How Information Technology helps Operation Management?
Information is one of the key drivers in operation management as it coordinates with other drivers to work together to make an integrated, coordinated organization. In recent years, almost all business processes and functions are based on information systems and technology. Several tools of information technology such as SAP help to take right decisions and gives company competitive sustainable advantages from the competitors. Information technology helps to be aware of information, analyse this information and execute on it to increase the performance of operation management. Utilizing Information Technology, managers can know in least possible time with lowest possible cost and maximum accuracy about customer’s needs, inventory stocks, and products movement etc. Information Technology serves as the eyes and ears of management in operation capturing and analyzing information necessary to make the good decision.
Information technology is the communication tool to communicate inside the organization as well as outside the organization. Nowadays, E-commerce has great impacts on business in a variety of keyways. These include cost efficiency, improve data accuracy, streamline business processes, accelerate business cycles, and enhance customer service etc. Besides that, Ecommerce gives businesses more flexibility in managing the increasingly complex movement of products and information between businesses, their suppliers, and customers. It is a vital link in the support of logistics and transportation services for both internal and external customers to give better services to their customers. E- Commerce also helps a company and its suppliers and customers in shipment tracking, shipping notice, freight auditing, shipping documentation and labeling, online shipping inquiry etc.
Nowadays, due to the shorter product life cycles of the products, increased product proliferations, more demanding customers with higher expectation and ever-changing needs, just-in-time manufacturing and globalization of marketplace, companies are using Information technology as a weapon to get competitive advantages from the competitors. Due to the emergence of Electronic Data Interchange (EDI), E-Commerce Company can handle large number of suppliers and customers in a lowest possible time. Improvements of Information Technology reduced logistics transactions costs and promoted better communications between organizations.
Traditional logistics distribution systems involve long processes. It involves the movement of goods from manufacturers to the distributors, distributors to the retailers and finally from retailers to the end customers. But Company like Dell’s does not follow these usual routes. Part of their success depends on proper logistics management and efficient utilization of Information Technology. Dell computers directly reach to the end customers without any activities of distributors and retailers. Customers can order their products online according to their preferences. The product will be reached to the destination with the help of logistics and information technology. The Customer can trace their product easily. With the help of logistics and information technology, the company as well as the customer is saving their costs. It also helps to minimize the agency costs associated with distributors or retailers who do not act in the producers' interests.
The main impacts of Information Technology are reduced cost on physical distribution, lower search and product costs for end users, and improved communications between end users, distribution channel operators, and manufacturers. With the ‘Holy Grail’ of Information Technology, company personnel can recognize the new parts just looking at computer screen. With the help of Internet, managers can compare several suppliers, their products with price list. After observing product review and all they can order their products and pay the bill online instantly. There would be a reduction in response time as well as in communications and information processing costs. Even he can receive the product on next day through express delivery.
With the help of Information Technology tools the manufacturer could own or control all data associated with own products. This would minimize the decision information costs of keeping the producer informed of the status of the goods (whether ordered, in transit, delivered, or paid for), referred to in the messages passed through the information substructure. It needs less manpower and it saves company’s cost.
Effective coordination of logistics activities is essential to organizational performance. However, for improved coordination to be possible, Information Technology must play a larger role than simply providing status information on existing flows of goods. Effective utilization of Information Technology helps in cheap, fast and effective connectivity between business and with the consumer. To be effective, logistics processes such as just-in-time (JIT) delivery require effective Information Technology support to share information between buyers and suppliers.
Information technology provides rich opportunities in transaction efficiencies, when-
Organization engages in many small transactions, especially among a multitude of buyers/sellers.
Significant buyer/seller qualification is not required in a transaction
Organization suffers from out-of-stocks, long lead times, and/or high inventory levels
Communication is the key to the efficient functioning of any system, whether it is the distribution system of an organization or the wider supply chain. Logistics communications are becoming automated, complex and rapid. The Logistics Communication takes place mostly between
· The organization and its suppliers and customers
· The major functions within the organization, such as logistics, engineering, accounting, marketing and production departments.
- Various logistics activities such as inventory management, warehousing, parts and service support, Procurement, customer service etc.
- The various aspects of each logistics activity such as coordinating warehousing of materials, work-in-process (WIP) and finish goods (FG).
- Various members of the supply chain such as Intermediaries and secondary customers or suppliers who may not be linked directly to the firm.
Information Technology helps business in several ways. Some of these are -
Production Process- Information technology helps production process in analyzing and selecting the process, designing and scheduling process, and monitoring and controlling the process. It helps a company to acquire the raw materials in write time to maintain the flow of the operation. The effective utilization of information technology tools can help a company to reduce the costs of operating, and maintenance, produce the highly quality of products and services, shorter cycle times, and speed up operating, delivery flexibility, new product introduction speed, etc.
Inventory Planning- Setting optimal inventory policies is one of the important concerns for the management. Low inventory levels means low working capital but chance of dissatisfying customers on the other hand high inventory level means high working capital but satisfy the customers. To optimize inventory level requires information that includes demand patterns, the cost of carrying inventory, costs of stocking out and costs of ordering. Evaluation of Information technology helps the organization to integrate its functions as a result low inventories and improved financial performance. It helps to reduce transaction cost for the company. The company like Dell holds very less inventory because customers order their product online and the company starts assembling the products only after getting the order.
Transportation- Now in the age of cut-throat competition companies are going global to acquire cheap products and to sell their product worldwide. At the time of transferring goods, which transportation mode (e.g. rail, water, air, truck, pipeline etc.) to use with proper routes which will provide lower cost but on time delivery is a crucial decision for the management. Moreover, Traffic and Transportation department is the major investment of whole business and it contributes larger part of products selling price. Information technology with the help of reliable information can help the company to decide on transportation networks, routing, modes, shipments and vendors requires information including costs, customer locations, and shipment sizes to make good decision.
Purchasing - The term purchasing means to acquire materials from outside the organization to facilitate the firm’s operation from production to logistics. In the recent years, companies are crossing the national boundary to acquire its raw materials. Suppliers are becoming one of the main resources for the manufacturer because purchase materials consider more than 50 percent cost of whole goods around the world. Companies are making a long-term relationship with the key suppliers to get good quality products in lower price and to reduce development times. Vendor Managed Inventory (VMI), Collaborative Planning, Forecasting and Replenishment (CPFR) and Collaborative Transportation Management (CTM) are different types of collaborative pattern between suppliers and organizations. Information on suppliers and company’s product margins, prices, quality, delivery lead times, and are all important in making sourcing decisions. Recently companies are using E-procurement while purchasing.
The advantages of E-procurements are
• Significant reductions in order processing costs
• Faster, more accurate order processing
• Centralized purchasing for volume discounts
• Prevents “maverick” (off-contract) buying
• Improved accountability
Through satellite communications, company can incorporate strategic alliances with suppliers; carefully select their store locations etc. Part of WalMart’s success can be attributed to computerized advance communications systems which link their suppliers to their actual customer sales on a regular basis, so that suppliers can plan based on up-to- date demand information, and provide timely and adequate replenishment to Walmart stores.
Customer service- Customer service involves getting the right products, at the right place, in right conditions, at the right time with lowest possible cost. Customer service is the output of logistics systems. Information technology helps a company to improve its customer service. It helps customers to select their products among various options, make their purchase order online, and track their products. Good customer service supports customer satisfaction which is the output of entire marketing process. Through information technology company can market their product worldwide. Information technology helps a company to maintain data about the customers and treat them according to profit gained from the customers.
Warehousing- Warehouses allow an item to store for later consumption saving time and place utility. Information technology helps in warehousing and storage activities such as warehouse layout, design, ownership, automation, training of employees and related issues. Information technologies such as telemarketing, express delivery, and improved inventory forecasting have already reduced the need for local warehousing and distribution networks.