Role of Information Technology in Establishing a Comprehensive Supply Chain Network

Innovations in information technology (IT) have affected all types of business transactions. In order to have an efficient physical supply chain, it is essential to establish equally efficient informational and financial supply chains. In this paper, we study the role of IT in establishing a comprehensive supply chain network. INTRODUCTION Organizations are forced to think in supply chain terms for producing and delivering goods due to economic and competitive pressures (Barry, 2003). Supply chain management is the planning, organizing, and controlling of the processes from the initial raw materials to the ultimate consumption of the finished product linking across supplier-user companies. It is estimated that the amount of world trade of products done electronically will approach $2 trillion by the middle of this decade [Cunningham et al, 1999]. A lion’s share of that would be B2B e-commerce. Ecommerce is generally understood to mean buying and selling of information, products, and services via computer networks [Kalakota and Whinston, 1996]. Examples of e-commerce include marketing applications such as electronic advertising, financial applications like electronic payment systems, and industrial applications such as product ordering and delivery of digitizable goods. One of the reasons for the failure of Electronic Data Interchange (EDI) services to fulfill its earlier promise is the absence of common standards for EDI [Leebaert, 1998]. The open infrastructure of the Internet which is the vehicle for e-commerce adds a new dimension to electronic transactions strengthening existing trading relationships as well as developing new commercial links. Manufacturing industry is affected by e-commerce in many important ways starting from raw material procurement to finished goods shipment. In this paper, we study the role of IT on comprehensive supply chain. This paper is organized as follows. First, we present some important implications of new innovation in IT on physical supply chain followed by the impact on informational supply chain. The concept of a comprehensive supply chain is discussed later. Concluding remarks form the last Section. EDI, E-COMMERCE AND PHYSICAL SUPPLY CHAIN According to the European Model EDI agreement, Electronic Data Interchange is the electronic transfer, from computer to computer, of commercial and administrative data using an agreed standard to structure an EDI message (Kalakota and Whinston, 1996). Prior to EDI, business documents depended on conventional means such as USPS, UPS and FedEx. Computer communications have totally changed the speed with which documents can be exchanged.