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The modern approach to the analysis of logistics

information systems
Ana Iskra 1, Edvard Tijan 2, Saa Aksentijevi 3

E-mail: ana_iskra@yahoo.com
University of Rijeka, Faculty of Maritime Studies

Studentska 2, 51000 Rijeka, Croatia

Tel: +385 51 33 84 11 Fax: +385 51 33 67 55 E-mail: etijan@pfri.hr

Aksentijevi Forensics and Consulting, Ltd.

Gornji Sroki 125a, Vikovo, Croatia

Tel: +385 51 65 17 00 Fax: +385 51 65 17 81 E-mail: axy@vip.hr

Abstract - The terms of logistic management in

organizations and the use of information and
telecommunication technologies in support of the
management are inextricably intertwined. The fundamental
benefit which business systems obtain by using logistics
business information systems is the optimization of business
processes. By using the logistics information systems the
focus is shifted to those business processes that result in the
highest added value. The highest level of development of
logistics business information systems results in the
construction of an integrated logistics information system
that allows data mining processes and supports managerial
decision making. This paper analyzes the development of
logistics information systems, their types and functionalities
in the context of modern business environments.



To understand the logistics information systems it is

necessary to clarify the concepts of logistics management
and computerization. Logistics is the science which
developed from the war planning, and its modern form
dates from the 17th century [1]. The use of computers in
business began to grow significantly in 1950s after the
launch of the first commercial electronic computer
UNIVAC [2] [3]. The computer, as well as logistics, was
first used to obtain military superiority (for example in
deciphering enemy messages) but the link of the two
concepts is not the original military purpose, but the
manipulation of data and information [4].
The logistics management can be interpreted through
the general division of the business system, consisting of
input and output information, and executive and
management processes. Therefore, each logistics function
takes and processes the data necessary for the operating of
core activities, but the logistics management level
integrates the relevant data, adds importance and value,
and uses the information to debug and optimize the
logistics processes [5].
A growing number of companies at the end of the 20th
century launched a redesign of their business processes
[6]. The classic form of business had to change
completely because information has become one of the
basic business resources. Reengineering or redesign of the


business processes changed the traditional approach to

business based on the work, natural resources and capital.
The construction of information systems in enterprises
created a new market division by applying the modern
work concepts and electronic business [7] [8].
Although the modern information systems have
evolved to a great extent, the human component remains
indispensable because the information system as useful
only to an extent to which a person is able to analyze and
make use of the information provided. Likewise, the
business information system is useful only if well
implemented to pursue the objectives of enterprise. The
company is not an isolated system, and in decisionmaking and management the wider environment must be
considered [9]. The information system must support the
management in a way that in addition to information
related to the company it includes the external information
available. This provides a comprehensive solution on the
basis of which the management makes their decisions [7].
Smaller companies develop their information systems
to the level they need for decision making. If the
management of a small company has a clear insight into
the business and the entire logistics process, they will opt
for an operational and/or executive information system
layer. For such companies, the most important goal is to
automate the input and output of data and to simplify the
processes in order to save time. If there is no
heterogeneity of business functions, data discrepancy or
poor communication, then there is no need for data
warehousing, complex reports and analysis [9] [10].
The combination of various forms of information
systems with the integration of the strategic system creates
an integrated information system. The information is input
within one organizational unit and is simultaneously used
in all the other units when needed. Such integrated
information system links the activities in the logistics
chain horizontally and vertically, and the processing time
is reduced to a minimum. The largest advantage of such
systems is the creation of a homogeneous organization on
the basis of sharing information, therefore the integrated
information systems form the basis of virtual
organizations [7].





The purpose of the logistics system is the

optimization of business processes and maximum
utilization of resources. Compared to the traditional
profit-oriented companies, logistics companies leave the
narrow-minded orientation directed toward financial
framework of revenue and expenditure. With the
development of modern logistics at the beginning of the
20th century, successful business could no longer be
based only on the retrospective financial indicators.
These were the beginnings of modern business, more
complex and yet more simple. Its complexity lies in the
extensive surveillance and monitoring of the business
functions. In the short term any such company makes
great effort to get updated information from all business
functions, in order to serve the business purpose. Data
from one of the business functions, such as procurement,
must be useful, unchanged, visible and usable in all other
functions, from production to distribution. On the other
hand, the establishment of logistics information network
within the company enabled the management (at all
levels) the visibility of the entire material, information
and financial flows. This in the long term led to more
manageable business processes [10].
Companies which utilize the logistics management
model focus on flows and indicators that give added
value. The logistics concept is not about producing to
cover all costs and achieve a profit; it is about fulfilling
customer requirements in the shortest possible time and at
the right time. If customer demands are met, the company
receives positive feedback, and thus the financial gains.
The modern business discards the traditional physical
and intermediary model and reduces the number of active
participants in the logistics chain. That does not mean the
end of continuous structures with actors from production,
procurement, transportation, storage, wholesale and/or
retail trade and end customers, but the integration of
certain functions in one segment. The inclusion of
heterogeneous functions was enabled by the development
of computer networks. Considering the various functions
as one means faster response to unpredictable situations
Through ICT solutions, the data from the logistics
chain arrive into one place, a database, and can be
extracted at any time and in different ways, depending on
the purpose. A quick way of entering data in
procurement, storage, production sales, distribution and
the possibility of mutual exchange of data provided the
basis of the logistics management model. Complete
information support between business functions is needed
to optimize the space- time flow of goods, energy,
information and knowledge. Furthermore, by linking
various stages in the logistics chain, the company
achieves lower operational costs mainly related to
supplies or stock. Optimization of production within the
logistics chain requires that the product comes to an end
point or to the end customer in the shortest possible time.
Information linking and dissemination of information
between participants in production, distribution and sale
reduces the waiting time resulting in faster cash flow and


communication leads to the integrated logistics
information system, and integrated logistics information
system leads to fully optimized logistics system [1] [12].



Although lowering the costs is the main reason for

implementing ICT solutions, another factor appeared later
in the evolution of ICT in business. It is the duration of
the business process. After initial calming of the
information revolution and the profiling of each of the
companies that have successfully carried out the
adjustment by applying an appropriate information
system in every logistics chain, the new types of
competition arose. In that regard, there was a focus on the
customer and meeting his needs. Companies developed
strategic plans in which the objectives were the
development of new quality products or services in a
more efficient and effective way, as soon as possible.
Information technology became a tool to save time in the
business. Modern companies with their ICT systems
received not only the easier view of the entire logistics
chain, but the system on which they can rely on, which
can give them a clear view of the previous operations,
whose storage capacity and processing time surpasses
humans and saves a lot of time and money in planning,
development, procurement, distribution, sales, marketing,
etc. The other reasons for ICT implementation may
include: modernizing administration, better cash flow,
energy conservation, and accelerated distribution of vital
resources [13].



In logistics, information systems maintain constant

communication between vertical and horizontal positions
in the logistics chain. Information support enables more
control over the current business as well as greater insight
into the previous business, on the basis of which a
business decision can be made to change and improve.
The goal of information technology is not the automation
of all business activities as this would lead to the
elimination of the human factor which is, and always will
be, a key link in the process of computerization.
logistics processes, the information technology plays a
key role in the integration of information sharing, joint
planning, coordination of business process and
acceptance of new business models and technologies
The components of logistic information systems are
hardware (material and technical component), software
(intangible component) lifeware (the human component),
Netware (network) and orgware (organizational
component [7]. The most influential component in the
realization of the logistics information system is the
human component - the users of the system who are
directly involved from the development of software to
using the final results. Therefore, all the people who


appear in the logistics chain as outsourcers, suppliers,

transporters, distributors, etc. and use the logistics
information system constitute lifeware. The orgware
includes functional, coordinated and synchronized
alignment of the remaining four components of logistic
and information systems. Network connection is the
prerequisite for information and communication links [7]
[15]. Many types of computer networks exist, depending
on the geographical location and structure, for example
PAN (Personal Area Network), LAN (Local area
network), HAN (Home Area Network), SAN (Storage
Area Network), CAN (Campus area network), MAN
(Metropolitan area network), WAN (Wide area network),
EPN (Enterprise private network), VPN (Virtual private
network) and GAN (Global Area Network) [16]. A large
increase in network and Internet traffic is measured in
exabytes today. According to Cisco forecasts, traffic will
by 2018 exceed 715 Exabytes per month, or 8.6
zettabytes per year. [17].

human error when combining data from different sources,

but did not eliminate the need for specific human
knowledge. Today, humans and computers work together,
discovering new methods and new knowledge. These two
spheres form a virtual organization and are the foundation
of connecting with new partners, suppliers, distributors,
customers and so on [3] [22]. What the information
capabilities, shortening the cycle time, knowledge
organizational complexity [23]. Information systems
present an important and irreplaceable role in connecting
with suppliers. Starting with the Just-In-Time concept in
Japan and later in Europe, the relationship with suppliers
was completely changed. To ensure that production
flowed continuously, with the delivery at the right time
and the right place, the suppliers gradually merged with
the production and have become strategic partners [24].

Some authors mention dataware, which represents the

data in structured databases and on any other media. All
information passing through the information system must
be archived in a way to allow them to be easily accessed
at a crucial moment. It is easy to conclude that if one
component fails to create a connection with the whole,
the system will not perform its designated tasks [18]. The
data in databases and data warehouses are usually
collected from various sources. Efficient database
operation is based on the structured relationships between
data from different sources, so a qualified user can
extract, transform and read useful information and draw
conclusions [19].

The information link between companies and suppliers

was enabled by the commercialization of Electronic Data
Interchange (EDI) in the 1980s and 1990s. The company
could achieve a cost advantage and establish a better
market position by connecting closely with its suppliers,
Through EDI system, a company can send timely
information regarding inventory, debit lists, information
regarding demand, or possible customer complaints, and
thereby reduce costs of intervention, reduce unnecessary
inventory, speed up the response time, etc. Of course, the
information system can always be created as desired,
thereby providing a control over output information,
because the increasing links with external partners may
lead to the risk of leaks of classified information [14]




Before the implementation of information technology

or information systems, the management must decide
which type of information system matches the business
and logistics processes. First, it is important to plan which
business functions the information system needs to
support, improve, speed up or replace.
1960s saw a growth of both the customer's awareness
and product portfolio to meet the growing demand. This
was a major factor in the distribution channels, as the
company had to work with multiple products and at the
same time maintain the cost of transport and stocks. In
the 1970s, the use of computers in business increased.
The change was significant because the business
processes were firstly redesigned and then computerized.
One approach of business redesign in the 1970s was
TQM or Total Quality Management [20]. In the 1980s,
due to recession and rising interest rates, many companies
re-focused on cost reduction, which gradually lead to the
development of integrated logistics [21].
The information systems and database facilitated the
process of monitoring the business and enabled business
development based on continuous corrective procedures.
Information systems almost completely eliminated the





The company is a complex organization consisting of a

variety of business functions in a business cycle. Looking
from the perspective of a common information system, it
can be concluded that it is impossible to apply only one
business information system which will be equally
beneficial to all business functions. For example, in the
human resources department the employee database will
be the most important (with their income, their working
hours, annual leave and similar), while this information
will be completely irrelevant in the production process.
It often happens that a variety of business functions
use completely different information systems that meet
the basic purpose, but slow down the process chain. For
example, if the same material specifications must be input
in procurement, warehousing, production or sales, it
extends the logistics process and thereby increases the
risk of errors at each entry. In order to solve such a
problem an integrated information system has been
developed, that connects all levels vertically and
horizontally and provides optimum data dissemination
within the company. It achieves the functional and
process connection within the company, because


operational, tactical and strategic levels of management

use the same information system. The integrated system
has eliminated the problem of multiple information entry
and has linked the process flow within the company. For
this reason, the integrated information system has had
greatest impact on the logistics processes. Also, it
eliminated the potential conflict between the vertical
levels because it enabled the use of a single system and
the same data in all positions within the company [7] [9].
Logistics management model is applicable to every
business aspect, in which the company wants the most
efficient way to get to the finish line. Logistics means the
coordination of system components and strategic linking
to obtain a harmonious whole that leads to the pre- set
target. Many companies are facing the problem of
disunity of operating information and data within the
organization. The same company can use a multitude of
different databases: virtual repositories, systems for
processing documentation data, electronic mail systems,
structured and unstructured knowledge databases and
more. Due to the use of information from different
sources, the common problems are inconsistency and
contradiction which leads to inefficiency of information
systems to support management [26].
Often the concept of integrated logistics is mixed with
the concept of supply chain management because they
share the idea of a continuous and uninterrupted flow of
information. Integrated logistics management implies the
management of physical distribution, materials
management, business logistics and business engineering.
Integrated logistics is the process of anticipating
customers' needs and desires [21]. From the definition, it
is clear that the integrated logistics deals with all logistics
activities: transportation, warehouse management,
inventory, materials management and communication and
information flow management. The last activity is crucial
for the whole system because it holds the system
together. For this reason, the study and development of
integrated information systems should be a priority and
main consideration in the implementation of integrated
The process of information management begins with
collecting basic data related to transportation, raw
materials, employees and so on. Such information is
processed in the integrated logistics information system
to finally reach integrated logistics managers. Different
subsystems exist: for data processing, for research and
development, for decision support, for reporting etc. All
of them ultimately support and link the functional areas
of integrated logistics [21].
The data processing system is comparable to customer
service and is of great importance due to the direct
contact with the customer. Computer solutions that are
used at the lowest level of management are Transaction
Processing Systems or Office Automation Systems. The
system for research and development includes activities


such as planning the integration of logistics and

information technology, the coordination of information
and logistics network, staff training, decision-making on
outsourcing of the IT solutions and more. Such a system
is backed up with strategic management level solutions.
Decision support systems are also a part of the strategic
and tactical levels of the organization and are based on
analytical modeling. A collective term is sometimes
Management Support Systems (MMS). MMS are based
on simulation models, projections and database analysis
for the purpose of finding accurate and relevant
information for decision making.
The principle of knowledge discovery in databases is
popularly referred to as data mining. Data mining is a
method of extraction of knowledge from information and
is often used at the highest levels of management [9].
Strategic managers apply decision support systems to
extract data entered at the tactical or operational level and
put it in context in order to reach solutions. Four types of
management support systems exist [27]: Decision
Support Systems (DSS), Group decision support systems
(GDSS), Expert Systems (ES) and Executive Support
Systems (ESS).
In order to support management in the decisionmaking process, various integrated information systems
are being used, such as ERP systems (Enterprise
Resource Planning), CRM (Customer Relationship
Management), PLM (Product Lifecycle Management) ,
BI (Business Intelligence) and others [28] [29]. They are
essential for today's management and timely decisionmaking, but are not limited to the management role. If
implemented, each employee (depending on his
professional position) will have access to the system. In
short, the employees are the ones who have direct contact
with the system as they input information from their field
of action, whereas the higher levels decide on the basis of
reports that the system is creating, not on the basis of the
information entered. The information system follows the
information flow within the company. Regardless of the
type of integrated information system, all of them are
implemented in order to accelerate business processes,
increase efficiency and reduce costs [28] [30].
Information, as the most important resource in the
business, opened the business organization to the
environment and encouraged internal reorganization and
redesign of processes, structures and business functions.
Companies have turned to modern way of doing business
the network structures that allow for greater autonomy
of the individual business functions, while on the other
hand the concentration of decisive power centralizes in the
form of uniting all business information in a virtual unit
called data warehouse.
As the information connection is critical in large
companies, increased development of tools, processes and
applications is required in order to better communicate
between the disparate functions, locations and employees.


Because of more specific activities, production

dislocation, integration with other companies, cooperation
with international partners, and so on, the use of
information technology in business is inevitable.Large
corporations that work in different locations are using IT
solutions for direct communication, but, more important,
for the processing, storing and archiving information and
data that is further processed and extracted in the form of
reports required for the future operation of the company.
The existence of multinational companies, and
international cooperation in general, would be unthinkable
without the information support today. Most modern
companies have invested heavily in the development of
information activities and their ICT departments, which
are now considered one of the central business functions.
Logistics information systems provide greater autonomy
and efficiency of business functions while imposing
technical constraints to control the authenticity of the
entered data. The entire business process takes place
within the same system. Cooperation through the
information system thereby reduces the operating costs of
sending physical documents, saves time and ensures the
timely dissemination of accurate information.
Some companies accept the information technology
only to reduce costs of the overall business process, while
others aim for the integration of business functions on the
basis of information connectivity. Therefore, many
companies see their vision in a successful integration
process in order to speed up the logistics flow and
communication, avoid loss of information, increase their
competitiveness and in the end reduce operating costs.
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