Information Systems in Supply Chain Management ————————————————- ————————————————- Chao Hsuan, Liu (41845491) ABSTRACT Information systems (IS) for the supply chain management have become critical tools for synchronizing information among the customers and suppliers of a supply chain (McLaren et al. , 2004). Moreover, the supply chain concept has become a concern because of global competition and increasing customer demand.
Thus, the information must be available in real time across the supply chain and this cannot be achieved without an integrated information system for supply chain management. More importantly, information technologies enable firms to become more effective to trade with customers and suppliers through the Internet. The aim of this paper is to examine that the good implementation of the supply chain information systems in firms can facilitate increase in their competitiveness and their profits.
Keywords: information systems; supply chain management; information sharing. INTRODUCTION Nowadays, firms are in the race of improving their organizational competitiveness in order to compete in the uncertain and emerging global market. Supply chain management (SCM) has become essential prerequisite for staying competitive in the global race and for enhancing profitably (Tan et al. , 1998). Gunasekaran and Ngai (2004) also indicate that global market is completely connected and dynamic in nature.
In addition, firms are trying to improve their agility level with the objective of being flexible and responsive in order to meet the changing market requirements. All of these factors emphasize the significance of information technology in integrating suppliers firms in virtual enterprise and supply chain. It is impossible to achieve an effective supply chain without good information systems. Because suppliers are located all over the world, it is necessary to integrate the operations both inside and outside of an organization.
This requires an integrated information system for sharing information on various activities along the supply chain (Rezapour, Moghadam, & Dehkordi, 2009). More importantly, Motwani et al. (2000) describe that nowadays companies spend large amount of money for redesigning internal organizational and technical processes, changing traditional product distribution channels and customer service procedure and training staff to achieve IT-enabled supply chain.
Therefore, IS has an important effect on implementing SCM and we will discuss how information systems can facilitate supply chain’s effectiveness in detail in the literature review and discussion. LITERATURE REVIEW Because there are a range of important factors for the development of information systems within supply chain management, a review of the relevant literature will begin with a brief description of the extant literature on importance of information systems. Then, it will look into a constellation of supply chain information systems. Importance of information systems
The development of information technology has revolutionised the life of human beings for decades. McKeown (2001) defined that information systems (IS) are the systems that are combined to develop the information and knowledge needed by managers and other employees of organizations to make decisions. He indicates that IS are used in organization for three purposes: 1. Handling the present: the organization must be able to take care of its day-to-day business, primarily through processing transactions that involve customers, suppliers, and employees. . Remembering the past: creating and using organizational memory using the results of handling the present. 3. Preparing for the future: extracting data and information and then combining it with human knowledge to help managers make better decisions that will determine the future of the firm. IS can also be defined as a set of interrelated components that collect, process, interpret, store, filter and distribute information to support decisions within and across partners (Kim et al. , 2006).
In addition, dramatic economic and strategic changes have brought about by recent advances in technology, including the Internet, the World Wide Web (WWW), broadband, and wireless technologies have expanded the scope of business operations (Lancioni et al. , 2003). These changes have an influence on firms that apply to enterprise resource planning (ERP) and supply chain functions (procurement, inventory management, logistics), resulting in startling cost reductions, enhanced efficiencies, and remarkable increases in profit across industries (Soloner, G. amp; Spence, 2002). Consequently, internet technology increases the richness of communications through greater interactivity between the firm and the customer (Watson et al. , 1998). Graham and Hardaker (2000) also highlight the role of the Internet in building commercially viable supply chains in order to meet the challenges of virtual enterprises. More importantly, internet fosters the integration of business processes across the supply by facilitating the information flows that are necessary to coordinate business activities. Information sharing in the supply chain
Some studies have emphasized the importance of information sharing within the supply chain in recent years (Barrat, 2004, Lambert, & Cooper, 2000). It is no doubt that the importance of the supply chain and information technology such as various Internet applications can greatly reduce the costs. So, strategic planning of this process and utilization of information is crucial. Additionally, only sharing of information will not lead to improvements, but also coordination of activities is crucial (Disney, Naim & Potter, 2004).
It was also found that the use of the Internet in SCM is rapidly increasing (Lancioni, Smith, & Oliva, 2000). They claimed that Internet will continue to provide logistics managers with important information and enable them to improve the profitability of the supply chain. However, sharing of information can obviously be a major issue because the companies in a supply chain may not be prepared to share their production data, lead times, especially when those companies are independent of each other (Terzi & Cavalieri, 2004).
In fact, the lack of trust between business partners is one of the main obstacles to collaboration in the supply chain (Ireland & Bruce, 2000). Therefore, Li and Lin (2006) found that information sharing is impacted positively by top manager’s support, trusting in supply chain partners and shared vision between supply chain partners, and negatively by supplier uncertainty. Their study indicates that partner relationship plays an important role in implementing SCM practice and improving SCM performance.
It is a must that an effective inter-organizational relationship needs to have a high level of information sharing. Moreover, it would be worthwhile for organizations that are contemplating sharing information to spend time and effort to build good relationships with their supply chain partners. In doing so, organizations will gain more benefits from integrating information and coordinating their suppliers or customers. Information systems in supply chain management
The primary role of information technology in supply chain is creating the integration or tight process and information linkages between functions within a firm such as marketing, sales, finance, manufacturing and distribution-and between firms, which allow the smooth, synchronized flow of both information and product between customers, suppliers, and transportation providers across the supply chain (Phillips & Baltzan, 2009). In addition, the most typical role of IT in SCM is reducing the friction in transactions between supply chain partners through cost-effective information flow (Cross, 2000).
On the other hand, information system is more importantly viewed to have a role in supporting the collaboration and coordination of supply chain through information sharing (Lee & Whang, 1997). Moreover, Reich and Benbasat (2000) indicate that recent innovations in more flexible e-business technologies have led to a confusing variety of SCM IS approaches such as extended Enterprise Resource Planning (ERP) systems, business-to-business electronic marketplaces, and web services. Accordingly, it is important for organizations to understand the importance of what problems within organisational’s supply chain.
Firstly, decision-makers at various points in the supply chain are usually not making perfect decisions because of the lack of information or their personal hindrances. Secondly, delayed, scarce or distorted information can create serious problems in the supply chain (Chow et al. , 2008). If organizations ignore these problems instead of improving their information operations, it will risk increasing its operation costs. On the contrary, some studies examine that the benefit of using IS application can allow organization to better negotiate with suppliers and reduce the cost of raw material (Ragowsky et al. 000). Levary (2000) also suggests that IS in SCM provides reduction of cycle time, reduction of inventories, minimization of bullwhip effect, and improvement of effectiveness of distribution channels. Consequently, it is inevitable for organizations to change their process of development in supply chain operation if they want to benefit from IS strategically. DISCUSSION AND CONCLUSION In this paper, we present how supply chain can benefit from good application of information systems. For this, we described that the importance of IS, Internet business, information sharing, and benefits of IS within SCM.
In addition, implementation of a supply chain information system is a complex and difficult task but if it succeeds, the participating organizations will better satisfy their customers and will gain a competitive advantage and a higher profit. These are possible because the information system allows organizations to share all the information about the demand, supply, manufacturing, delivery, and market conditions changes between the supply chain members, providing all these organizations the possibility to make decisions in real time, fast and efficiently.
Take Wal-Mart as an example, according to Wal-Mart News (2000), Wal-Mart is continually striving to develop its information systems to work more efficiently and cost effectively for its associates and with its suppliers. Wal-Mart has several competitive advantages against its competitors by implementing procurement (logistics) and information systems. These two important factors enable Wal-Mart to lower its cost of sales and provide lower prices to its customers.
It also offers its products online, which possesses critical advantage because it has firmly background in retailing industry not like other dotcom retailers that are solely dependent on website -type of business. However, Gunasekaran and Ngai (2004) conclude that successful strategic information systems are not easy to implement in SCM. They require major changes in how a business operates internally and with external partner. Integration of the supply chain’s activities and processes before the development and implementation of the IS in SCM is needed.
Implementation of IS in SCM requires a project management approach with the right team for the planning and implementation of IS projects to provide financial and technical support for the implementation of IS for achieving SCM (Rezapour, Moghadam, & Dehkordi, 2009). Even though a good information system can be developed for assisting SCM, an effective operation of supply chain is still a great challenge for many organizations. As a matter of fact, the literature suggests that information systems for supply chain research should be concerned with practical considerations.
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