THE ROLE OF INFORMATION TECHNOLOGY AND CUSTOMER RELATION MANAGEMENT IN THE SUPPLY CHAIN

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1 THE ROLE OF INFORMATION TECHNOLOGY AND CUSTOMER RELATION MANAGEMENT IN THE SUPPLY CHAIN Mina Beig Master of Industrial Management (OM), Department of Human Science, Najafabad Branch, Islamic Azad University, Isfahan, Iran Mohammad Hassan Pourhasomi Master of Industrial Management (OM), Department of Management and Economy, Science and Research Branch, Islamic Azad University, Tehran, Iran. Yaser Ghorbanzad Master of Industrial Management (OR), Department of Management and Economy, Science and Research Branch, Islamic Azad University, Tehran, Iran Abstract Supply chain starts with customer demand and ultimately leads to customer. The increasing development of technology leads to the rapid change in everything. These changes affect all aspects of human life, including the production and service organizations. Hence this study briefly examines the importance of customer role in light of the information technology in the supply chain. Keywords: supply chain, supply chain management, customer relation management, information technology 1. Introduction According to Christopher (1998) today not the size of products and economic scale, but the supply chain management is necessarily a powerful solution to achieve a cost advantage. He believes that the supply chain is a network from upstream and downstream organizations. These organizations are involved in different processes and activities that produce value in the form of products and services on their final customers. (Christopher,1998) Moreover, we can say that today all organizations are exposed to the developments in information technology. And the application of information technology and communication are obvious in all areas of the supply chain including the communication with suppliers and production and customer relation. So the use of information technology affects on the improvement of the supply chain management. (Aghajani, 2008 ) This paper attempts to review the literature and previous studies, and investigates the role of information and customer relation management in the supply chain. It finally presents the importance of information technology in customer relation management and supply chain. 2. Review of Literature This section provides the definitions of supply chain, customer relation and information technology, then reviews the related research literature Supply chain The concept of supply chain management has been analyzed and described by many researchers. Some researchers define it as logistics, operations management, procurement or a combination of these three. (Monzka, Trent and Handfield, 1998) Definition of supply chain A supply chain is a network of facilities and activities such as raw preparing materials, converting these materials to manufactured and semi-manufactured products and distributing the products between customers. ( Nematbakhsh, N & et al, 2004) Supply chain management Supply chain management is the integration of key business processes from the final user to the major supplier which is responsible for the supply of products, services and information that creates added value for customers and interested parties. In recent years, many organizations have accepted the reference model of supply chain operations as a powerful and comprehensive tool for describing, analyzing and improving supply chain: the model is based on the main supply chain processes such as sourcing, manufacturing and distribution. (Council of supply chain management, 2006) Definition of supply chain management Supply chain management coordinates the all activities of the supply chain. The term supply chain management was first used by two researchers Oliver and Webber (1982), and then it was used widely in the 1990s. Earlier, the terms logistics and operations management were used. According to Oliver and Webber the supply chain includes logistics and is posed at the level of senior management. (Eshtedler, Hartmot and Kigler, Christoph. 2007) COPY RIGHT 2012 Institute of Interdisciplinary Business Research 570

2 Another definition of supply chain management is as follows: coordinating the activities of production, products stock, positioning and transportation between supply chain participants to achieve greater efficiency and meet customer expectations. ( Hugos, 2006) According to Christopher, supply chain is a network of upstream and downstream organizations. These organizations are involved in different processes and activities which create value in the form of products and services. This definition focuses on satisfying customers' needs at all supply chain activities. (Rahman Seresht, Afsar, 2008) History of Supply Chain The term supply chain management dates back to Pre-1980s, but the supply chain existed since the human produced and trade. Transportation of natural resources as products and services seems to be very simple through individuals and organizations chain. But managing this transportation is not so easy, even in many cases; organizations involve numerous products and countries around the world. The purpose of supply chain management is to do the process of this displacement efficiently. (Christopher, 2011) Supply chain management is the result of the logical progression of logistics management. In the 1960s experts studied the internal relation between the storage and transportation that resulted in a distribution management. In fact the logistics was created by adding construction management, procurement and orders to the distribution management. Supply chain management was studied as a serious debate in the scientific community since early 1980 and many researchers have proposed a framework and a model for it. For example, Forrester presented a model as the first model which was considered as an appropriate model for the supply chain. (Ibid) 2.2. Customer Relationship Management Today s challenge is to see how companies understand the needs of individual customers and how meet their expectations while keeping costs down and improving quality, Customer relationship management is a tool to apply this concept. Customer relationship management forced many organizations to think on providing better service to customers. It is important to note that customer relationship management is not a product or service offered by an organization, but it is organization's business strategy. In other words, it is not considered as an information technology; but uses information technology to achieve its goals Definition of customer relationship management Customer relationship management is a strategy manages the relationships between customers and business processes. It uses technology to management, automation and making business process simultaneously. The benefits of customer relationship management. (Robert, 1991) 1. To increase sales 2. To better understand customer demands 3. To understand that customers are profitable 4. Customer satisfaction and reputation of the organization 5. To Reduce marketing costs (Ghahremanlou, Dhake, Sane and Vaidya, 2012) 2.3 Information technology Information technology consists of four basic elements of human, mechanism, tools and structure. In this technology the information is created through the value chain to join these elements and continues the improvement and development of the organization. Human: Human resources, concepts and ideas, innovation Mechanism: Rules, regulations and procedures, improvement and growth mechanisms, Valuation and financial mechanisms Tool: Hardware, Software, Network and Communications Structure: organizational, related ultra-organizational, universal Many concepts merge information technology with computer and informatics, while these are only the information technology tools. As Seyed Hamid Khosravani Shariati wrote in his paper: By assuming that information technology is an apple, computers, networks, software and other related tools are considered as the tail of apple which feeds the apple However, apple is the main product and summarizes the results and goals.( Khosrovani, 2010) Definition of Information Technology There are various definitions for technology. According to one definition, technology is divided to four elements as follows: 1. Technical tools: a device which includes technology. 2. Human tool: the set of people who are engaged in a production system. 3. information tools or documents: Documents which define and describe technology 4. organizational tools: an atmosphere in which these three components can be coordinated and conducted Each technology has combined these four components. COPY RIGHT 2012 Institute of Interdisciplinary Business Research 571

3 Definition of information and communication technology: Information and communication technology is the production management networks, processing, distributing and the optimum use of information in order to improve system performance. ( Hazhbar Kiyani, 2004) Information technology is a revolution and its purpose is to create the foundation of electronic supply chain. The intelligent use of information technology causes the information exchange through internet, prevents redundant data entry, provides the required information within the required time, allows managers to receive the complex information more efficiently and exchanges the information easier among supply chain members, so the provider customer communication can be improved.( Moore, 2008) 2.4 Research background Fang Wu has examined the impact of information technology on supply chain capabilities in They concluded that the ability of information technology is specific in the supply chain capabilities and can it hardly be employed in the same organization. (Fang Wu, Sengun Yeniyurt, Daekwan Kim, S. Tamer Cavusgil, 2006) Jabir Ali and Sushil Kumar studied on ICT and decisions of farmers in the agricultural supply chain in The results obtained in this study have shown that someone who used information and communication technologies had made better decisions and had better results. Jao-Hong Cheng presented a model to evaluate the factors affecting information on the implementation of inter-organizational relationships. (Jabir Ali, Sushil Kumar, 2011) Yu and his colleagues studied the impact of information technology on the supply chain capabilities and firm performance. The results showed that the placement of information technology in supply chain communication systems can provide better facilities in the supply chain in areas such as information exchange, coordination, activities integration and sensitivity (influence)( Jao-Hong Cheng, 2011) Bird and Davidson in 2003 investigated the effect of information technology on the supply chain and business performance. The results showed that the three factors of information technology technical quality, useful applications of information technology and the support of administrators from information technology positively and significantly affect the impact of information technology on the supply chain. In this regard, they have significant and positive relationship with financial performance at the firm level. (Blankley A. 2008) Michael Ahearne and his colleagues in 2007 have studied the effect of customer relationship management based on information technology on effective sales. The two companies have collected data and the results of positive impact on sales performance are reported. (Michael Ahearne, Douglas E. Hughes, Niels Schillewaert, 2007) Seungjeong and his colleagues in 2009 have researched on the integration of customer relationship management for the effective implementation of customer relationship management in small and medium organizations. (Seungjeong Yang, Jongtae Rhee, 2009) Timon and his colleagues in 2012 have examined the willingness to share information in a supply chain. They suggest that if colleagues are closer to each other, the tendency toward sharing the information will increase and the information will spread in the organization. (Timon C. Du, Vincent S. Lai, Waiman Cheung, Xiling Cui, 2012) Davood Ghahremanloo and his colleagues in 2012 have examined the effect of customer relationship management on the supply chain management. They concluded that if the customer relationship management is applied in the organization, everything will be written and recorded and everyone knows his/her job because they have common goals. ( Ghahremanlou, Davoud, R.J. Dhake, S.M. Sane and P.R. Vaidya, 2012) There is summarizes briefly of some studies on the subject in table (1). Insert Table (1) 3. The role of customer relationship management in the supply chain One concern of business is the customer satisfaction and contentment. (Morteza Poor, 2002) Best customer service will be formed in an efficient and effective manner with information such as order status, product availability, delivery scheduling and billings. Therefore, the importance of information in the field of customer service and their satisfaction and contentment is clear. (ibid) Therefore the main purpose of the activities related to the supply chain is satisfying customer demand, so that they can deliver a product with a maximum quality and a minimum cost.( Amid, Rezaiyan, Bagheri, 2008) When the kind of relationship between customer relationship management and supply chain management is defined precisely, then the actual performance of customer relationship management in the supply chain can be observed. Customer relationship management system is based on three fundamental variables such as engineering, economics and customer psychology. (Dimitris, 2001) The first variable is an intra-organization variable. This variable will be effective when the supply chain management provides comprehensive and accurate statistical information of the supply chain abilities. As a result the customer relationship management system will be able to classify customers and to identify the group who ask to receive a product at this level of quality. The second variable is associated with three components of the organization, customers and the community. In fact, study and work in the scope of this variable enables the customer relationship management to provide the supply chain management with a comprehensive information of Customer s views toward the cost of a product COPY RIGHT 2012 Institute of Interdisciplinary Business Research 572

4 which they are willing to pay, and the ability of the supply chain in providing a product at different levels of cost in order to achieve the best production plan. The third variable is an extra-organization variable that can be very effective and efficient due to the competitive share in the supply chain of global markets. Identifying the needs of customers in all areas that can cause customer satisfaction or even creating demand (induced demand) is a key objective to achieve the supply chain success, and this is one of the most prominent targets of the supply chain management. (Andreas Reichhart and Matthias Holweg, 2001) Furthermore, as it is shown in Figure (1) the customer relationship management is between the different elements of the organization. Suppliers, manufacturers and distributors all participate to meet the needs of customers. So all aspects of customer relationship management in the supply chain are not only inevitable, but they are important. Insert Figure (1) 4. The role of information technology in supply chain Nowadays the use of information technology is considered as a prerequisite for the effective control of complex supply chains.( Moore K.A. 2008) A supply chain which is fully integrated with information technology is a chain in which all important business communications of the organization suppliers and customers are enabled or disabled as digital. (ibid) Using information technology has the potential of developing supply chain partners to work together and deliver the products to consumers more efficiently. Information technology allows the supply chain partners to have a performance as a single entity. Interestingly, the idea of using information technology to cross the company s borders in order to improve efficiency is not a new idea. Forester in 1958 suggested that the data transfer between companies reduces the demand distortion in the supply chain. In fact, the new millennium with the advent of information technology and the new business environment, has led to the creation of the electronic supply chain, and unlike the conventional supply chain, the electronic supply chain focuses on the customer.( Rajab Zadeh & et al, 2011) Furthermore, the use of information technology in the supply chain, improves the chain efficiency by reducing the uncertainty due to the unavailability, incompleteness and distorted information.( NiuY. 2010) Information technology plays an important role in strengthening cooperation and coordination in the supply chain through sharing the information. Information technology supports the decision-making process in the supply chain. In this case, Computer analysis can be used to help make management decisions. (Rajab Zadeh & et al, 2011) The term supply chain management indicates the integrating task of organizational units along a supply chain and the integration of material, financial and information flows, in order to meet the customer demands; it is aimed at improving the competitiveness of a supply chain. So we can say that the supply chain management is based on integration and synchronization. Figure (2). In discussing integration issues such as the selection of a suitable partner for collaboration, inter-organization and intra-organization and leadership are expressed in order to coordinate the strategies of partners. The use of information and communication technology is so important which indicates the importance of information technology in the supply chain. Cooperation includes two distinct concept is two distinct concepts of internal and external cooperation. Internal cooperation is a shared a two-way process in two or more parts which have mutual understanding and a shared vision, shared resources and collective goals. External cooperation is similar, to internal cooperation; the difference is that it focuses on the chain. It should be noted that cooperation does not have the meaning similar to information technology. Many companies think they can use information technology to obtain the coordination, while cooperation is the result of human interaction that is supported by information technology. In fact, information technology is a concept that promotes the internal and external relationships. Due to the impact of information technology on internal collaboration and external collaboration, it can be stated that information technology has a considerable impact on the efficiency of organization performance. Sandres and Premus proposed a model to determine the impact of information technology on internal and external collaboration on the efficiency of organization performance. ( Sanders N.R., Premus R., 2005) Different technologies can be used to improve the performance of the organization. Such as electronic data interchange, internet, coding, identification of codes, and so on. Note that each of them is beyond the scope of this article. Insert Figure (2) 5. The role of IT and CRM in the supply chain Development and utilization of information systems needs diverse information technologies. Information technology can support the internal operations of companies and their cooperation in the supply chain, and the effective use of this technology is a key factor in the success of the company. The systems supported by information technology are applicable in all the major areas of supply chain management. The main areas of supply chain management include product and service design, production, marketing and sales, customer service and logistics. ( Jiang H., Jiang Y., 2007) COPY RIGHT 2012 Institute of Interdisciplinary Business Research 573

5 As described in the previous section, customer relationship management systems automate many tasks and activities associated with providing service to existing customers and attract new customers. These systems track and record customer buying patterns and provides the customers with a faster access to the data through integrating relevant data to customers with sales and service units. Customer relationship management can also increase customer satisfaction and it has a positive effect on them and their preservation. However, to achieve this purpose alone would not be possible without information systems and information technology. The aim of the present study was to examine the role and importance of customer relationship management and information technology. Thus, Figure (3) provides the hybrid model of customer relationship management which exists in all parts of the supply chain. Insert Figure (3) 6. Conclusion Today's competitive world is based on information and the profits of any organization depends on the extent to which the service and product are considered, Hence the placement of information technology in supply chain communication system can create better opportunities in the supply chain in areas such as information exchange, coordination, integration activities and sensitivity (influence). In other words, the adoption of information technology in communication systems can improve onformation sharing and coordination among different parts of a particular sector especially customer relationship management. In this regard, suppliers, manufacturers and distributors are also important because they all participate in customer relationship management. Since the purpose of customer relationship management is customer satisfaction and the ultimate goal of supply chain management is to gain more profit, so if the supply chain management is conducted in the best way, it will act as a solution for the supply chain in order to meet the goal. COPY RIGHT 2012 Institute of Interdisciplinary Business Research 574

6 References Agha Jani Zahra, (2008), Use of information technology in the supply chain (e- logistics), Business Studies;24: Andreas Reichhart and Matthias Holweg (2001) creating customer responsive supply chain,a Reconciliation of concepts, judge business school. Amir Amin, Rezaiyan Ali, Bagheri Mahdi, (2008). Analysis of strategic planning of information systems in supply chain management performance. Management messages. 25, 32-5 Blankley A. (2008) A conceptual model for evaluating the financial impact of supply chain management technology investments. The International Journal of Logistics Management; 19: Christopher M. (1998). Logistics and supply chain management strategies for reducing cost and improving service, Prentice-Hall Christopher, M. (2011). Logistics and supply chain management (4th edition). FT Press. Council of supply chain management,(2006) Dimitris N.Chorafas )2001(, Integrating erp, crm, supply chain management and smar material, Auerbach,,CRC press, page69 Eshtedler, Hartmot and Kigler, Christoph. (2007) Management of the supply chain, translated by Asgari, Nasrin and Farahani, Reza. Amirkabir University Press. (First edition) Fang Wu, Sengun Yeniyurt, Daekwan Kim, S. Tamer Cavusgil, (2006), The impact of information technology on supply chain capabilities and firm performance: A resource-based view, Industrial Marketing Management, Volume 35, Issue 4 Ghahremanlou, Davoud, R.J. Dhake, S.M. Sane and P.R. Vaidya (2012) Effect of Customer Relationship Management (CRM) on Supply Chain Management (SCM); International Journal of Industrial Engineering and Technology. ISSN Volume 4, Number 3, pp Hugos, M. (2006). Essential of supply chain management (2nd ed.). John Wiley & Sons. Hazhbar Kiyani, Kambiz, (2004). The effects of electronic commerce on macroeconomic variables, the Institute of Business Studies Jabir Ali, Sushil Kumar, (2011), Information and communication technologies (ICTs) and farmers decisionmaking across the agricultural supply chain, International Journal of Information Management, Volume 31, Issue 2 Jao-Hong Cheng, )2011(, Inter-organizational relationships and information sharing in supply chains, International Journal of Information Management, Volume 31, Issue 4 Jiang H., Jiang Y., ( 2007) Information Technology Support System of Supply Chain Management, 11th WSEAS International Conference : Dallas, Texas, USA Karbasian Saeed, (2004). Application Management information systems and decision systems in the evaluation, selection and planning of supply chain members. Master's thesis, Faculty of Engineering - Department of Industrial Engineering, Tehran University. Khosrovani Seyed Hamed Shariati, (2010). Sixth International Conference on Information Technology Management Michael Ahearne, Douglas E. Hughes, Niels Schillewaert, )2007(, Why sales reps should welcome information technology: Measuring the impact of CRM based IT on sales effectiveness, International Journal of Research in Marketing,Volume 24, Issue 4 Monzka R, Trent R, and Handfield R, (1998). Purchasing and supply chain management. South-Western College Publishing, Cincinnat. Moore K.A.(2008) Value mapping frame work involving stakeholders for supply chain improvement when implementing information technology projects, Ph.D thesis, M.S. University of Central Florida Morteza Poor Ali (2002). Information and information systems for supply chain management - Supply Chain Case Study Research in Education. School of Industrial Engineering. Iran University of Science and Technology. NiuY. )2010( The impact of information technology on supply chain performance: A knowledge management perspective, Ph.D thesis, University of North Carolina at Charlotte Nematbakhsh, N & et al. (2004). Designing of business process re-engineering for order management. Electronic Journal of Iranian Research Institute for Information Sciences and Technology, No 2. (In Persian) Rahman Seresht Hussein, Afsar Amir, (2008). The effect of information sharing on supply chain performance and competitive strategies. Technology Management, 37, 48-1 Rajab Zadeh Ali, Hussein Zadeh Ali Reza, Nalchigar Niloofar, Nalchigar Soroush, (2011). Model of risk factors affecting the electronic supply chain and its impact on organizational performance. Information Technology Management COPY RIGHT 2012 Institute of Interdisciplinary Business Research 575

7 Seungjeong Yang, Jongtae Rhee, (2009), Study of the wireless/wire integration CRM Gateway for the effective application of Event CRM for small and medium sized enterprises, Computers & Industrial Engineering, Volume 57, Issue 2 Shaw, Robert, (1991), Computer Aided Marketing & Selling; Butterworth Heinemann, ISBN Sanders N.R., Premus R.,(2005); Modeling The Relationship Between Firm IT Capability, Collaboration, And Performance, Journal of business Logistics 26, No. 1, p1. Timon C. Du, Vincent S. Lai, Waiman Cheung, Xiling Cui (2012), Willingness to share information in a supply chain:a partnership-data-process perspective; Information & Management journal Wu F, YeniyurtS, Kim D, Cavusgil S.T. )2006(The impact of information technology on supply chain capabilities and firm performance: Aresource-based view. Industrial Marketing Management; 35: COPY RIGHT 2012 Institute of Interdisciplinary Business Research 576

8 Annexure Table (1) Research Background Theorists Reviewed subject year 1 Bird and Davidson the effect of information technology on the supply chain and And business performance Fang Wu the impact of information technology on supply chain capabilities Yu and et.al the impact of information technology on the supply chain capabilities and firm performance Michael Ahearne and et.al the effect of Customer Relationship Management Based on information technology on Effective sales Seungjeong and et.al the integration of customer relationship management for the effective implementation of customer relationship management Jabir Ali and Sushil Kumar ICT and decisions of farmers in the agricultural supply chain Jao-Hong Cheng Evaluation of influencing factors on inter-organizational relationships Timon and et.al the Willingness to share information in a supply chain Davood Ghahremanloo and et.al the effect of customer relationship management on the supply chain management 2012 Figure (1) Customer Relationship Management in the Supply Chain COPY RIGHT 2012 Institute of Interdisciplinary Business Research 577

9 Figure (2) Information Technology in the Supply Chain Figure (3) Information technology and customer relationship management in the supply chain COPY RIGHT 2012 Institute of Interdisciplinary Business Research 578

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