The Role of Technology in Supply Chains

Introduction

This short paper aims to describe the role of technology in supply chains and assess its advantages and disadvantages.

Supply chain management comprises the active management of organisational procurement, logistics, production and distribution activities for the maximisation of customer value and achievement of competitive advantage (Carter & Rogers, 2008). It concerns the effective and optimal management of goods from the procurement of raw materials from basic suppliers to the delivery of products to ultimate consumers, and even beyond in terms of the return or the consumption or disposal of such goods (Carter & Rogers, 2008).

Several developments in recent years have however resulted in significant changes in organisational attitudes towards supply chains, sharply enhanced focus upon the area, and efforts for increasing the effectiveness of the SCM function (Chopra &Meindl, 2012). Various geopolitical and socioeconomic developments like the growth of a unipolar global order, the dominance of market-oriented economic activity, globalisation, economic liberalisation, and tremendous advances in transportation and communication technology, have resulted in enormous expansion of markets and the dispersal of production and manufacturing centres (Chopra &Meindl, 2012)

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With organisations engaging in sourcing of raw materials, production, research and development and sales and marketing in geographically distant locations, modern firms are placing great stress upon optimising the efficiencies and cost effectiveness of their SCM functions (Ghorban, 2011). Such organisational focus on enhancement of SCM effectiveness has also led to constant efforts for technological up-gradation and introduction of new technologies for optimisation of supply chain and enhancement of organisational competitiveness (Kremian, 2013).

This paper describes and discusses some of these modern SCM technologies, the reasons for their induction and their merits and demerits. It attempts to detail the advantages and disadvantages of new technological introductions in SCM, making use of theory as well as several practical applications, especially in the area of warehouse management.

Introduction of New Technologies in SCM Activities and Processes

Ghorban (2011) stated that technology has crept into SCM in a gradual and progressive manner, commencing with actions like electronic invoicing, computerised tracking and shipping and automated notifications and moving on to diverse and numerous other applications. Such incorporation of new technologies is being driven by diverse forces, like increasing customer expectations, intensification of competition, increasing fuel costs and greater demand for inventory control and Just in Time (JIT) management (Faze, 1997).

It is important to appreciate that contemporary technology has extensive capabilities, with regard to ensuring organisational production in line with schedules, the anticipation and correction of mistakes and the making of modifications for guaranteeing top quality products (Intermec Technologies Corporation, 2007). Each and every link in a supply chain can be simultaneously monitored and automated notification systems can be used for sending messages to diverse players through different channels (Intermec Technologies Corporation, 2007). Some of the top trends and technologies impacting supply chain operations, spanning production, distribution, retailing and remote servicing include (1) comprehensive connectivity, (2) voice and GPS communication integrated to rugged computers, (3) speech recognition, (4) digital imaging, (5) portable printing, (6) bar-coding advances, (7) remote management and (8) wireless and device security (Cohen & Roussel, 2013). Taking up the case of voice and GPS communication, leading cellular carriers have certified the utility of rugged hand held computers, which facilitate voice communication, data connection and cell phone functionality through one device (Cohen & Roussel, 2013). Stanley Steemer, a carpet cleaning franchisee made use of GPS and real time two-way communication to improve efficiencies, which resulted in the elimination of a fulltime despatch official at each of its branches and greatly reduced the time required for completion of process paper work (Chopra &Meindl, 2012).

Software programme and cloud computing have significantly improved material and product tracking, with real time updates of status now available without difficulty (Vella, 2012). These programmes furthermore allow business firms to adjust production schedules and inventory levels on a real time basis (Vella, 2012). With companies appreciating the advantages of technology incorporation in SCM, several multinational corporations have taken the lead and stand out as pioneers in the area(Intermec Technologies Corporation, 2007).

The John Deere Company made use of sophisticated logistics management software to enhance its onetime shipments to dealers from 60 to 92 percent, even as it reduced its inventory by 1 billion USD(Intermec Technologies Corporation, 2007). Nike worked with DHL Supply Chain to implement radio based product monitoring for warehouse and distribution purposes and real time delivery notifications, thereby reducing costs and increasing efficiencies(Ghorban, 2011). Walmart, the largest global retailer, has long been known for its SCM processes(Ghorban, 2011). The company is constantly engaged in using modern technology and network systems for predicting demand, tracking inventory levels and planning efficient transport routes(Ghorban, 2011).

It is important, in this context to appreciate that the introduction of new technologies has resulted in significant alterations in the conduct of specific SCM functions, like warehouse management (Halldorsson et al., 2007)). Searching for enhancements in efficiency and profitability, modern organisations have adopted various new technologies that have resulted in significant transformations in the management of warehousing functions(Carter &Rogers, 2008). The introduction of wireless technology and mobility has resulted in the development of a range of new products for enhancement of organisational productivity and profitability(Carter &Rogers, 2008). Some of these technological innovations are detailed below:

Warehouse Management Systems

Developments in warehouse management systems are being used to assist business firms in controlling the movement and storage of materials within warehouses (Simchi-Levi et al., 2007). Such systems are being used for diverse warehouse management functions like inventory management, including transactions like receiving, picking, packing and shipping, real-time monitoring of stocks, progression of products through warehouses and ensuring the elimination of obsolescence(Intermec Technologies Corporation, 2007).

Barcode Labels and Scanners

Barcode scanners, which were developed soon after the introduction of wireless technology, have become a common element of warehouse equipment (Vella, 2012). Barcode scanners are hardware devices that enable users to read barcodes, printout labels or product information and log products into the database of the warehouse management system (Vella, 2012). They are available in various types and come with different utilities (Poirier & Quinn, 2006). Barcode label printers are used by warehouse managers for printing product labels, shipping labels and bin labels(Reinertsen, 2009). Easy to use and cost effective, these devices help business firms to enhance the accessibility of management and data and augment productivity(Reinertsen, 2009).

Voice Hardware

Voice technology has recently been introduced in the area of warehouse management (Poirier & Quinn, 2006). These devices are now being used by firms to determine and finalise the amount of goods to be picked up (Vella, 2012). Voice hardware devices are fastened to wireless computers, with the data being transmitted to the device at the time of picking an order to ensure that the picker knows the product and the amount of items to be picked (Simchi-Levi et al., 2007). Several companies have started incorporating voice hardware, despite its costs, in order to save time(Ghorban, 2011).

Mobile Computers

Mobile computers are basically barcode scanners with their own display screens and operating systems(Reinertsen, 2009). The hardware for these products has been designed to ensure that they can function like portable PCs with barcode scanning capabilities(Ghorban, 2011). With mobility becoming increasingly desirable, organisations are adopting mobile warehouse management solutions(Ghorban, 2011). Such devices are proving to be extremely beneficial for organisations wishing to enhance accessibility to real time data and employee productivity (Poirier & Quinn, 2006).

Advantages and Disadvantages of Introduction of New Technology in Supply Chain Management

There is little doubt of the various advantages that can arise for companies from the adoption of new technology (Poirier & Quinn, 2006). Several firms have been able to achieve significant reductions in costs through the use of barcodes, advanced picking and other technologies in order to leverage their warehouse and transportation management systems (Poirier & Quinn, 2006). Several organisations have made use of advanced planning and scheduling systems for bringing about dramatic reductions in inventory levels and improving customer service (Poirier & Quinn, 2006). Pujawan (2004) stated that the introduction of new technology was likely to result in enhanced costs, disruption of work and the need to learn new things and eliminate old practices. He furthermore stated that modern businesses have, despite these challenges, been able to apply technology to convert their supply chain into profit generators through the reduction of costs and inventory levels and the enhancement of customer service (Pujawan, 2004). Coke, for example, upgraded its demand planning and collaboration capabilities into 2005 through the introduction of new inventory management processes, supported by software(Ghorban, 2011). This enabled the firm to improve fill rates by 15% and reduce inventory levels by 50%(Ghorban, 2011). The organisation was able to simultaneously absorb a 300% increase in product offerings, which resulted in a surge in profits through the reduction of assets and the support in enhancement of revenues through greater product availability(Ghorban, 2011).

The introduction of new technologies in SCM must however be carried out with great care and thought and in accordance with organisational requirements (Pujawan, 2004). New devices and system are expensive to purchase and install (Pujawan, 2004). Their utilisation furthermore calls for significant training and haphazard and unplanned implementation can result in a number of organisational problems(Carter &Rogers, 2008).

Investigation into the problems and disadvantages of introduction of new technology into SCM revealed that several organisations have faced different types of problems on this account(Carter &Rogers, 2008). A retailer specialising in children’s toys, for example, exceeded both the time schedule and the budget in the implementation of a new fulfilment system(Carter &Rogers, 2008). The occurrence of the Christmas demand spike before the completion of the fulfilment system led to severe challenges in the processing of orders (Sharma, 2010). Whilst organisational employees worked for 50 days at a stretch without holidays to satisfy customers, the firm was forced to delay deliveries till after Christmas to thousands of their buyers(Carter &Rogers, 2008).

SCM experts have stated that the width and scope of common SCM processes, like, for example, warehousing or transportation, are so extensive that the introduction of new technology was likely to involve significant costs, time and challenges associated with organisational change(Simchi-Levi et al., 2007). The majority of new technologies comprisedboth hardware and software and are expensive to purchase and install (Simchi-Levi et al., 2007). Organisations with limited operations and funds may thus not be able to obtain commensurate benefits from the implementation of such technologies by way of cost reduction or enhanced business (Sharma, 2010).

Many of these new systems are furthermore complex in nature and take time to install and operate(Carter &Rogers, 2008). With such installation likely to disrupt existing organisational operations, the managers of firms introducing new technologies have to plan their strategies in this regard with great care to ensure minimisation of operational disruption and customer dissatisfaction(Carter &Rogers, 2008). It is also important to keep in mind that the introduction of new technologies is bound to result in significant changes in operational activities and possibly to redundancy of labour, both of which could result in change resistance amongst employees and to opposition to organisational plans in this regard (Simchi-Levi et al., 2007).

Conclusions

The study reveals that whilst the introduction of new technologies in organisational SCM processes can result in several types of organisational benefits by way of (a) reduction of costs, (b) lowering of time, (c) reduction in inventory, (d) elimination of people and (e) enhancement of volumes amongst others, such introduction was likely to be expensive, complex and demanding in nature(Carter &Rogers, 2008). Organisational managements should, in such circumstances, introduce new technologies only after ascertaining the benefits from such actions for their organisations (Poirier & Quinn, 2006).

Great care should also be taken in the planning, implementation and installation of these technologies, with particular regard to operational disruption and organisational change (Poirier & Quinn, 2006). It has for example been explained earlier that the introduction of new technologies could help in reduction of costs through elimination of people. Such redundancies could however result in employee dissatisfaction and organisational strife. Organisational managements must, when introducing new technologies, take care to consider the various aspects and consequences of such actions and take appropriate actions. Lack of thought and care in these areas could result in inadequate and inappropriate implementation and extremely adverse organisational consequences (Poirier & Quinn, 2006).

References

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