Information Systems and the Supply Process

Information Systems and the Supply Process


Information systems include interconnected components that collect, process, and store raw data and distribute information to support decision making, control and coordination within an organization.  While information systems can be manual (paper based), most information systems rely on information technology infrastructure, consisting of hardware and software, to operate its information systems.


To determine which information systems might be used to support or enable efficient and effective processes, it is important to understand (1) the benefits of technology, (2) the technology options that provide these benefits, and (3) the trade-offs in costs and benefits when choosing technology.


  • Benefits of Information Systems Technology
    • Cost Reduction and efficiency gains – one must streamline process and fit the system in such a manner that it works will with the process.
    • Data accessibility – one needs quick and easy access to data and information for decision making and negotiations.
    • Speedier communication – help to better manage the supply chain and do it in a cost effective manner.
    • Dedicate resources to strategic issues – more resources are freed up to handle more strategic procurement issues.
    • Data accuracy – lowers admin costs and improves customer satisfaction.
    • Systems Integration – help with production planning, inventory, and decision making all along the supply chain.
    • Monetary control – provide control over how and where the money is spent.
  • Technology Options
    • Software – One needs operating system software to connect a computer and its components, as well as application software to manipulate data for a specific purpose.  Applications software can be onsite (software installed on the computers at the organization) or on-demand (also known as software as a service, or SaaS).  SaaS software is applications software on a remote server that is accessed by multiple users through the Internet.  Users pay a subscription fee for the service.


The benefits of any system, including ERP systems, have to be weighed against the costs and challenges of implanting a new system.


  • Types of Information Systems – four types
    • Operational Level Systems – systems that process data for routine operations such as generating Pos, change orders, RFQs, updating supplier lists, and maintaining commodity prices and supplier history files.
    • Management Level Systems – consist of management information systems (MIS) and decision support systems (DSS).
      • Management Information Systems (MIS) provide reports and information to management to support planning, controlling, and decision making.
      • Decision Support Systems (DSS) process data to assist in decision making.  DSS incorporate information into an analytical framework utilizing techniques such as mathematical relationships, simulations, or other algorithms.  The outcome is definitive in nature and present the results in either a deterministic or probabilistic fashion
      • Knowledge Level Systems (KLS) integrate buyer workstations into a number of elements to create a total systems package that can result in increased effectiveness and productivity.  The ideal technical components of buyer workstation include (1) an automated transaction system, linked to the company’s databases, which perform routine supply activities; (2) access to decision-support software; (3) an expert systems element; and (4) personal productivity improvement software, word processing, spreadsheets, graphics, and database managers.
      • Global databases allow for the consolidation of volumes and sourcing strategy.  Global databases, while expensive, allow for shared information world wide on customers and the supply chain.
    • Intranets and Extranets – The Internet is used by supply professionals to search, retrieve, and read computer files world-wide; exchange e-mail and text messages globally; search databases; access government sources; and search and purchase items form electronic catalogs, suppliers, and distributors.  An intranet is a single and widely accessible (internal company users) network set up to share information and communicate with company employees.  An extranet is a private intranet that is extended to authorized users outside the company, such as suppliers.  Extranets improve supply chain coordination by allowing suppliers (through a Web-based interface) to link into a customer’s systems to perform any number of activities such as checking inventory levels, the status of invoices, and submitting quotes.