With low inventories of finished goods and lean manufacturing processes, organizations are more likely to innovate new products that are in line with emerging needs and market tastes and preferences. Lean manufacturing processes make organizations more flexible, the result of which is that they are able to act in a rationally adaptive manner. For organizations holding huge inventories of finished goods, innovation is highly unlikely since the introduction of newer products is likely to lead to sales cannibalization of the existing inventories of finished goods and occasion huge obsolescence costs.
To that extent, supply chain management also helps facilitate innovation capabilities in an organization, on the basis of which the organization can differentiate itself and attain sustainable competitive advantages. Implementation of paperless operations, which has been identified as one element of demand side integration also delivers real and tangible value to organizations. Electronic Data Interchanges (EDI) for example help to link organizations with external partners who are crucial to the success of the organization, such as suppliers and customers.
They facilitate real-time collaboration and sharing of information between these partners and across the supply chain, thereby enhancing the availability and accessibility of information. According to Frohlich and Westbrook (2003, p. 730) “Distorted information from one end of the supply chain to the other can lead to tremendous inefficiencies: excess inventory investment, poor customer service, lost revenues, misguided capacity plans, ineffective transportation and missed production schedules.
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” Implementation of enterprise-wide systems that enable organizations across the supply chain to share information on a real-time basis and to collaborate results into high quality information that helps to avoid the adverse impacts of distorted communication (Donovan, 2004). By implementing such systems, suppliers are in a position to monitor the movement of the organization’s inventory and to determine, on a real-time basis, whether and when the organization is running out of stock.
Accordingly, they are able to automatically replenish the inventories as and when required, thus avoiding out-of-stock situations and the costs such situations entail (Donovan, 2004). According to Frohlich and Westbrook (2003), paperless systems also cut down on paperwork, which reduces costs and enhances the quality of information (it leads to greater accuracy by eliminating human error, since manual inputting of data is minimized). Automation results in less people being required to do the same amount of work, which also results in huge administrative cost savings.
Yet another element that has been explicitly acknowledged in the definition of supply chain management, and which has been identified by DeTreville, Shapiro and Hameri, (2003) as a supply side factor is the reduction of the supplier base. According to Donovan (2004), by reducing the number of their suppliers, supply chain management helps organizations to more efficiently manage their supplier relationships and leads to close r collaboration between the organization and suppliers.
The result of this collaboration is that the partners help each other improve product and material quality and organizational processes (Donovan, 2004). Examples abound of how the implementation of paperless operations have added value to organizations. One such example is that of organizations operating within the automobile industry. According to IBM (2007), by implementing computerized information systems, automobile makers have been able to enhance their effectiveness and efficiency.
According to IBM (2007), automobile makers operate in an industry which has in recent times been characterised by a shortening of the product life cycle and shifting tastes and preferences of the consumers. As a result, the need for the automobile makers to be both demand-driven and cost efficient has never been greater. To be successful in the industry therefore, IBM (2007) points out that automobile manufacturers need to boost the throughput of their factories, cut down on costs while eliminating or reducing wastes to the bare minimum, and attain high levels of efficiency across their supply chains.
By implementing the automated systems which have facilitated linkages with numerous suppliers, IBM (2007) writes that the manufacturers have been able to attain higher levels of productivity. The systems have led to enhanced access to information, thereby raising supply chain visibility and responsiveness. Additionally, the systems have enabled the automobile manufacturers to speed up the diagnosis and resolution of problems (resulting in better customer satisfaction, another potential point of differentiation), and sharply cut down waste at the automobile manufacturers. They have also brought about the generation of timely.