Technology Usage in the Supply Chain

ABSTRACT

Case Study: 4

In our report first of all we give an analysis of the case study in which the importance of Third Party Logistics (3PL) is discussed as well as the importance of ICT implementation in 3PLs. The analysis tells us about various facts and figures regarding ICT and Italian 3PLs. there are three types of service providers full haulage, basic logistics and advanced logistics. The small 3PLs have two alternatives whether to stay in the low cost transportation market or become the tier of the large logistics providers. We recommended that the Italian small 3PLs should move from the traditional services of transportation and warehousing to the advanced service providers. We suggest them incremental as well as radical innovation in the implication of ICT technology to improve their services. We recommend that they should increase the utilization of their websites and according to the Model of Internet Commerce Adoption they should move from promotional stage of their websites to the business processing stage in which they should perform online order processing, tracking of goods etc. and they should also give training to their employees which is a barrier in the implementation of ICT. Then we recommend RFID fro tracing and tracking, for this purpose we suggest six steps for the implication of it in their process and then the benefits which they achieve by implementation of it.

Technology Usage in the Supply Chain

INTRODUCTION:

Case Study: 4

Third Party Logistics (3PL) is the function by which the owner of goods (The Client Company) outsources various elements of the supply chain to one 3PL company that can perform the management function of the clients inbound freight, customs, warehousing, order fulfillment, distribution, and outbound freight to the clients customers. 3PL is usually associated with the offering of multiple, bundled services, rather than just isolated transport or warehousing functions (Leahy et al., 1995). (3PL Definition)

ANALYSIS OF CASE STUDY:

According to Christopher, The real competition is not company against company but rather supply chain against supply chain. One of the successful strategies of supply chain is 3PL. ICT developments in recent years have changed the role of 3PLs in supply chain management from asset based approach to process and knowledge based approach. Logistics companies play a more important role in physical and information flows along multiple levels of the supply chain. This has forced 3PLs to look for accurate and real-time information on the status of the entire shipment process to increase their planning capacity and to improve customer service levels. Over the sample of 150 respondents, almost 27% are micro companies and 42.5% are small and 30% are medium. Out of 100 companies 36companies spend less than 1% of their total cost on ICT. Telefax, mobile, internet access and email usage is better as compared to other useful technologies like RFID, Wireless LAN CRM and ERP.The use of significant technology increases day by day but companies are not using it.85.9% of companies have no IS integration with other supply chain participants. Only 10% have full integration through ERP systems. Companies underestimate the potential value of websites in improving their businesses. Nowadays where companies are competing based on their way of integration information, use of software are increasing rapidly but the use of specialize software like ERP, CRM is seldom. The trace and tracking services is also a very seldom use tool used by companies. Advanced providers are more oriented towards the

Technology Usage in the Supply Chain

Case Study: 4

customization of their services and customer service delivery. Many barriers exist to the successful adoption of ICT by these providers. The implementation cost together with running cost are considered most influencing factors .Some of the barriers includes the human and financial resources, the technical skills of staff and lack of technological standards. ICT is a critical tool for rapid customization of products and there are many potential benefits of adopting it in 3PLs. The main problem which small Italian firms face is the implementation of ICT. The risk is that small 3PLs could either be tier suppliers of large logistics companies, or even forced out of the market completely.

RECOMMENDATIONS:
Now the small Italian 3PL firms has two options, whether to go with the simplest option i.e. to continue their processes as it is (i.e. commodity providers) and survive in a low cost world of transportationor to improve their services by providing value adding services (i.e. to become advanced logistics providers) and purse the expensive and problematic path. In our analysis we recommend that the small 3PL firms should go with improving their services and become advanced logistics provider.

Reason:
The reason behind recommending advanced logistics services isthat previously, the 3PL just provide transportation services, and then they move to the next level in which they provide both transportation & warehousing and value added services. At present their services move to the next level i.e. planning phase in which they provide all the previous services as well as 4PLs services. The competition in this market has increased and the services of 3PL have been increased and they provide advanced services but the Italian 3PLs are still providing the very basic i.e. transportation and warehousing services. So if they want to remain in the market they should have to move to the next level and start offering value added services at the start and then move to the advanced level. The following figure shows the trends in the 3PL services and by observing it is easily to identify the level.

Technology Usage in the Supply Chain

Case Study: 4

Commodity Providers to Advanced Logistics Providers:

Commodity providers are the Small 3PLswhich are currently in a low cost world of transportation carriers. We are recommending commodity providers to move towards advanced logistics providers and for that the companies have to offer value added services through innovation. There are basically three stages of innovation. We have recommended only incremental and radical innovation. Incremental innovation is the innovation which is done through improvement of existing services so here we are recommending them to use Website on a massive scale and secondly they should train their employees to take proper advantage of 3PL services.In radical innovation something is built new, so here we are recommending RFID Technology for Tracing &Tracking services. These all activities will help the commodity providers to become advanced service providers.

Technology Usage in the Supply Chain

Commodity providers

Case Study: 4

Offer value added services

Advanced LP

Commodity providers

Innovation

Improvement in existing technologies

Website Advanced logistics providers

Incremental innovation Training of employees

Radical innovation

Creates new services

RFID Technology in T&T

Technology Usage in the Supply Chain

Company Website:

Case Study: 4

ICT applications are used in customization of logistics services. Website is one of the most important tools among the ICT applications. If websites are effectively utilized then they provides many potential benefits i.e. cost reduction and improved customer services. The facts and figures in the case study related to the website represents that this technology is now reasonably established within the Italian small logistic providers.

Company Website

Full Haulage 61.1%

Basic Logistics 71.6%

Advanced Logistics 72.9%

But the figure 5 in the case study shows that they most of the potential functionality of this tool has been underestimated and they are not enjoying the potential benefits. This shows that they are not very innovative in their use of website. Currently they are utilizing the websites as advertisement channel, company presentation etc. which shows that they are on the initial stage of Internet Commerce Adoption Model.

Internet Commerce Adoption Model is very good model which proposed a general
framework to evaluate Websites from the customers perspective of value-added. The purpose of a commercial website is classified into three categories i.e. Promotion of product and services, Provision of data and information, and Processing of business transactions.

So by using this model the 3PL companies should move from the promotion stage to the very advanced stage i.e. processing of business transactions. The 3PL should use their website for conducting business, taking sales order online, and processingonlinepayments and inquires, links to distributors and warehouses, offering online catalogues, and newer technology such as blogs, RSS and alternative payment processes. They can further analyze websites to identify all its value added features. They can also combine the internet with networking, software and hardware technologies to enhance or improve existing business

Technology Usage in the Supply Chain

Case Study: 4

processes or to create new business opportunities. The Internet Commerce Adoption Model is as following:

(PDF)

Technology Usage in the Supply Chain

Case Study: 4

The above table shows different levels of e-commerce sophistication. The term sophistication is used to prefer to the processes, structures and skills adopted by a company for facilitating the services over the internet. So the Italian 3PL firms should move to the levels of catalogue, transaction, registration and personalization so that they can get benefits from it by properly utilizing their websites as mentioned in the above table. The Italian 3PL firms should connect their website to the software which they are using as mentioned in the case study i.e. warehouse management software, sales software etc. in order to integrate the inside system with the outside organization. It provides value for both the organization and customers. For example, the customer places online order then the back-end system process it and check inventory etc. the following figure shows the working of it:

RFID Implementation:
3PLs have to find ways to innovate and expand their revenue streams," Konarski said. "RFID technology is a way for them to do that.RFID won't provide more revenue and profit right away, but it has twofold potential to help 3PLs. First, they can save money internally by saving time and labor in how they handle goods. Second, they can offer more information and more services to customers."

Technology Usage in the Supply Chain

Case Study: 4

The Italian 3PL firms should implement RFID technology in their processes in this way they will get benefit of competitive advantage along with many other benefits of this technology. Here we are not suggesting any proper framework or model for the implementation of RFID technology.

Step for the implementation of RFID:

We recommend six steps for the implementation of RFID in the 3PL (which are purely made by us), which are as following: Cost-Benefit Analysis: First of all the 3PLs perform cost and benefit analysis of this technology, collect facts and figures regarding it implications, methodologies, usefulness and requirements. When they collect ample data regarding it, then they should arrange meeting with their customers. Arrangement of Meeting: When the analysis had been done then they should arrange meeting their customer i.e. manufactures and retailers of goods for which 3PL firms provides services. In the meetings they should discuss and tell them the benefits of implementing RFID technology in the supply chain of both parties. And show them the facts and figure regarding it to convince them to adopt this technology. Negotiation: If their customers got the point and agree to implement RFID technology and ready to share cost and benefits then 3PLs negotiate with the customers, in order to share the benefits and cost of this technology. And decide to what extent both of them share the costs. RFID Implementation: When their customers agreed on it then at the staring level they should place RFID tags at pallet level and then latter on case level RFID tags. Here we are not providing the detail of process i.e. what is the framework which they follow to implement RFID tags. Sharing Cost and Benefits: After implementation both of them share cost and benefits of it.

Technology Usage in the Supply Chain

Integrated systems:

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So by using this technology the systems of both parties would be integrated. And there are many benefits of RFID implementation which are explained as follow.

Benefits of Implementation of RFID:

The Italian 3PL firms should implement RFID technology in their operations, by using this technology the 3PL will enjoy many benefits which are as followed: Gain competitive advantage Reduce operational cost, Improve integration, Improve trust and transparency, Reduced supply chain cost, Avoidance of redundant and duplicating activities, Long term business visibility, Improved buyer-supplier relationship (customer relationship management) etc. Training of the Employees: In the case study it has been mentioned that there are many barriers in implication of ICT one of them is human resource i.e. the employees dont have technical expertise. So for the successful implementation of different ICT technologies like websites, soft wares, and RFID technology the small 3PLs have to train their employees. Employee empowerment is very necessary in order to successfully implement incremental innovation. Train your 3PL employees by offering different training courses.

Reason: There is lack of technical staff for the proper implementation of ICT technology. Action Plan:
There are different training programs specially designed for 3PLs to improve their integration and collaboration on website (www.3pl-training.com). From this website they can train their staff based on their need. (Training)

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Technology Usage in the Supply Chain

Bibliography: 3PL Definition. (n.d.). Retrieved from

Case Study: 4

http://www.emeraldinsight.com/journals.htm?articleid=1603637&show=html

PDF. (n.d.). Retrieved from http://eprints.usq.edu.au/3597/1/Ally_CaterSteel_Toleman.pdf

Training. (n.d.). Retrieved from www.3pl-training.com

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