ManagementSupply Chain

The Role of Information Technology in Supply Chain Management

The supply chain management itself a very powerful task is to perform. In supply chain management the role of information technology is very crucial. An information-driven supply chain is essential for creating an integrated, coordinated supply chain because it serves as a glue that joins the other supply chain drivers together.

The information in the supply chain provides the basis for supply chain processes to execute transactions and managers to make decisions. Managers cannot know what customers want, how much inventory is in stock, and when more products should be produced or shipped without information. In short, a manager can only make decisions blindly if he lacks information.

As a result, information makes the supply chain visible to a manager. A manager can make decisions based on this visibility to improve the performance of the supply chain.

Information plays a critical role in the success of a supply chain, so managers should understand how information is gathered and analyzed. Information technology plays a key role here. In a supply chain, information technology consists of the hardware, software, and people that gather, analyze, and act upon data.

The Role of Information Technology in Supply Chain

Accurate Information Must be Provided.

It is very difficult to make good decisions without information that provides a complete picture of the supply chain. This is not to say all information must be 100 percent accurate, but rather that the data available paint at least a directionally accurate picture.

Timely Information is Required

Often, accurate information exists, but by the time it is available, it is either out of date or, if it is current, it is not in an accessible form. To make good decisions, a manager needs to have up-to-date information that is easily accessible.

Data Can be Used to Take Right Decisions

Often companies have large amounts of data that is not helpful in making a decision.

Companies must think about what information should be recorded so that valuable resources are not wasted collecting meaningless data while important data goes unrecorded.  Information is used for making a wide variety of decisions about each of the supply chain drivers.

Facility

The location and schedules of a facility can depend on the information on the trade-offs. Wal-Mart’s suppliers use demand information from its stores to set their production schedules. Wal-Mart uses information on cross-docking to determine where to place new stores.

Inventory

Setting optimal inventory policies requires data that includes demand patterns and costs. Wal-Mart collects detailed demand, cost, margin, and supplier information in order to make inventory policy decisions.

Transportation

To make good decisions one needs to know transportation networks, routings, modes, shipments, and vendors. Wal-Mart’s use of information to integrate its operations with those of its suppliers is important. Wal-Mart will be able to avoid inter-chain transportation by using cross-docking in its transportation network.

Sourcing

Information on profit margins, prices, quality, delivery lead times, etc., is important in making sourcing decisions. The source deal with inter-enterprise transactions and demands a wide range of transactional information.

Pricing and Revenue Management

The more information one needs, the more information it is necessary to set pricing policies. With this information, firms can make intelligent pricing decisions to improve supply chain profitability.

Wrapping it up;

In our previous articles, we have discussed the importance of information along with that the impact of the Lack of Supply Chain Coordination & Bullwhip Effect & Impact of Lack of Coordination on the Performance of the Supply Chain and the same applies here with the information technology as well. The technology can be used to proper information coordination.

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