Sectorial integration and CIT

Yanire Braña. Executive Director of IMRC and Professor at Instituto de Empresa

26 July 2004

Question: What do two sectors as different as construction and automobile manufacture have in common? Answer: The search for greater integration between each one’s players through use of Communication and Information Technologies.

Sectorial integration consists of achieving close coordination not only within the company but among the company and its suppliers, customers and partners. This requires efficient use of advanced technologies to foster collaboration among different members of the same industrial sector.

CITs are an effective tool for corporate development and integration, which allow different types of information to be processed, transmitted, handled, stored and recovered quickly, securely and efficiently.

The role of CITs in sectorial integration has evolved from a function-oriented system, without being integrated with other business areas, through the internal and external integration of processes, to a collaborative system.

The dynamics of corporate relations have evolved, adapting to changes in the environment. This has favored incorporation of CIT into business processes. Many firms see the need to increase communications with other participants in the supply chain, thereby arriving at an intercompany cooperation system. Today numerous technologies exist that facilitate the exchange of information and relationship channels with the agents involved, as a preliminary step toward reaching a collaboration system through electronic communities.

A fundamental aspect for successful sectorial integration is Supply Chain Management (SCM), or the integration of business processes from the end-user to the initial suppliers, which add value to customers and all others involved.

CITs are currently playing an essential role in building adequate supply-chain management, since they contribute to more rapid solving of challenges posed by customers’ changing demands, and to the availability of resources for production. This role consists of integrating information through platforms; synchronized planning via use of collaborative processes; a coordinated work flow thanks to business integration and adoption of new business models, such as marketplaces.

Spain’s construction and auto sectors today

Application and use of CITs in Spanish businesses will reach maximum potential when translated into increased company efficiency and effectiveness. But this must be accompanied by changes in organizational structure and critical business processes.

In their move toward effective sectorial integration, many Spanish firms encounter problems when integrating customers and suppliers. This happens because many firms are oriented, in the short and medium terms, to developing and strengthening customer relations, and devote less time and resources to improving supplier relations.

Systems designed to solve only departmental functions through automation of internal processes, without taking into account synergies and economies of scale resulting from integrated processes, must be discarded not only to achieve a single business vision, but also to gain better performance from the offer of services to customers.

The automobile industry, a key sector in Spain’s economy, makes most use of CITs in the different phases of its value chain; from product design and development, through production, procurement and logistics, to vehicle distribution and sales.

However, despite intensive use by automakers, at other levels of the supply chain, such as second and third level suppliers (mainly made up of SMEs), the CIT situation is very different.

This not only reflects difficulties faced by Spanish SMEs in adapting to advantages offered by CITs, but likewise results in large reductions in efficiency, increased costs and loss of opportunities for synergy associated with the use of technologies.

Impact of CITs on the construction sector supply chain cannot be separated from its own organizational transformation. This sector’s fragmentation creates an additional complexity in relations among its different agents. Efficient use of information throughout a project’s life cycle would bypass many of the coordination problems that exist in this sector.

Conclusions

Although many companies are starting to use CITs to collaborate and share information with their customers, suppliers and partners, most Spanish firms have yet to carry through efficient integration of their internal business processes. Spanish companies are at a stage now where any improvement in supply chain management can mean value added for customers and greater profits.

To enjoy the benefits implicit in effective sectorial integration, existing barriers to diffusion and application of CITs must first be overcome. Examples of these are many firms’ ignorance of and lack of confidence in the utility, reliability and security of CITs; their lack of a clear strategy for their use in relations with customers and suppliers and in critical business processes; and a low level of employee training in CIT.

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