Tuesday, March 10, 2015

The Role of IT in Advanced Logistics and Supply Chain Management

Information Technology (IT) is the study, creation, support, utilization and management of computer based information systems, especially computer hardware and software applications. IT is not limited to computers, with the current technological advancements in area of mobile and other handheld devices, IT is fast moving onto other forms of business and technology.

A supply chain on the other hand is a network of suppliers, subcontractors, and distributors used by a manufacturer to source for its raw materials, supplies and components. Logistics organizations store, transport and distribute work-in progress and supplies within the entire supply chain and also distribute the finished product to clients and intermediaries therein between. Thus, it follows that the integration of logistics operations and supply chain will not only reduce costs and improve efficiency but will also increase the competitive advantage of the organization.

How Technology Has Advanced SCM

A supply chain management (SCM) system is therefore concerned with the flow of information and products between the member organizations within the supply chain. Recent advancements in technologies have ensured that organizations can avail this information quite easily, thereby greatly reducing the cost of information. With integrated supply chain solutions, the flow of information and materials is usually bi-directional.

Today’s advanced IT systems have enabled organizations to leverage some turnkey logistics and warehouse management, and packaging systems as well as custom Electronic Data Interchange (EDI) solutions at a fraction of the previous price. This development, where the supply chain system is inter-organizational has three very distinct advantages.

First and foremost, there is a drastic cost reduction in the route to market, distributorship and production cost.

Secondly, the productivity of all the organizations in the supply chain is bound to improve and lastly there is bound to be a drastic improvement in the development and execution of product and market strategies.

Facilitation of Logistics Collaboration

For many systems, there are at least five basic levels in the system where logistics technology can enable high-levels of collaboration. The first level is at the remote input/output node where a member can participate from a remote location and interact with application system.

The second level is where a member of a fluid supply chain shares a single application such as an order processing system or inventory query with the application.

The third level is where a member of the supply chain develops and shares a network which links it to other participants with whom it has a business relationship.

In the fourth level, a partner organization may opt to develop and share a network with different applications which can be used by other members to make queries, place orders, check stock levels etc.

The fifth and final level is where a member decides to become more of data processing or communications utility and integrates any data coming from other participating members in real time and avails it when required to do so.

Next-Level Supply Chain Solutions

Solid supply chain solution providers choose the level of IT that best fits their clients' needs and requirements and will not overstretch or overburden their networks or lead to instances of information overload.

Another huge area where IT has become a facet in supply chain management has been in the integration of Electronic Data Interchange (EDI) into most supply chain management systems. EDI refers to the computer to computer exchange of business documents in a standardized format.

Through the use of EDI, supply chain partners are able to overcome the exaggeration and distortion usually prevalent in supply and demand set ups by simply improving technologies available so as to allow for real time sharing of actual supply and demand information. This not only improves customer service through limited stock outs but is also cost efficient, improves the billing process and enhances productivity for all the players or partners involved.

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