Cost Framework for Evaluation of Information Technology Alternatives in Supply Chain

Abstract

Organizations are often facing the problem of determining the degree of investment in building information links with their suppliers and buyers to reduce costs, lead times, and quality problems, improve timely customized delivery, increase asset utilization, and improve corporate profitability. One of the critical enablers for an efficient and effective supply chain is timely planning and information processing across the entire value-added chain. This paper presents an analytical model for selecting the right mix of analytical software and hardware alternatives at various planning and execution levels of an organization to remain competitive in a supply chain. Factors such as quality, reliability, flexibility, timeliness and organizational compatibility have been quantified into cost components that form the weighted cost function. The weights of the various cost components of software and hardware are derived from pair-wise comparison. These weights account for the relative importance of alternative supply chain strategies for an organization. A numerical example is presented to demonstrate the applicability of the proposed framework and exhibit the efficacy of the procedures and algorithms.