The Role of Information Technology in the Supply Chain The Supply Chain IT Framework Customer Relationship Management Internal Supply Chain Management Supplier Relationship Management The Transaction Management Foundation
Role of Information Technology in a Supply Chain Information is the driver that serves as the “glue” that allows the other supply chain drivers to work together with the goal of creating an integrated , coordinated supply chain Information must have the following characteristics to be useful: Accurate Accessible in a timely manner Information must be of the right kind
Accurate :- without information that gives a true picture of the state of the SC, it is very difficult to make good decisions Accessible in a timely manner:- need to have a up-to- date information that is easily accessible. Information must be of the right kind:- decision makers need information that they can use.
Role of Information Technology ina Supply Chain Information technology (IT) Hardware and software used throughout the supply chain to gather and analyze information Captures and delivers information needed to make good decisions Effective use of IT in the supply chain can have a significant impact on supply chain performance
Facility :- determining the location, capacity, and schedules of a facility requires information on the trade- offs among efficiency and flexibility, demand, exchange rates, taxes and so on. Inventory :- setting optimal inventory policies requires information that includes demand patterns, cost of carrying inventory, costs of stocking out, and costs of ordering… Transportation :- deciding on transportation networks, routings, modes, shipments and vendors requires information including costs, customer locations, shipment sizes to make good decisions.
Sourcing :- information on product margins, prices, quality, delivery lead times and so on. Pricing and Revenue Management :- to set pricing policies, one needs information on demand, both its volume and various customer segment’s willingness to pay, as well as many supply issues ( product margin, lead time and availability)
The Supply Chain IT Framework Use of IT in supply chain has increasingly been enabled by Enterprise Software. Enterprise Software collects transaction data, analyzes these data to make decisions, and executes on these decisions both within an enterprise and across a supply chain.
Customer Relationship Management (CRM):- processes that focus on downstream interactions between the enterprise and its customers. Internal Supply Chain Management (ISCM) :- processes that focus on internal operations within the enterprise. Supplier Relationship Management (SRM):- processes that focus on upstream interactions between the enterprise and its suppliers.
Transaction Management Foundation (TMF) :- includes basic ERP systems (& its components such as financials & human resources), infrastructure software, and integration software.
Why Focus on the Macro Processes? As the performance of an enterprise becomes more closely linked to the performance of its supply chain, it is crucial for the firms focus on these macro processes. Good supply chain management is not a “zero-sum game”, but a “positive sum-game”.
Macro Processes Applied to the Evaluation of Software Failures – B2B market place and software companies providing market place software that proliferated during 1999 and 2000. ERP –improving data availability and integrity within the supply chain.
The software Winners in a Macro Process Functional performance ( ease of use) Integration with other macro processes Strength of the software firm’s ecosystem.
Customer Relationship Management The processes that take place between an enterprise and its customers downstream in the supply chain Key processes: Marketing Selling Order management Call/Service center
Marketing :- decisions regarding which customers to target, how to target customers, what products to offer, how to price products, & how to manage the actual campaigns targeting customers. Selling :- providing the sales force the information it needs to make a sale and then execute the actual sales. Order Management :- managing customers orders, plan & execute order fulfillment. Call/service center:- primary point of contact between a company and its customers. Customer place orders, suggest products, solves problems, provides information on order status.
Internal Supply Chain Management Includes all processes involved in planning for and fulfilling a customer order ISCM processes: Strategic Planning Demand Planning Supply Planning Fulfillment Field Service There must be strong integration between the ISCM and CRM macro processes
The major areas of risk in IT can be divided into two categories 1)Risk involved with installing new IT system. 2)A firm still faces risks ones its IT systems are operating.
1)Risk involved with installing new IT system During the process of getting new IT system running the firm is forced to change from old process to new process in its IT system. troubles can be found in both business and in technical issues Business issues Requires employees to operate according to new process. These may be difficult to learn getting the entire org on board with the changes bought about by a new IT system is particularly difficult because top management is not actively involved in making this transaction.
Technical issues there are tremendous technical hurdles to overcome in getting new IT system operational When firm switches over to a new system without proper integration ,The new system is unable to perform all that was promised and sometimes even performs worse than the system it was replacing. Even when the employees are bought into new process.
2)A firm still faces risks ones its IT systems are operating The more a firm relies on IT to make decisions and execute processes, the higher is the risk that any sort of IT problem, ranging from software glitches to power outages to viruses, can completely shut down a firms operations . These are the serious risks that a firm plan to face.
Each of the major categories above has its own mitigation strategies. With regards to implementing IT system, there are three ideas to keep in mind. install new IT system in a incremental fashion rather than in a “big bang” approach. Firms can run a duplicate system to make sure the new system is performing well. Implement only the level of complexity that ones need .
On the operational side mitigation strategies include data backup systems running in parallel in case one should suffer a problem, and a range of security software products that can help to keep a companies system safe. In addition, picking systems that have flexibility to change if need be can be important.