The role of information integration in facilitating 21st century supply chains: a theory-based perspective

Transportation Journal, Spring, 2008 by Cheri Speier, Diane Mollenkopf, Theodore P. Stank

The second level of the continuum, information sharing between a firm and its vendors or customers, focuses on exchanging information regarding business processes between partners and includes information systems such as electronic data interchange. Buyer/seller information sharing involves the flow of accurate and timely information regarding a partner's resources, including forecasted customer demand, delivery expectations, or product orders. Research using simulation techniques has demonstrated that increased information sharing can lead to improved performance for both the supplier and buyer, including improved supplier order quantity and inventory allocation decisions (Lee et al. 2000; Li 2002), resulting in an overall reduction of a supplier's costs (Chen et al. 2000; Gavirneni et al. 1999). There is also evidence, however, that information sharing between buyers and sellers can lower performance outcomes (Steckel et al. 2004) and thus more sophisticated information integration may be necessary in some partnerships.

The third type of information integration--information collaboration--involves dyadic supply chain partners using information to actively collaborate on joint business processes (e.g., product promotions, vendor inventory management, and transportation lane consolidation) to improve customer service levels and reduce costs in specific areas of the supply chain (Stank et al. 1999b). Collaboration extends beyond the transmission of resource data to exchanging information that a strategic partner can respond to in order to increase the amount of supply available, change product/ service deployment decisions to best match the product/service required with where it is needed, and assess the trade-offs associated with expediting decisions.

Finally, the fourth type of information integration extends buyer/seller collaboration to multi-partner synchronization where supply chain entities coordinate business processes and decisions to tightly integrate activities across multiple firms. For example, firms that respond to customer demand using a just-in-time manufacturing approach rely heavily on electronic information synchronization to coordinate requirements and deliveries with both goods and transportation and logistics service suppliers (Lee and Whang 2000). Synchronizing activities and processes between supply chain partners results in more flexible operations that can lead to reduced cycle time, lower supply chain operating expenses and inventory, and greater end-customer responsiveness (Stank et al. 1999a; Stank et al. 2001).

Information systems will assume different characteristics across the various stages of the information systems integration continuum. For example, as information systems become more tightly integrated across a supply chain, firms will require systems that are externally focused rather than internally focused on a single firm' s activities and processes. Information systems will also move from being transactionally focused to supporting relational exchange between key supply chain partners. As the systems become more relationally focused, value creation from these systems will extend beyond an interest in efficiency as measured by the lowest unit cost to include performance outcomes that are focused on total system performance, such as lowest total landed cost and asset management. These characterizations are depicted in Figure 2.