Title : The Role Of Information Technology In Supply Chain Management

Transcription

1 Title : The Role Of Information Technology In Supply Chain Management Author : Sadegh Asadi Organization : Shahid Kazemi Industrial Group asadi133@gmail.com Country : Iran Key Words: supply chain management, e-business,it Abstract: The supply chain is a worldwide network of suppliers, factories, warehouses, distribution centers, and retailers through which raw materials are acquired, transformed, and delivered to customers. Rivalry is increasingly being contested at the supply chain level of analysis. Rather than competing firm versus firm, today s organizations are battling supply chain versus supply chain. Within this context, best value supply chains are emerging as a means to create competitive advantages and superior performance. This paper is aimed to present SCM specially with focused on using IT. It summarizes two important classification of IT in supply chain management. The first is about the role of information technology in SCM and the second is types of IT use in SCM. ١

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3 Introduction The increasing competitive pressures in the global marketplace coupled with the rapid advances in information technology have brought supply chain planning into the forefront of the business practices of most manufacturing and service organizations. Being a complex network of suppliers, factories, warehouses, distribution centers and retailers, the success of any SCMS depends on how well these system components are managed. In recent times information has become a key player in determining the productivity of a complex enterprise. The enterprise s ability to process information and make rapid but right decisions promises growth. In such a scenario it is necessary to forecast and estimate the demand, supply raw materials to the point of sale locations on and reorganize the business structure if necessary. To realize these goals a system must seamlessly integrate both information and material flow. Such a system can provide access to information, aid decision-making and execution.this paper review the main concept of SCM and focused the role of Information technology in SCM. It introduce two type of classification of relation between IT and SCM. This two classifications is in different view the first is classification shows role of IT in SCM and the second will show the types of IT use in SCM. What is supply chain management? Supply chain management (SCM) is the term used to describe the management of the flow of materials, information, and funds across the entire supply chain, from suppliers to component producers to final assemblers to distribution (warehouses and retailers), and ultimately to the consumer.[1] In an other definition, a supply chain is a series of units that transforms raw materials into finished products and delivers the products to customers (Mabert and Venkataramanan, 1998). Some of the units in a chain are located inside a single organization s borders while others cross such borders in complex and evolving ways. Effectively managing supply chains is vital to organizational success. Indeed, there is a growing recognition that modern competition is being fought supply chain versus supply chain rather than firm versus firm (Boyer et al., 2005; Ketchen and Guinipero, 2004).[2] The supply chain is a worldwide network of suppliers, factories, warehouses, distribution centers, and retailers through which raw materials are acquired, transformed, and delivered to customers. Supply- ٣

4 chain management is the strategic, tactical, and operational decision making that optimizes supplychain performance. The strategic level defines the supply chain network; that is, the selection of suppliers, transportation routes, manufacturing facilities, production levels, warehouses, and the like. The tactical level plans and schedules the supply chain to meet actual demand. The operational level executes plans. Tactical- and operational-level decision-making functions are distributed across the supply chain.[3] Figure 1 :schematic view of an SCM Information Sharing in the Supply Chain [4] In recent years numerous studies have emphasized the importance of information sharing within the supply chain (e.g. Barrat, 2004, Lambert, & Cooper, 2000; Lau & Lee, 2000; Stank, Crum & Arango, 1999). Indeed information sharing is a prerequisite for successful operation of the SC (Mason-Jones & Towill, 1997). While there is no doubt about the importance of informing in the supply chain and about the fact that information technology (especially various Internet applications) can greatly reduce the costs, strategic planning of this process and utilization of information is crucial. Information should be readily available to all companies in the supply chain and the business processes should be structured in a way to make full use of this information. It should be noted that the use of information technology, networks and e-business applications alone is not sufficient to realize the benefits. It was found that Internet adoption alone has demonstrated no benefits in terms of reduced transaction costs or improved supply chain efficiency in Scottish small and medium enterprises (Wagner et al., 2003), and has not led to a decrease in the inventory level in Slovenian small and middle-size enterprises (Trkman, 2000). Additionally, only sharing of information will not lead to improvements, but also ٤

5 coordination of activities is crucial (Disney, Naim & Potter, 2004). While it should not be claimed that Internet alone reduces certain costs, strategic utilization of the information is of the utmost importance and business process modeling and renovation (shown in the remainder of this paper) can be of great help in achieving this desired coordination. Sharing of information can obviously be a problematic issue as the companies in a supply chain may not be prepared to share their production data, lead times, specially when those companies are independent of each other (Terzi & Cavalieri, 2004). Indeed, the lack of trust between business partners is one of the main hindrances to collaboration in the supply chain context (Barrat, 2004; Ireland & Bruce, 2000). The main contribution of this paper is to show how business process modeling (specifically process maps) can be used in order to develop such business process models that will lead to improvements in sharing the information and integration of processes. Appropriate business processes are a prerequisite for the strategic utilization of information (otherwise sharing of information can only lead to an overload of information without much benefits for anyone involved). Business modeling techniques are of great help to get fully acquainted with the processes in question and to improve them. Information technology in supply chain management Recently the concepts of supply chain design and management have become a popular operations paradigm. This has intensified with the development of information and communication technologies (ICT) that include electronic data interchange (EDI), the Internet and World Wide Web (WWW) to overcome the ever-increasing complexity of the systems driving buyer supplier relationships. The complexity of SCM has also forced companies to go for online communication systems.[5] Companies need to invest large amount of money for redesigning internal organizational and technical processes, changing traditional and fundamental product distribution channels and customer service procedure and training staff to achieve IT-enabled supply chain (Motwani et al., 2000). The following are some of the problems often cited in the literature both by the researchers and practitioners when developing an IT-integrated SCM: lack of integration between IT and business model, lack of proper strategic planning, poor IT infrastructure, insufficient application of IT in virtual enterprise, and inadequate implementation knowledge of IT in SCM. ٥

6 Figure 2 : A framework for the development of IT for effective SCM. As indicated in Figure (), the classification scheme is based on the major components of IT-enabled SCM. IT is classified into five major broad categories focusing on developing an IT-enabled SCM: (a) Strategic planning for IT in SCM The strategic planning is a critical task especially for IT-enabled SCM. It has long-term implications on the performance of IT in SCM systems. (b) Virtual enterprise and SCM Virtual enterprise is based on outsourcing concept to take advantage of the core competencies with the objective of being flexible and responsive to changing market requirements. Companies integrate various links of the supply chain and their supporting information ٦

7 systems that are driven by the need to streamline operations. The relationships of VE and the Internet have brought SCM to the attention of top management. (c) E-commerce and SCM With the development of Internet based technologies, integration of e-commerce with SCM systems is becoming a necessity. It can support various activities along the supply chain. B2B ecommerce has tremendous influence on integrating partners in an organization to achieve an effective SCM. (d) Infrastructure for IT in SCM Companies suffer without having sufficient knowledge on what type of IT infrastructure or systems required for their business model to achieve an IT-enabled supply chain. The infrastructure includes the hardware and software and the nature and type of systems required for IT system in a supply chain environment. (e) Knowledge and IT management in SCM Since we are operating in information and automation intensive world, there is a need for knowledge workers to contribute to the valueadding activities in advanced organization. Knowledge and IT management requires a systemic approach or framework for educating and training workers in teamwork and be innovative. Management of technology requires planning, developing and implementation decisions based on the characteristics of business processes and organizational objectives. (f) Implementation of IT in SCM Implementation of IT in SCM requires a project management approach with the right team for the planning and implementation of IT projects. Top management support is essential in order ٧

8 to provide moral support as well as the financial and technical support for the implementation of IT for achieving SCM. This classification is based on the " Information systems in supply chain integration and management ", A. Gunasekaran a, E.W.T. Ngai, European Journal of Operational Research 159 (2004), Literature view. e-business defined in relation to supply chain Frohlich and Westbrook (2002) introduce four web-based demand and supply integration strategies (Figure 1) that describe the extent to which companies are using the Internet in integration with their suppliers or customers. The resulting categories are web-based low integration, web-based demand integration (similar to e-commerce), web-based supply integration (similar to e-procurement), and web-based demand chain management integration (a joint application of the previous two categories).[6] Figure 3 Web-based supply chain integration strategies(frohlich & westbrook,2002) Conceptual classifications IT in Supply chain management There are some few classification frameworks that describe how IT is used for SCM in the previous literature. Bagchi and Skjoett-Larsen (2002) examine the role of IT and organizational integration in supply chain integration and propose an IT integration path from low, through medium, to high ٨

9 integration. Themistocleous et al. (2004), in turn, use the scale of low, medium, to high to describe the integrativeness of different IT alternatives. The focus of these studies being on assessing the levels of supply chain integration, they do not describe how IT is actually used for SCM purposes.[7] Meanwhile, in their research, Kauremaa et al. (2004) have focused on the ways companies use IT in SCM and choose to classify the use of IT in SCM to transaction execution and information sharing. Based on the rarity of using IT for information sharing among their sample of companies studied, they hypothesize that the drivers and prerequisites of using IT in transaction execution and in information sharing differ, and that the benefits of IT in transaction execution are easier to quantify. Furthermore, they suppose that companies use IT for transaction execution in situations with high transaction volumes and stable business relationships, while IT is used for information sharing especially in environments with demand uncertainty and frequent product introductions. The most severe limitation of this study is that the drivers of using IT for transaction execution and information sharing are hypothesized, and can not be validated by their research data. To conclude, based on our literature review, there is a lack of research on how companies actually utilize IT in the management of their supply chains. Furthermore, there is a limited knowledge on the factors that drive the companies to use IT in a specific way in their SCM efforts. These identified shortcomings of prior research create a need for research that this study aims to address. Figure 4 IT in SCM Classification For the purposes of examining the use of IT in SCM, two a priori constructs were developed: 1) the types of IT use in SCM 2) the drivers for using IT in SCM. The a priori constructs are described in more detail below ٩

10 Types of IT use in SCM The first construct, types of IT use in SCM, refers to the ways in which companies employ IT for the purposes of SCM. Based on prior research discussed above, three different types of IT use in SCM transaction processing, supply chain planning and collaboration, and order tracking and delivery coordination were identified and chosen to represent the first construct. The first type of IT use, transaction processing stands for the use of IT for increasing the efficiency of repetitive information exchanges between supply chain partners. In this type of IT use the exchanged information is typically related to such tasks as order processing, billing, delivery verification, generating and sending dispatch advices, and producing order quotes. The second type of IT use, supply chain planning and collaboration, represents the use of IT for sharing planning-related information such as demand forecasts and other demand information, inventory information, and production capacity information, with the intention of increasing the effectiveness of the supply chain. Finally, the third type of IT use in SCM, order tracking and delivery coordination, refers to the monitoring of individual orders or shipments, which may consist of components or final products, with the aim of coordinating their delivery or conveying timely information of their location. Drivers for IT use in SCM The second construct, drivers for using IT in SCM refers here to the reasons why IT is used in a certain manner in SCM. Based on our literature review, we expected that following drivers for the use IT in transaction processing can be found in the case companies: reduction of the costs of operational processes (manual work), improvement of information quality by eliminating human errors, and speeding up the transfer of information between organizations. We further hypothesized that the volume of transactions acts as a driver for using IT for transaction processing. It was also assumed that supply chain coordination information is shared especially in volatile, unpredictable, and logistically demanding business environments. Finally, we expected that tracking and coordination activities are performed in project oriented businesses and in cases with in-transit delivery consolidation. The presumed relationships between these drivers and the a priori constructs are presented in Figure 3.1. ١٠

11 Results Our results show that adopting IT-based SCM systems results in significant performance benefits, particularly for firms in high-tech industries.in this paper, an attempt has been made to review the literature on IT in SCM and to develop a framework for the development and implementation of IT in SCM. The literature available on IT in SCM has been reviewed based on the major components of ITenabled SCM. Although the literature survey is not exhaustive, it serves as a comprehensive base for an understanding of IT in SCM. This classification has the objective of bringing out pertinent factors that would support practitioners in their efforts to successfully achieving an IT-enabled SCM. As a result of the literature survey, the major components of IT-enabled SCM comprises of six major areas: (i) strategic planning, (ii) virtual enterprise, (iii) e-commerce, (iv) infrastructure, (v) knowledge and IT management and (vi) implementation. The foundations of a well-developed IT-enabled SCM lie in the preparation of the ground factors of strategic planning and infrastructure from which all development emanates. IT in supply chain strategy needs to be determined by the senior executives in strategic plan. Senior managers and planners should understand that the importance of IT in supply chain and realize that without support of IT systems, it is difficult to provides information for making the best supply chain decisions. Refrences: [1] M. Eric Johnson, David F. Pyke, " Supply Chain Management", The Tuck School of Business Dartmouth College, 1999 [2] Saravanan Raju,Pradeep Rajendran, Mohamed E. Fayad, PhD," Web based Supply Chain Management System", 2002 ١١

12 [3] MARK S. FOX, MIHAI BARBUCEANU, AND RUNE TEIGEN, " Agent-Oriented Supply-Chain Management", The International Journal of Flexible Manufacturing Systems, 12 (2000): [4] Peter Trkman, Mojca Indihar Stemberger, and Jurij Jaklic, " Information Transfer in Supply Chain Management ", University of Ljubljana, Faculty of Economics, Slovenia, 2004 [5] A. Gunasekaran a, E.W.T. Ngai, Information systems in supply chain integration and management", European Journal of Operational Research 159 (2004) [6] Jaana Auramo, Capturing the Potential of e-business in Supply Chain Management, Espoo, February 14th 2005 [7] Jaana Auramo*, Aimo Inkiläinen**, Jouni Kauremaa*,Katariina Kemppainen**, ikko Kärkkäinen*, Sanna Laukkanen**,Sami Sarpola**, Kari Tanskanen*," The roles of information technology in supply chain management", 2000 [8] Jutla, D., Bodorik, P., Dhaliwal, J., Supporting the ebusiness readiness of small and mediumsized enterprises: Approaches and metrics. Internet Research: Electronic Networking Applications and Policy 12 (2), [9] Sarkis, J., Sundararaj, R.P., Evolution of brokering paradigms in e-commerce enabled manufacturing. International Journal of Production Economics 75, [10] Kauremaa, J., Auramo, J., Tanskanen, K. and Kärkkäinen, M. (2004), The use of information technology in supply chains: transactions and information sharing perspective, Logistics Research Network Annual Conference, Dublin, Ireland, September 9 10, [11] Disney, S., Naim, M.M. and Potter, A. (2004), Assessing the impact of e-business on supply chain dynamics, International Journal of Production Economics, Vol. 89, No. 2, pp [12] Auramo, J., Kauremaa, J. and Tanskanen, K. (2005), Benefits of IT in supply chain management an explorative study of progressive companies, International Journal of Physical Distribution & Logistics Management, Vol. 35, No. 2, pp [13] Ala-Risku, T., Kärkkäinen, M. and Holmström, J. (2003), Evaluating the applicability of mergein-transit: A step by step process for supply chain managers, International Journal of Logistics management, Vol. 14, No. 2, pp [14] Kemppainen, K. and Vepsäläinen, A.P.J. (2003), Trends in industrial supply chains and networks, International Journal of Physical Distribution & Logistics Management, Vol. 33, No. 8, pp [15] Nurmilaakso, J-M., Kettunen, J. and Seilonen, I. (2002), XML-based supply chain integration: a case study, Integrated Manufacturing Systems, Vol. 13, No. 8, pp [16] Raghunathan, S. (2001), Information sharing in a supply chain: A note on its value when demand is nonstationary, Management Science, Vol. 47, No. 4, pp ١٢

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