Information sharing in the supply chain – Part 1: The IT infrastructure

Due to a combination of recent technological developments (such as smartphones/tablets, wireless internet -WIFI, 4G-, social media, cloud computing and less expensive storage capacity) access to information has increased and sharing of information has been simplified. This has lead to an enormous increase in worldwide information flows over the past few years – a trend that is likely to continue for the foreseeable future.

However, without a well-organized informational infrastructure (informational processes, policies concerning information sharing, information systems and governance structure), the ever increasing flow of information will either result in organizations suffering from leakage of valuable information or an overload of information. On the other hand, organizations that proactively organize their informational infrastructure in alignment with their corporate governance and strategy may be able to capture the many benefits of the increased access to and sharing of information.

For many organizations, the technological developments mentioned above have opened doors to new levels of internal and external collaboration through the greater exchange of information. An example of this is the so-called Control Tower. Control Towers are cross-divisional organizations with system integrated “information hubs” that provide increased visibility into the supply chain. In such a cross-divisional organization, individuals continuously monitor and distribute filtered and integrated real-time information, which is collected internally from several systems within their own organizations and externally from organizations throughout the supply chain. This information enables individuals to detect and act on risks or opportunities more quickly. In addition to the flow of information, many organizations store a lot of this (partly publicly available) information. Smart use of this ‘Big Data’ may lead to competitive advantages for organizations. Of course, to realize these benefits, organizations will need individuals with the right analytical skill set. A rise in the prevalence of technology enabled systems and big data will therefore lead to a rise in the demand for individuals with the right analytical skills to leverage these trends.

IT-infrastructure
The Control Tower is only one example of an initiative that an organization can undertake to integrate information from multiple sources - there are many more. However, any initiative must first overcome several technical barriers that exist due to the fact that most organizations have their own enterprise applications and data. The figure below depicts a simplified, high-level view of an organization’s IT-infrastructure. In the center you can see the orchestration of services which is responsible for integration of front-end services and ERP systems, such as SAP and Oracle. The pillar on the left represents security services like authentication and system security. On the right, another pillar represents the equally important governance services. This category includes services such as user support and supplier services.

The high number of different software packages used within many organizations today makes aligning these systems a complex task. This becomes even more difficult when organizations want to integrate the systems of their supply chain partners into their own IT-infrastructure. In general terms, there are two basic approaches to handling the problem of integrations of multiple systems:

1)      New organizations (or departments within an organization) are created that are specialized in interfacing. These organizations integrate several systems by using middleware and display all relevant information for the end-user in one portal.

2)      Software vendors provide solutions by extending their software packages. For example, a vendor that is specialized in S2P software extends its software package with modules such as planning and inventory management.

Over the coming years, the first approach is likely to outgrow the second because most software vendors are specialized in certain modules and lack the expertise to develop other modules (especially over the short term). Additionally, many organizations prefer the relatively easy implementation of middleware over implementing a complete new software package throughout the whole organization. This is mostly because the former has less impact on departments while the latter presents many challenges. This is especially true when organization’s current software packages are working properly and individuals are comfortable with the current state.

Finally, a possible third approach may develop over time: software vendors may collaborate or even merge in order to offer a more complete solution offering. Examples of this approach include SAP, which acquired Ariba, and IBM which acquired Emptoris. By doing so, these vendors offer a more extensive solution set for organizations while at the same time overcome any knowledge gaps that may exist.

Information sharing process

IT-infrastructure is very important but it is merely an enabler for information exchange. Assuming that the technical solution is in place, several other hurdles may appear in sharing information. These problems may show up when internally sharing information, but especially appear when information sharing takes place outside the boundaries of the organization.

Taking a closer look at externally exchanged information, it is easy to identify two distinct types: horizontal and vertical information sharing. Horizontal means sharing information with other organizations that are complementing each other (e.g., Philips and Douwe Egberts) or with competitors. Vertical sharing means sharing with your suppliers and /or customers. Although there are many advantages to exchanging information with buyers and suppliers, organizations are often hesitant to exchange certain types of information.

The remainder of this series of posts concerns the vertical information sharing process. What types of information is exchanged between buyers and suppliers? Which goals serve the exchange of certain types of information? Why is information sometimes not shared even though it obviously will result in an increase in profitability? And last but not least, what can we do to control the information sharing process in order to maximize profit? In the second part of this series, we will focus on the types of information that can be exchanged and how this may lead to benefits for organizations. The third post of this series elaborates on understanding the information exchange process itself. Here we take a closer look at the factors that drive information sharing and try to understand why or why not organizations choose to share information. Finally, in the fourth and final post of this series, we’ll share some advice for optimizing the exchange of information as well as some of the pitfalls that organizations often face.