Using Information Technology to Revolutionize Your Supply Chain

 

     

Some have suggested that Supply Chain Management only exists because of Information Technology; that the IT revolution enabled supply chain management. They may be right. SCM, as a discipline and profession, gained prominence in the 1990's, the same time that many important information technologies were hitting industry. The two most important technologies are the development of the internet and ERP (enterprise resource planning) systems.

This article will review how IT has enabled SCM to reduce costs and grow sales.

How IT has enabled SCM to Reduce Costs

There are six methods I will outline that supply chain professionals have used to reduce costs.

Digital workflow

Integration of information streams

ERP systems to globalize information for global operations and suppliers

E-marketplaces

Internet auctions

RFID

Digital workflow reduces data entry and sends information to the next person who needs it, and only that person. The most widely used of these is EDI, electronic data interchange. EDI is a set of IT standards that different firms can use to share order and inventory data. Orders entered into a system connected through EDI eliminate the need to re-enter the order. The same is true of internet ordering systems. These allow customers to put orders directly into your system. Customers directly entering orders has eliminated millions of potential data entry errors.

Integration of information streams improves visibility of inventory and customer demand. The same EDI systems I mentioned above, and other software tools that allow supply chain partners to share data seamlessly, help reduce over and under ordering due to unknowns. Imagine seeing your suppliers' inventory. Well, it is happening right now. In addition, these systems send data to your suppliers, allowing them to see your inventory and your customers' orders. This visibility has dramatically reduced over and under ordering, which in turn reduces artificial peaks and valleys of demand in the supply chain. If you have any inquiries pertaining to where by and how to use https://riskpulse.com/blog/how-to-reduce-costs-through-supply-chain-network-optimization/, you can get in touch with us at the internet site.

ERP systems have globalized information and product flow for global supply chains. As supply chains have gone global, with companies' seeking the best suppliers worldwide, there has been a need to globalize information flow. Fortunately, ERP systems have the ability to deal with multiple languages and currencies. Instead of people translating languages and calculating currency exchange rates, ERP takes care of these chores. This has lowered the cost of having both internal and external global supply chain partners. By lowering this barrier, ERP systems have lowered total costs.

E-marketplaces have reduced the costs for purchasing professionals to find new supply sources. What once took internet searches, reference checks and phone calls can now be done on an e-marketplace. These marketplaces take care of the administrative work. Supply chain managers can now more easily find new supply sources for existing products, or to support new product development. These marketplaces have reduced the costs to find the best suppliers.

Internet auctions have been an amazing tool to create competition for commodity-type items. Instead of a having to hire great negotiators, or purchasing agents who are willing to "beat-up" suppliers, the internet auction allows supplier-competition to help you get the best price. When combined with an e-marketplace, the administrative costs of conducting an internet auction are so low, that even medium-size firms are able to use this cost-reducing tool.

RFID has often been called the technology of the future... and always will be. But it is finally happening. RFID has one purpose; to create visibility in the supply chain without needing to count or scan. RFID tags can be passive and scanned by a reader, for instance at the dock-door of a warehouse. These would check-in an entire pallet with no data entry. More expensive RFID tags are active and broadcast what they are, so even goods in transit can be tracked with total visibility. This prevents ordering goods that you either have in stock, and don't know it, or have ordered and are in transit. RFID has, and will continue to, reduce labor and improve inventory accuracy in the supply chain.