Abstract
The advent of information technology has led to the enhancement of organizational services through the adoption of IT. Therefore, this essay paper investigates the impacts of information technology on the logistic industry. The study develops secondary objectives for guidance in a bid to ensure comprehensive coverage of the topic. The following objectives will guide the study: Firstly, this paper investigates and reports on the state or extent of adoption of IT and awareness in logistic companies.
Secondly, the essay examines the perceived usefulness and perceived ease of IT systems in logistics. Finally, the paper proposes possible recommendations on what logistic firms should do to improve their services using Information technology. Based on empirical evidence obtained from prior studies, the study concludes that the status of IT adoption, integration, and implementation is considerably low.
From the findings, it is eminent that information technology in logistics industry plays an important role in enhancing productivity and inter-trade relations coupled with increasing efficiency, effectiveness, and flexibility in the delivery of goods and services. Due to the prevailing situation, this study recommends that capable firms should embrace IT; also, the government should intervene where firms have the low financial ability.
Introduction
With the rapid diverse changes becoming more eminent in the world of globalization and industrialization, several innovations are consuming industrial activities. Adebambo and Toyin affirm, “Information and Communication Technology aspects are fast becoming one of the main drivers of change, posing new strategic challenges” (68).
In essence, the business environment today has been witnessing unprecedented changes as numerous companies are seeking contemporary ways to manage the existing competition with the adoption of technology being the solution towards sustaining their competitive advantage (Azevedo et al. 2). With this insight in mind, based on empirical evidence sampled from prior research, this paper seeks to examine the impact of information technology on the logistics industry.
Background (Defining variables)
Two distinct variables are important in this study. They include information technology and logistics. Due to increased international fame on information technology, several studies have emerged to define these terms. Conventionally, information technology (IT) refers to advanced systems used to deliver information whereby it involves advancement, application, implementation, and management of computerized information systems (Azevedo et al. 8).
Information technology precisely involves the installation of networks, development of multimedia systems, and enhancement of communication components, web designing, network administration, as well as management and planning of technological systems.
Therefore, being an important component that covers several sectors and functions of companies, Information technology has become a necessity to enhance productivity, delivery of customary services, improve efficiency, and enhance communication within internal and external environs of companies, corporations, and other organization. With the advent of information technology, companies have witnessed improved relations with both the public and either directly or indirectly associations amongst companies.
Logistics refers to the technique used in the management of information, goods, as well as services from the area of production to the point of consumption. Bin and Chaoyuan assert, “The logistics industry is a compressive industry integrating service with equipment to become an entity; moreover, a stable and efficient logistics network not only cuts the abrasion and transaction costs but also amplifies every factor’s function and promotes profitability” (30).
Comprehensive research studies have associated logistics with the rapid global economic changes witnessed in the recent centuries, by enhancing economic expansion and stability, improving the quality of life, and above all enabling enhanced regional and international relations. Empirical research conducted by Altran Group & Consultrans reveals that transport and logistics are essential elements of a successful economy globally by making a significant contribution especially in the European Nations, and “currently generates 7 percent of the European Union’s gross domestic product (GDP) and accounts for around 5 percent of employment in the EU” (5).
Background (Current issues in IT and logistics)
Globally, integrating Information Technology in different companies from manufacturing to the service offering industries is increasingly gaining acceptance. The adoption of technologically enabled applications in organizational operations started several decades ago, with biggest economies becoming the first inventors of information technologies. The demand for Information Technology services increased exponentially, and thus, the need to integrate IT in business operations became much clear.
Developed economies like the US, Germany, and the UK become the first nations to adopt IT in logistics. Economically, according to Bin and Chaoyuan, Information Technology in logistics has significantly enabled economic growth and currently, “the proportion of logistics costs of the developed country on GDP is approximately 10 percent” (32). Currently, economic reforms coupled with the transition to a market economy is considerably high, thus forcing biodiversity of IT ranging from Multination Corporations (MNCs) to Small and Medium Enterprises (SME) to enhance efficiency and competence.
However, the situation is somehow different in developing economies, as several countries are still unaware of the imperative of enhanced technologies in logistics, lack enough financial or skilled human resource to implement it, or simply are becoming ignorant to changes due to existing traditional perceptions. Adebambo and Toyin affirm that as developed economies, “realize that easy access to information and communication and the delivery of their products or services are important drivers in developing and sustaining market competitiveness nationally and internationally” (68), the impact is flowing to the developing economies.
Research has consistently concluded that developing economies have demonstrated laxity and reluctance in adopting Information Technology systems in logistics operations. With an abnormal concentration of underdeveloped small and medium enterprises, developing economies lack well-developed IT systems in the logistics industry. However, enhanced international trade seems to enable MNCs to utilize the available opportunities in developing economies to enhance technological development to such countries, consequently resulting in positive economic intensification.
Problem statement
As mentioned earlier, logistics and transport form a significant backbone to the global growth of the economy in both developing and developed economies. From the definitions of logistics and information technology, it is clear that the two components interchangeably depend on each other. As the integration of Information communication and technology systems is a modernized way of delivering logistics services, it becomes an essential component in logistics management corporations. However, research reveals that only Multinational Corporations have realized the imperativeness of IT in logistics.
Despite significantly increasing market competitiveness, improving the quality of production of either goods or services, as well as enhancing relationships between companies interacting with each other, the adoption of information technology in companies, business, and government corporations dealing with logistics has remained considerably low. Characterized by expensive integration and implementation of the IT systems, several micro, and small firms have ignored the importance of IT and continuously depended on traditional ways of logistics operations, thus inviting the risks of failure.
Objectives and Methodology
In a bid to provide a comprehensive insight into the subject, this study has several objectives. The main objective of the study is to examine the impact of information technology on the logistic industry. However, the study has developed secondary objectives as follows:
- To investigate and report on the state or extent of adoption of IT and awareness in logistic companies
- To examine the perceived usefulness and perceived ease of IT systems in logistics
- To propose possible recommendations on what logistics firms should do to improve their services using Information technology.
However, since the study is all about examining the impact of IT on logistics companies, this research paper comprehensively concentrates on the impacts, principally to explore areas of significance in the adoption of IT. All objectives are formulated based on the empirical evidence provided by prior studies.
Methodology
Research methodology refers to different research methods combined purposely to enlighten the topic from different perspectives. Conventionally, there was no specific methodology employed in this study. This research perused through all empirical evidence provided by the prior study to ensure that the study addressed all the outlined objectives. The study ensured that there was a critical assessment of the information provided by the sources to ensure the reliability and validity of the documents.
Also, this research ensured that the sources relevantly correlated with the objectives formulated for the study. Through triangulation, a process that involves the use of more than one source of data, the study acquired the necessary data needed before effectively concluding the study. According to Mathison (13), a good research project generally allows the researcher to triangulate or simply integrate and use multiple methods, different sources of data to enhance the validity and credibility of the research results.
Discussion of empirical evidence
Discussion of empirical evidence involved an analysis of prior studies conducted objectively to ensure correlation of the objectives. As stated in the objectives, the study sought to investigate and report on the state or extent of adoption of IT and its awareness in logistic companies. Empirical survey research conducted by Obogne and Lidasan (3005-3021), revealed that the application of IT in logistics is considerably low to suit competition in contemporary times.
The study composed of the main capital or rather an urban center of the Philippines that is, Metro Manila or the National Capital Region, at least to achieve measurable results that research can compare with other world capitals. Using a sample of 114 logistic firms to evaluate the existing situation in the adoption of IT in logistics, the study concluded as follows.
In a bid to examine the existing cooperation between Information technology companies and logistic firms in Philippine to provide an overview of the prevailing situation in the country, Osborne and Lidasan achieved the following results. Among 114 firms participating in the survey study, 5.3 percent of the firm respondents were ICT manufacturers, while 94.7 percent were transport or rather logistic firms.
Out of the “17 ICT manufacturers contacted, only six (35%) firms were ICT manufacturers, who could provide solutions and services to logistics operations” (Osborne and Lidasan 3008), which implies that the relationship between IT firms and the logistics industry in Philippine is considerably low, with over 65 percent of them less concerned with the importance of IT in logistic firms. The researcher also wanted to establish the level of IT literacy in workers working within the logistic companies, which is an important component to investigate the extent of IT adoption in the logistic firms.
Surprisingly, according to Osborne and Lidasan, “the result of the survey revealed that a little more than two-thirds (68%) of the respondents were familiar with the use of ICT in logistic” (3009). However, the rest of the 32 percent of the respondents were unfamiliar with the use of ICT in logistic, thus proving that the level of IT adoption by companies in the logistic sector remains noticeably low. This aspect leaves them unaware of the importance of new trends of technology applicable to the industry, which possibly results in greater efficiency and effectiveness in the company’s operations.
A similar study conducted by Altran Group & Consultrans (6) in several European countries revealed similar results, with the adoption of IT remaining significantly low, below the expected demand within IT practitioners. This survey significantly revealed that only 8 percent of all enterprises across the European Nations had employed ICT practitioners, with the percentage being 33 percent in SMEs and about 66 percent in MNCs.
Based on this survey, the results revealed that the integration of ICT in logistics companies in several European countries remains low, despite several government interventions to improve the logistic companies as one way of enhancing national economic growth. According to Altran Group & Consultrans (6), the situation possibly resulted from a lack of awareness on the importance of ICT in logistics companies.
This survey revealed that several countries across Europe lack skills and resources, which are essential to exploit technological innovation opportunities available in their organizations. Specifically, apart from the two empirical surveys conducted in countries across Europe, there is considerable evidence from studies conducted by Evangelista et al. (3) that there is a low level in the usage of relatively sophisticated technologies. Ideally, the availability of a qualified workforce with specialized skills in Information Technology is the main limiting factor above all, especially in European countries where financial resources is likely not an important variable compared to developing economies.
Perceived usefulness of IT systems in logistics
From a theoretical perspective to an empirical perspective, the significance of IT is immeasurable for it immensely provides diverse applications important for the growth and development of logistic firms. Prior research studies pertinent to the application of IT in logistics have indicated substantial imperativeness ranging from firms’ productivity that relates to the economical significance and social importance that enhances corporate social responsibility and public relations.
According to Saura et al. (652), the multi-item scale used in research evaluates five quality dimensions of IT in logistics as reliability, reactivity, and guaranteed safety. However, this dimension is simply shallow to express the importance of IT in logistics.
In economical perspective, the IT sector has enhanced the delivery of goods and services, raised general productivity of companies, improved efficiency in production, advanced internal and external communication within companies, improved labor and companies turnover, and expanded the competitive market among other relevancies. However, these improvements are only achievable through proper integration of IT in logistics as an essential component.
IT impact on productivity
The emergence of technology and its impact on regional and global economies put researchers, scientists, and other related bodies into comprehensive investigations to examine possible impacts and implications of IT. Central to this subject, studies have identified one of the most significant positive impacts of IT in the logistics industry as enhanced productivity. Lin and Ho state, “Many logistics managers, see the information technology as a major source of improved productivity and competitiveness” (3).
According to managers, perceptions built on experience information technologies are capable of increasing organizational flexibility, productivity, and competence that results in stimulated inter-organisational networks, which is quite significant in company’s financial growth and national economic improvement. Using a combined term, “Logistics Information technology” (LIT), Hazen and Byrd (5), affirms that IT in logistics improves efficiency, flexibility, and effectiveness by reducing processing costs, improving the planning process, enhancing responsiveness, facilitating informed decision-making, enhancing better utilization of equipment, as well as improving the relationship with trading partners.
In a bid to provide empirical evidence that is necessary to confirm the argument to this study, this research analyzed evidence provided by two relevant studies. Altran Group & Consultrans (95), Adebambo and Toyin (68) assert that numerous companies’ carry out business using electronic commerce and for that reason, studies examining the impact of ICT on logistics have confirmed significant productivity increasing effects arraying from consumer to organizational perspective.
“Recent research suggests that the largest productivity growth effect occurs in the ICT-producing sectors themselves and selected service industry sectors like banking, wholesale, retailing, and telecommunication” (Altran Group & Consultrans 95). However, studies have also concluded that without proper execution and investigation of limiting factors like financials stability, labor market, and availability of the competent and human skilled resource, productivity aspect of IT in logistics might not be achievable. Commendable works by Azevedo et al. and Evangelista et al. also commented on the same pointing out finance as an important variable.
ICT impact on value-added growth
Empirical evidence conducted by Altran Group and Consultrans investigated the study on two important variables, including ICT impact on value-added growth and general impact on labor productivity growth. The study used two hypotheses to establish the impact of IT in logistics. The first hypothesis stated, “ICT-capital investment has become a key component in value added and productivity growth in the transportation and logistics sector” (Altran Group and Consultrans 96). In determining this aspect, ten EU member countries were involved, and essential data to the study was gathered over an estimated period of 9 years.
Despite limited evidence to prove the overarching role of ICT in gross value added, the study managed to conclude that the total factor productivity (TFP) growth positively changed with the enhanced adoption of ICT in logistics industries. The study also compared the TFP growth in the transport and logistics sector in ICT capital and non-ICT capital companies, where the contribution of ICT capital remained significant in over seven countries.
ICT impact on labor productivity growth
The study also covered the impact of ICT on labor productivity growth, as one way of determining the impact of IT on the logistic industry. Using data of survey studies conducted by Altran Group and Consultrans (99) to examine the impact of ICT on labor productivity in EU member countries, the study managed to conclude this study. The data used in the study contained consistent annual data from a subset of 15 European Union countries.
However, the study noticed that the pattern of labor productivity growth differed consistently in almost every country, though there was a positive correlation between IT consumption and labor productivity in logistics companies. According to Altran Group and Consultrans (100), Greece recorded a considerable high average labor productivity growth ranging between 4.9 and 10.3 percent, with several individuals acquiring jobs in logistic companies that integrated ICT in their operations. However, ICT impacts on labor productivity growth largely depended on the availability of a skilled labor force.
ICT on work efficiencies in logistics
Currently, perhaps the most significant perceived advantages of adopting the use of IT in the logistic industry involves faster information retort that consequently improves the efficiency as well as rationalizing logistics processes. Traditionally, since the emergence of IT, several MNCs welcomed the advent of IT in their companies with the first objective of improving the delivery of goods and services. Adebambo and Toyin assert, “With the advancement of ICT, many companies have adopted the use of technologies to improve the efficiency and effectiveness of their activities” (69).
Through continuous adoption and implementation of IT-based logistics information or automation technologies, firms are generally capable of enhancing their operational efficacy (Azevedo et al. 7). Logistic Information and Technology (LIT) may involve attaining, dispensation, storing, and disseminating information about business activities, and thus is capable of enhancing flexibility and effectiveness in logistics firms. Research has assumed the importance of ICT in several dimensions regarding the improvement of efficiency in logistics companies.
Through computer-mediated or web technologies, logistics firms that have managed to integrate IT as a basic operational component have witnessed significant improvement in their work efficiencies. The traction systems within logistics companies have greatly improved, with the appearance of the electronic data transfer system, including Electronic Data Interchange (EDI). According to Adebambo and Toyin (70), EDI is a form of electronic data transfer system that involves the transfer of prepared data through agreed conditions from one computer to another, thus connecting relevant financial sectors in logistics firms.
The system only allows minimum intervention with less labor force required, thus quite significant in enhancing interactive telephone systems. Electronic Data Interchange also allows proper functioning of e-commerce, which is relevant to business communication that is principally essential in executing reliable firm contracts, global procurement services, and advanced communication amongst transport systems (Lai et al. 1250). Customer relations also depend on Electronic Data Interchange to enhance customary care by avoiding inconveniences.
Other important components of IT integration that indicate enhanced efficiency in logistics firms include operational planning system and control system. The two systems are among the sectors in logistics firms that have received substantial changes. An operational planning system is a form of the logistic firm branch that primarily deals with logistic decisions and functioning of a firm. IT has supported the integration of route planning and logistic decision support software including Advanced Planning and Scheduling (APA), which has proven significance in enabling design, planning, and operation of supply chain management (Adebambo and Toyin 70).
In light of this realization, a company oversees work appraisal of employees within the supply chain. Another significant system is the Enterprise Resources Planning (ERP) systems, which extensively enables recording, processing, and accomplishment of orders in logistic firms. Control system is another important evidence of enhanced efficiency using IT in logistics, with mobile phones tracking and tracing systems like barcode scanners and Global Positioning System (GPS) in tracking vehicles proving significant.
In a bid to prove the importance of IT in improving the work efficiency in logistics companies, this study examined a survey study conducted by Obogne and Lidasan, which involved investigating the role of ICT in increasing transport efficiency at Metro Manila in Philippine. The study identified that one of the primary objectives in using Information and Communication Technology is “improving quality and efficiency both in services and operation” (Osborne and Lidasan 3011).
Out of 114 respondent companies used in the study, a majority of them provided positive evidence towards the use of IT in logistics, in terms of its efficiency. 81.5 percent of respondents agreed that it improves Communication and information exchange with customers, 57.4 percent asserted that it reduces operational costs, 50.9 percent agreed that it improves communication and integration within organization, 47.2 per cent said that it enhances faster planning and system integration, while 45.5 percent argued that it increases revenue and income. Manufacturer’s views were also included in the study.
Table 1: Efficiency factors associated with using IT in logistics.
Source: Osborne and Lidasan 3005.
ICT on business process flexibility
Industrial studies on performance measures regarding the impact of Information technology in businesses and companies have revealed considerable impacts of IT. Flexibility refers to the ability to withstand any changes. Integration of ICT in undertaking logistics operations has proven significant in enhancing business process flexibility. Flexibility ensures timely production and transport of goods as well as improving the delivery of services. Evangelista et al. assert, “Managers agree on the positive effects of ICT dimension on performance dimension, especially in terms of improvement of customer service, operations, and flexibility” (9).
By controlling the supply chain system, using intensified IT software systems, which allow companies to accommodate and disseminate large data, companies gain a competitive advantage. Even though flexibility rarely brings instant increases in efficiencies, effectiveness, or even immediate profits, it allows managers and supervisors involved in planning to prepare for future changes or unknown events, which may influence logistics operations positively or negatively.
Several empirical studies have significantly proven the influence of IT in the flexibility of firms operations. Hazen and Byrd, using the hypothesis, “organizational adoption of LIT increases business process effectiveness” (6), examined how IT influences the flexibility of organizations. Using Pearson’s analysis method, the research identified a great correlation between the use of Information Technology in logistics and its relative business flexibility.
The research drew conclusions based on investing in Electronic Data Interchange (EDI) and Radio Frequency Identification (RFID), as essential Artifacts of Logistic Information Technology (LIT) that is necessarily useful to measure the flexibility of IT application in businesses and firms. Both components yielded considerably high correspondence between IT applications and flexibility in firms for they enabled automated data collection systems to enhanced communication and transportation in logistics. However, this study concluded that LIT adoption and business process flexibility increases depending on the positive buyer-supplier relationship. Limited or lack of this relationship constrains the affiliation between LIT adoption and flexibility.
ICT on enhanced innovations
The development of Information and Communication Technologies has been associated with the merits of innovations and advancement across the globe. Research has revealed that technological innovations associate with supporting companies to create a competitive advantage over their business rivals. According to literature information provided by Evangelista et al. (1), the common ground is within the relationship between innovations and competence development among companies integrating ICT.
By explaining the meaning of logistics as the supply of products or services to the consumers or the consumption unit at the right time, quantity, quality, and within the expected cost and right place, Lin and Ho (3), affirm the aspect of innovation in their study. In trying to identify the existing correlation between supply chains, which is an important aspect of logistics with information technology, this study formulated different hypotheses. One of the hypotheses stated that China’s logistics service providers willing to adopt technological innovations are likely to enhance their performance.
In a bid to prove this fact empirically, this study used a questionnaire to collect data in China’s logistics industry. In about 1500 questionnaires, only 583 managed to return dully-filled reports. Technological innovation in companies included information technologies, data acquisition technologies, warehousing technologies, and transportation technologies. These variables are significant in determining the extent of technological advancement in China, which in turn portrayed the sense of enhanced performance and development.
The study achieved the following results after analysis. About 56 percent of the companies revealed that they posses data acquisition technologies, 94.9 percent agreed that they had information technologies, 73.8 percent revealed that they possessed warehousing technologies and finally about 88.5 percent of the respondent companies agreed to have possessed transportation technologies (Lin and Ho 13). Using the correlation matrix to provide evidence to the hypothesis, the study revealed that the supply chain performance positively correlates with the adoption of technological innovation. The following table represents the above information.
Table 2: Technological innovations adopted in China’s Logistic Industry.
Source: Lin and Ho 13.
Research has cited China as one of the biggest economic giants for the past five decades, with the US, Japan, Germany, and the UK composing the list of best-developed global economies. The adoption of technological innovation in China might best explain the reason why China is among the most developed economies in the globe, as well as the most technically updated country. Lin and Ho (4) argue, “Innovation can reinforce competitive advantage for companies in markets where customer preferences change rapidly” (4).
Similar conclusions appeared in a study conducted by Lai et al. (1264), Adebambo, Toyin (73), who demonstrated that greater business competitive advantage in IT is eminent since elevated IT adoption correlates with improved delivery speed, enhanced reliability, good customary relationship, and order accuracy in logistics companies. High IT adoption may result in higher cost advantage, which is essential for the financial boost of logistics companies. With this insight in mind, perhaps IT is currently the most competitive dynamic knowledge-based economic booster.
Enhanced inter-trade relations
Globally, the adoption of IT has consistently associated with enhanced inter-trade relations amongst organizations with each one of them depending on one another. In the context of the impact of IT on the enhancement of inter-trade relations in logistics companies, substantial efforts done to incorporate digitalized communication system as IT components in several MNCs and SMEs globally have served companies well.
One of the components of IT in logistics is communication elements, which cover systems, services, and devices used for data processing and transmission of information from one end to another, and thus IT is essential in internal and external communication. Proper communication has long been influential in enhancing production in logistics through proper maintenance of chain supply system. Since the advent of ICT in logistics, companies have reported minimal delays in delivery of goods and services. Customers in logistics can now enjoy better communication with their respective logistics service providers despite residing in different geographical zones.
Literature reveals that the integration of IT in logistics companies entails the use of Enterprise Resource Planning (ERP) business software, which allows firms to “plan and control all the resources required for collecting, making, sending and entering customer orders in production, distribution and service companies” (Saura et al. 655). Also, Electronic Data Interchange (EDI) is also one of the business software under IT in logistics that involve the electronic transmission of computerized information in the standardized form with only minimal manual interruption.
Material Resource Planning (MRP) is also amid significant business software in Logistic Information Technology (LIT), which is useful in optimizing materials for processing. Finally, road-tracking systems such as Global Positioning System (GPS) have emerged to track impunity and all forms of corruption during the transportation of goods. The following global statics table reveals the difference between IT and non-IT companies in service quality and customer satisfaction.
Table 3: Differences in satisfaction between High and Low ICT.
Source: Saura et al. 661.
Conclusion
Information Technology or Information Communication Technology remains the most important element in the current era of globalization and industrialization. Principally, about the impact of Information technology in the logistic industry, it is evident that IT has played an important role in improving the delivery of services and goods from manufacturers to consumers. Application of IT in the the logistics industry is diverse as it ranges from the point of manufacturing to the delivery of goods or services.
Through the integration of IT in logistics companies, these firms are capable of enhancing productivity in labor and GDP growth coupled with improving communication between business-to-business and business to customer, thus improving the inter-trade relations of logistic firms. Therefore, in general terms, in the current millennia, companies with improved IT systems are likely to outshine those depending on traditional techniques by improving their competitive advantage.
Recommendations
Based on the findings of this study, it is evident that IT is increasingly becoming an important company element necessary for the growth and development of companies. Research has indicated that the pace of IT adoption implementation and integration is considerably low. However, other important variables that are essential for growth and expansion of companies like the size of the firm, financial resources, and skilled workforce are posing a threat in the efforts to integrate IT, especially in developing economies.
Therefore, as the study has established the imperativeness of IT in enhancing efficiency, effectiveness, and flexibility in logistics companies, all companies capable of adopting ICT or IT into their operations should do so. For those with limited financial resources, this study recommends that government via through the responsible ministries should intervene since the growth of companies consequently results in great economic growth.
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