Some have indicated that Supply Chain Management only exists Due to Information Technology; the IT revolution enabled supply chain management. They could be right. SCM, as a discipline and profession, gained prominence in the 1990’s, the exact same time that lots of important information technologies were hitting sector. The two main technologies are the evolution of the web 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 Prices?
There are six methods I will outline that supply chain professionals have used to reduce prices.
- Digital workflow
- Integration of information flows
- ERP systems to globalize data for international operations and providers
- E-marketplaces
- Internet auctions
- RFID
The most frequently used of them is EDI, electronic data interchange. EDI is a set of IT standards that different companies can use to discuss order and stock data. Orders entered into a system connected through EDI remove the requirement to re-enter the purchase. The exact same is true of online ordering systems. These allow customers to place orders directly to your system. Clients directly entering orders has eliminated millions of possible data entry errors.Integration of data streams improves visibility of stock and customer demand. The identical EDI systems I mentioned previously, and other software tools that allow supply chain partners to share information seamlessly, help decrease over and under ordering because of unknowns. Imagine seeing your suppliers’ inventory. Well, it is happening right now. Additionally, these systems send information to your providers, permitting them to understand your inventory and your clients’ orders. This visibility has radically reduced over and under ordering, which in turn reduces artificial peaks and valleys of demand in the supply chain.
ERP systems have globalized information and product flow for international supply chains. As supply chains have gone global, with firms’ looking for the best suppliers globally, there has been a need to globalize information stream. Fortunately, ERP systems have the capability to take care of multiple currencies and languages. Rather than people translating languages and calculating money exchange rates, ERP takes care of those chores. This has lowered the price of having both internal and external international supply chain partners. By lowering this barrier, ERP systems have reduced total costs.E-marketplaces have reduced the prices for purchasing professionals to find new supply sources. What once took net searches, reference checks and telephone calls can now be performed on an e-marketplace. These marketplaces look after the administrative work. Supply chain managers can now more easily find new supply sources for existing products, or to encourage new product development. These marketplaces have reduced the prices to obtain the best suppliers.