Manufacturing Management: Information Technology and the Supply Chain

Introduction

The interaction between customer-supplier is very necessary because it can help increase contact between the two and this can reduce the customer-defection rate. The reduction of customer-defection rate may translate to an increase in profits of firms. Although the interaction is necessary for improving the number of sales, it may also translate to less production efficiency as customers are more involved in the production process (Fitzsimmons’, 1997; qtd. in Kim, Cavusgil & Calamtone, n.d.).

The better relationship that fosters customer loyalty can be improved with the increase in the sharing of information between the two. In today’s systems, customers can effectively take place in the production process through participation even without their presence, and this is possible with the usage of technology. Systems that encourage physical contact between the customer and buyer/agent are becoming unfamiliar in today’s business context even in industries such as the airline and hotel and catering which have traditionally employed travel agents even overseas.

Such industries are realizing that they can reduce transaction time, labor costs, ensure customer privacy is well-maintained, and achievement of other benefits such as reducing physical inconveniencies. On the one hand, technology has presented an improvement in the supply systems that not only encourage but also improve interaction, while on the other hand, customers have responded to them well because of the speed with which they can carry out a transaction, reduce inconveniences and realize other privileges such as those attached to customer loyalty programs.

Companies like British Airlines have customer loyalty programs that can make the customer continue using their products because of the attached benefits. In this paper, the case of British Airways in the usage of information technology to improve the supply chain and improve customer-supplier relationships will be discussed together with the related literature.

British Airways

British Airways has over 300 destinations in different countries and has implemented techniques for improving the relationship between them and the customer. To enable customers to acquire products and important information such as schedules and fares, the company uses global distribution systems, contact call centers, and the internet portal, in addition to travel agents. Through the internet, customers can purchase their tickets while at home, and use the online check-in system which helps improve advanced flight planning since customers can select the number of bags they will take to the airports.

The companies have been able to publicize and operate services through global distribution systems, and codeshare journeys. Customers can use the online facility on other carriers to connect codeshared journeys. Redemption for the Executive Club can be made through the online service. Among the Information Technology systems like the Employee Self Service to not only improve employee duties and the ba.com but also to help customers save time and avoid inconveniences.

The available services through the portal include online check-in systems and booking services. The volume of passengers that can be served at ago has improved with the adoption of such systems. Information technology also encourages the company to improve environmental concern through the reduction of green gas emissions through saving power by using notebook laptops which have about 70% power efficiency. The impact of the usage of technology in the environment-conscious means may be perceived in the affected environment conscious decisions can impact the masses through social corporate responsibility.

This is where the company uses its resources to the benefit of society but can plow back profits in terms of good publicity and high social rating. Thus technology, in this case, can be used to improve the relationship between the company and the customers, probably those who are environmentally conscious. The usage of technology through the Terminal 5 facility has helped the company to reduce the number of queues and offer catering services well. A quarter of the bookings is made through the internet portal. Customers can access information on the price and flight schedules for the company.

It is also possible for those on the flight to share information. The usage of information technology, namely, the internet has helped in reducing carbon emissions because it avoids the use of paper. The potential of establishment of the relationship between the company and its suppliers has also been premeditated, with the company planning to have a new supply contract in 2010. This would provide an opportunity for the company to meet customers’ demands through the establishment of an ethical code of conduct.

The importance of information technology can also manifest in the ability of remittance of payments to suppliers, improvement of assessments of the suppliers. The company found during 2007/2008 that information technology scored the second-highest as the most effective strategy after the face-to-face engagement as a means of communication. Therefore, information technology is better placed to improve communication not only between the company and the customers but between them and the suppliers.

The global distribution systems

Information Technology and communication are becoming an important tool in improving the relationship between the supplier and the buyer, both to ease and make fast the process of the transaction. The adoption of Information Technology as a competitive tool in the business arena has been explored, and evidence exists that firms with better technological systems have competitive advantages over their rivals. Information Technology has played an important role in the e-commerce sector in the modern world, where firms use it to remit payments, improve performance and efficiency, reduce costs on labor by eliminating the connectors between them and the buyers, and in the accomplishment of a combination of tasks within the firm, for example.

Although firms resources (organizational resources, physical and human (Barney, 1991; qtd. in Kim, Cavusgil & Calamtone, n.d.) are important, it is important to determine the necessary conditions under which each can give the firm a competitive advantage. Examples of Information System resources include interfirm system integration, administrative innovation, and applied technological innovation, and when properly used, they can give a firm competitive advantage.

The first one implies a situation where a firm improves its supply chain communication systems by using the most advanced information technology. Information Technology has transformed the Supply chain communication systems (SCCS) of a firm. The efficiency of operations within a firm and with its partners can improve with the use of SCCS. A firm can enhance efficiency within its operations. Barney (1991), notes that competitive advantages may be gained by a firm if it adopts new SCCS before the competitors (proactive adoption), or before it is adopted across the industry. SCCS can be used to improve interfirm coordination and information exchange.

Although firms may be equally endowed with the same resources, some may receive full benefits while others will not, depending on the degree of administrative innovation for their supply chain communication systems (SCCS). This degree varies across firms. To attain full competitive advantages of information technology resources over its rivals or competitors, a firm needs to have the necessary knowledge and skills to exploit or use it in a way that is not easy to be copied or duplicated. According to Barney, a firm may gain competitive advantages through the integration of advanced technology with its core strengths, assets, or capabilities (1991; qtd. in Kim, Cavusgil & Calamtone, n.d.).

The firm should be able to reduce the likelihood of mobility and increase the heterogeneity of the source of competitive advantage by making sure that it accumulates internal skills and knowledge instead of outsourcing (Powell and Micallef, 1997; qtd. in Kim, Cavusgil & Calamtone, n.d.). Furthermore, the firm may be able to employ SCCS especially as compared to other firms, when it integrates information technology in its core competencies through the internal deployment of technology rather than outsourcing.

The importance of usage of information technology in SCCS can be conceptualized in the fact that it is used to reduce technical barriers and incompatibility between firms so that they can improve collaborative activities through easier, quicker, and better communication (Bowewrsox, et. al., 1999; qtd. in Kim, Cavusgil & Calamtone, n.d.). A firm may apply interfirm integration as a tool for data exchange, order placement, inventory data and planning, and forecasting according to the aforementioned author.

Close relationships are fostered between partners adopting competitive SCCS through the sharing of planning resources and strategies, as companies adapt their technological and administrative innovations. The performance of a firm is further improved with the establishment of linkages with customers through supply chains, realizing more customer outreach and quicker operations.

The use of technology in the improvement of supply channels does not become easier with the change of customer preferences, tastes and demand. The internal and the external systems must be able to satisfy these through sustaining the necessary relationships. Moreover, the changing environment in the technology may demand that firms continue investing in technology and more so, in new systems because other firms may also gain competitive advantages over their rivals. Interfirm system integration can be discussed in the following aspects;

Information Exchange

Firms may improve performance through the sharing of knowledge among them and their partners to serve customers efficiently and effectively. Exchange of knowledge as relates to the customer preferences, and market environmental changes to improve existing channels of supply or introduce new ones. Various aspects of information exchange that might be necessary to consider when trying to align technological innovations of a firm to be able to achieve competitive advantages include credibility of information concerned, accuracy, timeline, and adequacy of the information. Effective use of information should involve use of it when it is necessary, adequate, and complete.

Interfirm Coordination

Firms can not only individually use information technology to improve operations within the organizations but also improve the transactions amongst the firms. There is the possibility of firms to coordinate to pursue customers through the collection of product-related information. According to Clemons and Row (1992; qtd. in Kim, Cavusgil & Calamtone, n.d.), firms can coordinate to pursue new customers, identifying and articulating their needs. In the electronic use of SCCs, firms can eliminate or reduce communication errors, transaction costs, and coordination costs.

The level of adoption of technology will also determine the benefits the firm drives from its supply channels. According to theory, there are four levels of technological adoption as relates to B2B e-commerce. The initial stage of development is where the organization may seek to improve performance for operations for particular departments. At this particular level, only a simple technological system may be in place. Information technology may be used to improve supply chains to save costs in the purchasing processes.

The process of implementation may be hampered by a few issues because the management is not aware of the possible problems and long-term effects of implementation. The management realizes the importance of proper planning and strategy of implementation and uses a centralized approach to implementing e-commerce. This may be accompanied by departmental collaboration and cooperation. The company or organization may think that this stage will be liable for success because of the success of the first stage and because they better understand technology. However, there may be a difference in focus from supplier focus in the first stage to customer focus in the second stage.

However, technology in these two stages may help improve the relationship between the company and the suppliers, and the customers. To harness the inward benefits of technology, the company may look for technology that works and that can be successfully implemented in the third stage. The fourth global stage is known as global e-commerce which involves globalization of operations and expansion of technology (Chan, 2004).

Conclusion

Information technology has also improved or helped participation in customer promotions and offers which can be used to improve the relationship between the customer and the company. The advantage of using global distribution systems for travel operations is that the business is linked to the hotel system. The hotel booking business would improve with the improvement in the airline booking services because customers attending the holidays may require air travel and therefore may accomplish online booking for the two services. Some Global Distribution System (GDS) avails booking services for hotels and air travel companies.

Although the GDS has little information on the company, it avails of advertising opportunities that companies can use. These services include the following; headline messages, broadcast messages, featured property, sign-on messages, and Point of Sale messages.

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