Impact of Information Technology

on Supply Chain Management

The use of IT is considered as a prerequisite for effective control of todays complex supply
chains. a recent study conducted by Forrester Research indicates that U.S. manufacturers are
increasingly dependent on the benefits brought about by to improve supply chain agility, reduce
cycle time, achieve higher efficiency and deliver products to customers in a timely manner.

The implementation of IT on the SCM can enable a firm to develop and accumulate knowledge
stores about its customers, suppliers and market, Supply chain management demands, which in
turn influences firm performance.

Information Technology System:

As for IT systems, when discussing the use of IT in SCM, we refer to the use of
interorganizational systems that are used for information sharing and/or processing across
organizational boundaries. Technology is giving businesses the ability to boost communication
and coordination of purchases. By centralizing inventory through a digital warehouse
management system, firms are able to improve market analysis, identify trends and adjust order
fulfillment strategies to provide better customer service. Despite all of these advantages,
technology is also creating new challenges that companies need to meet.

Supply Chain Management:

Stevens defines SCM as A series of interconnected activities which are concerned with
planning, coordinating and controlling materials, parts and finished goods from supplier to
customer. A supply chain typically consists of the geographically distributed facilities and
transportation links connecting these facilities.

Information Technology and Supply Chain Management:

Recently with the development of IT, the concepts of supply chain design and management have
become popular operations paradigm. Supply chain management emphasizes the long-term
benefit of all parties on the chain through cooperation and information sharing. This confirms the
importance of IT in SCM. It also appears that IT is an important factor for collaborative
relationship as it increases the information processing capabilities of suppliers, thereby enabling
greater relationship in addition to reducing uncertainty. It decreases transaction cost between
buyer and supplier and creates a more relational or cooperative governance structure.
Framework for Impact of IT on SCM:

Firm
1.Size of the
firm
2.Location
3.Learning.

Logistic
1.Transportaion
Scheduling
2. Vehicle
Tracking
3.Fulfillment .

Vendor
Relationship
Management
1. Long-term
Commitment
2.Trust
3.Information
Sharing

Figure: Framework for Impact of IT on SCM

Apart from these, IT influences procurement, operation and customer relationship management.

Importance of IT for Transforming SCM:

There are a few ways of IT to transform the supply chain management which are described under
the following pointsGreater Efficiency and Transparency:

The industry is shifting away from traditional, manual, fax-based systems to more mobile
and automated methodologies. Not only are automated systems faster and more efficient,
they also provide better data-capture, which can be stored and analyzed to target areas for
improvement. For example, hand held mobile devices can deliver wireless proof of
delivery and real time transportation monitoring, which can help managers discover and
address operational anomalies. 3PLs are also turning to technology to streamline their
client supply chain activity and improve client relations. The use of Customer
Relationship Management (CRM) technology can provide executive-level visibility of
supply chain operations, helping leaders to identify inefficiencies and bottlenecks in
commercial operations.
Technology like radio-frequency identification (RFID) has also become a popular method
of automatic identification and data-capture. Because RFID tags can be attached to
clothing, inventory, or almost any item, the tracing possibilities are extensive and
applicable to numerous aspects of the supply chain. The technology reduces labor costs
by streamlining data-capture and reducing error-prone manual processes. Access to realtime, up-to-date information across the entire supply chain is having a significant impact
on how companies are doing, and expect to do, business.
Focus on Individual Employees:

Putting employees in charge of their own job specific devices can cut down on damage
and encourage care of personal devices. Considering the daily actions and necessary
operations of each employee can help companies create an efficient, technology
stimulated workforce.

Tighter Communication and Community:

Smoother and more frequent communication undoubtedly makes business operations

easier. Mobile technologies and real time communicating can create a greater sense of
unity and development from those out in the field to those in corporate headquarters.
Managers are often on the move, but improved communication and access to live
information can make managers more intuned with daily happenings in the supply chain.

Strategic workforce management is especially critical for companies who are

understaffed or having difficulty filling capacity. Flexible communication channels within
all aspects of the supply chain can increase employee productivity and boost morale.
Greater collaboration and communication ultimately boils down to better customer
service. Communication aids in product tracking and delivery, which results in higher
customer satisfaction with the supply chain process. When employees are connected
through many stages of the supply chain, workers likely feel more fulfilled and
operations often run more smoothly.
Making Way for Small but Nimble Carriers:

The benefits of technologies like cloud computing and RFID may be compelling, but
for larger firms, technological transformations can be difficult. For large firms tied to
complicated, enterprise wide, wired technology systems, change may come slowly.
Often companies have already invested significant amounts into their wired
technology, making changing to cloud computing both unappealing and complicated.
Smaller firms with less of an investment in their current system may find it easier to
successfully integrate new technologies. Smaller fleets dont have to spend thousands
on mobile resource management or automatic vehicle location systems anymore.
Often, the job can be done with a relatively affordable mobile device, making the leap
to wireless much easier. This flexibility could give smaller carriers an edge, making
them more agile and flexible in a competitive environment.
Government Mandates Encourage New Technology:

As the government looks towards technological solutions, supply chain managers will
have no other choice but to do so as well.

Although technology is having a significant impact on supply chain management,

technological change may be slow moving. Companies are attempting to understand
the role that mobile or cloud technologies can play in their business, while striving to
integrate new technologies into their current systems. Supply chain management is
being transformed by technology, but exactly how and when depends largely on
companies themselves