Role of Information Technology in Supply Chain Management

INTRODUCTION:

Supply chain management (SCM) is concerned with the flow of products and information between
supply chain members' organizations. Recent development in technologies enables the organization to
avail information easily in their premises. These technologies are helpful to coordinates the activities
to manage the supply chain. The cost of information is decreased due to the increasing rate of
technologies. In the integrated supply chain model bi-directional arrow reflect the accommodation of
reverse materials and information feedback flows. Manager needs to understand that information
technology is more than just computers. Except computer data recognition equipment, communication
technologies, factory automation and other hardware and services are included.

The Wal-Mart & P&G experiences demonstrate how information sharing can be utilized for mutual
advantage. Through sound information technologies Wal-Mart shares point of sale information from
its many retail outlet directly with P&G and other major suppliers. The development of Inter
organizational information system for the supply chain has three distinct advantages like cost
reduction, productivity, improvement and product/market strategies.

Objectives of Information Technology in Supply Chain Management

• Collect information on each product from production to delivery.

• Access any data in the system from a single point of contact.
• Analyze, plan activities, and make trade-offs.
• Collaborate with supply chain partners.

Importance of Information

• Helps reduce variability in the supply chain.

• Helps suppliers make better forecasts, accounting for promotions and market changes.
• Enables the coordination of manufacturing and distribution systems & strategies.
• Enables retailers to better serve their customers by offering tools for locating desired items.
• Enables retailers to react and adapt to supply problems more rapidly.
• Enables lead time reductions.

Information and Technology: Application of SCM:

In the development and maintenance of Supply chain's information systems both software and
hardware must be addressed. Hardware includes computer's input/output devices and storage media.
Software includes the entire system and application programme used for processing transactions
management control, decision-making and strategic planning.

Information Technology

The Internet as well as the intranet (connecting the workstations within an organization) and extranet
(electronic network among business partners, e.g., EDI) have revolutionized the management of
supply chains. The power and flexibility of these networks offer businesses more control over the
flow of products, services and funds than ever before. Dramatic results have been obtained from using
information to improve supply chain performance. The Web has created a rare opportunity for
organizations to access global markets. It allows for mass customization, stronger business
relationships, a greater degree of channel coordination, and enhanced communications with
customers and business partners.

Internet based procurement

Business-to-business sales on the Web are starting to gain popularity. Companies around the world
are getting serious about Internet-based procurement (IBP) because the return on a relatively modest
investment is high and the risk is very low, at least for many items, companies buy routinely. There
are two distinct parts of the IBP market:
• Direct-Material Procurement, which involves the acquisition of products directly required
for production. These include the components and materials from key upstream supply chain
partners.
• Indirect-Material Procurement, which is the purchase of products that are indirectly used in
the production process. They include office supplies; maintenance, repair and operating
supplies (MRO).

Electronic Commerce:

It is the term used to describe the wide range of tools and techniques utilized to conduct business in a
paperless environment. Electronic commerce therefore includes electronic data interchange, e-mail,
electronic fund transfers, electronic publishing, image processing, electronic bulletin boards, shared
databases and magnetic/optical data capture. Companies are able to automate the process of moving
documents electronically between suppliers and customers.

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.

Electronic commerce has revolutionized how business is conducted in today's world. It is now a
reality in both business-to-customer and business-to-business transactions and is rapidly accelerating
in both areas.

Electronic Data Interchange:

Electronic Data Interchange (EDI) refers to computer-to-computer exchange of business documents in

a standard format. EDI describe both the capability and practice of communicating information
between two organizations electronically instead of traditional form of mail, courier, & fax. The
benefits of EDI are:

1. Quick process to information.

2. Better customer service.
3. Reduced paper work.
4. Increased productivity.
5. Improved tracing and expediting.
6. Cost efficiency.
7. Competitive advantage.
8. Improved billing.

Though the use of EDI supply chain partners can overcome the distortions and exaggeration in supply
and demand information by improving technologies to facilitate real time sharing of actual demand
and supply information.

Bar coding and Scanner:

Bar code scanners are most visible in the check out counter of super market. This code specifies
name of product and its manufacturer. Other applications are tracking the moving items such as
components in PC assembly operations, automobiles in assembly plants.

Data warehouse:

Data warehouse is a consolidated database maintained separately from an organization's production

system database. Many organizations have multiple databases. A data warehouse is organized around
informational subjects rather than specific business processes. Data held in data warehouses are time
dependent, historical data may also be aggregated.

Enterprise Resource planning (ERP)

Many companies now view ERP system (eg. Baan, SAP, People soft, etc.) as the core of their IT
infrastructure. ERP system have become enterprise wide transaction processing tools which capture
the data and reduce the manual activities and task associated with processing financial, inventory and
customer order information. ERP system achieve a high level of integration by utilizing a single data
model, developing a common understanding of what the shared data represents and establishing a set
of rules for accessing data.

❑ ERP is a generic term used to describe a comprehensive information system designed

to integrate all the business processes found in an enterprise.
❑ Efficiency and productivity are improved through the integration of information and
the removal of duplicate information and processes.
❑ It is to be highlighted that decision on ERP will have been made only after a great
deal of information gathering, analysis and forecasting.ERP Benefits
ERP Benefits
◼ Process Improvements
❑ Eliminate redundant transactions and multiple reconciliations.
❑ More efficient job rotation process
❑ More efficient staff and succession planning
◼ Information Technology (cost reduction)
❑ Reduced support costs.
❑ Reduced infrastructure costs.
◼ Strategic Direction
❑ Improved resource allocation
❑ More flexible organization.
❑ Better future decision making
◼ Related initiatives
❑ Better focus, reduced spending

Radio-frequency identification (RFID)

It is a technology that uses radio waves to transfer data from an electronic tag, called RFID tag or
label, attached to an object, through a reader for the purpose of identifying and tracking the object.
Some RFID tags can be read from several meters away and beyond the line of sight of the reader. The
application of bulk reading enables an almost-parallel reading of tags.

Benefits of using RFID

RFID can be used in many applications. A tag can be affixed to any object and used to track and
manage inventory, assets, people, etc. For example, it can be affixed to cars, computer equipment,
books, mobile phones, etc. RFID applications for traffic management, while automotive companies
use various RFID tracking solutions for product management. Many of these solutions may work
together in the future, though privacy regulations prevent many initiatives from moving forward at the
same pace that technology allows.

RFID can also be used for supply chain management in the fashion industry. The RFID label is
attached at the garment at production, can be read/traced througout the entire supply chain and is
removed at the point of sale (POS).

Logistics and transportation are major areas of implementation for RFID technology. For example,
yard management, shipping and freight and distribution centers are some areas where RFID tracking
technology is used. Transportation companies around the world value RFID technology due to its
impact on the business value and efficiency.