Role of Information Technology in Supply Chain Management

Considerable advancement in Information Technology (IT) has already taken place in the industries related to Logistics and Supply Chain Management. The recent shift in shopping options for the generation through eCommerce has made the role of IT in supply chain management more prevalent. Manufacturers, suppliers, retailers and distributors are the major stakeholders in the supply chain companies, which ends with product delivery to its customers. With technological advancements and changes in customer expectations, the need for an integrated role of IT in supply chain management has become increasingly important. 

However, information technology helps to restructure the entire distribution set up in a supply chain to achieve high service levels and reduce inventory and supply chain costs. For manufacturing companies to build a substantial supply chain, IT developments have provided unprecedented opportunities to add a value-proposition. Technological advancements for the supply chain have distinct advantages such as timely procurement, inventory and cost reduction, efficient productivity, improved market strategies and meeting customer needs in a timely fashion. The different role of IT in supply chain management are discussed below.

• Electronic Commerce (eCommerce)

Electronic commerce is the transmission of funds or data over an electronic network and involves a range of tools and techniques to conduct businesses primarily on the internet. Hence, it includes electronic data interchange, email, electronic fund transfer, electronic bulletin boards, shared databases and magnetic/optical data capture. 

• Electronic Data Interchange (EDI)

EDI involves the practice of exchanging information and communication between two companies electronically instead of following the conventional mode of communication like mail, fax or courier. The application of EDI helps supply chain companies overcome the deformity and falsehood in supply and demand information by remodelling technologies. It also supports real-time sharing of actual demand and supply information. It also provides various benefits like quick information processing, improved customer services, little paperwork, increased productivity, enhanced tracing and expediting, cost-benefit analysis and improved billing processes. 

• Bar Coding

All products/services come with a sequence of black parallel lines of different thickness with spaces in between. These bars have the information about the items in codified form. The code also states the name of the product along with the manufacturer. The information printed in a bar code also includes country code, date of manufacturing, material content etc. These details help for inventory management. Barcoding reduces paperwork and processing time. It has helped in increasing logistics system productivity through speed, accuracy and reliability.

• Stock Keeping Unit (SKU)

The role of information technology in supply chain management also involves the use of SKUs along with DIM (dimensional weight) done by weight machine integration. Currently, with the help of this DIM, length, width, height and weight of the consignment can be measured without any hassle. Moreover, it also avoids revenue leakage as earlier manual capturing of wrong dimensions leads to erroneous calculations during billing. 

• Radio-Frequency Identification (RFID)

Another role of IT in supply chain management is the use of RFID to track tags attached to objects automatically. It is more effective in manufacturing and other environments where barcodes could not survive. An RFID tag transmits digital data and identifies inventory numbers back to the reader. It wirelessly exchanges information improving the ability of manufacturers to manage the inventory better. It also helps improve the tracking, logistics and planning operations.

• Route Optimization

The role of IT in supply chain management helps to identify truck routing, delivery scheduling and reducing transportation costs every day by investing in route optimization software. The fast return on the investment helps reduce fuel bills, maximizing distribution efficiency, improved productivity and reducing overall transportation costs. 

• GPS Tracker

Most logistics companies are quite confident about the benefits of GPS tracking, which includes real-time monitoring of shipment, reduced fuel consumption, improved productivity and better customer service.

• Last Mail Delivery

Receiving a parcel from any eCommerce website comes with the last delivery mail. It plays a vital role in every supply chain. Nowadays, B2C transactions are activated with Turn Around Time (TAT) services to capture the delivery information. 

Conclusion

The role of information technology in supply chain management has a vast effect in predicting the future of a company. It also helps improve relationships in internal and external dimensions, increases responsibility, builds new customers by identifying their needs, developing sales channels, improving performance and competitive position of the supply chain. Companies should try to use the potential of the information technology to the maximum level to enhance the effectiveness of their supply chains. The strategic and technological transformation in the supply chain enables transparency and helps achieve competitive advantage. The IIM Supply Chain Management program by IIM Udaipur is a 12-month full-time one-year MBA in Global Supply Chain Management (GSCM). It provides a solid foundation in management fundamentals as well as in-depth knowledge in Global Supply Chain and Logistics Management.