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Tesco uses its Tesco Information Exchange system to closely monitor sales and stock levels at its branches in real-time. This allows Tesco's suppliers to also monitor demand and better plan their production and deliveries, improving supply chain management and costs. Zara is able to produce fashion clothing in as little as 2-8 weeks from design to distribution using IT. This allows Zara to constantly refresh its inventory with the latest styles. Dell is known for its just-in-time inventory system where it builds computers after receiving customers' orders on its website, minimizing inventory costs.
Tesco uses its Tesco Information Exchange system to closely monitor sales and stock levels at its branches in real-time. This allows Tesco's suppliers to also monitor demand and better plan their production and deliveries, improving supply chain management and costs. Zara is able to produce fashion clothing in as little as 2-8 weeks from design to distribution using IT. This allows Zara to constantly refresh its inventory with the latest styles. Dell is known for its just-in-time inventory system where it builds computers after receiving customers' orders on its website, minimizing inventory costs.
Tesco uses its Tesco Information Exchange system to closely monitor sales and stock levels at its branches in real-time. This allows Tesco's suppliers to also monitor demand and better plan their production and deliveries, improving supply chain management and costs. Zara is able to produce fashion clothing in as little as 2-8 weeks from design to distribution using IT. This allows Zara to constantly refresh its inventory with the latest styles. Dell is known for its just-in-time inventory system where it builds computers after receiving customers' orders on its website, minimizing inventory costs.
In this assignment I have explain the uses of strategic uses of
information technology THE STRATEGIC USE OF IT The Paper P3 syllabus contains an important section titled Information technology. Three sub-sections of that section refer to e-business applications: e-business application: upstream supply chain management e-business application: donstream supply chain management e-business application: customer relationship management. !lthough it is useful to categories e-business applications in this ay" you ill reali#e that it can represent an over-simpli$cation of hat happens in real life as the categories can interact and overlap. %or example" donstream supply chain management &basically" the sales side' ill be closely related to customer relationship management. (imilarly" some of the most successful modern businesses or) very hard to lin) closely the donside and upstream &purchasing and production' sides of their operations. *hen analy#ing or advising on the use of IT by businesses you should alays try to ma)e use of theories" models or frameor)s. (ome of these are fundamental to any discussion of business strategy+ some are more focused on the use of IT. The theory and frameor)s hich I ill refer to are: The value chain ,eneric strategies -ichael .arls analysis of ho organi#ations use of e-business evolves. *e ill start ith brief revision of each of these models" then e ill loo) at some real-life examples of ho companies have employed IT" relating their use bac) to models as appropriate. The value chain The value chain sets out all the groups of activities that a business performs" and see)s to identify hat the business does to give it the right and ability to earn pro$ts. The value chain is therefore perhaps the most fundamental model there is: value has to be added if any pro$ts are to be made at all. /alue chain theory emphasi#es ho important it is to identify lin)ages beteen activities. %or example" better technology development is li)ely to result in more e0cient operations and feer units needing after-sales service and repair. There is no problem at all seeing ho information technology could be used in each activity: Value chain Examples o !he use o IT componen! %irm infrastructure !ccounting system" corporate intranet" email Technology 1omputer aided design" automated softare development testing" internet searches for ne discoveries and processes 2uman resource ()ills databases" manpoer scheduling" computer management based training" performance monitoring Procurement 3rdering process" supplier databases Inbound logistics -aterial resource planning &-4PI'" manufacturing resource planning &-4PII'" 5ust-in-time inventory management 3perations 1omputer aided design" computer aided manufacturing" automated production lines" robotics -ar)eting and .-commerce" internet advertising" customer sales relationship management (ervice %ault monitoring" 6uality control systems" computer aided design. 2oever" 5ust because IT can be used does not mean that value ill be added" and if value is not added pro$ts cannot be improved. Inappropriate use of IT could harm a companys prospects. %or example" there is little point in automating production if hat your customers cherish are hand-made" individuali#ed products. Gene"ic s!"a!e#ies The value chain explains hy pro$ts are earned" but all businesses see) competitive advantage" that is" the ability to ma)e above average pro$ts in the long-run. -ichael Porter suggests that competitive advantage can be obtained in to main ays: cost leadership 7i8erentiation. !dditionally" each of these generic strategies might or might not ma)e use of a focus strategy. 2oever" the use of IT ill not necessarily generate competitive advantage. %or example" if the IT being used is pac)age softare" almost by de$nition this ill mean that many competitors are li)ely to be using the same pac)age. It is di0cult to see ho a pac)age ill of itself give a particular company any advantage over its rivals and such IT is li)ely to be the starting point &threshold capability' rather than a provider of strategic capability. 3rdinary IT is li)ely to be everyones starting point and the successful company needs to do more 9 either by using non-standard IT &a uni6ue resource' or by using their IT in a better ay &a core competence'. In addition to the generic strategies set out above" IT developments can also o8er the possibility of an organi#ation discovering and setting up an entirely ne business opportunity. %or example" the internet enabled !pple to invent iTunes" and no legitimate mp3 donloads have overta)en high street 17 sales. (imilarly" ()ype allos very cheap phone calls to be made over the internet and this is a ma5or challenge to traditional telecommunication companies. $ichael Ea"l%s anal&sis o ho' o"#ani(a!ions% use o e- )usiness evolves* .arl suggested that business use of e-business technology progresses through the folloing stages: .xternal ! eb presence communication Internal !n intranet communication .-commerce :uying and selling .-business :uying and selling" plus the capabilities to match .-enterprise -anagement processes and business processes are redesigned. Transactions can be monitored and analy#ed real-time. Transformation ;e business and management models re6uired for the ne economy are embedded. !s is said by .arl: The six stages are ideal types" stylistic phrases hich capture 9 even caricature 9 the experiential learning of these companies+ thus they are not necessarily de$nitive periods of evolution from old economy to ne economy corporations. 2oever e do $nd most companies identify ith the model. The particularly interesting elements of these steps are: .-commerce<e-business. It is recogni#ed that companies often try to run before they can al). Their ebsite promises e0cient transactions but their systems simply cannot deliver so that the dispatch of goods is unreliable and errors are made. !ll this manages to do is advertise the $rms incompetence to an international clientele. .-enterprise. -anagement processes and business processes are redesigned. Transactions can be monitored and analy#ed real-time. Its the real-time element thats important here. %or example" analy#ing sales as they happen and ad5usting purchasing and production in response. Transformation. ;e business and management models re6uired for the ne economy are embedded. %or example" iTunes as mentioned above. Examples o !he s!"a!e#ic use o IT There no follos a number of examples of ho businesses have harnessed IT and e-business to create competitive advantage. Tesco Tesco plc is the leading supermar)et chain in the =>. In the early ?@@As all supermar)ets developed the idea of lin)ing to their suppliers so that orders could be sent electronically hen inventories reached their reorder levels &.7I" or electronic data interchange'. 2oever" although this gave great cost e0ciencies" it did mean that suppliers could still be ta)en o8- guard hen orders ere received. !t the end of the ?@@As Tesco developed the Tesco Information .xchange system &TI.'" hich enables Tescos suppliers to monitor sales and stoc) levels of their products at Tesco branches. Therefore" suppliers are more aare of hen deliveries are needed as they can perform their on specialist forecasts of demand and more closely integrate their production of goods" dispatch and delivery to supermar)ets. This process can be extended so that instead of a supermar)et placing an order" suppliers )no hen they need to deliver to supermar)ets. (uppliers monitor their on stoc)s at the supermar)et branches and this enables even closer integration ith their customers. Through technological development Tesco has greatly improved its procurement" inbound logistics and supply chain management. %or example" if a product promotion is being run by Tesco" suppliers can atch closely the e8ect of the promotion on demand and react accordingly. This is an example of management processes and business processes being redesigned so that transactions can be monitored and analy#ed real-time. 1osts are reduced and customer service is also improved" hich gives the company competitive advantage. Zara Bara is the leading brand of the (panish retail group Inditex (!. It is based in ! 1orunna" ;orth *est (pain. It sells clothing through its international chain of shops. Traditional large clothing retailers had very long design" manufacturing and distribution times. Typically design of ne fashions ould start ?C months in advance of a season. /ery large 6uantities of garments ould then be ordered 9 enough to last the hole season. Darge volume production and relatively stable inventory lines alloed these companies to )eep their costs don. 2oever" you ill understand that if planning starts a year in advance" the clothes that result might not represent the latest fashions and the large orders meant that expensive mista)es could be made. Bara ta)es a very di8erent approach. Its development time of a ne article of clothing is typically E9F ee)s" and that covers design" manufacturing and distribution. Its clothes" therefore" have an excellent chance of loo)ing up to date+ around ?C"AAA 9?G"AAA di8erent styles are produced each year. %urthermore" the company deliberately under- produces so that maximum demand is often not met. This means that there is relatively little chance of having to mar) don excess" unsold clothing. Do volumes also mean that hen an item is sold out it ill usually not reappear in a store" so customers )no that they have to buy no as that might be their only chance. %re6uent inventory changes repeatedly dra customers bac) to the stores to see hat ne lines might be in. Dell 7ell is a ma)er of des)top and laptop computers. It is famed for its 5ust-in- time inventory management system. /isitors to the 7ell ebsite &'''*+ell*com, are given a choice of several levels of machine" such as home" home-o0ce and small business. 2aving chosen a base model" customers can then ad5ust those basic models by" for example" opting for larger hard discs" loer speci$cation operating systems" di8erent (creen si#es and so on. Typically about CA customi#ation choices are provided. The recalculated price is shon and the buyer can ma)e further amendments as re6uired. *hen the :uy option is chosen and payment ta)en" production of the machine begins. .very half hour" 7ell consolidates all its online and telephone orders and produces parts lists and manufacturing schedules &manufacturing resource planning" -4PII'. The speci$cations of the parts re6uired are transmitted to suppliers ho have to deliver ithin the hour. 3bviously" to meet this time limit manufacturers have to be located close to 7ell or have their on arehousing facilities on 7ells site. The parts are ta)en directly from delivery truc)s onto the production line and production commences. There is e8ectively no ra material stoc)" and inventory consists only of the small amount of or)-in-progress and the completed units being tested and delivered. The hole purpose of the system is to reduce inventory" and to provide Hexible and fast responses to customer re6uirements. The company has integrated its donstream and upstream supply chains very closely and manages to combine very lo cost production ith di8erentiation through customi#ation. It is certainly at the e-enterprise stage of IT use. Rolls Royce aero engines This company provides an illustration of the strategic use of IT hich goes beyond the usual examples of inventory control and ebsite design. !lthough there are relatively fe $rms in the aero engine mar)et" it is very competitive environment. 4olls 4oyce &44' competes not 5ust by ma)ing the initial sale" but by selling lifetime care of the engine. The initial sale is relatively lo cost" and pro$t is earned over the life of the contract. *hat the company has developed is a system called .ngine 1ondition -onitoring &.1-' in hich the airlines have e8ectively turned over engineering and engine maintenance to 44. The company has added value to hat its o8ering and built close relationships ith its customers through advanced use of IT" hich is used to reduce maintenance costs and service disruption. .1- is additional to the normal safety systems and inspections managed by the airlines. .ngines are $tted ith about CG sensors hich continually monitor conditions and transmit the data bac) to 44 in 7erby" =>. There" sophisticated IT methods &including arti$cial intelligence techni6ues' are used to analy#e the data and identify signi$cant events. These can then be noti$ed to 44 engineering sta8 and to the airline so that preventative chec)s and maintenance can be carried out. IT has been used to add value by giving customers much better service" reliability" safety and loer costs. The company has achieved great success through a transformation of the ay aero engines are sold and maintained. I CA?A !11!