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Strategic Use of Information

  • Oct. 12, 2020, 12:07 p.m.
  • Technology

We are living in an amazing era of technology-driven transformation that redefined how business organizations operate different functions to buy, sell, market, communicate and collaborate, all happening in really short period of time. Today more and more businesses are relaying on rich market data to obtain information about sells to predict product demand and control business operations based on real time data. Companies like Google, Amazon, Netflix, and Spotify are few of 1000’s of fast-growing companies that continue to leverage technology to gain more insights from the data they collect through their customer. Now think about the impact of technology on supply chain management. A supply chain is the heart of organization’s operations. It’s a network of business partners like manufacturers, suppliers, distributors, and retailers who all work together to fulfill the consumers demand of product and services. Tech advancement, which enable information availability made it possible to create transparency and integration within members of supply chain. In this blog, we will see the impact of information sharing on supply chain on retail business and related chain members. We will also examine how it relates to Porter’s Five Competitive Forces model.

It’s true that supply chain management is already a complex process and keeping information secure is challenging for many organization but if the organization keep Five Elements of Porter's Competitive Forces Model in mind and design their strategy to deal with these forces in long run, Supply chain management process will become comparatively easy and more transparent to the organizations. Decision maker should be aware about the information leakage issue and must carefully plan the strategy of how to share information with different members of supply chain. As we know that Supplier and consumer both have power to bargain and there are many competitors out there seeking for such information to achieve their own success goals, keeping information secure, is crucial for all members of supply chain management.

Another study of the impact of shared information on supply chain management discovered that it provides capabilities to retailers and suppliers to deliver goods faster and keep inventories lower. In this study, two Stanford Business School professor Seungjin Whang and Hau L. Lee conducted a study and try to figure out what data should be shared and what should be kept secret. They mention one strategy of information sharing in supply chain is through vendor-managed inventory. For example, Walmart share its weekly sales information to supplier like P&G, which would then manage the inventory at Wal-Mart. This way retailer like Walmart can lessen information distortion in a supply chain and lower inventory. "If the supplier doesn't perform, it pays a penalty," explained Whang. Supplier would also take benefit with shared sales data and can better manage production schedules. At the end, Lee and Whang suggested some precautionary tips that data-sharing partners should keep in mind. There first guidance is to be careful when sharing cost related sell information with supply chain members. If supplier or consumer have the price data or cost related information, they can ask to lower down the prices which eventually impact erode profits. They also suggested to keep confidentiality on top priority. Consider a scenario where a supplier provides a critical part to two competing manufacturers, the supplier should be committed to not share sells data with other manufacturer. The situation becomes tricky if the supplier and one of the two manufacturers are the same company.  The 3rd tip from Lee and Whang is that information sharing can lead to a violation of antitrust regulations. Here they alert the suppliers to not misuse the retailer’s critical data. Else antitrust authorities are likely to scrutinize such practices. Another challenge is developing a fair cross-organizational information system which is expensive, time-consuming, and risky task. Lastly, Lee and Whang recommend to share information in timely and accurate manner.

In my perspective, these tips can be help organization to improve process of securely sharing information in supply chain management. As we know from Porter's Competitive Forces Model that consumer and supplier both have bargaining power, it’s very important to take precautions when sharing sensitive cost data. Another important point to note here is supplier’s ability to predict future promotional campaign of their retailors via the information they receive regularly from retailor. If supplier share it to other retailor, it may be used as a price-fixing instrument which ultimately will create pressure from competitor (which is one from Porter’s five forces) on organization. 

In today’s volatile global economy, Sharing information securely and smartly is key of success for organizations participating in supply chain management. Due to the growing number of sources, these organization collects vast verity of data every day, Data can be processed to gain valuable insights. If these organizations carefully plan their strategies using market rich data, they can excel in their domain. While planning their strategies, it’s important to know how porter’s five forces effect their business and should calculate the profitability of the business based on that.  

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