Why is Technology Important in Supply Chain Management?

importance of Information Technology in SCM

Business processes have been digitalized in the past couple of decades, and it has become a necessity rather than an option. Why not? IT integrates various operations carried out by different companies in the supply chain. It speeds up the business processes and prevents bottlenecks. Companies are closer to achieving on-time procurement, shorter inventory, and better efficiency, especially in manufacturing. IT allows companies in the supply chain to meet the needs of consumers.

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

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), and information on their suppliers. (such as production planning and sourcing and purchasing).

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 the 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.

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.

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.

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You Should Also Read:

The Functional Roles of IT in Supply Chain Management
The Role of IT in Supply Chain Management
How Does Information Technology Affect Supply Chain Management?

danish mairaj
Danish Mairaj

Danish Mairaj is a medical device expert with a strong focus on regulatory and quality compliance. He has been involved in managing clinical trial infrastructure including supplies and logistics. He has over 15 years of experience in the MedTech and Pharmaceutical industry. He is a certified Product Owner, Scrum Master, and Project Management Professional PMP. He studied Biomedical Engineering in Germany and MedTech Regulatory & Quality in Galway, Ireland. He contributes articles to the BRASI newsletter.

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