Review of Business and Technology Research

Vol. 2, No. 1, 2009, pp. 1-4

ISSN 1941-9414, All rights reserved

A STUDY OF ROLE OF INFORMATION TECHNOLOGY ON SUPPLY

CHAIN MANAGEMENT
Alpana Trehan, Dev i Ahilya Un iversity, India
Kamal Nayan Agrawal, Ho ward University, USA
P.K.Gupta, Devi Ahilya University, India
Shine Dav id, Devi Ahilya University, India

ABSTRACT

In order to ensure the success of companies’ competitive strategies, supply chain management
(SCM) has gained much prominence in the last few years. In India many organizations preferred
to have a separa te supply chain cell (SCC) to promote products, responsiveness and to constantly
overview the price tags. SCC is a new cross-functional area along with informational technology
and armed with integration of production planning, dispatch order generation, l ogistics planning
and distribution to meet broadened objectives of the companies. This paper focus on facilitation of
information technology on supply chain management, with data inputs from 95 organizations
utilizing SCM in central India. This analysis aims at Product satisfaction factors (PSF) and
product demand factors (PDF) and also suggests enhanced information technology enabled
supply chain cell with optimization of demand and satisfaction. Successful supply chain
management requires cross-functional integration and marketing must play a crucial role. The
challenge within the supply chain is to determine how to successfully accomplish this integration.

Keywords: Supply Chain Management (SCM ), Supply Chain Cell (SCC), Product Satisfaction
Factors (PSF) and Product Demand Factors (PDF).

Introduction

In global and highly competit ive markets, companies strive to be innovative an d agile enough to meet customer
demands. Co mpetitiveness, based on organizational capabilities and production strategies, may lead to quality,
efficiency and flexib ility. In the pursuit of „mass customization‟, flexib ility and scale economies are fo llo wed
simu ltaneously. Successful supply chain management requires cross -functional integration and marketing must play
a crucial role. The challenge within the supply chain is to determine how to successfully accomplish this integration.
Business management has entered the era of inter-network co mpetit ion (Lambert and Cooper, 2000). Instead of
brand versus brand or store versus store, it is now suppliers -brand-store versus suppliers-brand-store, or supply chain
versus supply chain. In this emerg ing competitive environment, the success of the single business will depend on
management‟s ability to integrate the company‟s network of business relationships (Bhattacharya, 1996).
Supply chain management offers the opportunity to capture the synergy of intra -and inter-co mpany
integration and management.

The search for a system‟s flexibility, responsiveness and reliability on the one hand , and low costs on the other, has
led to the reconfiguration of the design and production activities and thus advocated the changes in the overall
supply chain management. In order to adopt the aforementioned properties, the three pronged manufacturing
strategies are modularity, quick response manufacturing (Suri 1998) and lean production. Supply chain networks
(SCNs) are formed out of complex interconnections amongst various manufacturing companies and service
providers such as raw material vendors, original equip ment manufacturers (OEMs), logistics operators, warehouse
operators, distributors, retailers and customers (Viswanadham and Raghvan , 2001) (see figure 1).
Review of Business and Technology Research, Vol. 2, No. 1, 2009 2

Figure 1: Supply Chain Network

A supply chain is dynamic in nature and involves the constant flow of informat ion, product and cash between
different stages. It is the coordination or integration of the activities of all the companies involved in procuring,
producing, delivering and maintaining products and services to customers located in geographically different places.
It is a process-oriented approach to coordinate all organizations and all functions in the delivery process. The main
objective of every supply chain is to maximize the overall value generated. The value of a supply chain generated is
the difference between the worth of the final product to the customers and the e ffort behind the fulfilment of the
request (Chopra and Meindl 2001). A supply chain cell (SCC) encompasses the integration aspects of various
planning functions, viz. production planning, distribution planning that includes logistics, and dispatch order
generation. It is a new cross -functional area and its main objective is to pursue integrated management of planning
and distribution tasks along with other accompanying activities so that value addition to the customer can be
enhanced. SCCs include the strategic decisions pertaining to location and capacities of product ion and warehousing
facilit ies, the product to be manufactured and stored and the mode of transportation (Ballou 1999, Chopra and
Meindl 2001). Since the product life cycle is shrinking, manufacturing organizations should adopt customizat ion in
their approach. Getting the product in the right time, place and mode and in the quantity required in an economic
manner is the new challenge for the SCC function.

Methodol ogy:

The present study is aimed at assessing the role of information technology on Supply Chain Management process in
Indian organizations. Since majority of Indian organisations are in the process of adopting the IT enabled supply
chain management process. The study was based on exploratory analysis of information technology enabled supply
chain management in Indian organizations located in central India reg ion.

Hypothesis: Since the study was planned with an exp loratory design, no specific hypothesis was framed. However a
general hypothesis was framed for study: “Informat ion technology facilitates Supply Chain Management process in
optimization of business functions”

Sample: The sample consisted of 95 organizat ions of central India, which are utilizing information technology
enabled supply chain management process in majority of their business activities. The study was conducted using
primary data using survey research. A questionnaire consisting of ten statements was used to measure utilisation of
informat ion technology on supply chain management process. The insistency of the questionnaire using Cronbach
Alpha of reliability was found to be 0.902 and validity was found to be 0.949. Principal Co mponent Varimax
rotation technique was used to analyse the sample data with the help of SPSS software.

Analysis and Discussion: The result leads to emergence of ten major factors having a significant contribution to
informat ion technology facilitation on Supply Chain Management process in optimizat ion of business functions . As
the supply chain management concept has gained prominence in Indian business scenario in the last decade only.
Today, where turbulent and volatile environment exist, there are pressures on companies to improve their
operational efficiency for enhanced competitiveness and overall business performance. Such pressures include
the privatizat ion o f public enterprises, economic downturns and agitation by shareholders for higher returns
on investment (ROI). Ho wever, information technology (IT) is a major driver of supply chain integration.
Review of Business and Technology Research, Vol. 2, No. 1, 2009 3

Through the Internet, a single data file can be accessed simu ltaneously by spatially distributed entities (Yusuf et al.,
2004). The ten prominent factors identified are as follows: Market share having a factor load of 0.654 , overall store
management have a factor load of 0.725, product pricing have a factor load of 0.657, product quality have a factor
load of 0.658, and inventory having a factor load of 0.798, demand forecasting having a factor load of 0.799, control
on variability of demand have a factor load of 0.719, wastage of short life cycle p roducts have a factor load of 0.542,
home delivery have a factor load of 0.665 and overall customer satisfaction have a factor load of 0.725. These
factors were paired in two broad main factors which are the base and pillar o f every type of business functions and
services. The First main factor is known as Product Satisfaction Factors (PSF) under which: inventory, product
pricing, p roduct quality, market share, overall store management and overall customer satisfaction were placed.

The second main factor was known as Product Demand Factors (PDF) under which: demand forecasting, home
delivery, control on variability of demand and overall store management were placed. PDF and PSF are the two
sides of a fundamental and dynamic equilibriu m of the market, if any one gets disturb then definitely the
relationship between demand and supply in the market will be affected. As well, co mpanies‟ growth vertical
integration and search for new markets in different countries has given rise to large ad ministrative structures.
Hence, the need to process and transfer large volu mes of data in the fo rm of designs, plans, budgets, and
reports across several admin istrative and operation units becomes even more necessary (Yusuf et al.,
2004). In addition, co mpanies allying to become integrated global businesses needed mutual access to data on
cost, personnel, stocks, sales and profit profiles. Th is is in addition to being able to mon itor several alliance
conditions such as compliance, contribution and attribution. In spite of all above, information technology in various
forms and combinations ranging from the Internet, WWW, HTML and XM L to different applications and systems
including enterprise resource planning (ERP, ERP2), customer relationships management (CRM ) supply chain
management (SCM ), and enterprise application integration (EAI), are enabling and facilitating business processes
and creating new business contexts for companies to operate (see e.g. Angeles, 2000, Lancioni et al., 2000;
Mukhopadhyay, 1998; Porter, 2001; Stephens and Ramos, 2003; Themistocleous , 200 4; Zablah, Bellenger, and
Johnston, 2004). Fast access to relevant supply chain information can pay-off handsomely in lower costs, less
inventory, higher quality decision-making, shorter cycle times and better customer service. One of the biggest cost
savings is in the overhead activity associated with lots of paperwork and its inherent redundancies. The non -value
added time of manual transaction processing can instead be focused on higher revenue creation activities without
proportional increases in expense. The result in cycle time co mpression, lower inventories, decision -making quality,
reduced overhead costs, among other benefits makes IT enabled Supply Chain Management a highly desirable
strategy. Supply chain processes can be more streamlined and efficient than could have been imagined just a few
years ago. For many co mpanies, mo re effect ive Supply Chain Management is where the p rofit and competit ive
advantages will emerge and be sustained.

CONCLUS IONS

This paper presented a preliminary finding of central India to study the management of info rmation technology
enabled supply chains. We pondered the impacts of information technology and digitization on supply chain and
supply chain management. Informat ion technology has made some changes to how firms operate but the
fundamentals of economics are still the same. In a nutshell, improving internal process with the help of the supply
chain and by connecting to other supply chain members the business parties can be integrated and connected in a
technological manner to form transparent supply chains. In a nutshell, imp roving organizational process with the
help of the supply chain and by connecting to other supply chain members, the business parties can be integrated
and connected in a technological manner to form transparent supply chains. This study is exploratory in nature and
thus is not without limitations. First and foremost, applicable technologies could have been more thoroughly
presented. Further research should include an elaboration and crystallizat ion of the I.T enabled SCM through case
studies and comparative case studies. Additionally, large scale quantitative study would provide considerable
insights into this under researched phenomenon. Hopefully, future studies will seek to further elaborate on this
pertinent topic.

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