What is the Role of IT in Supply Chain Management? (2022)

Companies face several challenges wherever they are inthe supply chain. Utilizing information technology, businesses can deal with various supply chain management issues.

What is the Role of IT in Supply Chain Management? (1)

What is a supply chain?

A supply chain refers to the entire process of making and selling goods, from the supply of raw materials and using them to manufacture products to the distribution and sale to consumers.It isa network of companies, including suppliers, manufacturers, shippers, distributors and retailers, working together to make stuff like logistics, inventory management, transportation and so forthgo as smoothly as possible.

What is the role of IT in supply chain management?

What is the Role of IT in Supply Chain Management? (2)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 informationabout the various stages of the supply chain, decision-makers can plan, manage, and adjust processes toachieve goals in procurement, inventory, manufacturing, etc.

Why is technology important in supply chain management?

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. Itspeedsup 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.

How does information technology affect supply chain management?

Supply chain management is all aboutproducing the right product in the right quantity and sending them to the right place at the right time. It seems simple, but it can quickly become complicated.

How Suppliers Can Utilize Information Technology

The supply chain starts with the supplies. With a reliable supply chain software that allows real-time information sharing,manufacturers and supplierscancollaborate betterand avoid production delays due to insufficient raw materials.

Normally, manufacturers initiate transactions with suppliers but if you are a supplier, you can monitor your clients' inventory, forecast future demands, and make sure that you're ready to fulfil orders for raw materials. Suppliers can also use historical data to make informed decisions in aspects like partnership and contract management.

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(Video) How Information Technology acts as a Key Driver of Supply Chain Management - Explained.

How Manufacturers Benefit FromIT

IT offers better visibility and transparencythat leadto better accountability and control over the production of goods. Manufacturers that have clear visibility on production can make adjustments to make the process more efficient as well as foresee problems and prevent them. For example, with IT, a manufacturer can foresee delays and make changes in the production schedule.

How Information Technology Helps Shippers

Timely delivery is essential in any industry. Delivery that's done on timeusually results in customer satisfaction, and customer satisfaction normally leads to customer retention.

As a shipper or logistics provider, you can ensure customer satisfaction by improving order tracking and delivery. Keeping the manufacturers and distributorsinformed ofthe entire delivery process and possible delays already puts you a step closer to repeat business. What more if you can avoid delays by utilizing data from the tools? Many supply chainmanagement tools for delivery and shipping service providers also let you give clients access to a platform where they can enjoy a sense of control.

Utilize the bestsupply chain management tools tokeep your clientssatisfied.

How Distributors Can Take Advantage of IT

Distributors that are spending a lot of time and wasting money on inventory management can rely on supply chain management tools for some badly needed assistance.With the right tool and documented process, distributors no longer have to worry aboutexcess or insufficient stock. Instead, they can predict demands and effectively manage inventory and orders.

How RetailersCan Use Information Technology

In the supply chain, retailers are the ones who face consumers. They need flexibility and visibility as well as integration.Retailers can integrate their POS systems, which capture their sales, with their tool for monitoring the stock level, which is also visible to the distributor. Retailers can also set areorder point that when reached will automatically generate an order.

Predict demands and manage orders effectively. Get the most reliable supply chain tools for sales and orders.

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The Role of IT in Supply Chain Management

IT is leaving a mark everywhere. Nothing remains untouched. No wonder every aspect of a business is now under its command! The role of IT in Supply Chain Management is highlighted in the following points.

1. Integrated and Coordinated Supply Chain

A supply chain can only work efficiently when it is properly integrated and well-coordinated. IT performs this crucial task by bringing in multiple technologies and combining them to optimise the supply chain. These technologies make data collection possible and much easier and more accurate. In turn, this allows precise and detailed data analysis leading to sound business decisions.

What is the Role of IT in Supply Chain Management? (3)2. Increased Productivity

Smooth flow of information, new technologies and effective communication increase the productivity of all entities in the supply chain. It is like a trigger for product movement. Instead of going back and forth, IT provides the link that passes the needed information continuously.

3. Cost Reduction

IT permits optimum utilisation of resources and assets. Old data is used to study the trends, and technology is used to analyse it for improving performance. When resources are used optimally, they result in cost reduction.

In a supply chain, the role of IT becomes more prominent because it motivates all parties to use their respective resources in the most cost-efficient manner. When IT is used as it should be, there is a dramatic fall in overall expenses.

4. Product Improvement

IT consists of tools and applications which can be used to gain early awareness. In a market where consumers always want something new, the product will either have to evolve or it will go out of demand. To stay in business, you must introduce product improvement and innovation sooner rather than later. The kind and extent of product improvement can be validated with the help of IT.

5. Supply Chain Visibility

Information makes the entire supply chain visible to supply chain managers. The manner in which the information flows from one collaborator to the other and the impact it has on others is used by the managers in making strategic decisions.

The Functional Roles of IT in Supply Chain Management

Apart from the above-mentioned basic roles, there are three functional roles of IT in supply chain management. These are:

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1. Transaction Execution

When information flows efficiently between the participants of the supply chain, the number of transactions between them is reduced. IT increases the efficiency of repetitive data exchanges. This data is usually appropriate for delivery verification, order processing, billing, and dispatch advice.

2. Collaborationand Coordination

IT renders the flow of information. This makes for easier planning, coordination and improved collaboration between all participants. Demand forecasts make it possible to plan for the future, and order tracking makes knowing the physical location of each order a reality. Neither of these activities ispossible without IT.

3. Decision Support

Good decisions cannot be pulled out of thin air.They are and should be based on data. IT is a huge benefit in decision support. It can collect even the most complicated set of data and convert it to easy-to-understand charts and reports. In this context, IT extends decision support to all managers.

Enjoy smooth transaction, efficient execution, and better collaboration whether you're on theupstreamor downstreamof the supply chain.

Software for Supply Chain Management

There are many tools that are used for effective supply chain management. These are primarily categorised as:

1. Enterprise Resource Planning

Materials requirement planning, which was earlier used to distribute resources for a manufacturing operation, resulted in enterprise resource planning (ERP), a system that links individual IT applications into a single one. This results in the integration of the data and the processes of the complete business.

When all operations are consolidated, information related to cash flow and material flow starts making more sense. ERP has now become the backbone of the supply chain and provides an integrated view of the organisation as a whole. Today, ERP has also led to the automation of many functions so that there is minimal human intervention.

2. Electronic Data Interchange

Electronic Data Interchange (EDI) is the exchange of business data from one computer to another. It is usually done in a standard format so that all concerned parties can use it according to their need without having to constantly ask for it. EDI allows companies, across the industry, to communicate with one another.

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Everyone who uses EDI follows the same rules and methods. This makes for efficient inventory management, better business relationships, and improved customer service.

3. Supply Chain Management Systems

An ideal supply chain management system will help in planning, selecting the vendor, manufacturing, logistics, and building the customer relationship. To provide the necessary assistance Supply Chain Planning (SCP) software and Supply Chain Execution (SCE) software are used.

4. Customer Relationship Management

CRM or e-CRM uses IT to assist an e-business in managing its customer base. It matches customer needs with the product plans to increase sales.

The Final Word

The secret behind successful Supply Chain Management lies in IT. From the very beginning of the supply chain to its very end, data plays a key role in bringing the entire set together. IT tools provide the necessary communication link between all entities and allow them to work independently and yet in a coordinated manner. The role of IT in supply chain management is undeniable. It is the chain that binds everyone and everything together. It is vital!

Editor's Note: This article was originally published on 28th January 2019. It has been revamped and updated to provide more information and to reflect recent trends.

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FAQs

How is information technology used in supply chain management? ›

By harnessing a combination of technologies like AI, machine learning, and predictive analytics, companies can automate warehouse operations, improve delivery times, proactively manage inventory, optimize strategic sourcing relationships, and create new customer experiences that increase satisfaction and boost sales.

What is the impact of information technology on a supply chain management? ›

One way is to streamline the process of tracking and distributing inventory. But the biggest benefits of technology in supply chains Management come from reducing costs, improving customer service, and increasing operational efficiency.

What is the role of it in green supply chain management? ›

Because green supply chain can reduce the environmental pollution and production costs and it also can spur economic growth, create competitive advantage in terms of greater customer satisfaction, positive image and reputation and provide better opportunity to export their products in pro-environmental countries [1].

What is supply chain in it industry? ›

A supply chain transforms raw materials and components into a finished product that's delivered to a customer. It is made up of a complex network of organizations and activities, such as raw materials suppliers, manufacturers, distributors, retailers and the customer.

What are the benefits of using information technology in a supply chain? ›

Value of Information Technology in Supply Chain Management
  • Increased Control Over Production. ...
  • Better Inventory Management. ...
  • Increased Collaboration Between Supply Chain Partners. ...
  • More Effective Order Tracking and Delivery.
12 Aug 2014

How has technology improved supply chain management? ›

Because technology and automation for the supply chain utilize real or near real-time data, companies have greater visibility and can track activities better. This helps improve collaboration and communication with key vendors and reduces cost through better vendor contract management.

What is the future of information technology to supply chain? ›

“Given today's volatile and disruptive environment, supply chain organizations must become more flexible, and the solution is digitalization.” In the next three to five years, we will see an increase in the adoption of digital supply chain technologies, as well as technologies that improve human decision making.

What is the role of information technology in logistics? ›

Information technology applied in logistics has a great impact when it comes to generating real-time data that serve as the basis for effective management. It makes processes more dynamic, agile and practical. Some software validated by large companies in this sense are the most used in logistics.

What is green design in supply chain management? ›

Green Supply Chain Management (GSCM) is a concept that integrates environmental factors into the traditional SCM started from the process of design, material procurement, production, distribution and end-of life.

What is green logistics in supply chain management? ›

Green logistics includes any business practice that minimizes the environmental impact of the logistics network and delivery. Sustainable logistics or green logistics secure a strong bottom line without sacrificing customer satisfaction, or the well-being of the planet.

What is supply chain in simple words? ›

A supply chain is the network of all the individuals, organizations, resources, activities and technology involved in the creation and sale of a product. A supply chain encompasses everything from the delivery of source materials from the supplier to the manufacturer through to its eventual delivery to the end user.

What is the role of information technology in procurement? ›

It helps you keep all of your data and documents organized so that you can easily and quickly track any vendor's contract. Technology also helps you create a more transparent procurement system.

What are the 7 supply chain functions? ›

The functions of a supply chain include product development, marketing, operations, distribution, finance, and customer service. Today, many supply chains are global in scale. Effective supply chain management results in lower costs and a faster production cycle.

What are the four 4 main elements of a supply chain? ›

Integration, operations, purchasing and distribution are the four elements of the supply chain that work together to establish a path to competition that is both cost-effective and competitive.

How technology is transforming the supply chain? ›

Thanks to AI, companies can automate functions such as demand forecasting, capacity and production planning and predictive maintenance. For example, AI-driven technologies can analyze weather, real-time sales data and other factors to generate accurate demand forecasts and facilitate logistics plans.

How technology and automation is improving the efficiency of supply chain management? ›

The Benefits of Supply Chain Automation
  1. Decreasing operating costs. ...
  2. Increasing productivity. ...
  3. Increasing Volume. ...
  4. Improving accuracy. ...
  5. Improving time savings. ...
  6. Integrating with large suppliers. ...
  7. Improving compliance.

What is the role of information technology? ›

Information technology is building communications networks for a company, safeguarding data and information, creating and administering databases, helping employees troubleshoot problems with their computers or mobile devices, or doing a range of other work to ensure the efficiency and security of business information ...

How information technology is used in logistics? ›

Information technology applied in logistics has a great impact when it comes to generating real-time data that serve as the basis for effective management. It makes processes more dynamic, agile and practical. Some software validated by large companies in this sense are the most used in logistics.

What is the future of information technology to supply chain? ›

“Given today's volatile and disruptive environment, supply chain organizations must become more flexible, and the solution is digitalization.” In the next three to five years, we will see an increase in the adoption of digital supply chain technologies, as well as technologies that improve human decision making.

What is the role of information technology in procurement? ›

It helps you keep all of your data and documents organized so that you can easily and quickly track any vendor's contract. Technology also helps you create a more transparent procurement system.

What is an it tool used in logistics? ›

Supply Chain Management Software (SCM)

This platform has tools and functionalities that allows logistics companies to reduce error and costs. At the same time, they make it possible to optimize the entire supply chain. It has tools that: Send alerts about shipment status and updates.

What is the role of information technology? ›

Information technology is building communications networks for a company, safeguarding data and information, creating and administering databases, helping employees troubleshoot problems with their computers or mobile devices, or doing a range of other work to ensure the efficiency and security of business information ...

What does an it logistics manager do? ›

Setting up and maintaining schedules for inbound and outbound shipments. Directing the flow of an organization's materials and products. Working with other departments in the organization to implement logistical improvements. Supervising the work of the rest of the logistics team.

How information system technology will enhance the role of logistics? ›

Logistics information systems also help companies track internal information within a company by providing reports on inventory costs that determine how much more inventory needs to be purchased (Ballou, 2013). This feature allows companies to be more efficient by providing optimal lot sizes and lead times.

How has technology improved supply chain management? ›

Because technology and automation for the supply chain utilize real or near real-time data, companies have greater visibility and can track activities better. This helps improve collaboration and communication with key vendors and reduces cost through better vendor contract management.

How technology can assist with increasing supply chain security? ›

Real-time data on the total supply chain enables organizations to accurately identify their intersection of demand and supply, more effectively and sustainably secure product, and better ascertain potential risks with suppliers.

What are the seven new trends in supply chain technology area? ›

7 Best Supply Chain Technology Trends & Innovations
  • Internet of Things.
  • Artificial Intelligence.
  • Augmented Data Intelligence.
  • Warehouse Automation.
  • Robotics.
  • Last-Mile Delivery.
  • Utilization of Supply Chain Management Software.

What is information technology in purchasing and supply? ›

Information technology helps collect the data in a centralized platform (ie database) that aids in analyzing to analyze the supplier behavior. It also enables the procurement officers to compare prices, quality, payment terms, and many other criterions to select an efficient supplier.

What are 3 examples of information technology? ›

Examples of Information Technology

Traditional computer applications that include data storage and programs to input, process, and output the data. Software and support for office automation systems such as word processing and spreadsheets, as well as the computer to run them. Users' PCs and software.

How technology can improve procurement process? ›

Technology is proving a major boon for a huge range of procurement and supply chain functions, allowing companies to leverage valuable data, enforce compliance through policy, track spend for greater visibility, and drive increased operational performance.

What are the 3 types of supply chain? ›

The 3 Levels of Supply Chain Management: Strategic, tactical and operational. The three levels of supply chain management are strategic, tactical and operational.

What are the 6 types of supply chain management? ›

Here are six types of supply chain models that can drive supply chain management for a business:
  • Continuous Flow. This is one of the most traditional models on the list. ...
  • Fast chain. The fast chain model is one of the new names in supply chain strategies. ...
  • Efficient Chain. ...
  • Agile. ...
  • Custom-configured. ...
  • Flexible.
10 May 2022

What are the four types of supply chains? ›

Six Types of Supply Chain Models
  • The Continuous Model.
  • The Fast Model.
  • The Efficient Model.
  • The Agile Model.
  • The Custom-Configured Model.
  • The Flexible Model.
  • About IDB.
  • FB.

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