INFORMATION TECHNOLOGY AND INFORMATION SHARING IN SUPPLY CHAIN OVERVIEW AND BUILDING OF A C ONCEPTUAL FRAMEWORK45331

INFORMATION TECHNOLOGY AND INFORMATION SHARING IN SUPPLY CHAIN OVERVIEW AND BUILDING OF A CONCEPTUAL FRAMEWORK Nguyen Anh Hao” ABSTRACT In a highly competitive environment, it is import

INFORMATION TECHNOLOGY AND

INFORMATION SHARING IN SUPPLY CHAIN OVERVIEW AND BUILDING OF A CONCEPTUAL

FRAMEWORK

Nguyen Anh Hao” ABSTRACT

In a highly competitive environment, it is important for firms to collaborate with their supply chain partners to save cost, enhance quality, and improve decision-making process This paper aims to review the concepts of information technology (IT) and information sharing in the context of supply chain, then building a conceptual framework linking IT link in supply chain, supplier and customer information sharing, supplier development, knowledge absorption from customers, and supply chain performance The model suggests that IT link should be a foundation to foster information sharing practices between manufacturing firms and their suppliers and customers Information sharing leads to better supplier development, knowledge absorption then improves supply chain performance The conceptual framework in this study can be applied in future empirical researches to test the relationships between supply chain

IT, information sharing and supply chain effectiveness in specific

1 Department of Business Administration, Yokohama National University, Japan

*Corresponding author: nguyenanhhao040294@gmail.com

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contexts and industries Empirical results would help firms to enhance information flow, supplier partnership, and customer relationship management

Keywords: Information technology, information sharing, supply chain, supplier development, customer relationship management

1 INTRODUCTION

Supply chain management requires collaboration across members to ensure material, financial and information flows Firms regardless what industry they are working in are facing uncertainties usually caused by delivery delays, machine breakdowns or order fluctuations Uncertainty leads to variability between demand and production, creating Bullwhip effect then increasing cost Moreover, due to the globalization of markets, collaboration between firms and external partners become crucial, so that firms should link their business with customers and suppliers Sometimes firms have

to work with too many suppliers and customers at the same time This may confuse them about whether it is customer requirement

or supplier quality To handle that issue, information sharing in supply chain is necessary, as the sharing makes information available

to all supply chain members (Kumar and Pugazhendhi, 2012) Many previous researches confirmed the importance of IT on the improvement of operations of supply chain (Ye and Wang, 2013; Vanpoucke et al., 2017) However, the impact of IT adoption on the organizational effectiveness of firms remains controversy For example, joining in an IT network can increase costs for suppliers because a quick-response program leads to more material deliveries, also increases inventory holding costs Moreover, IT application may increase cost if a firm makes a hugely financial investment but fail to benefit from such a highly sophisticated IT system

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Some other research works developed an analytical framework for the investigation of the impact of IT link on information sharing

(Baihagi and Sohal, 2013; Li and Lin, 2006) Since information

sharing is a process that requires two-way interaction, both how firms share information with their partners and how they receive

information from their partners As discussed above, it is necessary

to build a conceptual framework which can help researchers and practitioners to better understand the impact of information sharing and IT link in supply chain This paper gives an overview

of IT link, information sharing in supply chain, then proposes a

conceptual model which can be used in future researches

2 LITERATURE REVIEW

2.1 Concept of information sharing in supply chain

Lotfi et al (2013) defined information sharing as a process

of disseminating the useful information for systems, people or organizational units Information sharing is a multi-directional process that organizations implement internally among functions, and externally between partners and customers It has become an obligation that supply chain members have to achieve in order to increase the supply chain efficiency There are other terms which can be used interchangeably with “information sharing” such as

“knowledge sharing” or “information integration.” Because of a huge amount of information being exchanged in a supply chain, the management of information flows is considerably complicated It is difficult for firms to do so because they lack framework to exchange information In fact, information sharing between supply chains should be timely and undistorted so as to build up competitive

advantage (Li et al., 2005).

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To avoid uncertainty and reduce sharing cost, prior to sharing

information with other supply chain partners, it is necessary to answer

questions of what to share, whom to share, how to share, and when

to share There are various types of shared information, which can be

classified as product, process, inventory, resource, order, and planning

In the viewpoint of Pandey et al (2010), shared information in supply chain can be Purchases and sales, Inventory status, Product development,

Sales and forecasting, Market development, Future plan, Production

cost, Technology know-how, and Order tracking In more general,

information sharing among manufacturers, suppliers and customers can be tactical (e.g.: purchasing or logistics) or strategic (e.g.: long-term relationship objectives, customer information) (Kumarand Pugazhendhi,

2012) When it comes to manufacturers, sharing information with

both suppliers and customers is necessary to capture market demand, achieve efficiency in order management as well as facilitate collaborative

activities, leading to more innovation performance Nowadays, sharing information becomes easier thanks to IT advance

2.2 The importance of information sharing in supply chain

‘The effect of information sharing on the performance of supply chain has been proved in many previous researches as well as recognized

by many practitioners First, it allows supply chain partners to integrate their knowledge in order to identify opportunities in the market and develop potential competitive advantages (Sambamurthy et al., 2003)

In details, the more the information is gathered, the more accurate the

prediction of real demand is, which helps each supply chain member

to formulate effective future plans Therefore, information sharing

plays an important role in making supply chain activities become

smoother and more effective such as joint business plans, demand forecast, and new product development Second, for manufacturing

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as sales, production and logistics, hence improving visibility and

reducing uncertainty (Handfield and Bechtel, 2002) Moreover, it

is shown in the literature that cost and financial performance is an important business performance which is significantly influenced by

information sharing (Sahin and Topal, 2018) Thanks to the shared

information, a firm is able to achieve supply chain integration to improve its operational performance, which means it helps reduce material purchasing cost, facilitate quality improvement effort, and enhance flexibility in responding to customer needs For example, the efficient implementation of information can reduce inventory cost up

to 35% for manufacturers, while maintaining or increasing the level of operation (Lotfi et al., 2013)

Moreover, information sharing allows firms to work collaboratively with their suppliers and customers, therefore they can develop trust then lead to better long-term relationship with external partners The benefits of long-term relationship include shorter lead time as well as order fulfillment cycle, faster and high-quality new product development process, etc (Hall and Saygin, 2012) Good connection among supply chain members also fosters business partnership, bringing considerable enhancement in supply chain integration via cross-docking, quick response (QR), vendor managed inventory (VMI) Thus, in a broad view, information sharing is considered a crucially intangible asset to create physical and financial assets, leading to higher performance of supply chain Empirical studies have proved that information sharing has a significant impact

on the effectiveness of supply chain, ensures a common value-shared network, and leads to effective physical and non-physical asset flows from material sources towards product consumption by end-

customers (Li and Lin, 2006).

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2.3 Practices and tools of information sharing in supply chain

Information sharing practices in supply chain involve intra- firm and inter-firm data sharing An organization implements information sharing by encouraging interaction among its departments, sharing information with its suppliers and customers, also receiving information from its suppliers and customers Hence, information sharing practices are categorized into internal practices and collaboration practices (Baihaqi and Sohal, 2013) Internal information sharing refers to interdepartmental interaction in sharing resources, creating mutual understanding so as to achieve common goals Internal information sharing can be labeled as knowledge

transfer amongst functions, and it requires cross-functional teams,

which include members from each department to facilitate internal

collaboration (Mentzer, 2004) Moreover, collaborative culture should

be built, and all management procedures need to be standardized

Internal knowledge sharing is important because it is a prerequisite

to implement information sharing with other members in the supply chain Researches have demonstrated the significant correlation of

internal and external integration (Baihaqi and Sohal, 2013)

One of the tools to facilitate internal information sharing is enterprise resources planning (ERP), which is widely knownasasystem for internal integration Organizations can replace their operational

system with ERP modules so that firms become more integrated, data flows become smoother with electronic data interchange (EDI)

technology Another tool used for intra-organizational integration

is enterprise application integration (EAI) This technology incorporates functionality from disparate applications with cheaper, functional and manageable IT infrastructure

Collaboration practices refer to actions taken by a firm in association with its supply chain members in jointly planning and

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operating supply chain for greater success Information sharing is the basis for effective collaboration Information sharing among firms or downstream and upstream supply chain members is implemented through strategic supplier partnership and customer relationship management practices Strategic supplier partnership is a long-term relationship between firms and suppliers as they coordinate to utilize capabilities in achieving mutual benefits In order to do so, it is necessary

to build up IT systems to communicate with suppliers Some of them are SCEM (supply chain event management) systems, SCE (supply chain execution) systems, WMS (warehouse management system),

AOM (advanced order management) systems, TMS (transportation management system) (Genoulaz et al., 2010) When it comes to

customer relationship management (CRM), it is implemented to

collect customer feedbacks, handle customer complaints with the

aim of building long-term relationship and improving customer satisfaction Many firms apply CRM software, which aim at customers

in their information system, to anticipate demand for better knowledge

of customer expectations (Genoulaz et al., 2010)

2.4 Information sharing and information technology link in

supply chain

IT and information sharing have a tight link since IT link

is considered as a foundation for information sharing IT link is defined as the application of automated systems or computer-to- computer links between firms and suppliers, customers Hence, IT link is concerned with electronic link among organizations There are several tools for IT link such as transactional management system, electronic commerce, purchasing information system The main purpose of linking IT is to facilitate material flows as well as

information ERP is one of those tools.

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IT link facilitates the availability of information, thus

encouraging coordination and collaboration across supply chain partners through information sharing (Fawcett et al., 2007) Effective information sharing can be obtained when a supply chain has an integrated IT system, acting as a tool for a firm to retrieve, process and disseminate the information upward or downward in the supply chain for a better decision-making process As long as firms do not set up IT link with their suppliers and customers, they are restricted

in accessing information in a timely manner, consequently lowering

their responsiveness Furthermore, IT link should be adequately

implemented, otherwise it is difficult for manufacturing firms to utilize the information shared by suppliers and customers

It is shown in the literature that information sharing is beneficial for organizational performance, but not always It depends on the type of information, the intensity of information or the capacity of supply chain partners (Hall and Saygin, 2012) Table 1 provides a summary of the previous studies on IT link and information sharing

in supply chain management

3 BUILDING A CONCEPTUAL FRAMEWORK

3.1 Information technology link and information sharing

‘The implementation of an integrated IT system enables firms to share information, also to utilize information received from supply chain partners When it comes to suppliers, firms can share order

information, operational information, strategies, and competition

information In return, firms can ask suppliers for cost information, delivery information or change in engineering information For

customers, an IT link system helps firms to manage customer behaviors on a continuous basis (Fawcett et al., 2007) Furthermore,