The Concept of Supply Chain Information System

In business and general commerce,  chain management is often used to refer to the systematic process of organizing, controlling, coordinating and directing the overall flow of goods and services from one unit to another in an organization (Jacobs, Chase, Lummus , 2014).It’s more concerned with the physical movement of raw materials, work in progress, and inventory and also finished goods.

Supply chain information system has been attributed to the increased efficiency in firms. Reduced costs of operations have been recorded as a direct consequence of employing a functional supply chain information system.

This report aims at looking at some of the theories and practices related to information systems. In doing so, an analysis of Wal-Mart, an American multinational retail corporation that has for years been operating a significant chain of hypermarkets will be made in the aim of trying to bring some light on some tangible advantages of a well developed supply chain information system (Rushton, Croucher, Baker , 2014).Wal-Mart as an organization has benefited numerously from adopting a supply chain information system, however there are some challenges that it has experienced in the course of its operations. These challenges will be looked at along with the strengths and deficiencies of the organization as far as supply chain information system is concerned.

Finally, conclusions will be made and recommendations made based on the analysis of Wal-Mart organization and the supply chain information system it has adopted and its effectiveness in making the organization a success.

For an organization to unleash its full potential, a proper supply chain information system is mandatory. An organization capability is regarded as the ability of an organization to fully meet all its goals by proper utilization of its resources. Supply chain information system has been attributed to the increased efficiency in firms. Reduced costs of operations have been recorded as a direct consequence of employing a functional supply chain information system (Tayur, Ganeshan,  Magazine, 2012).

 A proper integrated information system plays a role in ensuring that an organizations’ full capability is unleashed. It is also important to note that there are various information system models that have been developed but not a single model can work on its own without being complemented by another. In order to obtain satisfactory results then these models must complement each other.

Previous conducted by various scholars and academicians have shown that the most crucial capabilities of an proper supply chain information system such as operational efficiency and also strategic planning are not guaranteed if at all the organization in question does not fully adopt a system that is dependable. This has been attributed to the fact that supply chain management information system have proven to have totally varying and different abilities as far as the coordination of various aspects such as demand and supply of information is concerned in the entire supply chain (Christopher, 2016).

There are certain key theories that are related to supply chain management information system and each theory has its own assumptions and also specific characteristics. Some of the theories related to supply chain management information system are; the agency theory, Network theory, Relational exchange theory, Resource dependant theory, Resource-based view and the Transitional cost economics. These theories are briefly discussed below with some of the main details that each of them contains.

Review of Theories and Practices Related to Supply Chain Management Information System

Transitional cost economics-This theory is quite significant and it argues that in the process of economic exchange it’s required that the costs of products or services should include all the possible hidden costs. Hidden costs are many and they differ depending in the nature of operation being carried out. For instance in the process of physical determination of the relationship that exists between supplies and buyers the hidden costs would consist of the actual time and costs that were incurred in establishing the relationship in the first place, contacts made in the process, and any transportation costs incurred in the whole process.

Basically, it can be depicted that the sole role of this particular theory is ensuring the maximum reduction of all possible transaction costs that an organization incurs in the process of its operations.

Agency theory-This theory usually involves the delegation of work by one party to another party. Usually the principle delegates work to the agent. This work is usually delegated so as to compensate on either lack of total or partial experience or to focus on much more core competences

Resource-based view-This is based on trying to explain how the combination two categories of resources, both the tangible and intangible can help an organization to not only achieve but also sustain a good competitive advantage. According to this theory it is usually assumed that both the control and ownership of resources is in the hands of the organization. It is also important to note that the application of this theory is usually but not always focused on structural analysis of the organizations operations in order to attain a competitive advantage in the entire supply chain.

Resource-dependence theory-As the name suggest this theory is usually based on the fact that there should exist some kind of power relationships within the supply chain that is based on the exchange of resources. This theory is very dynamic, this is so because it not only recognizes but also puts in mind that an organization may not have all the resources that are need in the process of value creation and therefore there might be a need to outsource.

The main focus in regard to this theory is the process in which an organization manages and oversees the power –dependence relationships as they maintain both the functional and operational parts of that particular organization.

Network theory-This theory is much wider in scope compared to all other theories, it basically provides a much greater and broader view of the interactions that the organizations sustains with other organizations in the entire network environment.

This theory is also dynamic in nature because it recognizes even the slightest influence that partner-partner relationships might bring to an organization and its entire operations (Muirhead & Page, 2010).This theory is mostly applicable in situations where an organization plans to a corporative relation with other organization so as to enhance its supply chain management information system.

Relational Exchange Theory-In this theory it is usually assumed that corporate parties should always act based on certain norms and not cultural obligations. It is usually quite complex and not used by most organization because of its complex nature.

Practical Study of an Organization: Walmart

As stated earlier, Wal-Mart is an American multinational retail corporation that operates in three main ways and these are a chain of hypermarkets, grocery stores and as discount department stores. Wal-Martz is basically among one of the largest retailer that is operating in this globe and according to them supply chain management and information systems has been the main source through which their organization has be registering a positive growth for so many years now (Laudon & Laudon, 2016).

In order to ensure a properly manage the supply chain; Wal-Mart considered three segments/components in the supply chain that the organization as a whole thought would bring results. This has been attributed to the fact that supply chain management information system have proven to have totally varying and different abilities as far as the coordination of various aspects such as demand and supply of information is concerned in the entire supply chain.

These segments are; procurement and distribution, logistics and inventory management. Supply chain management revolves around mastering these three segments (Monczka,  Handfield, Giunipero, Patterson , 2014).These are key segments that entail the supply chain and when properly understood and utilized then there is no doubt that there would a tremendous amount of success as that seen with Wal-Mart.

Wal-Mart is recognized as the mother of Supply chain information system all over the globe. This name is iconic and it sets the organization apart from the rest of its kind. Wal-Mart has been very efficient in terms of its entire operations and this is attributed to the fact that the organization was purposefully established and designed so as to provide the customers with exactly the kind of goods they wanted, when they wanted them and where they wanted them from.

According to Wal-Mart, their supply chain incorporates three aspects and these are the supplier, distributer and the customer logistics requirements (Xu, 2011). Here the supply chain often focuses on creating a lasting and effective connection between the stakeholders involved and these are the various organizations distributers and distribution centers, manufacturing plants, various organizations retail outlets, organizations personnel and relevant information.

The main aim for the adoption of a supply chain management information system by Wal-Mart was to avoid/eliminate all the unnecessary steps that would bring about some delays in the provision of better quality services to the customer. With their well developed and integrated system Wal-Mart has been in a position to sources for extremely affordable products from suppliers. With these affordable products from suppliers then there was no doubt that customers were assured of cheaper but yet quality product (Ahi & Searcy, 2013). They also sued the supply chain management information system to establish long lasting relationships with very important stakeholders. With all these in play,walmart was ensured of a constant and cosnostent supply of products for its extremely loyal customers.

Merits, demerits, strengths, and deficiencies of Wal-Mart as a result of their supply chain management information system

Through the adoption of their integrated supply chain information system the Wal-Mart has been in a position to climate and also reduce at a greater percentage the chain and links and other middle men that were previously involved in the supply process. With the reduce middle men, Willmar cut with a great percentage the amount of expenses that it was incurring when the middle men existed. With the expenses reduced Wal-Mart started realizing greater amounts of profits (Chauhan, Guman,  Palmer,  Wilson,  O’neill, Dinkins,  Sanders, 2015).

With the supply chain management information system, Wal-Mart has been in position to create a communication system that was much elaborate and a relationship system that guided the relationship that exists between the organization and its suppliers. With this system, the Wal-Mart has been in a position to improve its overall material flow but with much lower inventories.

 A network of suppliers, retail stores and warehouses was also created by Wal-Mart through the supply chain management information system.

The supply chain management adopted by Wal-Mart has the following advantages;

-The profitability of the supply chain could be improved in a quite a number such as through ensuring better delivery performance and increased availability of relevant information which incorporates better demand insight among others (Tako & Robinson, 2012).

-It is possible to reengineer and redesign a supply chain so as to meet the demands of organization in terms of customer satisfaction.

A supply chain management information system has a common disadvange/challenge and this is called the bullwhip effect. A bullwhip effect can be defined as a phenomenon that occurs when the orders to suppliers have a variance that is much greater than orders from the buyer. This effect is so critical and it usually occurs when there is an amplification of parties in the supplier chain and not other external factors such as customer demand. The specific causes of this effect are;

-Perceived demand

-Quality of information

-Constant delays in the supply chain

It is also important to note that this effect has very serious consequences to any organization that experiences it and it should be acted upon so as to ensure that it’s handled.

Wal-Mart has experienced this issue of the bullwhip effect. This effect is completely unavoidable and at times it occurs without any prior notice (Chauhan, Guman,  Palmer, Wilson, O’neill, Dinkins, Sanders, 2010).

Conclusion

A supply chain can simply be defined as system that  involves linking various aspects about the organization. It is also important to note that an organization can establish quite indifferent a sees to it that products and raw materials flow in a smooth manner to and from the point of production to the point of consumptions. A supply chain management information system is very important to each and every organization.

Wal-Mart has been in a position to maintain a well developed supply chain information system and it has proven to us that it is indeed worth it and whatever the organization handle things (Diabat & Govindan, 2011).

A proper supply chain management information system can directly be linked to efficient organizations operations, reduced middlemen, reduced expenses and thus increased profits. It can therefore be recommended that organizations adopt a well integrated supply chain management system so as to ensure that the operations within an organization are carried out in a much more efficient manner.

Supply chain management information system should be coupled with increase supervision during the first stages of so as to ensure that an in an organization the right thing is done, not them (Sarkis, Zhu, Lai, 2011).

References

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Muirhead, C. S., & Page, D. J. (2010). U.S. Patent No. 7,684,321. Washington, DC: U.S. Patent and Trademark Office.

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Xu, L. D. (2011). Information architecture for supply chain quality management. International Journal of Production Research, 49(1), 183-198.