Difficulties of managing supply chain integration


Many business organisations globally are currently faced with how best to manage their business processes for effective supply chain integration. In this regard,the rapid developments in e-business technologies and the performance measures developed by Kaplan and Norton balanced scorecard(BSC) is facilitating management of of the operational linkages which links the various systems,procedures and routines of buying and selling organisations comprising suppliers,manufacturers,wholesalers,customers in an ever more affordable and revolutionary way. The objective of this essay is to evaluate the adoption of inter-organisational information systems(IOIS) in managing the supply chain management processes in combination with the BSC performance measures. It is found that using IOIS to aid in the management of supply chain systems reaps a good number of associated benefits that is useful to the management of supply chain systems when aligned with each of the perspectives of the BSC.


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Many sectors of the global economy today are increasingly adopting supply chain management(SCM) for enhanced performance of their business processes and to solve problems that may arise from strong competition in inter-organisational purchaser-suppliers relationships(Saad,Jones&James,2002) .The major challenge currently facing many of these business organisations is in managing an effective system of supply chain integration relating to the operational linking of autonomous businesses with the following multi-dimensional goals and objectives:

cutting costs such as inventory cost,

increase revenues such as sales,

improving asset utilization,

improve customer service satisfaction.

Producing highly reliable products

improving on-time delivery


Thus,supply chain integration is key to supply chain management. In this respect supply chain management canbe defined as " the combination of art and science that goes into improving the way companies finds the raw components they need to make a product or service and deliver it to the customers"(CIO,2010).

The methods in which supply chain management is carried out has changed over the last decade. From face to face management,manual tracking systems and paper dominated to the adoption of new tools and techniques such as e-purchasing,electronic marketplace and the wide use of the internet in particular(Lanciom,Schau&Smith,2003).These techniques today emphasis the need for businesses globally to be agile and responsive to meet the demands of competition(Ghiassi&Spera,2003).The key to this competition is information management. In particular,information "is the substance from which managerial decisions are made which is of vital importance in supply chain management(Forrester,1962).

(Chew et al,2008 ) argue that any delay in information transfer,insufficient or altered information is potentially detrimental to the activities necessary for successful implementation of a supply chain system. A characteristic of all supply chains is that they consist of various players from different business entitites and so information sharing becomes very useful in the management of supply chains(Doolan,Traxler &McBride,2006).Information sharing is made possible through communication linking the various organisations within the supply chain so as to meet the challenges of doing business in an increasingly complex and competitive business environment. In this context the prime goal of any organisation is to have a medium. in place where inputs from various partners or organisations within the supply chain can share and exchange information with each other. This medium is an inter-organisational information system(IOIS) which canbe defined as a set of components related to each other which collects,interprets,process,filter and distribute information to support decisions between various partners(Kim,Cavusgil&colantone,2006 ).The use of IOIS is increasingly being adopted in supply chain management by many industry sectors as a result of rapid developments in information and communication technologies (ICT) which comprises electronic data interchange,the internet and the world wide web(WWW),that solve managerial problems within the supply chain networks that are increasingly complex requiring speedy flow of information.(Gunasekaran and Ngai,2004).Almost all industry sectors ranging from airlines,automotive,retailing transport ,health care have been identified for adopting inter-organisational information systems particularly serving as an ordering system through which organisations are interconnected with their customers,suppliers and with the various points of distributions and operating using the internet(Cavaye and Cragg,1995).A large number of research studies point to the potential benefits that are derived through the integration of inter-organisational information systems in managing a supply chain network (Zheng et al,2006).Inorder to measure the management performance of the positive role of inter-information systems in supply chain networks both in the short term and long term a balanced scorecard approach is used.The balanced score card primarily serves in assessing and evaluating corporate performance based on four important criteria which includes the financial perspective,the non financial perspectives comprising-the internal business process,the customer perspective and the learning and growth perspective (Protti,2002).The use of the BSC together with inter-organisational information systems is vital for managerial purposes in better assessing inter-organisational information systems in

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the supply chain management process in line with the business goals and objectives of the organisation(Smandek et al,2010).The role of the BSC as a management system in the development of strategy,ensures that both at the individual and team level management are on track with the application of strategy,setting long term strategic targets or acts as a blueprint in setting up future thresholds or targets, together with the allocation of short and long term resources and providing the necessary feedback of the outcome which aids in adopting future management strategies(Protti,2002).The current use of BSC now plays a key role in assessing web services which is central to inter-organisational information systems(Ravarini et al,2005).

The role of the balanced scorecard when applied in measuring the performance of inter-organisational information systems in the management of supply chain processes serves as a strategic management tool in ensuring that there is a balance in relation to short and long term set goals and objectives of the organisation in line with both the financial and non-financial measures(customer,business processes and operations,learning and growth) and in relation to those areas that management can find insufficient in achieving their set objectives or the areas that show that the set objectives are attained(Protti,2005).It is of significant importance to fully understand the objectives of the supply chain management process inorder to illustrate the benefits of implementing an inter-organisational information system by setting out well defined goals in relation to each of those objectives.(Protti,2005),before preceding with developing a BSC which will act as the blueprint in directing the optimal use of interorganisational information systems by those responsible for using and managing the inter-organisational information systems.The potential ways in which inter-organisational systems plays a positive part in managing supply chain networks canbe distingushed into tangible and intangible benefits.The tangible benefits are those whose performance canbe measured using the BSC while the intangible benefits cannot be measured(Milis and Merken,2004).To fully understand the role of an inter-organisational information system in managing the supply chain management process in relation to each of the perspectives of the BSC is exhaustively discussed in the essay.

Discussions:Balanced Scorecard and Interorganisational Information Systems in supply chain management

The write-up below describes how utilizing the IOIS meets with each of the perspectives of the balanced scorecard in managing the supply chain processes.

Learning and growth perspective :

An integrated supply chain using IOIS should be managed not only for the purposes of cost reduction but also for innovation and value creation(Bath et al.2003).Thus strategies should be frequently updated to realise and improve the ways the employees use IOIS in supply chain management and how the technology of the system can be enhanced through updating or replacing old applications to produce better management results(Smandek et al,2010).For instance adopting smarter systems with intelligent capabilities can enable companies to closely monitor and make modifications on their business processes through automation using self learning software agents .This agents can make corrections through calculations on various scenarios drawing upon inputs from both historical and current state information available(Ghiassi and Spera,2003).IOIS is a learning tool for organisations in improving their employee competencies. For instance as cited by (Lancioni,Smith &Oliva,2000),Huffy Services a technical service company,used the internet as a tool to keep in constant contact with its field technicians. In the process the firm learned to use the data collected from the internet to make changes that resulted in more efficient scheduling of its field personnel and timely response to the needs of its customers.

The data captured and stored within the database systems in IOIS such as from customer enquiries or partners problems logged into the system can be retrieved by management for survey purposes so as to make adequate future changes to services or products offered by the company(White,Daniel and Mohdzain,2005).This will result in innovations that is beneficial in meeting with long term or future objectives of the organisations.

Data related to either ordering or production data is not only shared by each of the partners within a particular supply chain process but it aids in managing the forecasting and planning of the firms future operations.This canbe implemented within the context of a collaborative approach with each of the various partners contributing in the decision making process with the aid of their previous experiences on the business process they were involved in. As such better decision can be made for future adoption of strategies necessary for effective and efficient management of the demands of a collective supply chain where each supplier are interlinked..to one another and their overall inputs is necessary to determine the performance of the system(Akkermans,Bogerd and Doremalen,2004)

Internal Business Processes and Operations perspectives:

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The performance of each of the suppliers within a supply chain network is a key determinant in achieving the objectives of the supply chain. An appropriate supplier measurement system is particularly beneficial to companies in terms of better quality of products ,achieving just in time production and in the process it considerably decreases the order to delivery time of items and the level of inventory in stock .All these benefits are possible through the information flow within an inter-organisational information systems (Doolen,Traxler and McBride,2005).

Through the communication channels of IOIS systems such as the internet difficulty in managing production scheduling is reduced as scheduling information can be shared speedily between vendors,firms and customers within the supply chain system.(Rahman,2003).

The IOIS enables the linking of order entries to manufacturing planning systems that speeds up the availability of demand requirements(Ghiassi & Spera,2003).Furthermore,orders placed or any updates in the order configurations and situations such as changes in demand level can quickly be responded to using information available to management of the SCM and in the process reducing stock-outs(Gunasekan,Lai & Cheng,2008).The inter-organisational information systems can be used to exchange vital information regarding production planning for instance Williamson,Harrison and Jordan(2004) provide the example in the motor industry where data collected from online ordering process is directly fed continuously in real time to the manufacturing plant which management can then use the data to make decisions on what levels of production need to be achieved at a given time based on customer demands and in the process suppliers of the raw materials or those engaged in component parts manufacture also receive this information from the manufacturing plant in order that they can also match their own side of the tasks to the needs of the manufacturing plant The balanced scorecard is key in checking at all times that the inter-organisational information systems implemented is providing increased value to the organisation in accordance with the overall supply chain objectives(Smandek et al,2010).For instance questions such as whether or not the inter-organisational information systems is quickly making available information on items such as monitoring the inventory stock online at a given period .In so doing data on the stock levels is readily used by management to ensure that inventory stocks within the supply chain are maintained at acceptable levels in relation to the need for them in the system.Inorder to practically understand how the system works, Conspectus (2003) technically cites the example of Londis implementation of inter-organisational information systems in which the suppliers operating within the system could have direct access to particular product information through direct access to Londis stock database to get updates on the stock levels,returns,falling sales volume and handling costs.Through real time access to this information one of the BSC core objectives of operational efficiency is met with the subsequent windfall benefits of process cost reductions attained and also resulting in better volume of sales which is within the financial criteria.Managers using reporting system which can provide aid in evaluating the quantity of finished goods in stock ,the inventory levels, and raw materials at manufacturing and at various depots in storage locations(Williamson,Harrison and Jordan,2004).Orders are also made available to the market on time to meet the demands of customers.(Ghiassi & Spera,2003).Using the internet customer management processes is facilitated with a 24 hour access to the services offered by companies with regard to any issues they may face.(Rahman,2003).For instance Waste Management Inc. makes use of the internet as a tool customers can request product update information through its website email system. This resulted in greater satisfaction by its customers(Lancioni,Smith & Oliva,2000).The system can be expanded by management more easily by increasing the number of suppliers in the supply chain process .Thus providing greater level of flexibility in terms of quickly responding and managing any unforeseen changes n production operations that requires additional suppliers to the system such as increase customer demand.

Another major area of crucial importance is distribution in any supply chain management process due to its vulnerabilities. If for instance goods are delayed due to breakdown in transportation vehicles,information can immediately be made available to management to take the necessary steps to deal with the situation and also the transportation vehicles can be tracked to understand their performance issue(lanciom et al,2000).//The outcome is an improvement in operational efficency and the data collected can also used for future decision making processes.

Inter-organisational information systems when used in the supply chain management processes helps in the production of enhanced products which is a supply chain management objective that can meet customer expectations or even exceed it in terms of the product quality.For instance in the case study of stealth B-1 bomber manufacture Agyres(1999) research studies found that collaboration among the various partners within the supply chain process in the design and production stages of the the stealth aircraft, produced an air craft with state-of-the-art technology. The success was attributed to the inputs from the various partners made possible by the use of inter-organisational information systems in which the information collected from each of them with regards to innovative ideas and guidelines on how the aircraft should be built was analysed resulting in a well designed and innovatively built aircraft .

Customer perspective:

One of the most fundamental reasons for firms adopting an inter-organisational information system apart from cost reduction and performance benefits in their supply chain operations is to provide better quality of customer service. In order for these firms to meet the current challenges of customers who are becoming increasingly more sophisticated in the range and quality of the services they require, needs careful management of the customer service operations consisting of sales and support processes in the face of increased market competition (White,Daniel and Mohdzain,2005).Through the internet customers have availability for 24 hour service and support. The interactive nature of the internet between the customer and the firm in the SCM processes enables the prompt management of any issues for resolutions from customer resulting in excellent customer-firm relationship. The outcome is increase in customer satisfaction levels and such customers are more likely to become loyal to the firm and purchase the products agin (Rahman,2003).Additionally,the possibility of responding to customers emergency demands for good or services is facilitated ensuring that the firms can more quickly satisfy the needs of their customers. Thus,order processing is carried out faster resulting in almost half reduction in order to delivery cycle time that is carried out within the supply chain and the inter-organisational information system can be used for management purposes to monitor the performance of the order process and customer enquiries resulting inoperational excellence(Williamson,Harrison,Jordan,2004).The IOIS enables companies to implement and manage mass customisation during sales which canbe attributed to their products leading in the market.For instance Dell Computer Corporation which leads in internet based mass customisation has been most profitable PC computer company since 1999.this is carried out by the customers building their own computers online based on their personal needs and specification(Ghiassi & Spera,2003).Dell also ensures that delivery of the product is made available to the customer within 5days thereby achieving operational excellence in the process.

Financial Perspective:

The current rise in competition amongst businesses today now places more emphasis on cost control so that firms can reap the benefits of better returns on capital investments,in which the full application of ICT is crucial to meet these demands.ICT is intrinsically central to any inter-organisational information system and would therefore serve in meeting these goal in the supply chain management process with the BSC as the performance management measuring tool, so that the positive impact can aid in managing the supply chain system.which is part of the entire business process.(Milis& Merken,2004;Protti,2002).

The adoption of inter-organisational information systems is the equivalence in economic terms to major infrastructural projects like roads,business schools. Just like these other investments the nature is usually long term characterised by significantly high investments .The usefulness of inter-organisational information systems which is IT centric is difficult to predict if the level of investments will be beneficial in the overall supply chain management process. A possible solution is to bring out the value or importance of organisational informations systems to the supply chain management process so as to encourage the right expenditure for these systems,so as to aid in facilitating the management of the supply chain process (Protti,2005).

A characteristic of supply chain systems is the likelihood that it comprises of partners operating from various locations world wide. The challenge will be how to manage the process of negotiations with partners operating from different locations across the globe .An inter-organisational system having multimedia facilities can facilitate these negotiations to be carried out in real time without involving the necessity for employees of the various organisations to displace themselves .This has an advantage in reducing cost related to transactions in moving employees for negotiations (Porter,2001).

Through IOIS management can create new revenue sources through e-market place,e-commerce and the possibility of business-to-business exchanges and e-hubs.Through this the potentials of market liquidity and transaction costs reduction are achieved(Baatz,1999.

The use of inter organisational informations systems is rapidly being adopted by an increasing number of organisations supply chain management processes and is linked to better economic performance by these organisations(Williams,1997).There are several ways that this can be achieved.For instance through inter-organisational information systems companies can cut down cost by reducing the number of manual tasks carried out by staff through automation of such processes which is a key characteristic function of all inter-organisational information systems.The automated entry of data will result in the occurrence of less errors recorded and as such a higher degree of information accuracy can be derived through which management can use for proper decision making processes on supply chain management. Also the organisation will not need to employ staff for manual data entry processes which will reduce the overall labour costs resulting to financial benefits for the organisation.A Morgon/Stanley(2000) report for instance puts the cost of manual processing of purchase orders in the range of 125$ to $175.But through online purchasing of items the cost drops drastically to between $10 to $15 per order.

The technical architecture of IOIS in supply chain management is very crucial in meeting very high levels of customer demands. High volumes of information on transactions can be processed in real time using any platforms. The effect is the revenue growth for the organisation and higher profits are achieved.(Ghiassi & Spera,2003).

It is of prime importance to most business entities to continuously strive in having very effective and efficient supply chain management processes to manage the various functions within their supply chain networks that includes activities such as purchasing,warehousing,materials management, and distribution of goods (Williamson,Harrison and Jordan,2004). The principal goal or outcome these companies expect from these processes in utilizing inter-organisational information systems is to check that it is aligned to their financial objectives of cost control.The adoption of technology to manage these processes in particular is to reap advantages of effective and efficient supply chain management processes to attain the financial goals of the firm in order to maximise profits. Furthermore, this will serve the organisation in the production of higher quality of products which is attractive to customers in the market resulting in larger sales volumes /(Chaffey,2002).


The use of inter-organisational information systems whose performance is managed in accordance with the views of balanced score card is a strategic tool in the management of the supply chain process. Financially it reduces the cost of production and distribution by enabling effective management of organisational resources. Higher levels of efficiency at the operational levels are met and customers are better served using the system in faster and more innovative ways as the managers have faster access to information which helps them in making changes at their operational level and responding more quickly to these challenges.There is better management of customer activities as data captured is used in providing better customer services and helping in designing products that meets with customer expectations.The role of inter-organisational information systems when managed on the basis of the balanced score card strongly aids in the management of the supply chain management processes by meeting with the objectives or goals of managing a complex supply chain network consisting of several partners.