Influences of Information Technology on Supply Chain Performance

Term Paper, 2012

23 Pages, Grade: 1,0


Table of contents

1 Introduction

2 Methodology

3 Descriptive Analysis

4 Does Information Technology influence Supply Chain Performance?
4.1 Higher Supply Chain Performance through Information Technology Application
4.1.1 Increase in Supply Chain Efficiency
4.1.2 Higher Responsiveness to environmental Changes
4.1.3 Achievement of more Integration and Coordination
4.2 Negative Influences of Information Technology in regard to Supply Chain Performance
4.2.1 High implicit and explicit Costs
4.2.2 Increase in Dependency on Information Technology

5 Conclusion

6 References

1 Introduction

Today’s business environment is unstable and uncertain. Shorter product life cycles, uncertain demand due to quickly changing customer needs, offshore production, higher supply chain complexity as a consequence of global and severe competition, and fast technological progress are all factors that foster this (Javanmardi et al., 2012; Chen, Yang, & Li, 2007; Tan et al., 2010). “The economic environment is dynamic and the only certainty about it is it will continue to change” (Pereira, 2009, p. 1). To cope with a high degree of uncertainty and increasing supply chain risk a company needs to establish a robust, resilient but still efficient supply chain. Due to the strong competition companies have to be responsive, introduce customized products quickly to the market and constantly work on their internal and external operations in order to gain a competitive advantage (Javanmardi et al., 2012; Leng & Zailani, 2012). They not only have to offer quality to gain customer satisfaction, but also speed and a reasonable price (Leng & Zailani, 2012).

As supply chain activities are very information-intensive, information technology has been noted as an increasingly important topic to help enterprises improve supply chain performance (Leng & Zailani, 2012; Sinkovics, Jean, Roath, & Cavusgil, 2011). “An information system can be defined as a set of interrelated components that collect (or retrieve), process, interpret, store, filter and distribute information to support decisions within and across partners” (Pereira, 2009, p. 4). The distribution of accurate, high-quality information has the potential to reveal inimitable differentiators against competitors, thus creating long-term and overall profitability and sustainable competitive advantages (Gilaninia, 2011). Leng & Zailani define supply chain performance as efficiency, flexibility, responsiveness and quality. Influences on costs or profits will affect the efficiency, whereas customer satisfaction or delivery flexibility has impact on flexibility. Responsiveness is a matter of fill rate, lead time and customer response time. Quality is impacted by product and process quality (Leng & Zailani, 2012). For Qrunfleh & Monideepa supply chain performance includes flexibility, integration and customer responsiveness. Supply chain flexibility is an effective and fast adoption to market changes. Integration is the degree of coordinated communication, decision making processes and activities with supply chain partners. Lastly Qrunfleh & Monideepa address customer responsiveness which is a timely reaction to customer needs (Qrunfleh & Monideepa, 2012). Following these descriptions, supply chain performance in this paper is defined as efficiency, responsiveness and integration/coordination.

With the increasing use of information technology, processes changed from intra- to cross-company operations (Chen, Yang, & Li, 2007). Due to the increase of knowledge-intensive activities in many industries not single companies compete against each other anymore, but rather whole supply chains (Javanmardi et al., 2012). More intense integration and collaboration that comes with the shift from traditional market-based relations to strategic relations are essential in a rapidly changing, global environment and can create differential advantage and profitability (Leng & Zailani, 2012; Javanmardi et al., 2012; Fawcett et al., 2011). Companies have to make complex decisions concerning the importance of information technology on supply chain performance. Therefore the impact of information technology on supply chain performance is a topic worth to study. The purpose of this paper is to explore the positive as well as negative impact of information technology on supply chain performance.

2 Methodology

Before beginning to search for literature it was important to first of all understand the topic and state the research question “What influences does information technology have on supply chain performance?” in order to be able to precisely look for qualitative literature. The databases “EBSCO”, “Science Direct”, “Emerald” and “ABI Inform Global” were used for undertaking the literature research in titles of premier academic journals. A combination of different keywords such as “information technology”, “supply chain”, “supply chain performance” and synonyms like “logistics information system” or “information and communication technology” was helpful to find appropriate papers. After gaining some sensitivity, a journal-focused search, “snowballing techniques”, “cited-by approaches” and Google Scholar Search Engine were conducted. By reading the title it was directly evaluated whether a paper is worth reading the abstract or not the topic.

A thorough documentation of all articles in an Excel sheet together with the respective database and keyword with which the sources were found was important to be perfectly able to track the literature search after a while. 104 articles were found and then assessed by reading the abstracts and scanning over the structure with three different determinants in order to narrow the literature down. According to the scores in “content fit”, “year of publication” and “journal”, 27 primary papers were selected that are mainly dealing with information technology and their effects on supply chain performance, not older than 6 years and published in top- and peer-reviewed journals. Moreover the research resulted in 11 secondary papers that touched upon the topic in a secondary way. 25 tertiary and 41 “no” papers that were not or only peripherally dealing with the subject were sorted out. Of course the literature is mainly composed of papers out of supply chain journals. However, as the topic is discussed from various perspectives, also a lot of articles in information science journals as well as few papers out of marketing journals were found. As the information technology industry is rapidly changing it was vital to base the literature review on up to date articles that are not older than 2007. Now that a broad literature base was established the articles had to be read and summarized and finally important findings for the literature review filtered out.

There are a lot of country and industry specific articles or papers that assess the effects of information technology capabilities on firm performance without addressing the logistics perspective. On the one hand there exist a lot of papers on special information systems such as Electronic Data Interchange, and on the other hand articles that talked about technology in general. It appears that recent literature mainly deals with more specific topics such as the implementation of the explored performance advantages as well as barriers to supply chain integration. Considering the growing importance of interconnected supply chains, many publications dealing with collaboration can be seen. Furthermore, a lot of papers examined the conditions necessary to benefit from information technology such as a relation of trust between supply chain partners, the commitment to share information or the fit between information processing needs and capabilities.

3 Descriptive Analysis

Interest in information technology has grown continuously among management practitioners and academics. The research conducted to date has built a solid foundation regarding the importance of information technology for the supply chain. However, there is currently a gap in the empirical literature in respect to the negative influences of information technology on supply chain performance. Some papers address risks and problems resulting from humans working with information technology such as lack of controls and knowledge among managers, nevertheless clearly stated disadvantages are rarely found. This is not surprising as information technology at the moment contributes high value for companies. For the reason that current literature concentrates heavily on the positive aspects of information technology on supply chain performance this paper will take a balanced look at both sides.

Due to limitations of scope the focus of this paper will be on the most prevailing influences addressed in literature. Five clusters can be identified out of this paper’s literature base. As indicated in the methodology, there are a lot of papers examining the relationship between information technology deployment and collaboration, coordination and integration which compose one subject area of the literature. Moreover, several articles elaborate on supply chain agility and responsiveness and the third cluster is made up of papers that are investigating moderators and mediators as well as direct and indirect effects of information technology on performance. Additionally there are articles talking about the potential risks and challenges regarding the high investment and complimentary investments. Lastly some papers take a broader view and talk about competitive advantage or firm performance, while others include information technology only as a partial area in the study and analyzed for example besides information also material and financial flows.

As mentioned in the introduction, there are different possible definitions and measures for the exogenous, that is supply chain performance, and the dependent variable which is the information technology. Some papers regarded information technology as generic IT systems, others as information processing capability or special technologies such as Electronic Data Interchange. When addressing specific logistics information technologies, Electronic Data Interchange and Radio Frequency Identification were the two most often used in the supply chain literature. To measure information flow it is suggested to look at the adequacy, availability, visibility of information and the infrastructure for information exchange. For the measurement of supply chain performance total supply chain costs, cooperation between supply chain members, cycle-time reduction, average order fulfillment rates or service level was used.

Since the majority of papers use the resource-based view of the firm, it can be assumed that this is the predominant view in literature. According to this view, it is most important how companies organise and use their productive, inimitable resources to create value and capabilities and gain a sustainable competitive advantage. Solely the acquisition of resources does not lead to superior performance (Fawcett et al., 2011; Tan et al., 2010). Few papers also used the information processing view or transaction cost economies to explain their hypotheses. The papers’ findings were most of the time proved by at least two parts of the triangulation approach – literature review, interviews and survey. This way papers could benchmark current practice and identify facilitators to best practice. Most authors included a practical method in cooperation with companies to emphasize their findings. Each hypothesis stated in a paper was statistically tested mostly using a confirmatory analysis for reliability, convergent validity and discriminant validity, and hypothesis testing through structural equation modeling analysis.

In addition, the findings of the papers were mixed. The majority of papers found a strong relationship between information technology use and supply chain performance, some argued that the impact is restricted to cost reduction rather than service improvements. Others came to the conclusion that the use of information technology implementation alone does not have direct positive impacts on supply chain performance, but is moderated by for example partnership quality or competitive uncertainty or has indirect effect on supply chain integration which increases supply chain performance. Reasons for the disparities can lie for example in a lack of inter-organizational integration, dependency on organizational factors, management commitment, or compelled adoption by more influential firms. Another explanation gives the “IT Productivity Paradox” which is widely spread in literature. Although high investments in information technology are made, productivity does not increase which is emphasized by the following statement of Robert Solow: “You can see computers everywhere but in the productivity statistics” (Grover, Zu, & Radhakrishnan, 2008, p. 2).

4 Does Information Technology influence Supply Chain Performance?

Supply chain management involves several activities such as material sourcing, production scheduling and physical distribution system, all of which are today continuously supported by information systems (Koh et al., 2008). Companies today have to adapt their supply chain and business model to the changing environment and increase cooperation and information sharing (Pereira, 2009; Fawcett et al., 2007). In the following the positive and negative influences information technology has on the performance of the supply chain will be examined.

4.1 Higher Supply Chain Performance through Information Technology Application

Today’s managers exactly know the importance of the information technology applications and their possible competitive advantage. Information technology has tremendously altered products, processes as well as infrastructures and the flow of information is the mechanism that connects supply chain partners (Campo, Rubio, & Yagüe, 2010; Leng & Zailani, 2012). Information technology furthermore provides new opportunities such as the internet to drive innovation and a higher ability to quickly launch new customized products (Fan, Zhang, & Luo, 2012). Although every single information technology drives different advantages and the positive influences differ from industry to industry, major similarities regarding the performance outcomes can be identified (Hazen & Byrd, 2012; Han, Chang, & Hahn, 2011). Hereafter the most cited benefits that information technology has on supply chain performance, proceeding according to this paper’s definition of supply chain performance, will be addressed.

4.1.1 Increase in Supply Chain Efficiency

As explained in the introduction, efficiency gains occur when costs are reduced or profits increased. Ongoing technological progress makes it continuously easier for companies “to collect, analyze, and disseminate information among members of the chain” (Fawcett et al., 2007, p. 2). Information technology not only provides reliable, accurate and high-quality information with high accessibility and timeliness, but also processes and exchanges information in an adequate way and speeds up the information flow (Gilaninia, 2011; Pereira, 2009; Yang et al., 2009; Perego, Perotti, & Mangiaracina, 2011). The ability to track and automate real-time information flows also makes product movement as well as the integration of remote labor and processes easier (Savitskie & Katrina, 2007; Marchet, Perotti, & Mangiaracina, 2012).

According to Wang, Lai & Zhao, “IT is one of the few productivity tools that can increase capability, reduce costs, and improve service simultaneously” (Wang, Lai, & Zhao, 2008, p. 2). Operational benefits such as cost and waste reduction, tighter processes and value creation for the customer can be achieved (Koh et al., 2008; Vijayasarathy, 2010). This enables a company to gain a competitive cost-based advantage (Marchet, Perotti, & Mangiaracina, 2012). Vijayasarathy mentioned that “the use of EDI in supply chains benefited Chrysler Corporation by at least $220 million in annual savings as a result of improved information exchange and reduction in operating cost” (Vijayasarathy, 2010, p. 2). Qrunfleh & Monideepa suggest that information systems which improve information availability and accuracy can help a firm to establish a cost efficient, that means lean, supply chain and thereby increase supply chain performance. A lean supply chain strategy is achieved by decreasing inventory, waste, lead time and moreover establishing economies of scale and standardization (Qrunfleh & Monideepa, 2012; Mithas et al., 2012).


Excerpt out of 23 pages


Influences of Information Technology on Supply Chain Performance
Otto Beisheim School of Management Vallendar  (Kuehne Foundation Chair of Logistics and Services Management)
Literature Seminar in Supply Chain Management
Catalog Number
ISBN (eBook)
ISBN (Book)
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557 KB
Supply Chain Management, information technology, supply chain performance
Quote paper
Inge Wedel (Author), 2012, Influences of Information Technology on Supply Chain Performance, Munich, GRIN Verlag,


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