THE ROLE OF INFORMATION TECHNOLOGY IN SUPPLY CHAIN MANAGEMENT

Introduction

Information is crucial to the performance of supply chain because it provides the basis on which supply chain managers make decisions. Information Technology consists of the tools used to gain awareness of information, analyze the information and execute on it to increase the performance of the supply chain.

Role of IT in a Supply Chain Information is a key supply chain driver because it serves as the glue that allows other drivers to work together with the goal of creating an integrated, coordinated supply chain. Information makes the supply chain visible to a manager. With the visibility, a manager can make decisions to improve the supply chains performance.

.contd Managers must understand how information is gathered and analyzed. This is where IT comes into play as IT consists of the hardware, software and people throughout a SC that gather, analyze and execute upon information. Thus, the organization needs to be connected and become able to share information in real time and instantaneously. This is not achievable without IT and the tools it offers for organization wide collaboration.

Functional Roles of IT in SCM

Functional Roles Of IT

Transaction Execution
Collaboration & Coordination

Decision Support

.Contd
The most typical role of IT in SCM is reducing the function in transactions between supply chain partners through cost-effective information flow. IT is viewed to have a role in supporting the collaboration & coordination of supply chains through information sharing. It can be used for Decision Support. In this instance the analytical power of computers is used to provide assistance to managerial decisions.

Objectives of IT in SCM
1) Providing information, Availability & Visibility. 2) Enabling single point of contact of data. 3) Allowing decisions based on total supply chain information. 4) Enabling collaboration with supply chain partners.

Tools of IT IT with its tools and techniques is able to provide the necessary backbone infrastructure to support the alignment and hence the smooth data flow. Commonly used tools being :o ERP o EDI o INTERNET o SC Software's.

Enterprise Resource Planning (ERP)

ERP is a s/w that aims to serve as a backbone for the whole business. It integrates key business & management processes to provide an integrated view of the entire organization & the activities that take place within it. ERP systems have emerged to automate business functions and offer an integrated data solution across an orgs infrastructure.

.contd It provides the capability to manage & integrate the information & services of departments throughout an entire enterprise. This allows orgs to better manage all their resources, thus achieving cost reduction and efficiency through the integration of all information among various business processes. By combining all the operations within the firm, ERP allows cos to view the information, cash and material flow.

.contd
Currently various ERP systems are available like--- Baan JD Edwards Oracle PeopleSoft & SAP

Electronic Data Interchange (EDI) EDI is the computer-to-computer exchange of business data in standard formats. In EDI, information is organized according to a specified format set by both parties, allowing a hands-off computer transaction that requires no human intervention at either end. EDI standards are developed & managed by the Accredited Standards Committee (ASC) X12. The standards are designed to work across industry & co. boundaries.

.contd It permits hundreds of unrelated cos to communicate & process business transactions electronically. EDI works because it relies on a standard system that everyone can use, developed under the guidelines of the American National Standard Institute (ANSI), USA. The ANSI committee ensures that everyone using a process such as EDI follow the same rule & methods, making the programme universally accessible.

Benefits of EDI Following are the pros of using EDI: Better inventory management. Increased productivity. Reduced costs. Improved business relationships. Improved accuracy. Enhanced customer service. Increased sales.

Internet Internet has a profound impact on SCM. The backbone of SCM is communication & realtime information exchange between various parties involved in the production & distribution of materials. Following are the various SCM activities that have created new Internet opportunities: Online Vendor Catalogue (without human contact). The ability to schedule outbound logistics.

.contd Provide world wide customer service (24X7). Receive orders from all over the world all the time. Place bids on projects. Pay invoices electronically. The ability to directly communicate. The ability to be more responsive to customer service problems. To reduce service costs & response time.

SCM Software's

The SCM data in a SC resides in several different basic systems, so it is essential to carefully examine the ability of a software package to be integrated with existing systems. The greatest advantage of SCM software is to be able to execute & evaluate decisions real time. It is especially important that users can perform what-if scenarios & evaluate the effects of changes. This requires planning & control of SCs. SCM s/w provides these features.

Examples o CISCO reported savings of $500m by restructuring its internal operations & integrating processes with suppliers & customers with the help of web-based tools. Currently 90% of CISCOs sales are facilitated online. o Intel replaced hundreds of order clerks by an automated on-line ordering application. o Godrej & Boyces 28 locations view their account status and sales order delivery status online by enabling stockists to directly access information from the Baan system.

The Use & Benefits of IT

1) Successful companies have developed focused E-business solutions for improving customer service elements that are most important in their business. 2) Improved efficiency allows company personnel's to focus more on the critical business activities. 3) E-business solutions support planning collaboration & improved agility of the supply network.

.contd 4) The use of E-business solutions improve the information quality. 5) To gain strategic benefits, the use of IT has to be coupled with process re-design.

Conclusion
SCM & IT are inseparable & incomplete without one another. IT, Internet & its tools have enabled supply chain to prosper & become an aid to the SCM manager. The IT tools combined with each other provide an ability to the supply chain manager to take informed decisions in real time.