Information Technology And Supply Chain Management: Importance And Risk Mitigation

Importance of Information Technology (IT) in Supply Chain Management (SCM)

Question:

Write a report on Supply Chain Risk Management and also define:

• SCRM and different types of information system risk in supply chain.
• suggest a model/solution/theory to minimize information system risk in supply chain.
• suggest a quantitative method technique to establish and test the relationship between information system risk and supply chain.

 Information and technology has changed our way of living and working very intensely. All aspects of our lives have changed; in fact it has also a great impact on our day today lives. It has given us the ability to transform the world into a very small place. The power of technology is increasing at an exceptional rate. In the organizational level, Information technology helps us in specifying the strategies, objectives, developing, and supporting all the procedures to lead us to the correct strategies. It enables to disseminate the information throughout the organization, which in return helps the organization in making more strategically sound decisions.  Here the database management system works and eliminates all the unnecessary data. The organization wide dissemination of information is very useful in maintaining automated procedures and high quality information for better decision making. In supply chain management, it has a big role to play. Many organizations in SCM have been able to spread their businesses with the help of IT (Business.qld.gov.au, 2015).

 The scope of Supply chain management is producing some broader organizational perspective. Many studies have been conducted until now on the topic and many loopholes have been found out. Many advantages and hidden aspects came out with those studies. All those components have been included in the study here. The theories that related to cost economics and competitive advantage over the competitors have also assisted in the study. Those projects, or risk management plan, which taken previously is (Emeraldinsight.com, 2015)-

Results according to this paper were obtained in the postdoctoral school programme financed framework by the “Developing the Innovation Capacity and Improving the Impact of Research through Post-doctoral Programs – POSDRU/89/1.5/S/49944” project.

“Supply chain risk management: a new methodology for a systematic literature review”- Here the literature review shows  demonstration on the number of key findings in the field of  SCRM , where evaluation takes place by the analysis over the evaluation on the key concepts, where a number of directions were identified for discussion (Emeraldinsight.com, 2015).

It is a system that attempts to reduce the vulnerability to various types of day-to-day risks involved. It analyses all the points where there are possibilities of failure. Organizations face many challenges in supply chain management. Mitigation of this risk and finding out optimised solutions is its basic nature. This industry is facing a lot of trouble like of safety and quality, political issues, environmental changes etc. These risks are to be estimated by the supply chain engineers much before and they mitigate the loss that would happen because of such risks. There are two types of risks: day-to-day risks and other categories are of those which happens when a very big issue arises (Visual8.com, 2015).

Advantages of Information Technology (IT) in SCM

Change in the demand of the customers: The sudden alterations in the demands of the customer after ordering delays the chain system.  The optimization engineers have to always look after those options, which would take proper care of customer demand and avoid delays. Delays in transits, where there are delays in the transfer of goods from one place to another. There is delay in the chain too. Every point of the chain will have to face the delay and its consequences. The delay in transit can always be avoidable with better system of machines and good class of people. Delay in production is another issue, this happens because of the suppliers: If the suppliers delay to deliver the production raw materials, then the whole chain suffers because this is the beginning of the chain. The shortages that occur in the warehouses may occur when the order is taken; the engineers should ensure that there is enough supply in the warehouse. After the order has been made and lack of resources is found in the warehouses, then the arrival of new raw materials would take a lot of more time, hence delaying the order. The security issues of cyber: There can be various issues related to cyber, because this whole business is based on the cyber world. If the cyber is slow, corrupted or not supporting, it can hamper a lot to the business.

Information system risk in the supply chain process: The use of internet has led to a revolution, it has made the process of chain very faster. It has also brought in many options to develop and grow. There are many advantages of information technology in supply chain management (Visual8.com, 2015).

The transactions of order have become very simpler and faster. The transactions have become faster and because of the IT there are many new opportunities that have been added to it.  The cost of transaction and marketing has reduced. Everything that use to cost extra before, now has very less implications. IT has lessened up the transaction cost and the marketing cost by minimising the extra resources needed to complete am order. Now the organizations don`t have to pay extra for people, transportations and other cost. The access to the international market has gone very high. Since everything is so global on the internet, the organizations get orders from international markets too. The best example of this could be Dell laptops. They have such a good supply chain system that there laptops are delivered amongst their customers globally and very fast. Efficient communication with the clients has become easy. No matter from where the order has been made and where the order will be delivered the requirements of the clients are always at ease. The organizations can connect their suppliers and client at very pace rate. There is a good availability of the business at any time of a day. Whenever there is an alteration the client, supplier or the organization can connect each other at any point of time.

Risks Involved in Supply Chain Management

Inadequate documentation of the orders can lead to slow down of the chain. If the systems are not integrated, the change in the requirements will be misunderstood and if the technology is not upgraded always, this might give the competitors and edge.

Here the prevention is only possible if the visibility in the process is increased. The visibility can be increased by reducing the probability of risk.  The visibility can be increased by connecting more efficiently with the suppliers and other partners, with customers. Furnishing proper information to the total chain in the business ensures proper functioning of the business. The organizations should be more efficient and try to upgrade themselves with better technology.  The organizations can increase (Supply chain risk management: outlining an agenda for future research, 2015) :

 Inventory visibility can provide its access of its warehouse to its customers the visibility would increase. Logistics visibility: logistic visibility relates to the tracking of the shipment. The customer should always have an efficient way to track their shipment and know the status of the product.

Solution to minimize information system risk in supply chain: In today’s organization to address and eliminate supply chain-related risk is a major concern. A deep concept over supplier rationalization, virtual inventory and few distribution facilities reduce cost of supply chain. In order to have the improvement, supply chain risk prioritization, assessment and mitigation is done (Business.qld.gov.au, 2015).

A corporate wide effective strategic of sourcing and implementation of cost efficient and effective management of suppliers, control capabilities and contacts management should be started. Identification and assessment of current risks should be prioritized in order to perform mitigation strategy. Must start form the backward of the customers and measure the revenue impact due to the disruption of supply chain. Trail needs to be followed through manufacturing cycle to the logistics constrained factors or potential sourcing. Identification of delivery alternatives and supply and building of collaborative relationships with secondary and primary suppliers and must be watchful about the suppliers who are identified as the best alternative sources. Trading partners need empowerments, to exchange information a collaborative platform should be there with a designed communication framework, while reducing errors and cutting costs (Reconciling supply chain vulnerability, risk and supply chain management, 2015). Selection of vendors from different geographic location who can supply through secondary ports and maintenance of diverse of suppliers, even when there is availability of equivalent materials from the suppliers in same region-will help only when country experiences disruption. Full engagement in supplier relationship is needed some time to rely on the supplier, when disruption arises, for any kind of potential problem suppliers need to be monitored. Here this can include supplier risk factor, such as, regular compliance, financial strength, practices on risk management and also political stability.

Taking controls over logistic process: Instead of being always dependent on suppliers’ delivery, bring raw materials, using elements closer to home, where a better economic sense is concerned. It is important to take leadership of both the delivery and supply process to be clear about the inherent risks, regardless of responsible persons for the economical issues related to the delivery according to the norms and rules of sales contract. Joint plan and collaboration about disruption of potential supply chain, inclusion of suppliers, customers and logistic service providers in collaboration plans. Drive toward the manually available risk plans for each link resides in supply chain. Building flexible process to promptly adapt changes with minimum impact: Sharing of demand information and forecast among the trading partners to be more responsive to fluctuations of customer demands. Corporate culture on agility needs to be developed, more than reactivity. Optimization of inventory buffers and safety levels of stocks: To keep producing, one must be sure to have enough supplies. Needs to be proactive: Increment of visibility into operations of supply chain, must include management that will enable monitoring and tracking material flow. Incorporation of analytics to identify patterns to develop the data-driven pre-emptive action.

Conclusion:

Being realized and after reading the literature and case studies, there is an identification of most common risks and encountered risk sources in the implementation of reports on SCRM. Based on these the priorities on key solution of SCRM based on IT systems are given to eliminate the risk.

References

Business.qld.gov.au, (2015). Identifying supply chain risks | Queensland Government. [online] Available at: https://www.business.qld.gov.au/business/running/risk-management/managing-risks-supply-chains/identifying-supply-chain-risks [Accessed 16 Feb. 2015].

Emeraldinsight.com, (2015). Supply chain risk management: a new methodology for a systematic literature review: Supply Chain Management: An International Journal: Vol 17, No 4. [online] Available at: https://www.emeraldinsight.com/doi/abs/10.1108/13598541211246558 [Accessed 16 Feb. 2015].

Gaonkar, R. and Viswanadham, N. (2004). A conceptual and analytical framework for the management of risk in supply chains. IEEE International Conference on Robotics and Automation, 2004. Proceedings. ICRA ’04. 2004.

Husdal.com, (2015). [online] Available at: https://www.husdal.com/2009/05/29/supply-chain-risk-management-a-complete-literature-review/ [Accessed 16 Feb. 2015].

Kouvelis, P., Chambers, C. and Wang, H. (2006). Supply Chain Management Research and Production and Operations Management: Review, Trends, and Opportunities. Production and Operations Management, 15(3), pp.449-469.

Ltd., D. (2015). Supply Chain Risk Management. [online] Decisioncraft.com. Available at: https://www.decisioncraft.com/dmdirect/supplychainrisk.htm [Accessed 16 Feb. 2015].

Reconciling supply chain vulnerability, risk and supply chain management. (2015). International Journal of Logistics: Research and Applications. [online] Available at: https://www.tandfonline.com/doi/abs/10.1080/13675560600673578 [Accessed 16 Feb. 2015].

Supply Chain Risk | World Economic Forum, (2015). Supply Chain Risk. [online] Available at: https://www.weforum.org/issues/supply-chain-risk [Accessed 16 Feb. 2015].

Supply chain risk management: outlining an agenda for future research. (2015). International Journal of Logistics: Research and Applications. [online] Available at: https://www.tandfonline.com/doi/abs/10.1080/13675560310001627016 [Accessed 16 Feb. 2015].

Visual8.com, (2015). Supply chain optimization & logistics modeling. [online] Available at: https://www.visual8.com/industries/supply-chain-optimization-logistics-modeling/ [Accessed 16 Feb. 2015].