7 Key Importance of Information Technology in

Supply Chain
Last Modified: 1 September, 2020 1 Comment

The application of information technology to the process of planning and

control of supply chain activities (including logistics activities) has grown
rapidly with the introduction of microcomputers.

importance of information technology in supply chain

In modern management, information has become a central feature
of management planning and control. Computers and information
technology have been used to support logistics and supply chain
management for many years.

Nowadays, information technology is viewed as a key factor that will affect

the growth and development of logistics and supply chain management.

This section focuses on how information can make logistics and supply
chain management decisions more effective, considers the role of
information management in the development of supply chain strategy,
and then discusses the issuers from an operational perspective.
Information Technology in Supply Chain or
Logistics
The following are the reasons why information technology is important for
the supply chain:
1. Effective Information Management
Effective information management can help ensure that a firm meets the
logistical needs of its customers.

Firms need to place priorities on logistical elements such as on-time

delivery, stockout levels, order status, shipment tracking and expediting,
order convenience, order completeness, creation of customer pick up, and
backhaul opportunities and product substitution.

The logistics managers are responsible for these activities and time and
accurate flow of meaningful information enable them to successfully
implement the same.
The logistics activities assist significantly in meeting customer needs and
an accurate and relevant information system can facilitate the logistics
mission.

2. Useful Combination of Software and Hardware

2. Useful Combination of Software and Hardware
Logistics information systems combine hardware and software to manage,
control, and measure logistics activities that occur within specific firms as
well as across the overall supply chain.

Hardware includes computers and servers, internet technologies, ancillary

technologies such as barcode and RF devices, communication channels,
and storage media.
The software includes systems and application programs used for logistics
and supply chain activities.

The ability to integrate and thus leverage the power of the technologies
makes the firms more successful than other firms that do not have such
abilities.

3. Helps in Decisions Support Systems

Companies need better information on their customers (such as customer

service and sales forecasting), information on their suppliers. (such as
Areas of technology systems including decision support
systems/information technology and logistics management activities were
not delivering needed information to the management for making strategic
decisions.

4. Digital Order Processing System

The order processing system is the nerve center of the logistics
and supply chain system.
A customer order provides the communication message to set the logistics
process in motion.

The cost and efficiency of the entire communication can result in loss of
customers or excessive transportation, inventory, and warehousing costs
together with possible manufacturing inefficiencies caused by frequent
changes in the production line.

The order processing and information systems form the foundation for
logistics and corporate management information systems.

5. Computerization of Firm Activities

Leading-edge organizations are utilizing computers extensively to support
logistics activities.

Computers are used in order entry, order processing, finished

goods inventory control, performance measurement, freight audit/payment,
and warehousing.
World-class logistics practices include the use of logistics information
systems as a key to competitiveness.

Related: Importance of Marketing in the Modern World.

6. Competitive Advantages
Computer-based decision support systems (DSS) support the
executive decision-making process in logistics and supply chain
management.

To support time-based competition, firms are increasingly using information

technologies as a source of competitive advantages.

Benefits of information technology in logistics

Systems such as a quick response (QR) just in time (JIT) and efficient
consumer response (ECR) are integrating a number of information-based
technologies in an effort to reduce order cycle times, speed
responsiveness, and lower supply chain inventory.

More sophisticated applications of information technology such as decision

support systems, artificial intelligence and export systems are being used
directly to support decision making in logistics and supply chain
management.

7. Fast Connectivity through WEB

Today, companies are restructuring their businesses to function in the new
era of electronic commerce.

Organizations can have a deluge of information on websites, business to

business requirements, and online customer and supplier linkages.

ERP systems, purchasing databases and data warehouses, electronic data

interchange (EDI, business to business electronic commerce are recent
development which applied in logistics and supply chain management.

Conclusion
Many firms today effective management of logistics and supply chain
activities as a prerequisite to the achievement of overall cost efficiency and
as a key to ensuring their ability to price their products and services to meet
and beat the competition.

The logistics competencies of a firm provide unique ways in which the firm
is able to differentiate itself in the marketplace.

Information technology is being used by leading-edge firms to increase

their competitiveness ad develop technologies that have been traditionally
regarded as key strategic resources and expertise in these areas is now
thought to be the most valuable and essential of all corporate resources.

What Is the Role of IT in Supply Chain

Management?
Companies face several challenges in various stages of the supply chain.

What is the role of IT in supply chain management?

What is the role of IT in supply chain
management?

supply chain managementThe role that IT plays in

supply chain management or SCM is so important.
IT provides the tools which can pick up relevant
information, break it down for proper analysis and
execute it for optimum performance of the supply
chain. Data is pivotal to the execution of the supply
chain, primarily because it provides the base on
which the supply chain managers can take
decisions.
The role that IT plays in supply chain
management or SCM is so important. IT provides the tools which can pick up
relevant information, break it down for proper analysis and execute it for
optimum performance of the supply chain. Data is pivotal to the execution of
the supply chain, primarily because it provides the base on which the supply
chain managers can take decisions.
Real-time or almost real-time information is the key to proper supply chain
management. With information about the various stages of the supply chain,
decision-makers can plan, manage, and adjust processes to achieve goals in
procurement, inventory, manufacturing, etc.

Customer Relationship
Management and Supply
Chain Management
What is customer relationship management in supply chain management?

Customer relationship management is the process of managing customer

interactions with a business.

It allows businesses to improve customer satisfaction, retention, and loyalty.

It also includes the analysis of data to identify customer needs, providing

information to customers about various products, and making sure customers are
happy with their experience.
The Need for Customer
Relationship Management and
Supply Chain Management
Customer relationship management is an essential part of supply chain
management because it creates value for the supply chain.

By improving customer satisfaction, retention, and loyalty, increases profit

margins.

CRM also helps companies improve their sales and revenue by making the supply
chain more efficient.

It provides a way to make sales and marketing more targeted and impactful.

Customer Relationship
Management and Supply Chain
Management Key Terms
Before we get into the details, let’s define some key terms:

Customer Relationship Management (CRM) is a business strategy that focuses on

improving relationships with customers to increase customer satisfaction and
loyalty.

A CRM system is a software that helps businesses manage customer interactions.

In the supply chain, it may be necessary to implement CRM systems at multiple

points in the supply chain.
When that happens, the systems will rely on each other to share information.
Customer service representatives use the CRM system to manage incoming
customer requests, questions, and complaints.

The system helps them resolve customer issues quickly and efficiently.

Manufacturing operations use the CRM system to track inventory, ensure that
products are made correctly, and ensure that orders are fulfilled quickly and
efficiently.

They can also use the system to manage production schedules.

Finance uses the CRM system to manage customer accounts and transactions.

The system tracks all of the money flowing in and out of the supply chain.

It also provides reports that help businesses analyze their financial performance.

How CRM Can Benefit the

Supply Chain Management
CRM systems can help businesses reach people who are right for their products
and services.

They also allow businesses to target their marketing efforts and make them more
efficient. Additionally, they help businesses develop better relationships with their
suppliers.

CRM systems track customer interactions, so it is easy for businesses to understand

what customers want and need.
Businesses can use this information to improve their processes and ensure that
orders are fulfilled quickly and accurately.

A CRM system can help businesses identify the best ways to improve customer
satisfaction, retention, and loyalty.

It also helps businesses analyze data to identify trends that may affect sales or
revenue.

WHAT IS GREEN SUPPLY CHAIN

MANAGEMENT?
Green supply chain management (GSCM) involves sustainable environmental processes built
into conventional supply chains — from manufacturing to operations to end-of-life
management — incorporating the principle of 4R1D (reduce, reuse, recycle, reclaim and
degradable).

Supply chain sustainability aims to reduce the impact of factors such as pollutants,
deforestation, ozone depletion and global warming affecting the environment. Solutions
could range from intelligent packaging such as from using right-sized packaging boxes,
avoiding oversized boxes for smaller consignments to using recyclable paper pads as
replacement for plastic packaging.

The other big revolution that’s slowly picking is the use of electric-powered fleet instead of
fossil fuel-based fleet to lower carbon emissions. However, EVs can also provide better
performance in terms of maintenance and longer range per charge.

Manufacturing industries bring onboard suppliers that have a proven track record of
implementing green practices in their offices and processes, thereby incorporating
environmental consciousness as a factor or metric for supplier selection.
Figure 1.

Green supply chain of child’s crib manufacturer.

Green supply chain makes the applications of the key sustainable development
strategy outstand. It emphasizes how green practices can be adopted in firms to
mitigate the environmental degradations and increase the economic and operational
performance of firms, while Figure 2 illustrates a simple model of green supply
chain. Khan et al. [2] have explained the concepts of sustainable and green supply
chain management:
Figure 1.

The role of critical success factors in GSCM

There is no doubt that green supply chain is a relatively new idea, which is gaining popularity
so as to improve environmental performance in the whole chain [5, 14]. We have identified
the following six key critical success factors for putting green supply chain management into
practice to attain better environmental sustainability

 Ethical leadership/internal management

 Customer management
 Supplier management
 Competitiveness
 Societal
 Regulatory

2.1 Ethical leadership/internal management

Internal environment management contains support and encouragement from senior

managers. Internal management is a key critical success factor for enterprises to adopt green
practices. Pressure employees bring about, encouragement and support from environmental-
protection motivate senior management. Meanwhile, the perception of environmental risks
involved could bring positive change in adoption of green practices [8, 15, 16].

2.2 Customer management

In green supply chains, customers play an important and effective part [13]. Indeed,
developing nations’ firms are facing heavy pressure to adopt green practices in their business
operations of supply chain to meet their customers’ demand so that they can be competitive
in the market [17]. Cooperation with customers becomes very useful to attain fruitful
advantages from green supply chain management [7, 18].

2.3 Supplier management

Green supply chain practices are unable to be adopted without active participation of
customers and suppliers [19, 20]. Strong collaboration with suppliers enhances incentive
systems, boosts the adoption and development of innovative ecofriendly ideas. Technologies,
green partnership agreements and openness in implementation of innovative green practices
may generate enhancement in operational and environmental performance so as to achieve
economic goals of firms [21].

2.4 Competitiveness

A number of published researches showed that competence and relevant elements could play
a part in green practices implementation in their supply chain [22, 23]. Competitiveness has
been perceived as a significant factor to implement green practices rather than organizations’
wish to protect environmental sustainability. Implementing green practices in firms’ business
operations may also be dated back to additional voluntary for competitive factors [8].

2.5 Social

A number of researchers found the significance of societal factors for attaining environmental
friendly practices objectives [15, 22, 24]. With growing attention of regulatory bodies and
awareness of customers on environment, firms have to exchange end-to-end information
regarding their supply chain operations’ effect on local community and people lives [25]. In
addition, NGOs (nongovernment organizations), electronic and social media are more
effective in exerting pressure on firms to adopt green practices.

2.6 Regulatory

Increasing prominence of environmental concerns has forced regulatory authorities to strict

their environmental laws and policies [8, 26]. Governmental bodies have been farming strict
environmental laws to control climate change, global warming and pollution; and firms are
required to reduce their supply chain’s negative effect on environmental sustainability [27].
Hence, it becomes more and more important for firms in supply chain to have conformity
with regulations so as to conducting ecofriendly strategies.

A DVERTISEMENT

3. Green practices in supply chain management

With numerous green practices adopted, companies in their business and supply chain
operations improve their productivity with better environmental growth. While, some well-
known green practices are as follows;
3.1 Green material sourcing

Green sourcing means sourcing or purchasing materials and components which

have such enviable ecofriendly characteristics as reusability, recyclability and
nonuse of hazardous/dangerous chemicals [28]. With more and more concerns on
environmental protection, procurement professionals have been motivated to
reconsider their existing sourcing, purchasing strategy and their impact on
environmental sustainability [29, 30]. The role of ecofriendly purchasing is the
involvement of recycling and remanufacturing. Min and Galle [31] further
emphasized green sourcing supporting waste reduction enhances recycling and
remanufacturing and other activities in supply chain. Carter and Rogers [32] did a
research to explore the impact of green sourcing on firms’ environmental and
financial performance. They concluded that owing to the successful adoption of
green purchasing strategy, products’ cost is reduced and environmental
performance and financial performance of firms is increased with positive
reputation obtained in the market. Zailani et al. [33] highlighted that ecofriendly
purchasing has positive relationship with firms’ operational and environmental
performance. Yang et al. [34] green purchasing was categorized into five main
facets: design operation management, supply chain management, environmental
authentication, ecological, and external environmental management. They
confirmed that green purchasing improved to the overall firms’ performance [35].
The adoption of green purchasing in supply chain and business operations is a
reliable tool in mitigating waste, air and water pollution.

3.2 Green marketing

The actions directed to all incorporates and consumers comprise green marketing, a
broad range of marketing activities (e.g., planning, production,, process, price,
promotion and after-sale service) designed to illustrate the goal of organization to
mitigate the harmful effects of their products [36]. Green marketing practice
promotes the products with environmental friendly properties [8, 37]. It contains
the activities that can satisfy human desires of minimum negative effects on the
environmental beauty. In addition, green marketing enhances firms’
competitiveness and financial and environmental performance with positive
corporate reputation and image [35, 38].

3.3 Green management

Green management practices (GMP) provide a firm with supplementary sources of

information that can enhance their business and environmental objectives [39].
Adoption of green management practices help with improved firm image,
increased efficiency, environmental compliance improvement, cost savings,
achievement of societal commitment and reduction of carbon emissions etc.
[40, 41].
3.4 Green distribution and warehousing

Green distribution and warehousing can reduce the waste and play an important
role in energy reduction and value addition of green products in warehousing
significantly improve overall performance of organization with better corporate
image [7]. Green distribution helps enterprises to obtain superior financial and
environmental performance [42, 43].

3.5 Green manufacturing

Green manufacturing practices are to implement socially and environmentally

accountable practices to mitigate harmful effects of manufacturing and increased
profitability of firms [8, 29]. Green practices in production improve efficiency of
processes [33]. This practice involves the application of the green resources, which
may lead towards competitive advantage through reduction in products’ cost and
improvement in products’ quality. Lean and green manufacturing industry both are
working for eliminating waste and improving the efficiency of manufacturing
processes [43]. Baines et al. [42] highlighted the benefits of green manufacturing:
green practices in production processes mitigate the bad effects of manufacturing
processes on environmental sustainability, while green manufacturing improve
operational, environmental and financial performance of firms.

3.6 Ecological design

Luthra et al. [8] highlighted that 80% impacts on environment from product and
process related could be controlled with the adoption of ecological design in
supply chain management. Ecological design incorporates many ideas such like
using cleaner technology processes, green raw material and components [28, 44].
Green design of products reduces ecological impacts of products during their life
[8, 45]. In addition, green design of products also supports reusing, recycling and
remanufacturing of products, which not only helps firms to improve their
environmental performance but also provide opportunity to reduce their costs [1].

3.7 Green transportation and reverse logistics

Green transportation and reverser logistics practices provide opportunity to

organizations, to improve their image and reduce their costs [46]. Logistics
overheads can be saved through promoting transportation system’s efficiency and
enhancement of customer association also can be obtained to create more
profitability [8]. The logistics activities integrated with rehabilitation comprise the
practice of reverse logistics (reusing, recycling, and remanufacturing), which can
produce the products that can be used again for customers [29]. Green logistics
practice helps firms to reduce their environmental impacts with improved quality
and cost reductions [47].
3.8 Renewable energy and biofuels

Undeniably, global logistical and supply chain operations mainly depend on energy
as well as fossil fuel, which are the main cause of climate change, global warming
and pollution with greater carbon and greenhouse gas emissions [46]. Renewable
energy and biofuels are required in supply chain operations so as to obtain
sustainable environmental and economic growth [48]. Anable et al. [49] highlight
that logistics related activities consume greater energy to accomplish their task.
Renewable energy and biofuels improve economic performance of firms and also
reduce carbon emissions. In addition, fossil fuel is more expensive than biofuels
and green energy sources [50]. The strict governmental policies together with
customer awareness build pressure on corporate sector to use biofuels and
environmental friendly energy in their supply chain operations. The bioenergy
mitigates the carbon emissions and also improves profitability of enterprises with
better image and reputation building [7, 46].
The cost minimization is considered as the most important factor for firms to
implement green practices in their supply chain operations. The implementation of
green supply chain initiatives would help to cut down the costs of packaging,
components and materials due to use of reused, recycled and remanufactured
products. Khan et al. [2, 46] highlighted that green practices provide opportunity to
capture new markets and export to pro-environmental countries, while polluted
firms are unable to export their products in pro-environmental countries such as
USA, Germany, UK and Poland. Undeniably, green supply chain management
practices have been a tool for firms to decrease their products’ cost, enhance
profitability and increase market share [51]. On the other hand, to improve social
performance, firms also adopt green practices in their business activities. Social
performance indicates improvement of people’s quality life standard without
compromising on environmental beauty. In addition, social performance includes
the enhancement of firm image and the improvement of environmental
sustainability, as well as reduction in environmental risks [29].
By adopting GSCM practices, firms may enhance their operational performance
through improving products quality and improving delivery service [15]. Green
supply chain management initiatives also help organizations to improve their
environmental performance such as reduction in carbon emissions, elimination of
waste from end-to-end supply chain, effective and strong collaboration with
suppliers would decrease their communication costs and easily promote reuse,
recycling and remanufacturing [52]. Environment management system (EMS)
integrated into firms’ manufacturing strategy will assist the firms to enhance its
ecological performance [53].

What Is Supply Chain Sustainability?

Supply chain sustainability refers to companies’ efforts to consider the
environmental and human impact of their products’ journey through the
supply chain, from raw materials sourcing to production, storage, delivery
and every transportation link in between. The goal is to minimize
environmental harm from factors like energy usage, water consumption and
waste production while having a positive impact on the people and
communities in and around their operations. These concerns are in addition
to traditional corporate supply chain concerns around revenue and profit.

To set the stage for a more comprehensive understanding of supply chain

sustainability, here are some foundational definitions and answers to
common questions.

What Is a Supply Chain?

A supply chain is a coordinated network of all the companies, facilities and
activities involved in developing, manufacturing and delivering a business’s
products.

What Is Supply Chain Management?

Supply chain management is the practice of coordinating sourcing,
production, inventory management and transportation among all the
participants in a supply chain to maximize efficiency and customer
satisfaction. Many businesses realize major time and cost savings by
evaluating and improving supply chain management.

What Is Sustainable Supply Chain Management?

While conventional supply chain management focuses on the speed, cost
and reliability of operations, sustainable supply chain management adds
the goals of upholding environmental and societal values. This means
addressing global issues such as climate change, water security,
deforestation, human rights, fair labor practices and corruption.

How Can a Supply Chain Be Sustainable?

Companies around the world have taken steps to lower their carbon
emissions, cut back on waste and improve labor conditions. By tracking
sustainability metrics in supply chain management (SCM) systems, they
monitor multifaceted programs that, for example, prioritize renewable
energy, recycle products and materials or encourage greater social
responsibility among suppliers. Subaru’s Indiana car-making plant—the
U.S.’s first zero-waste factory—is a compelling example of a sustainable
supply chain, as documented by Scientific American.

Additionally, companies can use intelligence and pre-defined rules to

ensure that products aren’t being shipped unnecessarily—for example,
making sure products are sent from the closest distribution center as
opposed to one on the other side of the country.

Why Is Sustainability Important in the Supply Chain?

Research has shown that, for most companies, the supply chain is
responsible for the bulk of their environmental impact. By their very nature,
supply chains often involve energy-intensive production and transportation
as goods are made and moved around the globe. Therefore, organizations
can often make the biggest difference by making changes to their supply
chain rather than other business operations.

The complexity of myriad supplier relationships and border crossings also

makes supply chain sustainability challenging. This complexity can
hinder visibility into important operational considerations such as labor
conditions at a supplier’s factory that is thousands of miles away.