Information sharing model and electronic data exchange in supply chain management

Abstract

Inter-enterprise information systems are seen by many businesses as a way to mitigate the effects of increased demand. The key advantage of information exchange is that it helps to reduce the bullwhip effect, which can distort demand information and increase associated supply chain costs when it occurs. The exchange of information between suppliers and customers can provide a source of competitive advantage for both. Since the implementation of just-in-time (JIT) manufacturing by US companies, electronic data exchange (EDI) has been used to send critical pieces of information between businesses. Manufacturing and service industries typically use this data exchange mechanism to communicate inventory reordering and purchasing information. Only through the restructuring of business process channels will an organization be able to reach its full potential to improve its performance. While automation of operations in the supply chain will have little impact on performance, the overall nature of the process will have a significant impact on performance. Many authors now argue that firms must change their business operations to take advantage of the cost reductions made possible by new technologies. According to a recent study, sticking to just one philosophy or technology will have little impact on a businesss performance unless the firm’'s infrastructure practices are taken into account.