10th August 2001N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in ERP/SCM INTEGRATION N. R. Srinivasa...

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

ERP/SCM INTEGRATIONERP/SCM INTEGRATION

N. R. Srinivasa RaghavanAssistant Professor

Department of Management StudiesIISc

raghavan@mgmt.iisc.ernet.in

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

The E-QuationsThe E-Quations

E-SCM = E-PROCUREMENT +

E-MANUFACTURING + E-PLANNING

E-DISTRIBUTION

E-SRM = E-SCM + E-ERP + E-CRM + E-SEM + E-LOGISTICS + E-PDM

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Information Systems in SCMInformation Systems in SCM

*ODP * Shipping * CRM*Inventory Assignment * Pricing + Inventory *Payrolls etc.

*Fin. Mgmt. *Cust.Serv. Mmt.*Cost/Asset Mgmt. * Productivity Mmt. *Vendor Mgmt. *Quality Mmt.

*VRP& Schg *Invy.Control *NPD *SCN Design *FMS *Virtual/Vertical Integration

*StgcAlliance

formulation*Devp of

Core Competence

StrategicPlaning

Decision OPTAnalysis Tools

MgmtControl

ERP

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Integration @ what levels?Integration @ what levels?

Transaction level

Management control level

Decision analysis level

Strategic planning level

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Need for Integration: Strategic Need for Integration: Strategic motivationmotivation

IExcessInventory

LateDeliveries

Poor usageof capacities

Premiumtransportation

costs

Revenue

Expenses

Assets

InfeasiblePlan

Premiumpurchase

costs

Quality costsQuality issues

Late Resynch-ronisation

Demand plan & PDN plan notsynchronizer.

PDN.plan &Capacity plan not

synchronizer.

Prod.plan &Purchase plan not

synchronizer.-R

OA

Unnecessary Prod./Purchase

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Need for Integration: Operational Need for Integration: Operational motivationmotivation

Supplier

Factory

Distribution Centers

Customers

Lockout forcesprodn. to be shut

B/D of logisticsoperations

M/C 2010 is down. Will be up again in 3 days

Sudden 20% raise in retail demand

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Solutions due to ERP are myopicSolutions due to ERP are myopic

An ERP System would react by:-

*Adapting the schedule of machine 2010 and reschedule other manufacturing orders.

* Send orders through EDI to the distribution centre

*Arrange for alternate fleet to route finished goods.

Impact on total supply chain is ignored

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

S/W Modules covering the SCP S/W Modules covering the SCP

SOURCE MAKE DISTRIBUTE SALES

STRATEGIC NETWORK PLANNING

MASTER PLANNING

MRP

Prodn.Planning

Scheduling

Dristbn.Planning

Transport Planning

DemandPlanning

Demand

&ATP

Longterm

Mediumterm

Shortterm

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Global SCN FormulationGlobal SCN Formulation

Maximize Sum of the global after tax discounted yearly profits ($,Rs,etc)

S.t., for every planning period: Supplier's capacity Production capacity at plants and DC's Transportation capacity of channels Customer demand constraints, BOM Minimum profit for SBU's on a country basis

Solution: MILP: Use ILOG/CPLEX/NEOS etc.

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Global SCN Formulation: Data Global SCN Formulation: Data requirementsrequirements

Average capacities available at various entities (at any granularity desired: eg. Machine-Shopfloor-Factory)

Availability and utilization of logistics fleet Estimates/Forecasts of customer demand by region,

product etc Average per unit costs incurred for various

resources BOM

All obtainable from OLTP systems

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

ATP ComputationsATP Computations* Provide promised dates for customers

- influences leadtime + on time delivery

* Generate fast & reliable order promises (esp. in E- business environment)

* Helps in retaining customers & increasing market share

* Complexity increases as :

# of parts increase; PLC decr.; #of customers increase;flexible pricing policies;demand gets uncertain.

Should be based on status of ALL SCN facilities

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

SchedulingScheduling

* Generate detailed prodn./procurement/tptn schedules for all

facilities over a rlatively short interval of time.

* Specify start & end time of various activities

* Identify bottlenecks & provide efficient means of prompt

delivery of customer desired products & right place & time

objectives* makespan. *sum of lateness/tardiness * sum of flow times * sum of set up times * max.lateness/tardiness

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Phases in SchedulingPhases in Scheduling

1. Model building-ILP, queueing model, NLP

2. Extracting required data from ERP system- (set up time,cycle time

m/c breakdown data, resource requirements)

3. Generating scenarios (input cases)

4. Iterative creation/adjustment of schedules

5. Approve a scenario

6. Executing the schedule via ERP system.

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

SCM Solutions: i2 RHYTHMSCM Solutions: i2 RHYTHM

Source Make Deliver Sales

SC Strategist

SC Planner

Factoryplaner

Optimalscheduler

Tptn.-Modeler

-Optimizer-Manager

Demandplanner

Demandfulfillment

Long term

Mid term

Shortterm

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

SCM Solutions: J. D. Edward'sSCM Solutions: J. D. Edward's

Source Make Deliver Sales

Enterprise Planning

Production and Distribution Planning

Production Scheduling

P&DP

Demandplanner

P&DP

Long term

Mid term

Shortterm Vehicle

Routing

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

SCM Solutions: SAP's APOSCM Solutions: SAP's APO

Source Make Deliver Sales

Supply Network Planning

ProductionPlanning and

Detailed Scheduling

Demandplanning

Global ATP

Long term

Mid term

Shortterm

Deployment

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Integration IssuesIntegration Issues

SCM solutions need to be integrated in existing IT Systems

SCM

OLTP/ERP D/W

SCM cannot replace ERP.On the contrary, they extendplanning tasks

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Integration with ERPIntegration with ERP

* ERP has transactional data

* SCM solution regularly has to talk to several ERP/OLTP

systems of various SC entities.

Two models required

A. Integration model-(what)

Defines - Which objects are exchanged (eg.BOM’s, routings,

inventory levels, Customer Order, PO, etc)

- Their origin

- Which planning tasks performed on which system.

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

B. Data exhange model (how) Specifies how the flow of data & info between systems is organized. Most solutions provide a macro language to define these models

An SCM solution should:* Match data items from ERP system & structure it

* Provide Import/Export formats (eg.ASCII format with fixed field size or csv files)

Integration with ERP (contd)Integration with ERP (contd)

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Data exchange modelData exchange model

Two types - Initial transfer Incremental transfer

Master data(Long term changes,new facility, new shifts, new suppliers, etc.)

Transactional data(for implementation ofplans)

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Data exchange model (contd.)Data exchange model (contd.)

BOM,

Inv.levels,routing,..

Masterdata

Transactionaldata

Model building

ERP SCM

Model adjustment

Planningdata

Initial tranfer

Incremental tranfer

Incrementaltranfer

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Integration with D/WIntegration with D/W

ERP D/W

Real time dataTransactional purposes

Historical snap shotsDecision support purposesKDD/Data mining/OLAP

D/W are mainly used in demand planning:Finding patterns in demand using stats

OLAP tools help in fast and powerful reporting on data

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Data warehouses and SCMData warehouses and SCM

Collect data from various companies; Ensure consistency of data from disparate

transactional

systems

Historical data

D/WOLAP tools

KDDdata mining

tools

Modelbuilding

Time seriesanalysis

SCM

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Classification of SCM integration technichesClassification of SCM integration techniches

Sta

ndar

dT

echn

olog

y

Ven

dor

spec

ific

te

chno

logy

Standard middleware

pdteg.CORBA

Vendor specificmiddlewareeg.i2 RhythmLink

Internalinterfaceseg.SAP R/3, APO

Open only for pdts of vendor Open for other systems

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

SCM Solution Providers: A GlanceSCM Solution Providers: A Glance

Dynasis i2 logility Manugistics JD Edwards Web Planner

ElectronicsAutomotiveMech. Engg.MetalsPharmaChemicalsPaper/PrintOil and GasFMCGTextilesFoodTransportation

INDUSTRY FOCUS A/C TO VENDORINSTALLATIONS EXISTING A/C TO VENDOR