Supply chain management is an essential part of any commercial organization today. Supply chain is 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 is a network of companies and management of all these altogether is known as supply chain management.
Information is key to good supply chain management and when data can be obtained in real time, the supply chain management become much easier. Here comes the role of IT in SCM. 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. In fact, according to statistics, 79% of companies with high performing supply chains achieve revenue growth greater than the average within their industries.
There are various benefits of IT in Supply chain management. It integrates various operations carried out by different organization that are involved in the supply chain. It helps in speeding up of various business processes. Through IT companies can achieve on-time procurement, shorter inventory, and better efficiency, especially in manufacturing. Let us look at the role of IT in supply chain.
- Information management.
According to The Hackett Group, 81% of supply chain managers’ report that data analytics will be crucial when it comes to reducing costs. Data is very important in supply chain and nothing can help in data management more than Information technology. Logistical elements such as on-time delivery, stockout levels, order status, shipment tracking and expediting, order convenience, order completeness, creation of customer pick up, and backhaul opportunities and product substitution are very crucial to supply chain of any organization and with effective use information technology an organization can ensure that it meets the logistical needs of its customers.
2. Maintaining inventory.
Under supply chain management it is important to collect detailed demand, cost, margin, and supplier information in order to make inventory policy decisions. An effective inventory management offers a lot more benefits for supply chains. In fact, companies can reap a 25% increase in productivity, a 20% gain in space usage, and a 30% improvement in stock use efficiency if they use integrated order processing for their inventory system. IT plays a major role in streamlining the inventory and its management. Many inventories management software is used today to make the process error free and faster. BCI statistics suggests that 19.6% businesses plan to have more inventory.
3. Transportation Management Systems (TMS)
With the help of IT many transportation management systems have come into use in the market. These management systems help in better organizing and consolidation of inventory levels, they also provide document management for shipment documents and shipment management tools as well. Even though only 35% of shipping companies utilize transportation management systems for their overall SCM strategies, it is predicted that he market share of transportation management systems worldwide is predicted to hit $4.8 billion before the end of 2025. TMS is a very big contribution of IT to supply chain management, in fact, ARC suggests that using transportation management tools can yield an 8% saving on freight costs.
4. Shipment tracking.
With the current offerings of tracking apps and automated email notifications, shippers should strongly consider requiring the carriers they work with to have some sort of automated tracking alert system or an online web-based shipment tracking portal. In the recent years, 73% of supply chains experienced pressure to improve and expand their delivery capabilities. Through shipment tracking many organizations will be able to recent quickly and easily verify the location of their freight as well as check on delivery times and potential delays.
5. Data Analytics.
Data collection and analysis of each lane and mode selection can provide meaningful insights into the most cost-effective and reliable service offerings currently available. Combining shipment data with required inventory levels from closely tracking the inventory turn can yield significant supply chain service and cost savings. Data analytics and digital transformation are inescapably intertwined. The data is only as good as the analysis and with 41% of Excel users stating spreadsheets alone cannot handle data volumes, digital transformation is key. In fact, Data-driven companies are 23 times more likely to acquire customers than their peers.
In the past few years, there has been a steady stream of new technology products and offerings for supply chain management and logistics operations. Incorporating technologies into your logistics processes can result in significant efficiencies and cost savings. There is an ever-increasing role of IT in supply chain management, most of which are positives. We hope that we could explain the impact of information technology on supply chain management.