight management, carrier rating, and route, mode, and carrier optimization (Essex and Kakade, n.d.).

Telematics is an interface that utilizes GPS, ELD- Electronic Logging Devices, IoT- Internet of Things, to integrate the data and aid in real-time supply chain monitoring. Through a telematics system, fleet managers can re-route drivers based on changing traffic trends, avoid accidents, monitor a driver’s attentiveness, find equipment, and be integral in routing autonomous vehicles.

The supply chain is only as efficient as the data driving it. With the development of new real-time supply chain data sources such as telematics, combined with an interpretative platform, supply chain managers are proactive and more responsive.

2.7 Electronic Logging Devices (ELD)

ELD is a technology that is significantly impacting the trucking world. A driver’s logbook was updated manually by the driver in the past. The driver would record all on-service hours, driving hours, rest hours, and waiting hours. The logbook is a required document used by Ministry of Transportation officials to validate driver compliance with legislated service hours. Most highway drivers are compensated based on miles driven, not hours of service, so it was not uncommon for drivers to manipulate their logbooks. If the driver could change a couple of entries to enable them to log more miles, they often would. The introduction of electronic logging devices has limited the ability of a driver to manipulate their hours of service. ELDs are becoming a federal requirement in many jurisdictions and driving compliance within the industry.

2.8 Automating Warehouses

One element of the supply chain that can improve the utilization and efficiency of logistics is warehouse management. Effective warehouse management allows the logistics arm of the supply chain to function optimally.

Warehouse Management System

Electronic Data Interchange (EDI)

Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents, such as purchase orders and invoices, in a standard electronic format between business partners, such as retailers and their suppliers, banks and their corporate clients, or car-makers and their parts suppliers.

EDI enables the companies to transfer the documents without having any people involved. The documents are automatically transferred from one computer (account) to another. As a result, there are many advantages to using EDI. The primary benefit is the speed and accuracy of the information transmitted. Information is made available in real-time and errors that may have previously been caused during the data entry process are eliminated.

Common information exchanged using EDI include:

• Purchase orders
• Invoices
• Advance shipment notices (ASN)
• Customs documents
• Inventory information
• Shipping status
• Payment documents
• Bill of lading
• Sales/price catalogues
• Shipment status messages

Barcodes

Barcodes have been used extensively since the 1970s, and consist of data that is displayed in a machine-readable form that can be scanned by barcode readers. The information contained on the barcode is typically pricing information, product number and description and any other pertinent information. Barcodes have become the norm in retail operations allowing for pricing accuracy and easy price changes. This data provides point-of-sale information to allow retailers to track items being sold, update inventory, identify fast and slow-moving products and assist in forecasting.

QR

Quick Response (known as QR) is using bar codes and EDI to make sales data available to vendors so that vendors can quickly replenish goods in the correct quantity. This is thought of as JIT in the retail industry. The goal is to reduce out-of-stock incidents, as well as use smaller more frequent deliveries to reduce inventory and operating expenses.

Radio Frequency Identification Device (RFID)

This technology uses radio waves to communicate the information contained on a tag attached to an object. The information contained on a tag may include things such as the product’s origin, date of production, shipment information, pricing info, and any other pertinent info. To transfer this info, both a tag and a reader are needed. There are two types of tags, active and passive. An active tag contains a power source such as a battery and can operate a great distance from the reader. Passive tags use energy from the reader. Unlike barcodes, the RFID tag and reader do not require a line of sight to transmit the information.

RFID applications include the following plus many more:

• Retail use to protect from theft
• Toll road payments
• Identification (i.e. tracking of animals and people)
• Passports
• Shipping tracking – to identify location and contents of orders
• Asset tracking (e.g. laptops, expensive tools, medical devices in hospitals)
• Race timing for marathons
• Tracking luggage during travel

2.10 Summary

The complexity of the supply chain is rapidly increasing, and understanding how to integrate technology into logistics is crucial. The key takeaway from this chapter is the notion that a supply chain expert must stay abreast of current technology. More importantly, they must understand how to utilize the technology, put it to work; how to harness it.

2.11 Post Assessment (Check Your Understanding)

2.12 Chapter References

Bohdan, A. (2021, March 31). Top 6 global logistic technology trends in 2021. Supply and Demand Chain Executive. https://www.sdcexec.com/transportation/article/21307643/amconsoft-top-6-global-logistic-technology-trends-in-2021.

Ceulemans, R., Diefenbach, T., & Guthmann, M. (2020). Blockchain in logistics. PwC. https://www.google.com/url?sa=t&rct=j&q=&esrc=s&source=web&cd=&cad=rja&uact=8&ved=2ahUKEwittIjWhpb1AhUKXc0KHaX5BlAQFnoECAgQAQ&url=https%3A%2F%2Fwww.pwc.de%2Fde%2Fstrategie-organisation-prozesse-systeme%2Fblockchain-in-logistics.pdf&usg=AOvVaw2Wxnaf4X0-EWQfEj55BQuR [opens a PDF]

Essex, D., & Kakade, S. (n.d). Transportation management system (TMS). Tech Target. https://searcherp.techtarget.com/definition/transportation-management-system-TMS

Majaski, C. (2021, October 9). Financial technology and automated investing: Distributed ledgers. Investopedia. https://www.investopedia.com/terms/d/distributed-ledgers.asp

Creative Commons Attributions

Section 2.9 was adapted from Chapter 7: Supply Chain Management from Introduction to Operations Management by Hamid Faramarzi and Mary Drane. Licensed for reuse under CC BY-NC-SA 4.0)