Information Technology/Systems Applications

Author(s):

Robert M. Monczka, Ph.D.
Robert M. Monczka, Ph.D., Director, Global Procurement and Supply Chain Benchmarking Initiative, Professor of Strategic Sourcing Management, and The NAPM Professor, Michigan State University, East Lansing, MI 48824, 517/432-2086
Ernest L. Nichols, Jr., Ph.D.
Ernest L. Nichols, Jr., Ph.D., Assistant Professor and Associate Director of the FedEx Center for Cycle Time Research, The University of Memphis, Memphis, TN 38152, 901/678-4973
Robert B. Handfield, Ph.D.
Robert B. Handfield, Ph.D., Associate Professor of Purchasing and Operations Management, Michigan State University, East Lansing, MI 48824, 517/432-3514

81st Annual International Conference Proceedings - 1996 - Chicago, IL

Introduction. This paper provides an overview of the workshop session to be held during the 1996 NAPM International Purchasing Conference. This session will include brief presentations about purchasing and supply chain information technology/systems innovations and applications identified through the research activities of the Global Procurement and Supply Chain Benchmarking Initiative at Michigan State University and NAPM's Computer Information Systems and Technology group. In addition, two industry participants will provide insights into selected information systems applications at their firms.

Global Procurement And Supply Chain Benchmarking Initiative. The Global Procurement And Supply Chain Benchmarking Initiative (GPSCBI) at Michigan State University was established 1993. The group's objectives are to:

  • Identify the most advanced global procurement and supply chain management strategies and practices throughout the value/supply chain and across company boundaries, from product/service concept through product discontinuance
  • Identify future oriented global procurement and supply chain management strategies and practices to address emerging competitiveness issues
  • Establish performance data for key procurement and supply chain management effectiveness performance indictors
  • Establish linkages between global procurement and supply chain management strategies and approaches and measurable improvements
  • Develop a longitudinal set of performance and strategy information to identify "what really works", "what doesn't", and "why"
  • Establish and maintain a best-in-class reference library
  • Develop an electronically linked network of over 200 leading firms worldwide to participate in the ongoing research activities.

The following sections summarize preliminary results of the GPSCBI research as it relates to procurement information systems and technology.

Information Systems and Technology Strategies. About 120 companies responded to The Global Procurement and Supply Chain Electronic Benchmarking Network's (GEBN) pilot benchmarking questionnaire during September-December, 1994.

The pilot benchmarking questionnaire requested member companies to provide a detailed description of their most advanced procurement and supply chain strategies and practices being applied or planned.

Thirty-two responses addressed the application of information systems and information technologies (IS/IT) to sourcing and materials management activities. Twenty-one companies discussed implemented IS/IT strategies or practices and eleven pertained to planned IS/IT strategies or practices.

The IS/IT applications presented fell into three main categories: 1) Purchasing transactions systems (PTS), which automate some portion of the company's procurement process, 2) decision support systems (DSS), which are tools that provide assistance in specific sourcing decision-making areas, and 3) Electronic Data Interchange (EDI) linkages with the supply base.

Information Systems and Technology Strategy Drivers. The goals, objectives, and rationales that lead to a specific IS/IT strategy vary according to application type and company. However, several common themes are associated with each IS/IT application. Companies that have implemented or are planning to implement a PTS are usually concerned with reducing the time required to complete procurement transactions, improving the quality of the transactions, and reducing total cost. These companies are also interested in gathering information regarding the procurement process to support sourcing decision-making activities. The goals, objectives, and rationales driving DSS applications relate to providing sourcing decision-makers with the capabilities to make better decisions in a more timely manner within specific decision making areas. For example, one DSS application helps decision-makers assess the effects of inflation on the cost of purchased materials. For EDI applications, the reasons provided are similar to those for a PTS and typically relate to cost, time, and process quality improvement.

A primary objective common across IS/IT procurement applications is the desire to improve or "reengineer" current processes. Companies recognize that the application of IS/IT provides a means to do this. This perspective differs from a situation where the company is merely automating an existing process, because there is an intention to not only improve but to change the process. The IS/IT application is an important enabler of procurement re-engineering.

Critical Processes, Techniques, and Strategy Elements. Companies present a number of critical processes, techniques and elements associated with IS/IT strategies including:

  • IS/IT strategy linked to corporate and business unit objectives
  • IS/IT strategy linked with process re-engineering/improvement
  • Formal implementation plan
  • Formal make/buy and cost/benefit analysis for IS/IT application
  • Cross-functional design, development, and implementation
  • Senior management empowerment/support
  • Implementation plan addresses integration of new IS/IT application with existing systems
  • System utilizes a common part numbering scheme
  • Training provided to IS/IT users
  • System performance monitoring and correction

Results. Performance results vary by company and strategy with the most common results involving cost and time areas. Companies that implemented PTS or EDI applications have reduced the time and administrative costs required to support the procurement process. Companies that have implemented DSS have added capabilities that allow them to make better decisions and, in some cases, to pursue strategies that would have previously been too time-consuming. An example of this is the development of a company-wide, global parts data base that supports leveraging purchase volumes on a world-wide basis. Prior to implementing the data base the effort required to conduct this activity was prohibitive.

Critical Success Factors. A number of factors are critical to the success of IS/IT implementation these include:

  • Top management support
  • Acceptance by user groups of the IS/IT system
  • The use of cross-functional teams
  • Training

Future Plans. The primary thrust of future plans is the extension or refinement of an IS/IT application area. For example, a company with a PTS may extend it to include additional plant locations. Companies discussing EDI applications typically discuss increasing the percentage of suppliers that communicate via EDI or increasing the number of transaction sets utilized. As for DSS applications the responses typically address increasing the functionality of the specific DSS application.

Note: This paper provides partial development of the presentation to be made at the NAPM International Purchasing Conference. Additional public domain findings, specific examples and managerial implications resulting from the ongoing research activities of the Global Procurement and Supply Chain Benchmarking Initiative and the NAPM Computer Information Systems and Technology Group will be discussed during the workshop session.

REFERENCES

  1. The Global Procurement and Supply Chain Benchmarking Initiative at Michigan State University Brochure, 1995.
  2. Monczka, Robert M. and Research Associates, GEBN Pilot Module Analysis Report, East Lansing, MI: The Global Procurement and Supply Chain Benchmarking Initiative at Michigan State University, 1995.

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