logistics services industry lacks solutions that would integrate the services of different ... software and information provided to computers and other devices on demand [7]. .... process of settlement of accounts and documentation is described.
Cooperation between Logistics Service Providers based on Cloud Computing Arkadiusz Kawa, Milena Ratajczak-Mrozek Poznań University of Economics, al. Niepodleglości 10, 61-875 Poznań, Poland {arkadiusz.kawa, milena.ratajczak}@ue.poznan.pl
Abstract. The paper describes the use of cloud computing in logistics, especially the creation of the multi-modal platform designed for cooperating logistics service providers and their customers. The research conducted within the EU project is presented. The article focuses primarily on the findings of its initial phase – the analysis of information requirements needed for cloud computing platform. The processes maps and use case are proposed. Keywords: cloud computing, companies cooperation, logistics service providers.
1 Logistics service providers A characteristic trait of the modern enterprise is the growing importance of its relationships, interactions and interdependencies with other entities from its environment. Finding themselves under increasing competitive pressure, companies are ceasing to treat these relationships and cooperation with partners as a solution that can help all parties achieve substantial benefits. At the same time they look for solutions facilitating this cooperation. Logistics service providers are companies belonging to the so-called transport, forwarding and logistics industry. This sector covers activities of companies of different sizes, multiplicity of services and global range. It includes very large but also small firms, offering a range of services – from simple transport services, through service forwarding, warehousing, palletizing, packing, packaging, to full service of supply chains. Their range of activities may comprise a region (e.g. a province), country, continent or the whole world [6]. To ensure a fast and correct flow of information between individual entities of the operating system, a logistics service provider has to use appropriate information technologies [7]. Logistics service providers, in general, apply information technology in order to increase efficiency and automate their work. A particularly important goal, however, is to meet the expectations of potential and existing customers. Unfortunately, customers using the services of various logistics service providers always have to adapt to their tools. The logistics services industry lacks solutions that would integrate the services of different operators in one place. A more serious problem arises in the case of small and medium (SME) logistics service providers. These companies are generally more flexible but often lacking the
needed resources for growth. Additionally, SME logistics companies have limited or no IT-competence and investments. The next problem of the logistics industry is a lack of formal semantics which prevents automated data integration. There are not any universal solutions which let smaller companies work together in the changing conditions and access resources, software and information provided to computers and other devices on demand [7]. The solution to aforementioned problems may be cloud computing.
2 Cloud computing conception According to the National Institute of Standards and Technology cloud computing is “a model for enabling ubiquitous, convenient, on-demand network access to a shared pool of configurable computing resources (for example networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction” [8]. In other words, cloud computing is a pay-per-use consumption and delivery model that enables real-time delivery of configurable computing resources. Typically, these resources are delivered over the Internet to multiple companies, which pay only for what they use [2]. One may also say that cloud computing is a large-scale distributed computing paradigm that is driven by economies of scale, in which a pool of abstracted, virtualized, dynamically-scalable, managed computing power, storage, platforms, and services are delivered on demand to external customers over the Internet [5]. There are many advantages resulting for companies from the use of cloud computing. Generally speaking, it allows enterprises to manage the building blocks of IT, provided by other people in the same way they would their in-house infrastructure, but without the challenges that such complex architecture would normally produce [10]. The most important advantages are cost reduction and more flexible use of resources and operations. Cloud computing represents a fundamental shift in how organizations pay for and access IT services. It is a model for provisioning and consuming IT capabilities on a need and pay by use basis ("pay as you go" method) [10]. It eliminates the need to purchase licenses and pay for software installation and administration. The IT service is consumed according to the actual user demands. It enables externalization of IT costs in the logistics sector by a change of fixed costs to variable costs [1] and shifting the cost structure from capital expenditure to operating expenditure and also helps the IT systems to be more agile [10]. With cloud computing, there is a paradigm shift to an asset-free provision of technological resources [10]. Moreover thanks to these changes and among other things thru, effecting economy of scales and pooling together of knowledge and experience in diverse industries, cloud computing enables expanded products (service) sophistication, allows for more end-user simplicity, increases product (service ) relevance and drives potential new businesses [2]. The enterprise can get the advantage of developing and marketing the product or service earlier to the market, ahead of its competitors [10].
Companies are not only relying on cloud services to enhance internal efficiencies (cost reduction, more flexible use of resources), but also to target more strategic business capabilities. Research has confirmed that number-one objective for adopting cloud services is an external capability – that of increased collaboration with external partners [2]. One must underline that due to the aforementioned advantages cloud computing is a very good solution for small and medium sized companies. Thanks to the use of cloud computing they themselves do not have to invest in the entire infrastructure (equipment, facilities and staff). All they need to do is rent a server from a professional company.
3 Logistics project based on cloud computing Logical project is implemented through the Central Europe Programme. The project is promoted by six infrastructure providers that are supported by economic development agents and logistics cluster associations. The partnership is completed by research institutes and universities with enormous capacities to deliver innovative ICT solutions for the logistics sector [11]. The objective of the project is “to enhance the interoperability of logistics businesses of different sizes, to improve the competitiveness of Central European logistics hubs through a decrease of transaction costs (better access to systems of global players), and to promote collective (sustainable) modes of transport (multimodal co-operation)” [11]. The main tasks of the Logical project are to identify the need for cloud services including logistics companies, create a platform for cloud computing and its implementation in selected logistics centers in Central Europe and to develop patterns of cooperation of future users of the system. The basis of the platform is easy and cheap access to information about the current demand for logistics services and possibilities of their implementation. Assumed key benefits for users, resulting from the Logical project, should be: more efficient flow of information by providing access to global information systems and institutional players (such as infrastructure providers) and a balanced and optimal use of transport [12]. The Logical project began in 2011 and will last until 2014. In the first stage of the project, a survey among small and medium sized enterprises based in Poland, Germany, the Czech Republic, Hungary, Slovenia and Italy from the logistics industry was conducted. During the study, respondents were asked questions concerning the scope of logistic services, the use of solutions from the IT industry, the main problems with the use of the systems they owned. They were asked to express an opinion on the solutions based on data processing systems in the cloud [12]. As a result of the survey interviews and their implicit instructive elements, about 59% of the interviewed logistics service providers stated that they were planning to make use of cloud computing in the future provided that suitable software tools are available.
When analyzing, the companies were asked about their expectations of the clouds. The most important expectations for cloud data of the surveyed companies were: improve / simplify communications with our business partners, improve / simplify communications with our customers, achieve higher quality in logistical services (greater reliability, better supplier loyalty), achieve greater transparency in handling data / better information flows, improve integration in the supply chain / transport links. At the same time, it was noted that Polish companies were far less enthusiastic about the new information technologies than German companies, which saw a lot more benefits in them. This may be due to the fact that Polish companies from the SME sector have less experience in implementing IT solutions over the Internet [12]. In the next step of the project, the information requirements analysis was individually performed with prospective users of the system. This involved, inter alia, profiling the enterprises on the basis of questionnaires, identification of processes and an analysis of the logistics processes. Below, the results of the research carried out in one of the companies (Trans Logistics1) are presented.
3 Exemplification of cloud computing idea The overall business aim of the Trans Logistics (Poland) is to acquire an established position in the market of logistics services in the SME segment. The key activity of the company is to provide services related to road freight forwarding (95% of activity, the remaining relates to handling and storage). Trans Logistics (Poland) intends to develop the newly opened office in Poland, which will provide comprehensive logistics services in the field of Trans Logistics orders from the headquarters in Denmark and gain new customers in the Polish market. All the tactical and operational decisions are taken by a board member from the Polish office of Trans Logistics and their contributors. However, every day, Trans Logistics (Poland) works closely with the Danish office which gives direction for the company. The mega process of the Trans Logistics company is Forwarding. It is the coordination and organization of the transport process. An important part of this process is conceptual work, which includes exchange of information between the participants of the transport process as well as the commercial process and arranging all kinds of formalities, such as filling in the transport and commercial documents. The mega process „forwarding” is divided into the following processes (see fig. 1): Acquisition of clients, Calculation of transport rate, Acquisition of carriers, Shipment realisation order, Shipment coordination, Settlement and turnover of documentation.
1
The company name has been changed.
Fig. 1. Main map – forwarding process of the Trans Logistics company
After analyzing the business processes of the studied companies, a question arose which of the processes could be moved to the cloud. After a lot of careful examination, we came to the following conclusion: it is best to start with the processes that are performed most frequently and that are strongly linked with the environment. Examples are processes associated with obtaining the order and the carrier, the process of coordination of transport. Some of these processes can be placed entirely in the cloud, and some only in part. With the exception of the process “Calculation of transport rate”, all of listed processes have been transferred (entirely or partly) to the cloud. In this paper the authors present only one example of the process. Below, the process of settlement of accounts and documentation is described. It is one of the processes, which is the most complex one in the Trans Logistics. Settlement of accounts and documentation process Settlement of accounts and documentation starts when the carrier puts the documents into the cloud-based database. When the data is uploaded, the forwarding agent verifies the documents. If the documentation is incomplete or incorrect, the forwarding agent puts appropriate information into the system. The carrier is required to correct the data in the system. Upon receipt of correct and complete documents, the groups of processes are executed in parallel. These are: (1) sharing the electronic version of the invoice with the client and (2) invoice preparation and invoicing. Within invoice preparation and invoicing the forwarding agent validates the prepared invoice and invoicing is done by the financial module. In the case of
discrepancies, correction is made manually. Once the invoice is prepared properly and invoiced, the forwarding agent orders the payment for the carrier. Simultaneously, the system sends an electronic copy of the invoice to the client and waits for notification about the payment. After notification, the payment is booked automatically. The forwarding process finalizes the realization of both groups of the processes (see fig. 2).
Fig. 2. Settlement and turnover documentation process
To present the process, use cases have been designed which are perfectly helpful to describe the system requirements. An use case shows the interaction between the actor (user system) initiating the event and the system itself. Furthermore, properly designed use cases allow the development of future system design, and an affordable and comprehensive platform for collaboration and communication system developers, investors and owners of the company. An use case represents a basic course of operations, the so-called "basic flow" or "happy flow". In fig. 3 and 4 there are graphical use cases of the actors and the relationships between them. In order to facilitate the presentation of the use cases, the process of Settlement of accounts and documentation is divided into two parts: Settlement of accounts with customer, Settlement of accounts with carrier. The process of Settlement of accounts with customer consists of preparation, sending and accounting of invoices (see fig. 3).
Fig. 3. Settlement of accounts with customer
In table 1, the main issues of this process are described (assumptions, preconditions, postconditions, and steps). Assumptions
1. Trans Logistics and the customer use Electronic Data Interchange (EDI) 2. The client does not require paper version of invoices 3. Accounting system is able to put down the invoice automatically 4. The invoice can be generated from the data collected by the system in previous steps 5. Information from the bank’s IT system can be sent to the system of Trans Logistics Preconditions Receiving completed and correct documentation from the carrier Postconditions Invoice accounted Steps 1. Invoice preparation – system fills in the form with data collected in previous steps 2. Giving the invoice a status “unsettled” 3. Sending the invoice to the client electronically 4. Accounting the payment after receiving information from the bank’s IT system 5. Changing the invoice status to “settled” Tab. 1. Main issues of settlement of accounts with customer process
The process of Settlement of accounts with carrier is about receiving and accounting invoices and settling liabilities (see fig. 4).
Fig. 4. Settlement of accounts with carrier
In table 2 the main issues of this process are described (assumptions, preconditions, postconditions, and steps). Assumptions
1. Trans Logistics and the carrier use Electronic Data Interchange (EDI) 2. Trans Logistics does not require paper version of invoices 3. Accounting system is able to put down the invoice automatically 4. The system of Trans Logistics is able to send information to the bank IT system, with payment order Preconditions Receiving the documentation from carrier Postconditions Settlement of liabilities with carrier Steps 1. Receiving invoice from carrier electronically 2. Invoice accounting 3. Generating payment order to the bank’s IT system Tab. 2. Main issues of settlement of accounts with carrier process
4 Conclusion The continous development of new technologies, emergence of network interdependencies mean that companies no longer must invest in self-development of complex and sophisticated IT solutions. Instead they can use the ready-made solutions, that yet at the same time meet their requirements. Such an option for logistics service providers may be cloud computing and the platform, proposed within the Logical project. The proposed platform should allow to: improve the process of acquisition and transmission of orders (including the process of settlement of accounts and documentation), reduce or completely eliminate the reporting process, reduce time processes by facilitating access to information, make it possible to easily evaluate the processes – thanks to information from all stakeholders gathered in one place, and enable to create a virtual call to foster cooperation.
Of course during the implementation phase of the proposed platform many potential problems may occur. Many enterprises still remain very sceptical about the idea of cooperation and network relationships for fear of leaking information and knowledge – especially where these determine a company’s competitive advantage [9]. And in the case of cloud computing, data is held “outside the company”, which only intensifies aforementioned concerns. There is a lot of concern about the security and privacy of the data. Security is a great concern for most organizations. Many managers are not comfortable about their data located in a data centre in a foreign country. And true standards for how to control applications that are in a vendor’s cloud have not yet been established. The current challenges must be addressed including developing acceptable compliance and security policies, reducing the risk by developing robust infrastructure for reliability and high availability along with performance guarantee [10]. Possible source of difficulties related to cooperation within the platform is the fear of losing independence and control over the company. Research has confirmed that companies are reluctant to engage in partnership relations if they fear becoming dependent on the other entity [3]. Moreover poor information flow between cooperating parties may damage relations, cause conflict and result in an “information deficiency” that threatens the well-being of projects. Research has confirmed that information processing requirements and information processing capability affect intention to adopt cloud computing [4]. Above-mentioned conclusions raise an important problem concerning the negative attitudes of companies and their managers. Many of them still view their companies as isolated units and are reluctant to engage in any form of cooperation, including cloud computing.
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