Open Journal of Applied Sciences, 2012, 2, 298-301
doi:10.4236/ojapps.2012.24044 Published Online December 2012 (
Supply Chain Integration, a Chain of Efficient Utilization
of Information Technology: Its Benefits & Challenges
Regine Adele Ngono Fouda
Department of Logistic Management, Shanghai Maritime University, Shanghai, China
Received September 22, 2012; revised October 22, 2012; accepted November 10, 2012
Business renovation , effective utilization of information techno logy and the role of business process modeling are dealt
in supply chain integration projects. The main idea is to show how the performance of supply chain can be improved
with the integration of various tiers in the chain. Integration is preconditioned for efficient sharing and utilization of
information between diverse companies in the chain.
Keywords: Supply Chain Management; Supply Chain Integration; Benefits & Challenges; Business Process
Renovation; Simulations; Information Transfer System
1. Introduction
One of the major transformations in the rapidly evolving
digital economy occurs in the SCs of both traditio nal and
e-commerce companies. Information technology has en-
abled channel partners to trade goods, share information,
and integrate their processes, thereby reshaping the inter-
organizational dynamics and resulting in more efficient
channels. The power of inter-organizational information
systems (IOIS) is well known. It has proven to be effec-
tive for reducing transaction costs. Three progressive de-
grees of IOIS are transactional, operational, and strategic
(Seidmann and Sundararajan, 1998) [1]. This paper will
reveal how business process modeling (explicitly process
maps) can be used in order to develop such business
models that will lead to improve sharing of information.
Appropriate business processes are a prerequisite for the
strategic utilization of information. The mere implemen-
tation of new technology without changes in a com-
pany’s operation will realize only some of all the pos-
sible benefits. The rest therefore mainly deals with busi-
ness renovation and changes in business processes that
thus might improve the flow of information, as well as
their challenges. All the theoretical findings are illus-
trated in a company that deals with transport of their
product to their suppliers’ base.
2. Literature Review: SC Management as a
SCM is the management of interconnected businesses
network involved in the ultimate provision of product
and service packages required by end customers (Harland,
2.1. A Linked Set of Resources and Processes
This begins with the sourcing of raw materials and
widens to delivery of end items, to the customer (Bri-
dgefeld Grp ERP/SCGlossary, 2004).
2.2. The Integration of Key Business Process
SCM is “that key business processes from end user
through original suppliers that provide products, services,
and inform at i on…” (Cha n & Qi , 20 03).
2.3. SC Propagate & Enlarge Companies
Even though SC is often measured with the bullwhip
effect. Some companies have incomplete information
about the needs of others, however (Forrester, 1958-1961;
Holweg & Bicheno, 2002) have shown that production
peak can notably reduce by transmitting the information
directly to the manufactur er.
3. Current Situation: Overall Model of
Information Transfer in SC
Recent studies have emphasized the importance of in-
formation sharing within SC (e.g. Barrat, 2004; Lambert
and Cooper, 2000; Lau and Lee, 2000) [2], which shows
different changes as a result of using e-business.
3.1. Information Transfer in an SC
ICT has an important influence on dexterity between
Copyright © 2012 SciRes. OJAppS
R. A. N. FOUDA 299
companies, (Hengst and Sol, 2001). Internet by itself
demonstrates no benefits and has not decrease inventory
in any enterprise ( e.g. Slovenia’s) Paul Trkman , [3] 2000.
Gavirneri (2002) summarized findings that show reduc-
tions of costs between 0% and 35%.
3.2. E-Business Transfer as a Business
Process renovation is a re-engineering strategy that criti-
cally examines current business policies, practices and
procedures, rethinks them, then redesigns the mission-
critical products, processes, and services (Prasad, 1999).
The Internet enables companies of all sizes pursue inten-
sive and interactive relationships with their suppliers,
collaborating in new product range issues. E-business
represents a shift in changing traditional organizational
models, business, relationships and operational models
that have been dominant for the past 20 years. (Phipps,
2000). However, IT alone is not a panacea for all SC
problems. It was shown that electronic data interchange
(EDI) could reduce swings in inventory and safety stock
3.3. Business Renovator Goals
They remain a buzzword that brings back memories of
headcount reductions, budget cuts, facility closures, costly
consulting engagements and endless reorganizations that
destroy and confuse partners/customers (Davenport,
1993; Miller, 1994). For more, see Leavitt’s diamond in
Burke and Peppard, 1995. IT serves as a facilitator
through time saving and efficient application e.g. busi-
ness modeling and computer aided design tools (Chang,
2000); also, analysis and simulation, including, Com-
puter-Aided System Engineering (CASE) tools. At first,
Customer satisfaction would grow if one managed to
reduce costs, shorten execution times and increase ser-
vice, excluding therefore 3 goals.
3.4. Business Process Modeling
Venkatraman and Henderson (1998-2000) [4] defined
this as a co-ordinate plan to design strategy along three
vectors: customer interaction, asset configuration and
knowledge. There are several reasons producing this
(Eriksson and Penker, 2000): *A business process model
helps us understand the business: it’s to increase under-
standing and facilitate communication. *A business pro-
cess model is a basis for creating suitable information
systems: used in identifying info rmation systems needed.
*A business process model is a basis for improving the
current business structure and operation: used to identify
changes required to improve business. *A business pro-
cess model provides a polygon for experiments: used to
study the implications of business structure. *A business
process model acts as a basis for id entifying outsourcing
4. SC Integration: The Benefits That
Integrated SCs can benefit its major participants i.e. sup-
pliers, manufacturers, distributors and customers. Bene-
fits include increasing loyalty among partners, reduce in-
ventory, improved on-time delivery and increased flexi-
4.1. Initial Benefit
Here, integration grows deeper over time. The 1st benefit
is forming partnerships, thus trust among SC partners
solidifies, leading to cons istent predictable sourcing.
4.2. Forecasting
In addition to real-time tracking, companies begin to ex-
change planning data, thus Inventory management, ship-
ping and production schedules with goal of increasing
4.3. On time Delivery and Inventory
The SC center for advanced purchasing studies, said
companies that moved to an integrated SC reported 50%
increase in sales with 35% lower inventory.
4.4. Resilience
In chaotic times, true partnership, companies can quickly
adapt to changes without prolonged production or deli-
very gaps.
5. SC Integration: The Challenges That
The developed business model helps to understand the
current problems and also makes them more visible to all
decision-makers in both compan ies. Problems on tactical
level are: 1) the stock level cannot be measured accu-
rately since the tank always contains some water; 2)
communication between various departments and com-
panies is costly; and 3) the transport company’s trucks
are not fully utilized. However, strategic level has bigger
problems: 1) The flow of information in the process is
slow and costly; 2) Human limitations prevent the deci-
sion-maker from using all available information (e.g.
stock levels); 3) Each member in the chain is trying to
attain its local optimum instead of the global chain’s op-
timization; 4) Companies in the SC may not be primed to
share their production data, lead times; (Terzi and Cava-
lieri, 2004) [5] indeed, lack of trust between partners is
Copyright © 2012 SciRes. OJAppS
one of the main barriers to collaboration (Barrat, 2004;
[6,7] Ireland and Bruce, 2000); 5) Asymmetric distribu-
tion of costs and benefits: since substantial investments
are needed from both sides, but the transporter realizes
less benefits, while taking on new responsibilities, risks
and a more strategic role in the process. Thus, the finan-
cial compensation plan for its services also has to be
changed from previous system that was based on number
and punctuality of deliveries to the final customer and
average inventory costs; 6) Different organizational cul-
tures and leadership styles; and 7) A new way of thinking:
since employees will have to seek solutions on the SC
global instead of local optima and learn to cooperate
closer with its supplier/buyer. Business modeling plays
the role of a facilitator of changes (Bay, Tang and Bennet,
2004; [8] Burgess, 1998; Kidd, Richter and Li, 2003).
6. Case Study & Results of a Specific Field
Based on the mentioned problems, several improvements
were proposed. The main change is that the processes at
both companies are now integrated and the supplier takes
responsibility for the whole procurement process. There-
fore, a renewed business model is perceived.
6.1. Case Study
This case study can be found with explicit details in
(Aleš Groznik and Mujkic, 2005) [9]. This case deals
with the fulfillment/procurement process in SC that con-
tains a Petrol Company (with multiple fuel stations at
different locations) and the supplier that transports the
fuel to the stations from a few larger warehouses. The
main goals are similar to the usual SC goals: to offer
good service to the final customer, while keeping costs
and lead-times low. The main cost of drivers is thus:
number of stock-outs, stock level at the fuel station and
process execution costs. The description of the current
process is as follows: the stock level is measured manu-
ally once a day. Results are faxed to the purchasing de-
partment that collects information from all fuel stations.
It predicts future demand, while taking seasonal and cy-
clical actions into account. Additional consultation with
the fuel station manager is possible, if needed. The needs
of several fuel stations are merged into one order. Tacit
employee knowledge is used to make and optimize or-
ders and transport routes. The analytical department con-
trols possible changes in demand and supply patterns and
transport routes. If required, it can adjust or cancel orders.
After that, the order is sent to the tran spor t comp an y. Th e
order has to be fulfilled with the available fleet, but can-
not be modified. Financial compensation is paid to the
transporter on the number of miles driven, fuel delivered
and punctuality of deliveries. While the description fo-
cuses on one typical fuel station, the inputs from other
stations are also taken into account at various points in
the model. Most importantly, the capacity of each truck
is considerably higher than the needs of one station so
orders from different stations are usually merged into one.
Obviously this is a specific case study with a standar-
dized product and only one supplier so the results cannot
be generalized to other industries without caution. The
main findings are however relevant to most SCs regard-
less of the industry. Based on the process described in
this study, an AS-IS model was developed. Process maps
(standard method for modeling and analyzing in business
renovation) were used for visualization of the model.
Here, employees can be quickly taught how to develop/
validate these models (Chen, 1999). They enable analy-
ses of the costs and time needed for the process (Indihar
Stemberger, Jaklic and Popovic, 2004). The Igrafx Pro-
cess 2003 with a graphical user interface was used—such
interface enables an easy understanding of everything
involved in the project (Bosilj-Vuksic, Indihar Stember-
ger, Jaklic and Kovacic, 2002) [10].
6.2. Results of the Business Process Modeling
Although all phases are supported by IT, deep structural
changes were needed to fully realize the potential bene-
fits. Some of the proposed changes can be described with
the popular buzz-word “vendor-managed inventory”
(VMI), others with material requirements planning, data
mining, operations research and generally SCM. How-
ever, it’s the interconnection of those changes that bring
the desired benefits. The chief idea is that the transport
company takes a strategic role in providing a sufficient
inventory to fulfill the demand of the end customer. It
takes all important decisions regarding orders in order to
realize this goal. The main proposed changes ar e: 1) The
measurement of the product is now fully automatic; 2)
The stock levels from all fuel stations are instantly
available to the transport company; 3) Future demand is
predicted using the model based on neural networks; 4)
The system at the transport company automatically iden-
tifies the current levels of stock, predicted future needs
and suggests possible orders and delivery among differ-
ent petrol stations; 5) The final decision is made and ap-
proved daily by an employee in the transport company; 6)
Operation research methods (e.g. the vehicle routing
problem) are used to optimize transportation paths and
times (see Gayialis and Tatsiopoulos 2004); and 7) In a
long-term, the locations of the warehouses can also be
optimized to bring further reduction in costs and trans-
portation times. Further advantages not directly visible
include: 1) Due to the use of optimization methods with
full information available the transport is more efficient;
2) the predictions of future demand are considerably im-
proved tacitly. The role of IT in all these suggestions is
Copyright © 2012 SciRes. OJAppS
Copyright © 2012 SciRes. OJAppS
crucial. An automatic system for the measurement and
communication of current levels of stocks at all stations,
neural networks, computer-assisted operation research
methods etc. enable the changes. While it becomes pos-
sible to develop an information system to support the
AS-IS model, it would be much more beneficial to do so
for a renewed model.
7. Recommendation & Conclusion
After all the adequate benefits & challenges, integrated
SCs are not ubiquitous at this time, thus cases of failures
and breakdowns. During this research, some main keys
were established for a brighter network process in SC
7.1. Recommendation
The 1st is to set up how financial & non-financial results
will improve SC integration. The 2nd is developing peo-
ple, culture & an organization that support the SC v ision.
The 3rd is establishing the correct positioning of work on
a global basis. The 4th is to incorporate SC consideration
into product & service design decisions. The 5th is main-
taining sourcing as a first-level p riority. The 6th is to stay
focused & consistent in relationships with customers &
suppliers. The 7th is to create an effective Sales & Opera-
tion process. The 8th is to develop valid & reliable data-
bases & information. The 9th is to develop the capabili-
ties & analytic tools to make effective decisions in an
increasingly complex & risky environment. The 10th is to
build trust within & across organizations in the supply
chain. The 11th is to find ways to share risk equitably
among SC partners. The 12th is to truly share rewards
equitably among SC partners.
7.2. Conclusion
In this paper, one analyzed the main aspects needed for
the successful renovation, integration and operation of
SC (This research does not grant all of the answers to
overcome these challenges to integrating SCs or even a
comprehensive approach for doing so. Nevertheless, one
can find strategies & good practices developed by spot-
light companies to meet these challenges & to push
ahead in integrating SC). The core idea is that the suc-
cessful implementation of SC integration projects is not
as much a technological problem and that a thorough
study of the current and desired states of business pro-
cesses in all companies involved is required. The case
study showed a two-phased approach to estimate the dif-
ferent challenges & benefits of business process renova-
tion with the use of simulations. The tran sfer of informa-
tion transports important advantages in process costs and
lead-times, while the resulting possibility of smaller and
more frequent orders means reduced inventory costs.
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List of Acronyms
SC: Supply Chain
SCs: Supply Chains
IOIS: Inter-Organizational Information Systems