Introduction, Objectives, Role of Information Technology in Logistics and Supply Chain Management

29/08/2020 1 By indiafreenotes

Information technology is simple the processing of data via computer: the use of technologies from computing, electronics, and telecommunications to process and distribute information in digital and other forms.

Information Technology, or IT, is the study, design, creation, utilization, support, and management of computer-based information systems, especially software applications and computer hardware.

IT is not limited solely to computers though. With technologies quickly developing in the fields of cell phones, PDAs and other handheld devices, the field of IT is quickly moving from compartmentalized computer-focused areas to other forms of mobile technology.

Logistics and Supply Chains

A supply chain is the network of suppliers, distributors and subcontractors used by a manufacturer to source its raw materials, components and supplies. Logistics companies store, transport and distribute supplies and work-in-progress within the supply chain and distribute finished products to customers or intermediaries. Integrating supply chain and logistics operations improves efficiency and reduces costs, increasing the manufacturer’s competitive advantage.

The contributions of IT in helping to restructure the entire distribution set up to achieve higher service levels and lower inventory and lower supply chain costs. Fundamental changes have occurred in today’s economy. These changes alter the relationship we have with our customers, our suppliers, our business partners and our colleagues. IT developments have presented companies with unprecedented opportunities to gain competitive advantage. So IT investment is the pre-requisite thing for each firm in order to sustain in the market.

IT and Supply Chain Integration

Supply chain management (SCM) is concerned with the flow of products and information between supply chain members’ organizations. Recent development in technologies enables the organization to avail information easily in their premises. These technologies are helpful to coordinates the activities to manage the supply chain. The cost of information is decreased due to the increasing rate of technologies. In an integrated supply chain where materials and information flow in a bi-directional, Manager needs to understand that information technology is more than just computers.

At the earliest stage of Supply Chain (the late80s) the information flow between functional areas within an organization and between supply chain member organizations were paper based. The paper based transaction and communication was slow. During this period, information was often over looked as a critical competitive resource because its value to supply chain members was not clearly understood. An IT infrastructure capability provides a competitive positioning of business initiatives like cycle time reduction, implementation, implementing redesigned cross-functional processes. Several well know organizations that are involved in supply chain relationship through information technology have ripe huge gain through integration. Three factors have strongly impacted this change in the importance of information. First, satisfying and pleasing customer has become something of a corporate obsession. Serving the customer in the best, most efficient and effective manner has become critical. Second information is a crucial factor in the managers’ abilities to reduce inventory and human resource requirement to a competitive level and finally, information flows plays a crucial role in strategic planning.

Supply chain organizational functions

All enterprises participating in supply chain management initiatives accept a specific role to perform. They also share the joint belief that they and all other supply chain participants will be better off because of this collaborative effort. Power within the supply chain is a central issue. There has been a general shift of power from manufacturers to retailers over the last decades. Retailers sit in a very important position in term of information access for the supply chain. Retailers have risen to the position of prominence through technologies.

The examples and experiences of some firms in the Retails Supermarkets has demonstrated how information sharing can be utilized for mutual advantage. Through sound information technologies, firm’s shares point of sale information from its many retail outlet directly with their Manufacturers and other major suppliers.

The development of Inter organizational information system for the supply chain has three distinct advantages like cost reduction, productivity, improvement and product/market strategies.

Firms can collaborate and participation within five basic levels in the interorganizational information system.

Remote Input/Output mode: In this case the member participates from a remote location with in the application system supported by one or more higher-level participants.

Application processing node: In this case a member develops and shares a single application such as an inventory query or order processing system.

Multi participant exchange node : In this case the member develops and shares a network interlinking itself and any number of lower level participants with whom it has an established business relationship.

Network control node: In this case the member develops and shares a network with diverse application that may be used by many different types of lower level participants.

Integrating network node: In this case the member literally becomes a data communications/data processing utility that integrates any number of lower level participants and applications in real times.

Information and Technology: Application in Supply Chain Management

In the development and maintenance of Supply chain’s information systems both software and hardware must be addressed. Hardware includes computer’s input/output devices and storage media. Software includes the entire system and application programme used for processing transactions management control, decision-making and strategic planning.

Recent development in Supply chain management software

  1. Base Rate, Carrier select & match pay (version 2.0) developed by Distribution Sciences Inc. which is useful for computing freight costs, compares transportation mode rates, analyze cost and service effectiveness of carrier.
  2. A new software programme developed by Ross systems Inc. called Supply Chain planning which is used for demand forecasting, replenishment & manufacturing tools for accurate planning and scheduling of activities.
  3. P&G distributing company and Saber decision Technologies resulted in a software system called Transportation Network optimization for streamlining the bidding and award process.
  4. Logitility planning solution was recently introduced to provide a programme capable managing the entire supply chain.

How IT can be applied in Supply Chain Management

Electronic Commerce: It is the term used to describe the wide range of tools and techniques utilized to conduct business in a paperless environment. Electronic commerce therefore includes electronic data interchange, e-mail, electronic fund transfers, electronic publishing, image processing, electronic bulletin boards, shared databases and magnetic/optical data capture. Companies are able to automate the process of moving documents electronically between suppliers and customers.

Electronic Data Interchange: Electronic Data Interchange (EDI) refers to computer-to-computer exchange of business documents in a standard format. EDI describe both the capability and practice of communicating information between two organizations electronically instead of traditional form of mail, courier, & fax. The benefits of EDI are:

  1. Quick process to information.
  2. Better customer service.
  3. Reduced paper work.
  4. Increased productivity.
  5. Improved tracing and expediting.
  6. Cost efficiency.
  7. Competitive advantage.
  8. Improved billing.

Though the use of EDI supply chain partners can overcome the distortions and exaggeration in supply and demand information by improving technologies to facilitate real time sharing of actual demand and supply information.

Bar coding and Scanner: Bar code scanners are most visible in the check out counter of super market. This code specifies name of product and its manufacturer. Other applications are tracking the moving items such as components in PC assembly operations, automobiles in assembly plants.

Data warehouse: Data warehouse is a consolidated database maintained separately from an organization’s production system database. Many organizations have multiple databases. A data warehouse is organized around informational subjects rather than specific business processes. Data held in data warehouses are time dependent, historical data may also be aggregated.

Enterprise Resource planning (ERP) tools: Many companies now view ERP system (eg. Baan, SAP, People soft, etc.) as the core of their IT infrastructure. ERP system have become enterprise wide transaction processing tools which capture the data and reduce the manual activities and task associated with processing financial, inventory and customer order information. ERP system achieve a high level of integration by utilizing a single data model, developing a common understanding of what the shared data represents and establishing a set of rules for accessing data.

Benefits of IT application in Supply Chain Management

Streamlining: Communicate and collaborate more effectively with suppliers worldwide.

Connecting: Make the connection between what your customers want and what you produce.

Analyzing: Analyze your supply chain and manufacturing options and choose the plan that makes best use of your assets.

Synchronizing: Synchronize the flow of your batch production by managing the capacity of vessels, tanks, and lines-and the flow between them.

Communicating: Improve your communication and collaboration with suppliers worldwide.

Designing: Create the optimal supply chain network and adapt the network to keep pace with changes in your business.

Transforming: Transform processes inside the warehouse and across the supply chain to meet demands for new efficiencies.

Understanding: Get a better understanding of your warehouse labour activities and implement the changes you need to optimize worker performance.

Maximizing: Maximize warehouse profits by using advanced costing, billing, and invoicing capabilities.

Optimizing: Optimize your day-to-day fleet performance to reduce costs and improve customer satisfaction.

orld is shrinking day by day with advancement of technology. Customers’ expectations are also increasing and companies are prone to more and more uncertain environment.  The IT field is evolving and developing every day. New technologies in computers and mobile devices are shaping the way the world communicates with one another, gets work done, and spends free time. Companies will find that their conventional supply chain integration will have to be expanded beyond their peripheries.

The strategic and technological innovations in supply chain will impact on how organizations buy and sell in the future. However clear vision, strong planning and technical insight into the Internet’s capabilities would be necessary to ensure that companies maximize the Internet’s potential for better supply chain management and ultimately improved competitiveness.

Internet technology, World Wide Web, electronic commerce etc. will change the way a company is required to do business. These companies must realize that they must harness the power of technology to collaborate with their business partners. That means using a new breed of SCM application, the Internet and other networking links to observe past performance and historical trends to determine how much product should be made as well as the best and cost-effective method for warehousing it or shipping it to retailers.