Engineering & Logistics Identifying Effective Term Paper
- Length: 15 pages
- Subject: Business
- Type: Term Paper
- Paper: #19543865
Excerpt from Term Paper :
These improvements have not been realized across the board, though, and many companies are wondering just what happened to their enormous investments in IT-supported SCM applications.
In the late 1990s, IT was expected to raise productivity across the board while simultaneously reducing risk for supply chain managers (Banerji 2002). According to Banerji, "In particular, the use of IT systems for supply chain management reduced uncertainty and cut the risk of demand surprises along the supply chain. As a result, firms could afford to carry lower levels of inventory and thus become more efficient, without worrying as much about sharp inventory corrections triggered by unexpected demand shifts flowing up the supply chain" (6). Banerji (2002) also notes the benefits of IT-driven supply chain management in smoothing out potential fluctuations. In the Age of Information, though, supply chain managers are finding themselves drowning in an ocean of data that must be interpreted and applied effectively to make investments in IT worthwhile; in fact, this may be the most difficult challenges facing managers today and in the future, a point discussed further below.
From the 1970s through the 1990s, one general pattern emerged in IT development: the collection and application of five basic types of information. According to Cortada (2004), "All applications of computing used these data in one fashion or another. There were, and are, data about products, vendors, customers, finance (and accounting), and employees" (306). Further, various supply chain management applications and point-of-sale (POS) applications focused on products, customers, finance, and vendors. During this period, companies used traditional accounting and financial applications data concerning their vendors, employees and products and customer relations management (CRM) applications were increasingly used to analyze data about customers and sales. "Enterprise management planning (ERP) software tools," Cortada says, "which appeared first in manufacturing industries in the 1980s and then in retail during the 1990s, used data about employees and accounting" (306). Internet-based IT applications, of course, were able to use all five of these types of data, which may account for why this new form of networking has assumed such importance with customers, vendors, wholesalers, and retailers today (Cortada 2004).
This point is echoed by Hoctor and Thierauf (2003) who point out, "Connecting to customers through Web storefronts and to suppliers through supply chain management systems has generated much more information to be included in day-to-day decisions" (68). While the introduction of more sophisticated tools such as CRM (customer relationship management), SCM (supply chain management), and/or ERP (enterprise resource planning) in recent years has helped managers in making such decisions, the fact remains that future supply chain management practices will by necessity be forced to rely on IT applications to remain competitive (Hoctor & Thierauf 2003). Many of these early IT initiatives extended beyond the Internet, of course, such as the refinement of supply chains from the "push" strategies of past decades ("push" strategies involve moving goods from factory to retail) to "pull" approaches (in which customers, through their buying habits, and retailers, "pull" products to them) (Cortada 2004). The Internet became the next enhancement to the various telecommunications tools that companies used to support their supply chain operations. According to Cortada, "It was especially useful to retailers in expanding communications and disseminating information, ordering products, and communicating levels of supplies in their tanks. Purchasing practices changed, much along the lines evident in the steel, automotive, and aerospace industries and for the same reasons (178). For companies concerned with transportation by sea, improved communications with tankers became possible and allowed for the transmission, to and from vessels, of graphical, audio, and textual information. "In this industry, as in so many others," Cortada advises, "the Internet emerged as a basic component of the infrastructure of the supply chain management process" (178).
These additional IT initiatives have all fueled the need for supply chain managers to evaluate the role of the Internet as part of those broader initiatives. In fact, it was only after the Internet had been recognized as a viable medium in the industry did that new networking technology begin to influence the work of retailers (Cortada 2004). In his review of the press coverage from the 1990s, this author suggests that supply chain managers were still not able to recognize all of the advantages, as well as the constraints, inherent in such a medium. This is "because of the injection of the Internet into the picture, the continued filling out of supply chain management, the ongoing installation of enhanced POS systems, the data mining of customer information, the emergence of online shopping, and the expanded use of credit cards" (305). According to Cortadao, by the turn of the 21st century, innovators in supply chain management practices who enjoyed the most benefits in their return on investment were primary larger multinational companies with more than 20,000 employees, who increased their revenues in the middle years of the 1990s at annual rates of approximately 18%. "Key customers were innovators in supply chain management," he says, "GM, Chrysler, Nabisco Foods, and PPG, for example. The logistics arm operated as a relatively independent part of the firm, often sending up to 95% of its business to carriers other than to Schenider National" (251). The ability of these larger enterprises to operate their supply chains efficiently and to grow their businesses while others faltered can be attributed to the manner in which their approached their information processing operations, with a view to providing improved services to their customers and by linking a variety of carriers together in an integrated fashion (Cartado 2004).
All of these trends took place only in the context of increased competition and overcapacity as they applied to traditional brick-and-mortar facilities; however, in this environment, effective SCM practices still concentrated on the traditional roles and missions of retailers involving the management of inventory costs and availability, attempting to recognize consumer trends to improve sales, and to manage the company's day-to-day operations in purchasing and merchandising (Cortada 2004).
While much of these functions remain unchanged today, there has been a concomitant increase in the need for companies to develop strategic alliances that take advantage of IT applications wherever possible. "The international telecommunications sector continues to advance," Czinkota and Ronkainen say, "requiring more corporate technology investment and ever faster response times. Since communications technology will create independent communities with significant power, it will be crucial for firms to be part of such networks" (1997:828). For instance, these authors emphasize that active participation in direct order entry networks and maintaining compatibility with large proprietary corporate logistics systems will be critical to the survival of companies in the future, particularly because a lack of linkage will ultimately lead to an exclusion from any transactions (Czinkota & Ronkainen 1997).
For manufacturing applications, the electronic supply chain management processes and protocols that are in place today are actually collections of standards that have been established over the course of many years, beginning with electronic data interchange (EDI) specifications in the early 1970s (Cortada 2004). Furthermore, the reliance on improved information technology in areas including supply chain management, information access, software development, and communications continues to escalate rapidly (Earl 1998).
Despite these advantages, though, there remains a firm need for supply chain managers to maintain a close watch on external factors that may adversely affect their logistical networks; according to Banerji, supply chain IT applications are highly effective in communicating data, but human managers must still analyze this data in terms of what is taking place in the real world at the same time: "Information technology systems perform flawlessly in transmitting supply chain data. What they lack is the 'I' of IT -- the information that a cyclical downturn may be imminent" (7).
In sharp contrast to the limitations of past years, supply chain managers today can effectively use customer data to help synchronize supply chain operations with consumer needs. According to Cook et al. (2001), "This can be done through customer supplied forecasts, which many people deem a necessary part of managing a supply chain. The latest emphasis of forecasting has been in the areas of scheduling and logistics, renamed 'Supply Chain Management'" (15). Clearly, the increased use of IT systems has resulted in a dual-edged sword for supply chain managers who are faced with the opportunities provided by an increasingly globalized marketplace while simultaneously being inundated with data that may or may not be valuable for their specific purposes.
Once the global information infrastructure has been more completely integrated, it has the potential to radically change the manner in which commerce is conducted by accelerating the growth of trade around the world. According to Mansell and Wehn (1998), "Use of the Internet, intranets, and other computer networks could lower transaction costs dramatically, and facilitate new types of commercial transactions" (41). Depending on what Internet protocol is being used, intranets are potentially accessible only to users of a corporate network (running on public or private networks); these systems depend on firewall security…