IT for Competitiveness

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					  Enhancing Business
Competitiveness through
Information Technology

    Jatinder (Jeet) N. D. Gupta
University of Alabama in Huntsville

A box of cereal spends ? days in the
  supply chain.
• A box of cereal spends 104 days in the
  supply chain.
Total inventory in the pharmaceutical
  supply chain exceeds ? days and ? $ in
  savings to be realized.
• Total inventory in the pharmaceutical
  supply chain exceeds 100 days with at
  least $ 11 billion in savings realized.
          Quiz (continued)
Poor coordination in the food industry supply chain
  wasted ? dollars.
• Poor coordination wasted $ 30 billion
  annually in the food industry.
Boeing wrote-off ? dollars in 1997 due to supply
   chain inefficiencies.
• Boeing wrote-off $ 2.6 billion in 1997 due to
   supply chain inefficiencies.
It costs, on average, ? dollars to process each
   purchase order.
• It costs, on average, $80 to process each
  purchase order.
            Principal Component Analysis

                           The doughnut never changes shape even
                           though the projections are quite different.
  Impact on Business Decisions
• Decisions are based on partial information,
  from a specific perspective only.
• A decision good for one business function is
  not best for overall business.
• Information needed to make business
  decisions are not available.
• Coordination and collaboration becomes
  rather difficult, if not impossible.
                                    Nobel Prize in Economics 2001
                                    Information Asymmetry
                                   Information Asymmetry between Customer Demand and Manufacturing

                                                                                                      Distributor Orders

                                                                                    Retailer Orders
Order Size


                                                                    Production Plan

             Source: Tom McGuffry, Electronic Commerce and Value Chain Management                                Time
What is Information Technology?
• Information Technology (IT) refers to a
  wide variety of items and abilities used in
  the collection, storage, dispersal, processing
  and conversion of data into information to
  create knowledge.
• Knowledge is an understanding of a set of
  information and how that information can
  be put to the best use.
     Three Dimensions of IS/T
• Processing dimension: Here IS is treated
  primarily as a data processing system.
• Functional area dimension: Here IS is considered
  as meeting the functional needs of the firm.
• Management hierarchy dimension: Here IS is
  considered as supporting the decision making
  processes at various levels of management.
     Fourth Dimension of IS
• Knowledge management is one of the
  fundamental requirements in an
• Hence, the fourth dimension of IS
  considers the IS function as one of
  knowledge generation and management.
• This is a much broader role for the IS
  function and will gain importance.
         An Information Age
• Person-to-person IT links between
  individuals and businesses are an important
  feature of an Information Age.
• Now, more people work at handling
  information than in agriculture and
  manufacturing sectors combined.
• Effective use of IT enables an organization
  accomplish more than a few years ago.
Embedded Information Technology

• In an Information Age, IT is embedded and
  integrated with other components of
  products and services.
• Products and services with embedded IT are
  also called knowledge-based because
  knowledge about their function and
  performance are embedded within them.
  Transformational Technology
• A technology that transforms the way we
  usually do work is called transformational
• It is also called a ‘disruptive technology’ as
  it causes a disruption in organizations.
• The full benefits of these technologies are
  only realized after majority of the
  participants start using these technologies.
            Electronic Commerce Solutions


                      EC Productivity Focus

                       Source        Integrate                CUSTOMERS
             Design                              Distribute
                        Build       Assemble

 Supply Chain                   Solutions
  Connectivity                                           Extranet
 The Business Value of Electronic Commerce

• Order processing cycle times reduced by 30% to
• Customer service levels improved by 5% to 25%
• Inventory was reduced by 10% to 15 days
• Inventory turns increased by up to six fold
• Distribution personal productivity increased by
  25% to 30%
• Demand forecast errors reduced by 50% to 60%
• Profit improved 150% to 250%
          Global Manufacturers’ Challenge

            ….. Move Productivity Beyond the Shop Floor


                       Source        Integrate
                       Build        Assemble

                     Traditional Productivity Focus
                         Plan / Forecast

  Supply Chain Integration is the Competitive Differentiator
The Six Forces Model for the NE Era

                                       Added for
                                      NE Strategy
           SCM and EC Issues
•   Multiple partners in an extended supply chain
•   Global nature of the business operations
•   Increased need for coordination
•   Increased need for collaboration
•   Increased need for cost reduction
•   Increased need for speed
•   Coordination and Integration is key to success
                                                      Strategic Decisions
                                                     Entry/Exit Decisions
                                                    Investment Decisions
                                                    Sales/Marketing Targets

                                                                                                Financial Strategic Management
                   Supply Chain Decisions                                                     Evaluating opportunity costs
           Supply Chain cost & pricing targets                                              Checking if targets are met
           Budget allocations for purchasing new                                            Revising targets according to business
           inventory                                                                         plan
           Holding cost and other variables

                                                                                                  Financial Management System
                                                                                          Storage and processing of data
 Supply Chain Management System
                                                                                          Conversion of data into timely, accurate, useful
Inventory management
Tracking and storing inventory
Recording procurement and sales                            Data
Asset recording
                                              Inventory costs
                                              Inventory quantity
                                              Transportation, warehousing and other
                                              SC costs
                                              Assets on hand and their classifications
                                              Amount sold / purchased
 Multi-enterprise Design Collaboration
Value-added Suppliers                                              Develoment Parnters
 and Manufacturers                                                  and/or Customers

                           High-speed                CAD/CAE Models;
                             Lines                       E-mails

   CAD/CAM Models;                          Design
       E-mails                               Data                        High-speed
         Technical Data;                Environment                  Technical Data;
          2D Drawings;
                                                                      2D Drawings;


    Distributors & Customers                                       Piece Part Suppliers

   Dramatically Decrease NPI Cycle Time While Improving Quality
  Generic Competitive Strategies
• Low Cost Leadership: Outperform firms in the
  industry by providing products or services at a
  lower cost than competitors.
• Product Differentiation: Provide a product or
  service that is generally recognized as distinct
  from competitors.
• Focus on a Market Niche: Identify and compete
  in a market segment in which competitive
  advantage may be gained by concentrating on a
  specific buyer group, product line, or geographical
      Realizing IT’s Competitive
• Changing the basis of competition: Dell’s
  Computer Order Entry and Manufacturing System
• Build barriers to a new entrant: Microsoft
  Windows on PCs
• Build in switching costs to customers: Merril
  Lynch’s CMA integrates variety of product and
  services to offer valuable service
• Strengthen a firm’s power in dealing with
  suppliers: Wal-Mart
• Provide new products and services: UPS
             In Conclusion
• Information Technology can provide
  significant competitive advantages to a firm
  by making the firms more efficient and
• Information Technology also decreases the
  competitive disadvantage for a firm by
  focusing on customer service and desires.
• Looking only to IT to solve organizational
  problems is inviting disaster.
    Personal Research Emphasis
• Walk a rather thin line between theory and
• Attempt to understand the way to collaborate
  while playing the competitive game.
• Learn the process of intra-organizational and inter-
  organizational integration.
• Develop strategies and tools for supply chain
• Use technology as a tool that we must learn to
  manage this tool to gain advantage.
The Computer Industry: Dell on-
                                                      Customer Order and
     Customer Order and     Procurement cycle         Manufacturing Cycle
     Manufacturing Cycle

     Procurement Cycle        PUSH PROCESSES              PULL PROCESSES

                                                Order Arrives

 Dell Supply Chain Cycles

   Customer                     Customer
                      Pull                        Pull
    Amazon                     Retail Store

   Distributor                Warehouse (?)

   Publisher                    Publisher

Amazon Supply Chain          Bookstore Supply Chain
          Grocery on-line

   Customer                 Customer


 Online Grocer
                          Warehouse (?)

 Manufacturer             Manufacturer

On-Line Supply Chain   Supermarket Supply Chain
  Courses and Programs at UAH
• Developing and teaching a graduate course in Supply
  Chain Management and E-Business.
• Developing a track in Supply Chain/Logistics
  Management at the graduate and undergraduate levels.
• Reviewing the MS in MOT program to determine its
  effectiveness in current times.
• Learning the process of learning to develop effective
  strategies for the “learning to learn” paradigm.
• Researching in the integration of technology with other
  business functions to gain competitive advantage.

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