IS and IT are the back bone of any organization and have a very strong control over the financial performance and productivity of an organization. The Information System hyped up, to become a key contributor to a business as the requirement of software and hardware systems to provide adequate technology to run a business increased. The implementation of the Information System has always been a tedious task, considering the fact that a minor flaw or downtime can cause a loss of millions to business and can lead to so major customer dissatisfaction.
CIOs (Chief Information Officers) across organizations are always attempting to achieve a smooth transition, procurement and implementation of Information Systems however there are different strategies which are in place, for different organizations, depending on the industry type and the kind of role that they possess. This research will highlight some of the key determinants of a successful IS within organizations and will use the example of the Saudi Arabian supply chain maret to prove its utility. It will also also present suitable data, from the perspective of outsourcing the IS and the benefits that can be drawn from the same, including the drawbacks.
The adoption and use of new technologies, especially information technology (IS), is of crucial importance for the competitiveness of companies in many countries (Caldeira & Ward 2002); for example European SMEs (Oke, Burke & Myers 2007), American companies (Garavan & McGuire 2001), and that have led to positive sales turnover growth. SMEs in East Asian countries (Kyobe 2004) and SMEs in Taiwan (Lin & Chen 2007) that have showed that through overseas investment the company performs more efficiently in terms of sales because competing in an international arena challenges the company to become more innovative. Bakos and Treacy (1986) state that technology offers a greater range of compatibilities at lower costs and technology is challenging the business environment for economic aspects via information technology. This is because information technology can benefit the organisation, both internally, such as communication via an intranet that people in the same organisation can contact each other; and externally such as the Internet via email (Gerstein & Reisman 1982).
This is because both IS business experience and relationship infrastructure helps organizations to successfully set up IS resources to pursue advantages and business opportunities. Furthermore, Ravichandran and Lertwongsatien(2002) state that there is an importance for IS to provide firms with a competitive advantage. Researchers have posited that firms are required to make choices on how technology resources are deployed in using IS capability. This enhances core competencies because it is likely to be dependent on IS functional capabilities, taking into consideration the strategic powers of the organization.
Other barriers that hinder the use of information technology in organisations include: 1) ignorance of information technology by senior management; 2) poor communication systems within the organisation; 3) resistance to change by people in the organisation; 4) lack of knowledge about information technology in the organisation; and 5) a lack of instruments to measure benefits (Robbins et al. 2003). However, using technologies in organisations has many advantages as stated earlier. Additionally, according to Davenport and James (Davenport & James 1990), will help redesign the work flow in the organisation and could lead to cost reduction, time reduction, output quality, and quality of work life.
In terms of capability definition, Amit and Schoemaker(1993, p. 35), refers capabilities to a “firm’s capacity to deploy resources”. Sabherwal and Kris (1994) defined IS capabilities as the scope to which the technology required for manipulation, storage, and communication of information are offered within the organisation. Bharadwaj(2000, p. 171), cited by 1339 researchers, defined a firm’s IS capabilities as “the ability to mobilize and deploy IS-based resources in combination or co-present with other resources and capabilities.” These definitions show the contribution of capability in combination with IS, firm, and resources.
Ravichandran and Lertwongsatien (2005), found a gap in the literature regarding the relationship between information systems or information technology resources and capabilities, which had not been fully examined. The researchers explored this gap by examining the relationship between IS resources and IS capabilities to provide a better understanding of how resources could be deployed to develop capabilities. They state that there is a positive relationship between IS functional capabilities and IS support for competencies. This shows the importance of firm’s resources in deploying IS within the firm. For example, many have argued that the success that Wal-Mart achieved in competitive advantage over time is from the ideal integration between its business practices and IS use (Ravichandran, T. & Lertwongsatien 2005).
Information system or information technology effectiveness can be defined as “the extent to which the information system actually contributes to achieving organisational goals” (Thong & Yap 1996, p. 252).
In summary, technology has been classified into three types: traditional technology (Drejer, Anders 2000), actual technology (Drejer, Anders 2000), and information technology (Kelley & Rice 2002). Different organisations may decide to utilise different types of technology depending on the type of business and requirements of business to acquire technology. Some organisations, such as this research, which will focus on the role of information technology in the supply chain, may use only one type of technology because it will focus on the information technology in term of computers and the Internet, and includes applications or software for computers while other organisations may use two or more in combination. A better understanding of the term ‘information technology’ can be made through understanding the role of information technology in the other entities, TPL providers, petrol stations, oil supply chain, petrol supply chain, and Saudi Arabia, which will be discussed in the next sections of this chapter.
In term of accuracy of prediction in petrol companies Groznik and Trkman(2006) and Jaklic et al. (2006), state that the use of technology, specifically artificial neural networks (ANN), a system based on algorithms used for predication such as accurate prediction and replenishment, will help to reduce petrol companies' costs by 70% in terms of inventory and petrol supply due to accurate predictions. This can be achieved through applications such as the Continuous Replenishment Program, which is based on ANN, where the data about past sales, daily and weekly trends, season, prices, promotions, and weather conditions are included in predictions.
Xiaoxu and Qi (2008) found in their research that the members in the supply chain can maintain customer satisfaction with decreasing inventory processby using eXtensibleMarkup Language (XML) systems. This is a system interface for sharing information between members of a supply chain, which can be called the key to achieving quick response (Xiaoxu & Qi 2008). The life cycle from issuing an order until receiving the goods is called lead-time in the supply chain process. Sharing information by using the application of Quick Response (QR) systems, which is a supply chain management method to respond to customers and retailers quickly and facilitate information sharing, to reduce the uncertainty of time delays in the order cycle. Therefore, members in the supply chain can enhance customer satisfaction with lower inventory processes(Xiaoxu & Qi 2008).
Jaklic, et al. (2006) found that the use of traditional communication between departments and companies such as the telephone and fax machines in terms of information flow are slow and costly. Furthermore, in terms of logistics, they found that the trucks of petrol transportation companies were not fully utilized and that transportation was not optimized. As a result both the inventory levels and transportation costs were considerably higher than needed. They did, however, find a significant improvement in petrol supply processes via IS. Moreover, by using technology in petrol transportation the transport company was not considered as a transporter of petrol but rather as a strategic partner in providing services to customers (petrol stations), because the transporter would know the forecasted demand for each petrol station of the contracted stations through an integrated system between petrol stations and the transporter. This will help the transporter to supply petrol stations by petrol on time and by the right quantity and fill the capacity of trucks based on the needed petrol, which leads to maximising the fulfilment of a trucks capacity as well.Jaklic, et al. (2006) highlight that sharing information allows for improved customer service, shortened process cycle times, decreased utilization of resources, reductions of the "bullwhip" effect, and improved decision making, all of which provides globally optimal solutions and reduced inventory costs.
It is expected that IS is likely to become increasingly important as a user-requirement of logisitics service providers (Burns, Warren & Cook 2001). IS as a concept of core competence in organisations and logistics service providers is becoming important in helping organisations achieve competetive advantage. Therefore, an understanding of IS is required for this study.
IT is utilized to reengineer business processes, improve process flexibility, integrate supply chains and advance the efficiency of logistics. Concerning the reengineering of the business process, “the internal and external process such as, product improvement, product distribution, suppliers and markets, and inter-organizational relationship especially in global manufacturing environment need to be integrated. IS is an important element in such integration, for example, the techniques as time-based analysis, systems re-engineering tools and IS can be applied to supply chain management” (Gunasekaran & Nath 1997, p. 93).
There are various examples on the importance of IS support for core competencies in Dell and how Dell benefited from integrating IS systems to support its direct selling business model. Similarly, over the years Wal-Mart targeted IS to improve its inventory management, procurement and logistics, to cover the needs of its different stores. Many have argued that the success that Wal-Mart achieved in competitive advantage over time is from the ideal integration between its business practices and IS use.
Boeing as an example of success in using sophisticated computing-aided design platforms, whereby IS helps the company to collaborate with all specialists related to the aircraft industry based on IS systems to achieve cost-savings, add-value and decrease lead time in contacting and satisfying its customers. For example, CATIA, a collaborative 3D-design platform that allows engineers worldwide to collaborate on the design of each part of the 787 aircraft, helped the firm to finalize the design without creating a physical model which leads Boeing to be the final assembler and integrator, rather than building much of the aircraft from scratch.
Based on the above criteria, the researcher will investigate the role of IS in the technology supply chain taking into consideration the right capability, to achieve competitive advantage and customer satisfaction. Right capabilities will be explored through interviews and participant’s observations who will state from their experience the right capabilities which fit their firms.
Since the objective of this study is to explore the role of IS in technology supply chain, one of the basic entities in petrol station supply chain is petrol procurement. The next entity in this literature analysis is to understand the readiness of using e-commerce in developing countries.
Oxley and Yeung(2001) state, that countries with strong rule of law, which refers to countries with sound political institutions, a strong court system, and an orderly succession of power will increase the trust of people in using e-commerce. Moreover, traditional financial intermediaries such as credit card companies play a big role in trust, as they monitor and provide benefits of trust to both the buyer and seller. Physical infrastructure is another important element in trust when adopting e-commerce. The lack of access to personal computers or the unreasonable high cost of internet connections hinders the use of e-commerce. As stated in Oxley and Yeung(2001), the cost of internet access is a significant issue and much attention has been paid to the high telecommunication charges in many countries and the barrier that these pose to internet use.
IS infrastructure and core competencies are further important entities that should be investigated in this study because core competencies and IS infrastructure help organisations to determine the beneficial resources, either internal or external resources, to achieve a competitive advantage. Weill (1992, p. 8) defined IS infrastructure by combining the literature and his empirical observations from the perspective of firms’ managers as “the base foundation of IS capability budgeted for and provided by the information systems function and shared across multiple business units or functional areas. The IS capability includes both the technical and managerial expertise required to provide reliable services.”
Technologists state that IS infrastructure flexibility is an enabler of core competencies, which is closely related to competitive advantage. By enabling the competencies, the significance of IS,specifically IS infrastructure, should be recognised.
It is usually pinpointed that the flexibility of IS infrastructure eases integration of new technologies within existing platforms, which allows the IS unit to deliver quick cost savings. This is because a flexible IS infrastructure develops the organisation’s ability to deliver technical solutions rapidly and more efficiently. For example, platform readiness for new software, easy access to relevant data, and the presence of essential networking systems helps a firm to provide faster, more cost-effective IS solutions to end-users (Ravichandran, T. & Lertwongsatien 2005).
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