RESEARCH PAPER ON

APPLICATION OF INFORMATION TECHNOLOGY

IN SUPPLY CHAIN MANAGEMENT

SUBMITTED BY

ABHINAV CHANDRA

(A01010909359)

MBA(Gen)

2009-11

LEARNING OBJECTIVES:

Supply chain management has become an important way for modern enterprise to get

competitive advantage in competition and information technology greatly promotes its

development. Starting from the perspective of supply chain management, this paper studies the

application of information technology in supply chain management and its influence.

INTRODUCTION:

With the development of information technology and economic globalization, modern

competition has already become the competition among enterprises and their supply chains

rather than the competition among enterprises only. The management of supply chain directly

determines whether they can get competitive advantage in competition, which does not come

from some enterprises, but from the coordinated ability among the whole supply chain members

and the integration of the resource. The communication among all the parts in the supply chain

system as well as the dispatching of basic resource depends on information exchange. Without

the support of highly advanced information network technology, the management of supply

chain with information as its core cannot be realized. This paper discussed the present

application of modern information technology in supply chain management and its function.

General Introduction of Supply Chain Management

Supply chain is a kind of new organization structuring model based on enterprise cooperation. It

is a functional net chain surrounding key enterprises to connect suppliers, manufacturers,

wholesaler, retailers and final customers. IT is not only a chain connecting material, information,

capital from suppliers to customers, but also an increment chain from which material increases

its value in the process of production, packaging and transportation to get benefit for the relevant

enterprises. In the whole functional net chain, three different flows, namely material flow, capital

flow and information flow. Earlier view is that management of supply chain is an internal

process in producing enterprise, which refers to the management in transferring the collected raw

material and spare parts to manufacturing customers by production and sales. The later concept

of management supply chain lays emphasis on the connection with other enterprises and the

external environment of supply chain. It tends to be defined as: the management of supply chain

is a transforming process from raw material to finished products of production, assembly and

wholesaling among different enterprises. For example, Evens thinks that: “the management of

supply chain is to connect suppliers, producers, retailers, and wholesalers to final customers into

an integrated management model through the information flow, material flow.” Phillip thinks

that: “the management of supply chain is not another name of management of suppliers, but a

new strategy. It integrates different enterprise to increase the efficiency of the whole supply

chain and lays emphasis on the cooperation between different enterprises.” The management of

supply chain makes the enterprise on joint point as a part that cannot be cut, thus making each

enterprise to share the task of purchasing, producing, wholesaling as a coordinated organic unit.

It shows an integrated concept and method aiming to get the balance between high customer

service and low investment as well as low cost and low investment. In management of supply

chain, material flow is not the only content, the planning, cooperation and controlling of capital

flow and information flow are also included. It concerns with the following questions the

pinpointing of key enterprise, equipment and the plan, tracking, controlling of supply chain

producing; the demand estimate and planning for product on supply chain; designing of products

and management; the management of relationship between strategic suppliers and partners; the

material management within and between enterprises; the management of capital flow between

enterprises as well as the management of interactive information flow. It is important to design

and run an effective supply chain, which can make the enterprise to accustom new environment,

thus elevating service, effectively lower cost, enhancing the competitive strength of enterprise,

lowering stock and improving working efficiency. And the information technology acts as a

necessary role.

Application of Information Technology in Supply Chain Management

To general enterprises, traditional enterprise model is material flowing from supplying source to

demand source and then sell the products and the end of demand to get capital, which is used to

turn around again. Its operation model is centered with key enterprise, covering the whole

process from suppliers to customers, aiming to optimize the whole resource to benefit other

enterprises on the supply chains to get “win-win deal” and all-win deal. Only when advanced

information technology has been gained, can the supply chain concerning resources and links

timely and accurately collects, stores and controls data. The great effects of information

technology serves as basis for effectively managing the supply chain and watching it over, which

is the fundamental difference from that of traditional enterprise adopts. The application of

information technology includes the following aspects

Electronic data interchange (EDI)

Electronic Data Interchange (EDI) is an electrical information applicable technology based on

computer and data communication network technology. EDI system is an information system for

data exchange and data resource sharing. Utilizing EDI to eliminate the blocks between

functional departments so as to make the information smoothly and reliably moves between

different departments, thus decreasing low effective work and business with no increasing value.

By using EDI, producers, suppliers, retailers, wholesalers and final customers can be organically

bound together, business glow in supply chain can be improved and regularized, cost reduced

and supply time shortened. At the same time, by EDI, information can be obtained quickly to

make between communication contacts and to better service for customers.

Bar code technology:

Bar code technology is an important and quick information collecting technology. It includes

code-editing technology; code-shaped designing technology, quick recognition technology and

computer management technology are all the necessary technology for realizing computer

management and electrical data exchanging. In supply chain flowing system, material flow is

characterized by plenty and high-speed. The application of bar code technology resolves the data

entering and data collecting problems, which can greatly improve the efficiency of flow and

provide support for management of supply chain.

Expert system / artificial intelligence:

Expert System is an intelligent computer programming system, simulating human experts to

solve the problem in this area. In the deciding questions concerning in supply chain management,

decision-making is an unavoidable technical problem. The application of expert system and

intelligent as well as CIM can effectively eliminate the block between material flow and

information flow, thus promoting data sharing and improving cooperation between enterprises.

In this way, the automatic optimizing can be realized to elevate the whole efficiency of the whole

supply chain.

Communication technology

The basic advantage of communication technology lies in that it can improve the service to

customers. Bymore timely confirm task, more quickly to deliver sales and stocking information

to improve service. However, the application of information technology needs rather big

investment. For example, the application of radio, satellite communication and picture dealing

technology can effectively overcome the problem brought by products moving and material

dispersing, but the investment cost is rather high.

Database technology / data warehouse technology

Database technology is the technical basis for enterprise informationalization. In the supply

chain management, database technology can better manage stocking information, customer

material, thus effectively planning, analyzing cost and decision-making. Database warehouse

resolves the new problem in business activities, which is hard fort database technology, heighten

the quality of data. It pays attention to database integration as well as data seeking and provides

SCM for intelligent decision-making information

Network technology / electronic business

Internet provides a basic instrument for sharing information. Both intranet and Internet are the

support for normal running for supply chain. They provide convenient, timely and low cost

sharing information for member in supply chain to reduce cost and improve the efficiency of

service. Electronic business, in Internet environment, by using computer and network

technology, realize the commercial activities between products and service . It reduces transition

cost, shorten term and improve information management and improve decision-making. From

quality, cost and response time to improve enterprise management and enhance competitive

ability so as to rapidly satisfy the customers. Electronic business can improve the efficiency of

the supply chain from system management, stocking management, transportation management

and information flows.

IT Impact on Supply Chain Management

Information plays a leading and optimizing role in the whole operations of supply chain. The

development of IT has changed the way that company gains competitive advantages through

supply chain management, successful companies always utilize IT to support and develop their

business strategy, which will significantly impact on the whole supply chain.

(1) Establish new customer relations, in order to know the requirements of the customer and

market better. IT helps supply chain managers establish new customer relations by forming

information flow and knowledge flow with their customers and suppliers, which makes an

interactive, timely and integrated information communication in the whole supply chain from

suppliers to customers. And IT, such as Internet, has become an effective way to help companies

gain the information about the requirements of the customer and market.

(2) Benefit to broaden and develop an efficient marketing channel. Companies always can carry

out virtual business and establish virtual marketing network by using IT. And through the

application of Internet company, co-operating with its distributors, can establish the order and

inventory system of retailers for continuously inventory supplement and marketing conduction,

so that it’ll improve the efficiency of marketing channel and enhance customer satisfaction

together with retailers.

(3) Change the composition of supply chain and achieve the unity of merchandise flow and

logistics. Nowadays with the Internet widely applied, the utilized tendency of product and

service is changing their manner of circulation and usage, the border between product and

service has become more and more vague. For instance, 3C company sales its MODEMS

product, the development of IT has totally changed its sale manner. When customers buy

MODEMS, as soon as the product upgrades each time, customers can buy it directly through

Internet, which gets rid of traditional supply chain of product sale.

(4) Rebuild value chain between companies or company leagues. Many companies at home or

abroad have already used modern electronic means for information transaction and customer

service and also make the most of outsides resource through business outsourcing, so they can

expand their own developing space and keep their limited resource focusing on the core ability.

Such IT starts to rebuild value chain between companies, with e-commerce flourished and third

party logistics popularized, manufacturers and retailers start to utilize third party service to

outsource logistics and management business, finally manufacturers, retailers and third party

service suppliers will build a new value chain. Nowadays the market competition has changed

from originally between companies to between supply chains,from between products to between

services. IT will be an important means to enhance their own competitive and serve their

customers better; ultimately it’ll become a significant project considered in the supply chain

management research.

CONCLUSION:

With the formation of economic globalization, the competition between enterprises has become

increasing fierce even beyond the countries. At the same time, the expense need of customers

develop to be diverse and personal. With supply chain, modern information technology provides

a new way for the development of enterprise management. To get advantage in competition, the

enterprises are imperative to change the traditional information system, to adopt advanced

technology and optimize the supply chain in order to share the information of all joints on the

chain, thus shortening the term for ordering in advance, lowing the stock, elevating the efficiency

of transportation, decreasing transferring time, improving ordering and sending effectiveness and

timely answering the questions from customers and improve competition edge[9]. The

development of information technology and the continuous lowering of cost make the

management of supply chain possible. The combination of information technology and

management idea of supply chain improves the competitive edge of enterprises. Many of them

have already connected with their customers and suppliers by computers. By multi-media

technology, they can timely and accurately transfer pictures, voices and words to conveniently

store and get data. In this way, the efficiency and satisfaction of customers have been greatly

improved. Nowadays, an era with information explosion, whether an enterprise can adopt

advanced information technology will directly determine its development or survival. Particular

attention should be paid on how to use the modern information technologies while adopting the

methods of supply chain management, which should be studied further by both managers and

professors.