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IMPORTANCE OF INFORMATION TECHNOLOGY FOR

EFFECTIVE SUPPLY CHAIN MANAGEMENT

Prof. Himanshu S. Moharana1, Dr. J.S. Murty2, Dr. S. K. Senapati3,

Prof. K. Khuntia1
1
(Raajdhani Engineering College, Bhubaneswar, Odisha) India
2
(Ex-Head, Design, RRL, Bhubaneswar, Odisha) India
3
(Professor, Dept. of Mech. Engg., IGIT, Sarang, Odisha) India

ABSTRACT
In order to survive and beat the enterprise–wide sharing has many benefits likes
competition in today’s competitive world, one has automation of procedures, availability of high
to manage the future. Managing the future quality information for better decision-making and
means managing information. In order to deliver faster response times.
quality information to the decision-maker at the
right time and in order to automate the process II. INFORMATION TECHNOLOGY AND
of data collection, collation and refinement, SUPPLY CHAIN
organizations have to make Information The supply chain management (SCM) is concerned
Technology an ally, harness its full potential and with the flow of products and information between
use it in the best possible way. IT is beneficial for the supply chain members that encompasses all of
cooperation and integration within the those organizations such as suppliers, producers,
stakeholders of the supply chain. service providers and customers. These
organizations linked together to acquire, purchase,
Keywords – Coordination, Cooperation, convert/manufacture, assemble, and distribute goods
Integration, Information Technology, SCM and services, from suppliers to the ultimate and
users.
I. INTRODUCTION Today, information and technology must be
Information technology is revolutionizing the way, conceived of broadly to encompass the information
in which we live and work. It is changing all aspects that businesses create and use as well as a wide
of our life style. The digital revolution has given spectrum of increasingly convergent and linked
mankind the ability to treat information with technologies that process the information with the
mathematical precision, to transmit it with high emergence of the personal computer, optical fiber
accuracy and to manipulate it. These capabilities are networks, the explosion of the Internet and the
bringing into being, a whole world within and World Wide Web. The cost and availability of
around the physical world. The amount of information resources allow easy linkages and
calculation power that is available to mankind is eliminate information-related time delays in any
increasing at an exceptional rate and Computers and supply chain network. This means that organizations
communication is becoming integral parts. are moving toward a concept known as Electronic
At the organizational level, IT should assist Commerce, where transactions are completed via a
in specifying the objectives and strategies of the variety of electronic media, including electronic data
organization. IT should also aid in developing and interchange (EDI), electronic funds transfer (EFT),
supporting, and procedures to achieve them. At the bar codes, fax, automated voice mail, CD-ROM
departmental level, IT must ensure a smooth flow of catalogs, and a variety of others. The old “paper”
information across departments, and should guide type transactions are becoming increasingly
organization to adopt the most viable business obsolete. Leading-edge organizations no longer
practices. At this level, IT ensures seamless flow of require paper purchase requisitions; purchase orders,
information across the different departments and invoices, receiving forms, and manual accounts
develops and maintains an enterprise – wide payable “matching” process. All required
database. This database will eliminate the need information is recorded electronically, and
of the isolated data islands that existed and in each associated transactions are performed with the
department and make the organization’s data minimum amount of human intervention. Recent
accessible across the departmental boundaries. This developments in database structures allowed part
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numbers to be accumulated, coded, and stored in 2) Information is a crucial factor in the

databases, and electronically ordered. With the managers’ abilities to reduce
application of the appropriate information systems, inventory and human resources
the need to constantly monitor inventory levels, requirements to a competitive level.
place orders, and expedite orders will soon become 3) Information flo ws play an essential
a thing of the past. role in the strategic planning for and
deployment of resources.
III. IMPORTANCE OF INFORMATION
Information is the key to the decision making in The need for virtually seamless bonds
Business. Prior to the 1980s, a significant portion of within and between organizations is a key notion in
the information used to flow between functional the essential nature of information systems in the
areas within an organization, and between supply development and maintenance of successful supply
chain member organizations, were paper-based. In chain. That is, creating inter-organizational
many instances, these paper-based transactions and processes and link to facilitate delivery of seamless
communications were slow, unreliable, and error information between marketing, sales, purchasing,
prone. Conducting business in this manner was finance, manufacturing, distribution and
costly because it decreased firms’ effectiveness in transportation internally, as well as inter
being able to design, develop, procure, manufacture, organizationally, to customers, suppliers, carriers
and distribute their products. During this period, across the supply chain will improve fill rates of the
information was often overlooked as a critical customers service, increase forecast accuracy,
competitive resource because its value to supply reduction in the total inventory and savings in the
chain members was not clearly understood. company’s’ transportation costs - goals which need
However, firms that are embarking upon supply to be achieved.
chain management initiatives now recognize the In fact, inaccurate or distorted information
vital importance of information and the technologies from one end of a supply chain to the other can lead
that make this information available. to tremendous inefficiencies such as excessive
In a sense, the information systems and the inventory investment, poor customer service, lost
technologies utilized in the supply chain represent revenues, misguided capacity plans, ineffective
one of the fundamental elements that link the transportation, and missed production schedules.
organizations into a unified and coordinated system. This is termed to be bullwhip effect, which is
In the current competitive climate, little doubt commonly being experienced by the consumer
remains about the importance of information and goods industries. Suitable technologies such as bar
information technology to the ultimate success, and codes and scanners have been developed and
perhaps even the survival, of any supply chain applied in the portions of supply chain to remove
management initiative. Cycle time reduction, inaccuracy.
implementing redesigned cross-functional
processes, utilizing cross-selling opportunities and IV. INTER ORGANIZATIONAL
capturing the channel to the customer. INFORMATION SYSTEM
Timely and accurate information is more In supply chain-management, the suppliers,
critical now than at any time. Three factors have producers, customers are the members and are
strongly impacted this change in the importance of linked through the ultimate level of integration.
information. These members are continuously supplied with
information in real time. The foundation of the
1) Satisfying customers have become ability to share information is the effective use
something of a corporate obsession. of Information Technology within the supply chain.
Serving the customer in the best, most Appropriate application of these technologies
efficient and effective manner has become provides decision makers with timely access to all
critical, and information about issues such required information from any location within the
as order status, product availability, supply chain. Recognizing the critical importance of
delivery schedules, and invoices has information in an integrated supply chain
become a necessary part of the total environment, many organizations are implementing
customer service experience. some form of an inter-organizational information
system (IOIS).

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An IOIS is an integrated data- information. Although organizations recognize the

processing/data-communication system utilized by importance of an IOIS for effective supply chain
two or more separate organizations. These management, no standard approach is being utilized
organizations may have a preexisting business in terms of technology or information.
relationship. What must exist is a computer-based
electronic link between the two organizations that Information is of crucial importance in SCM
automates some element of work, such as order cooperation because it is present in all three
processing, order-status, inventory-level review, and elements like cooperation, collaboration and
shipment tracking information or, minimally, integration of SCM the core SCM model. Some
transaction transfer, which would previously have even see information as an independent
been performed manually or through other media, production factor, in addition to the traditional
such as the mail. production factors of material, capital, and
The development of an IOIS for the supply human capital. In general, a distinction can be
chain has three distinct advantages: cost reductions, drawn between the volume of information and
productivity improvements, and product/market the richness of information exchanged. In the
strategy. Five basic levels of participation for case of coordination, the amount of information
individual firms within inter organizational system exchanged is generally larger, whereas the
are: information exchanged in collaborative
1) Remote I/O node, in which the member relationships is richer. Evans and Wurster have
participates from a remote location differentiated between the reach of information
within the application system supported by and the richness of information. Reach refers to
one or more higher-level participants. the number of people or companies exchanging
2) Application processing node, in which the information and therefore to connectivity.
member develops and shares a single Richness is characterized by the dimensions
application such as an inventory-query or bandwidth, customization, and interactivity. Data
order-processing systems. must be turned into information by being
3) Multi participant exchange node, in which organized, modeled, formatted, edited, verified,
the member develops and shares a network placed in context, and delivered in a timely
inter-linking itself and any number of manner to decision makers before it takes on
lower-level participants with whom it has value. Davenport and Prusak have suggested the
an established business relationship. “five Cs” as methods to transform data into
4) Network control node, in which the information. According to this, data has to be (1)
member develops and shares a contextualized, (2) categorized, (3) calculated, (4)
network with diverse applications that may corrected, and/or (5) condensed in order to
be used by many different types of lower- become information.
level participants; and finally. Integrated and coordinated decisions in supply
5) Integrating network node, in which the chain networks require a free flow of relevant
member literally becomes a data- information. Acknowledging the importance of
communications/data-processing utility information for SCM raises the question of how
that integrates any number of lower-level important it is. Many researchers have tried to
participants and applications in real time. capture the value of information by different
methods. In order to determine the value of
The participant shares a network of diverse information, Li have examined twelve
applications with any number of participants with representative models. Based on their comparative
whom it has an established business relationship. analysis they conclude that information sharing
All relevant information ultimately must circulate to has value for SCM, but also that it may not be the
and among all organizations between the supply only way to achieve optimal performance. In
chain’s point of origin and its point of consumption, general, suppliers gain higher profits than
such as ordering (i.e., orders for component parts, retailers by sharing information. In terms of
services, and finished products), inbound relevant factors influencing the value of
transportation, manufacturing, warehousing, information sharing, they conclude that it is highly
inventory management, outbound transportation, dependent on the specific supply chain situation.
sales, marketing, forecasts, and customer-service Researchers have also provided an extensive

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literature review of a variety of models that just-in-time relationships.

investigate the impact of information sharing  Capacity: Sharing capacity
on performance in different settings. Again, information, especially production and
depending on the specific settings, benefits vary, transportation capacities, can mitigate
but in almost all models, information sharing shortage and gaming behavior and
improves supply chain cost performance directly supports supply chain planning.
or indirectly between 0% and 35%.  Performance metrics: This includes all
It has been found out that a quicker and more performance metrics that are relevant for
even flow of goods through the supply chain is the whole process under consideration.
more beneficial than information sharing. Examples are quality data, lead times,
Achieving a quicker and more even flow of queuing delays, and service performance,
goods requires at least improved information to name a few.
processing capabilities and therefore information
sharing also influences that indirectly. It is also In addition to the points listed, cost accounting
acknowledged that in an environment with figures are also of high relevance. Information
higher demand uncertainty, the value of about selling price, salvage value, variable
information sharing may increase. Despite the production cost, and fixed production cost,
proven impact of information sharing, Lee and etc., are important to complete the
Whang have pointed out that information sharing informational foundation necessary for optimal
is only an enabler for better coordination and decisions. However, this kind of information is
planning of the supply chain. Accordingly, highly sensitive. The benefits of such shared
companies must develop capabilities to make use information are undisputed and all information
of information. mentioned before could be used in highly
Typically, the following types of information integrated and aligned organizations for better
are of relevance (Lee and Whang), decisions. Nevertheless, there are obstacles that
prevent companies from sharing such information.
 Inventory level: This includes all kinds This is mainly based on the prevailing belief that
of inventory, such as material, work in information represents power and sharing it would
progress, finished goods, and goods in lead to a loss of power and threaten the sharer’s
transit. position in the supply chain. Traditionally,
relevant information has been a substantial source
 Sales data: Ultimate sales data lessen of strategic advantage, which is in line with
the negative effects of distorted demand economic theory, where a monopolistic promises
information when simulated with visible to retain all profits.
end consumer demand. Profits associated with superior information are
often referred to as informational rent. In such a
 Sales forecast: Since companies adapt
constellation, however, available and retrievable
their plans to their forecasts, it is
information can only be exploited, but not
important to share these expectations. If
properly leveraged. This is a major challenge for
sales data are shared, every company in
supply chains.
the supply chain could do their forecasts
based on ultimate sales data. However, Another aspect of information sharing is the
different methods might lead to differing quality of shared information. Quality in general
results. has many dimensions and its meaning depends
 Order status for tracking and tracing: highly on the context. One widely accepted
This supports mainly customer service definition of quality is provided by the
and reduces uncertainty in the supply International Organization of Standardization
chain and for the ultimate customer. (ISO). They define quality as the degree to which
a set of inherent features of a product or service
 Production and delivery schedules: The
fulfills customer requirements. In the context of
different tiers in a supply chain can align
SCM, quality can be interpreted as the fulfillment
their operations to support the whole
of customer requirements in terms of physical-
process if production and delivery
functional specifications of products or in terms
schedules are shared, as is the case for
of an expected outcome of processes. Quality of
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information in supply chains can be interpreted  Validity: Information is valid when its
similarly. In contrast to the customer orientation truth can be verified and it satisfies
of entire supply chains, all supply chain members appropriate standards related to the other
who rely on information are addressees, and dimensions.
therefore customers of information. Therefore,
quality of information must be defined according V. CONCLUSION
to how the information is perceived and used by It is confirmed that the importance of IT and
each supply chain member separately. Sometimes quality of information are complementary to each
it has been presented ten dimensions of other because manual filtering might disappear.
information quality that characterize the overall Although automated information processing
quality of information: prevents manual mistakes, it also makes the
process less transparent and therefore, wrong
 Relevance: The information addressee’s information or information of low value might be
needs define the relevance of generated if the information input is already of
information. This does not mean that bad quality and not properly checked. A
irrelevant information is of poor quality distinction can be generated between the volume of
but in the wrong context, it might be information and the richness of information
irrelevant. exchange. The sharing of information in systematic
 Accuracy: Information should reflect the language involves more action and commitments
underlying reality. Problems may arise support to enhance the quality of any organization
when information becomes too accurate which is beneficial in the light of supply chain
for its purpose and lead to an information network.
overload.
 Timeliness: In contrast, information can REFERENCE
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