Impact of Information Technology in Managing Supply Chain
Posted in Operations & IT Articles, Total Reads: 484
, Published on 23 November 2016
Supply Chain management is undergoing a fundamental, rapid transformation forced by host of factors. Globalization has often brought goods and services to our country at a lower price with a very high quality than indigenous one. Multinational companies have perfected the art and science of combining globalization and localization to give ‘Glocalization’ i.e. global products and services customized to meet the needs of locales. Current economic fluctuation has made customer highly cost sensitive. Thus yesterday’s competitors are cooperating today to serve the needs of customer.
Today’s customer not only have plethora of models and manufacturer to choose from but also are participating in the design of the products which was quite not popular in the last millennium. Consumerization has brought in increase consumption and this reality are forcing the manufacturer to revisit the supply chain at different angle to ensure that the right product is delivered at right cost, to the right customer at the right time.
In the report titled “2016: Future Supply Chain” published by Global Commerce Initiative (GCI) in corporation with Capgemini and Intel identified and approved three projects that GCI would pursue. These projects were determined to be core to the competency of Board members and were aligned with the Board’s strategic direction:
• New Ways of Working Together
• Information Sharing
• The 2016 Future Supply Chain
The continued rapid strides that are being made in the field of information technology have also touched the field of supply chain management. Advancement in existing technology and emerging technologies have impacted all stages of supply chain. Today, real time global tracking, continuous and automatic monitoring and instance notification are possible. In today’s world distance and time are no longer a barrier.
Need and role of Information Technology:
The primary objective of a supply chain is to increase value proposition. Value proposition can be defined as the difference between willingness to pay and supplier opportunity cost. The goal is to maximize willingness to pay and to minimize supplier opportunity cost. And this is the true meaning of competitive advantage. Among the three components, asset and products flow forward and fund flow backwards while information alone can flow in both the direction. The six drivers affecting the performance of the supply chain are as follow:
1. Inventory: IT plays vital role in locating, identifying, monitoring, tracking and in notifying when inventory level has fallen below the safety limits. In case of vendor managed inventory the computer automatically orders the next consignment without any human intervention.
2. Transportation: Transformation forms the backbone of a supply chain. It helps in movement of goods throughout the supply chain. IT helps in developing and solving various mathematical models of transportation. This requires integer programming, goal programming and linear programming.
3. Facilities: Location and layout can influence leanness, agility and robustness which in turn significantly affects efficiency and effectiveness of a supply chain. IT tools help in development of mathematics driven models for different scenarios. These models are analyzed and their effects on various other parameters are studied. Computer Aided Design tools help in preparing facility layouts, CAD models, complex assemblies, and also helps in performing various analysis including stack up tolerance, failure analysis etc. to study live conditions in virtual environment.
4. Information: Information is the heart of planning and execution. IT systems helps in accumulating, storing, working, channeling, analyzing and visualizing the information.
5. Sourcing: It refers to selection of vendor for performing different activities. IT acts as a bridge between vendor and the customer. Different reformation, storage and delivery option can be modeled in real time thus adding value throughout the supply chain.
6. Pricing: Deciding the price of the product is again a key activity for a supply chain. Balancing the needs of customer who are willing to pay more and those who wants to buy at lower price is a challenging task. Also consumer buying patter has to be analyzed to decide the price. IT provides highly efficient data mining and forecasting tools to unveil the flip side of the patterns.
Apart from above driver’s security is also a very important parameter for supply chain. IT plays instrumental role in controlling access, detection, tracking, screening and surveillance role.
In many occasions manager has to take many strategic and tactical decisions as per the demand. IT plays a vital role in all such stages. Considering the operational level decision to be taken. The head of the manufacturing shop should be aware of which machines are operating and which have broken-down, operators present and those who are on leave, status of customer order, ability to meet the promise delivery date. An IT system provides all the above functionalities in real time. The system can alert, alarm and automatically notify the concerned persons.
Thus the era of information technology has revolutionized today operations and supply chain. It has become the skeleton of the supply chain network and are used strategically to get a competitive advantage over the others.
This article has been authored by Saurabh Kumar from IIM Raipur
Capgemini, “The 2016 Future Supply Chain”, Capgemini report