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7/30/2019 CRM ERP SCM
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1
Enterprise Business Systems
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1. Identify and give examples to illustratethe following aspects of Integrated
Information Systems, customer
relationship management, enterpriseresource management, and supply chain
management systems:
• Business processes supported
• Customer and business value provided
• Potential challenges and trends
Learning Objectives
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Why?
• "many organizations are using informationtechnology to develop integrated cross-
functional enterprise systems that cross
the boundaries of traditional businessfunctions (such as marketing and finance),
in order to reengineer and improve vital
business processes all across the
enterprise and improve the efficiency andeffectiveness of business objectives.
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How?
• Organizations view cross-functionalenterprise systems as a strategic way to
use IT to share information resources and
improve the efficiency and effectivenessof business processes, and develop
strategic relationships with customers,
suppliers, and business partners.
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• Thus, instead of having functionalmainframe-based legacy systems,
organizations are shifting to integrated
cross functional client/server applications,for example
• ERP, SCM or CRM software systems from
SAP, People Soft, Oracle, etc.
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Why Integrated solutions?
• Enterprise software focuses on supporting integratedgroups of business processes rather than informationprocessing requirements of the respective businessfunction.• ERP focuses on efficiency of a firm’s internal production
logistics distribution, HR, and Financial processes.
• CRM focuses on acquiring and retaining profitablecustomers through marketing, sales and serviceprocesses
• SCM focuses on developing the most efficient andeffective souring and procurement processes with
suppliers for the products and services needed by abusiness.
• Knowledge management (KM) applications focus onproviding a firm’s employees with tools that support groupcollaboration and decision support (Sawhney Mohan, andJeff Zabin, 2001).
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What is Cross – Functional Enterprise
• cross-functional components are a set of extremely powerful components designed
for streamlining, simplifying and handling
critical processes found within mostindustries and businesses.
• These processes include business
performance, customer relationship
management, supply chain management,
business modeling, as well as document,
quality and project management.
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• Business Modeler lets companies viewtheir organization in terms of businessprocesses.
• Through its PC-based tools, methods, andgraphical models that make it easier tomatch a company’s existing processeswith the best-practice processes that IFS
Applications supports, it gives insight intoways to re-engineer businesses to bemore efficient, more profitable andfocused on customer satisfaction.
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Corporate Performance Management
• Continuous improvement is essential for long-term profitability.
• Corporate Performance Management is
an integrated performance managementsystem for measuring functions and
processes.
• It allows users to analyze areas for improvement and focus on results gained
from changes, in order to make better
strategic and operational decisions.
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Customer Relationship Management (CRM)
• Customer Relationship Management isessential for all types of business
situations, enabling support for business
proposals and decisions in everyinteraction with the customer.
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Quality Management
• Quality management relies on two major considerations.
• One a proactive decision making process.
And
• two, failure prevention.
• Therefore to maintain quality you need a
Quality Management system that ensures
you receive a steady flow of data via a
totally integrated and highly accessible
solution.
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Document Management
• With Document Management™, you getfull control over your company's
documentation to focus on the things that
really matter:• selling your products and services,
• keeping your plant and equipment in top
shape, and
• ultimately meeting or exceeding your
business goals.
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Project Management
• Without a progressive approach to projectmanagement a business runs the risk of
allowing its operational efficiency to
gradually decline.• With the right project management
enterprise tools a company can review its
business projects, both new and old, and
continually raise them to higher levels.
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Business Modeling
• Anticipating your customers changingrequirements is the best way to maintain
their loyalty.
• But it can only be successfully achievedwhen you have a business modeling
solution that gives you a precise insight
into what you’ll need to re-engineer your
business to meet the change.
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Why Study Customer
Relationship Management?
• It is easier than ever for customers to
comparison shop and, with a click of the
mouse, to switch companies. As a result,
customer relationships have become acompany’s most valued asset.
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Customer Relationship Management (CRM)
Definition:• The use of information technology to
create a cross-functional enterprise
system that integrates and automatesmany of the customer-serving processes
in sales, marketing, and customer
services that interact with a company’s
customers
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Customer Relationship Management (CRM)
• CRM is application which takes care of the sales activities, customer interactions,
marketing products and customer service.
• The role of CRM is restricted to the salesrelated activities only.
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CRM Application Clusters
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CRM Application Components
• Contact and Account Management – helpssales, marketing, and service professionals
capture and track relevant data about every
past and planned contact with prospects and
customers, as well as other business and lifecycle events of customers
• Sales – provides sales reps with tools andcompany data sources needed to support and
manage sales activities, and optimize cross-
selling and up-selling
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CRM Application Components
• Marketing Fulfillment – help marketingprofessionals accomplish direct marketing
campaigns by automating such tasks as
qualifying leads for targeted marketing, and
scheduling and tracking direct marketingmailings
• Customer Service and Support – providesservice reps with software tools and real-time
access to the common customer database
shared by sales and marketing professionals
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CRM Application Components
• Retention and Loyalty Programs – help acompany identify, reward, and market to
their most loyal and profitable customers
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Three Phases of CRM
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Three Phases of CRM
• Acquire new customers by doing a superior jobof contact management, sales prospecting,selling, direct marketing, and fulfillment
• Enhance relationship with customer bysupporting superior service from a responsivenetworked team of sales and service specialistsand business partners
• Retain and expand business with customers byproactively identifying and rewarding the mostloyal and profitable customers
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Benefits of CRM
• CRM allows a business to identify andtarget their best customers so they can be
retained as lifelong customers for greater
and more profitable services.
• CRM makes possible real-time
customization and personalization of products and services based on customer
wants, needs, buying habits, and life
cycles.
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Benefits of CRM
• CRM can keep track of when a customer contacts the company, regardless of the
contact point.
• CRM systems can enable a company to
provide a consistent customer experience
and superior service and support acrossall the contact points a customer chooses.
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CRM Failures
• Lack of understanding and preparation
• Rely on CRM to solve business problemwithout first developing the businessprocess changes and changemanagement programs that are required
• CRM projects implemented without theparticipation of the business stakeholdersinvolved
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Trends in CRM
• Operational
• Analytical
• Collaborative
• Portal-based
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Operational CRM
• Supports customer interaction with greater convenience through a variety of
channels.
• Synchronizes customer interactions
consistently across all channels
• Makes your company easier to do
business with
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Analytical CRM
• Extracts in-depth customer history, preferences,and profitability information from your data
warehouse and other databases
• Allows you to analyze, predict, and derive
customer value and behavior and forecast
demand
• Lets you approach your customers with relevant
information and offers that are tailored to their
needs
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Collaborative CRM
• Enables easy collaboration withcustomers, suppliers, and partners
• Improves efficiency and integrationthroughout the supply chain
• Allows greater responsiveness to
customer needs through sourcing of products and services outside of your enterprise
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Portal-based CRM
• Provides all users with the tools and informationthat fit their individual roles and preferences
• Empowers all employees to respond to
customer demands more quickly and becometruly customer-focused
• Provides the capability to instantly access, link,and use all internal and external customer
information
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Partner Relationship Management (PRM)
Definition:• Applications that apply many of the same
tools used in CRM systems to enhance
collaboration between a company and itsbusiness partners, such as distributors
and dealers, to better coordinate and
optimize sales and service to customers
across all marketing channels
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Enterprise Resource Planning (ERP)
Definition:• A cross-functional enterprise system
driven by an integrated suite of software
modules that supports the basic internalbusiness processes of a company
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Enterprise Resource Planning (ERP)
• ERP is application software, which automatesthe internal functional departments of an
organization. There will be a smooth flow of
information across the functions like accounts,
production, human resource and administration.
• ERP looks after the supply chain management,
production management and accounts
management. There is no such a tool available
in the industry which can cater all the issues
across the company.
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ERP Application Components
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ERP Process & Information Flows
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ERP Benefits
• Quality and Efficiency – ERP creates aframework for integrating and improving a
company’s internal business processes
that results in significant improvements in
the quality and efficiency of customer
service, production, and distribution
• Decreased Costs – Significant reductions
in transaction processing costs and
hardware, software, and IT support staff
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ERP Benefits
• Decision Support – Provides vital cross-functional information on business
performance quickly to managers to
significantly improve their ability to make
better decisions in a timely manner
• Enterprise Agility – ERP breaks downmany former departmental and functional
walls of business processes, information
systems, and information resources
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Costs of ERP
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Causes of ERP Failures
• Business mangers and IT professionalsunderestimate the complexity of the planning,development, and training needed
• Failure to involve affected employees in the
planning and development phases
• Trying to do too much too fast in the conversionprocess
• Failure to do enough data conversion andtesting
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Trends in ERP
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Enterprise Resources Planning(ERP) Definition 1 (Cont.)
Includes:Typical MRP II Functions Quality Functions
Sales Force Automation Field Service Functions
Engineering Function / PDM Complete Financial Functions
Advance Manufacturing Function Human Resources Functions
Distribution / Logistics Functions Management Reporting
ERP is a System for the Entire Company – A Global Tightly
Integrated Closed-Loop System
(1) Source: APICS Complex Industries Special Interest Group
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Typical ERP Functionality
Engineering / Product Date MGT
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Engineering / Product Date MGT.
Document Creation, Management & Control
CAD Interface / Image Management
Configuration Management
- Change Order Creation & Control
- Revision Control
Engineering Data Management
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Engineering / Product Date MGT.(Cont.)
Product Information Management
Technical Data Management
Technical Information Management
Engineering Item Data & BOMs
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Manufacturing
MRPII Functionality
- MPS, BOM, Routings, MRP, CRP, PAC
Sales & Operations Planning
Integrated Production Configuration
Statistical Inventory Control
Flexible Product & Job Costing Options
Kanban / JIT / Flow Manufacturing Support
Theory of Constraints / Advanced Planning
Systems
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Sales and Operations Planning
Balance market demand with resource capability
Develops a contract between Manufacturing and
Marketing
A single set of numbers upon which to base plans
and schedules
Manages Inventory and Backlog
Forecasting
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Advance Planning and OptimizingSystems
Supply Chain optimization
Constraint-based multi-location master planning
- Generation of feasible production plans across
multiple plants
Ad Pl i d O ti i i
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Advance Planning and OptimizingSystems (Cont.)
Constraint-based factory level scheduling
- Generation of feasible schedules (integrated with
feasible production plan)
Optimized distribution and transportation planning
- Intelligent allocation of inventory through a
network
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Distribution / Logistics
Purchasing
Supplier Reliability Analysis
Distribution Requirement Planning
Global Transportation Management
Fleet Management
Shipping & Receiving
Import / Export
Warehouse Management
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Human Resources
Requisition Management
Applicant Tracking
Employee Master
Job Descriptions
Employee Evaluations
Training & Certification Management
Payroll Deduction Accounting
Benefits Tracking
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Quality
Quality Management Plans
Quality Specifications / Requirements
Test / Inspection Results
Cause and Corrective Action Tracking
Process / Product Certification
Statistical Quality Control
Cost of Quality Reporting
Equipment & Tool Calibration Mgt
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Finance Financial Budgets
General Ledger
Accounts Payable
Accounts Receivable
Payroll
Fixed Assets
Cash Management
Activity Based Costing
Financial Statements
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Field Service
Installation Management
As-maintained BOM
Warranty Tracking
Preventative Maintenance Scheduling & Control
Service Order Planning & Control
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Typical ERP Integration
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Typical ERP Integration
System Wide Elements
Project Management & Project Costing (EVM)
Executive Management Information System
Work Flow Management
Multi-Company
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Typical ERP Integration
Multi-Currency
Multi-Lingual
Multi-Mode
EDI / Electronic Commerce
Web Enabled / Internet Communications
Imaging & Multi Media
F t
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Features
• Each application has got its own features andbenefits in a different way.
• With the help of ERP, the business owner
integrates the internal business process byautomating all the departments.
• CRM, tracks the marketing related activates,
individual sales performances, customer
services and all.
• CRM is restricted to only marketing and sales
departments.
Benefits of CRM
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Benefits of CRM
• Automated sales and marketing process
• Regular work tracking of the sales person, which in
turn leads to the higher sales productivity
• Helps the company in cross selling the products, if the
company is into multiple product lines
• Ameliorated customer service as the system will
automatically warns the sales person regarding the
deadlines and this also leads to higher sales closures• Reduced expenses
• Overall, higher profitability
Benefits of ERP
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Benefits of ERP
• Automated business environment leads to effectivecommunication
• Smooth flow of information between the inter-
departments and intra-departments
• Reduced lead time of the manufacturing products
• Availability of relevant and accurate information on
timeliness
• Better decision making
• Helps in improving ROI in the long-run
Supply Chain Management (SCM)
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Supply Chain Management (SCM)
Definition:• A cross-functional interenterprise system
that uses information technology to help
support and manage the links betweensome of a company’s key business
processes and those of its suppliers,
customers, and business partners
SCM Life Cycle
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SCM Life Cycle
Electronic Data Interchange (EDI)
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Electronic Data Interchange (EDI)
Definition:• Involves the electronic exchange of
business transaction documents over the
Internet and other networks betweensupply chain trading partners
EDI Activities
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EDI Activities
Role of SCM
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Role of SCM
SCM Planning Functions
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SCM Planning Functions
• Supply Chain Design – optimize networkof suppliers, plants, and distribution
centers
• Collaborative Demand and Supply
Planning – develop an accurate forecast
of customer demand by sharing demand
and supply forecasts instantaneously
across multiple tiers
SCM Execution Functions
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SCM Execution Functions
• Materials Management – share accurate
inventory and procurement order information,
ensure materials required for production are
available in the right place at the right time, and
reduce raw material spending, procurementcosts, safety stocks, and raw material and
finished goods inventory
• Collaborative Manufacturing – optimize plans
and schedules while considering resource,
material, and dependency constraints
SCM Execution Functions
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SCM Execution Functions
• Collaborative Fulfillment – commit to delivery
dates in real time, fulfill orders from all channelson time with order management, transportationplanning, and vehicle scheduling, and supportthe entire logistics process, including picking,packing, shipping, and delivery in foreigncountries
• Supply Chain Event Management – monitor every stage of the supply chain process, fromprice quotation to the moment the customer receives the product, and receive alerts whenproblems arise
SCM Execution Functions
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SCM Execution Functions
• Supply Chain Performance Management – report key measurements in the supply
chain, such as filling rates, order cycle
times, and capacity utilization
Porter’s Value Chain Model (1985)
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Porter s Value Chain Model (1985)
PRIMARY ACTIVITIES
• In bound logistics (in puts)• Operations (manufacturing & testing)
• Outbound logistics (storage & distribution)
• Marketing & sales
• Service
Supply
Chain
SCM Objectives
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SCM Objectives
C
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Case: How Dell Reengineered its Supply Chain
Problem:
Dell pioneered the mail order approach to selling PCs In 1993, Compaq cuts prices to drive Dell out of the market. Dell experiences
$65 million in losses.
Solution:
Dell implements the following re-engineering strategies: mass customization
just-in-time marketing
electronic orders & shipments
e-collaboration with major buyers
reduction in testing period
monitoring of productivity & returns on investments
Case: How Dell Reengineered its Supply Chain
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Case: How Dell Reengineered its Supply Chain
(cont.)
Results: In 2001, Dell made over $4 million in computer web sales/ day.
Becomes leader in Customer Relationship Management (CRM)
Online tracking of orders & shipments
Viewer approved configurations and pricing
Customized home pages for clients.
Use of Intelligent Agents in production process.
Increased communication with suppliers.
By 1999, Dell becomes the number two PC seller and is a leader inmanagement & profitability.
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Lessons from the Case
By introducing a new business model , one can change the manner in which business is done.
To implement this model on a large scale, one needs to build superbsupply chain management.
Another major success factor in Dell‟s plans was the improvementsmade in its logistics system along the entire supply chain.
Improved communications and customer service, which are part of Dell‟s CRM program, are the cornerstones of its success.
Dell was using c-Commerce with its business partners.
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Supply Chain & Value Chain Definitions
SUPPLY CHAIN flow of materials, information, payments, and services from raw material suppliers, through factories and warehouses, to the end customers.
DEMAND CHAIN the process of taking orders.
SUPPLY CHAIN MANAGEMENT (SCM) to plan, organize, and coordinate all the supply chain’s activities.
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Benefits of SCM
Contributes to
overall
increase inprofitability &
competitive
advantage.
This positivelyaffects inventory
levels, cycle time,business
processes &customer service.
Reduces
uncertainty
& risks in
the supply
chain.
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Components of Supply Chain
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Components of Supply Chains
Upstream Supply Chain
Organization‟s first tier suppliers & their suppliers.
Internal Supply Chain
Processes used by an organization to transform their inputs to
outputs.
Downstream Supply Chain
Processes involved in delivering the product to the final
customers.
Th S l Ch i
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The Supply Chain
Involves the life of a product from „dirt to dust‟.
Involves movement of tangible & intangible inputs.
Can come in all shapes and sizes and may be fairly complex.
Can be bi-directional and involve the return of products (reverselogistics)
The flow of goods, services, information & financial resourcesmust be followed with an increase in value.
S f S l Ch i P bl
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Sources of Supply Chain Problems
UNCERTAINTY
In demand forecast In delivery times &
production delays
POOR COORDINATION
With Internal units andbusiness partners
Ineffective customer service
High inventory costs,loss of revenue & extra
cost for expeditingservices.
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The Bull Whip Effect
The most persistent SCM problem.
Erratic shifts in orders up & down the supply chain.
Distributor orders fluctuate because of poor demand forecast,
price fluctuation, order batching & rationing with supply chain.
Example: Porter & Gamble‟s distortion in SCM for manufacturing of disposable diapers.
Avoidable with proper interorganizational EC. EDI, Extranets & Groupware technology
S l i S l Ch i P bl
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Solutions to Supply Chain Problems
Vertical Integration
Purchasing & managing the supply source.
Building Inventories
“Insurance” against supply chain shortages.
Main problem: It is difficult to correctly determine inventory
level for each product & part. This can be costly.
CASE H Li l d I d i SCM
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CASE: How Littlewoods Improved its SCM
Problem: Littlewoods Large British clothing retailer with 136 stores in the UK &
Ireland. Overstocking problems in the supply chain management.
Solution: Introduced web-based performance reporting system.
Enabled merchandising personnel to make more accurate stock,sales and supplier decisions.
Results:
In 1997, Littlewoods saves $1.2 million as a direct result of its strategicprice merchandizing.
Oth S l ti t SCM P bl
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Other Solutions to SCM Problems
During peak times, outsource rather than do-it-yourself. “Buy” rather than “make” production inputs when appropriate.
Configure optimal shipping plans.
Create strategic partnerships with suppliers.
Use the just-in-time approach to purchasing.
Reduce the lead time for buying and selling.
Use fewer suppliers.
Improve supplier-buyer relationships.
Manufacture only after orders are in.
Achieve accurate demand by working closely with suppliers.
T T l f R d i S l Ch i P bl
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Two Tools for Reducing Supply Chain Problems
Supply Chain Teams
“Teams of tightly integrated business that work together andserve the customers”
Measurements & Metrics Use of IT for measuring areas in need of improvement. For
example;
Delivery on time
Quality at unloading area Cost performance Lead time for procurement
COMPUTERIZED SYSTEMS & S C M
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COMPUTERIZED SYSTEMS & S.C.M.
PHASE 1: 1950s - 60s, the first software programs to support thesupply chain arrive.
PHASE 2: Development of the Material Requirement Protocol(MRP).
PHASE 3: Enhanced MRP known as Material Resource Planningbecome available.
PHASE 4: Enterprise Resource Planning (ERP) integrates
transaction processing activities.PHASE 5: Extended ERP/SCM software.
COMPUTERIZED SYSTEMS & S C M
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COMPUTERIZED SYSTEMS & S.C.M.
Benefits of Systems Integration
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Benefits of Systems Integration Source: Sandoe & Saharia (2001)
TANGIBLE BENEFITS
Inventory reduction
Personnel reduction
Productivity improvement Order management
improvement
Financial-close cycle
improvements IT cost reduction
Procurement costreduction
Revenue/profit increases,
INTANGIBLE BENEFITS
Information visibility
New/improved processes
Customer responsiveness
Standardization
Flexibility
Globalization and business
performance
Value Chain Integration
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Value Chain Integration
“The process by which multiple enterprises within a shared market channel collaboratively plan, implement, and manage
(electronically as well as physically) the flow of goods,
services, and information along the entire chain in a manner
that increases customer- perceived value.“
Integrating the Supply Chain & Value Chain
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Integrating the Supply Chain & Value Chain
A Supply Chain transforms into an integrated Value Chainwhen it…..
Extends the chain all the way from sub-suppliers tocustomers.
Integrates the back-office operations with those of thefront office.
Becomes highly customer-centric, focusing on demandgeneration and customer service.
Is proactively designed by chain members to compete as
an “extended enterprise”. Seeks to optimize the value added by information and
utility-enhancing services.
Value Chain Integration
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Value Chain Integration
Case Warner Lambert’s Integrated Supply Chain
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Case: Warner-Lambert’s Integrated Supply Chain
Problem:
WL requires assistance with demand forecast of products.
Solution:
They use Manugistic Inc.‟s Demand Planning Information System
to analyze their manufacturing, distribution and sales data. The system is able to anticipate seasonal impact or a production line
problem.
Results:
WL increases its „shelf fill‟ rate from 87% to 98%, earning them $8million/year in additional sales.
Enterprise Resource Planning
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Enterprise Resource Planning
ERP = Process of planning &managing all resources &
their use in the entire
enterprise.
Leading ERP softwareproducers
SAP, Oracle, J.D. Edwards,Computer Associates,
People Soft
MAIN OBJECTIVE of ERP
to integrate all departments &
functions across a company onto
a single computer system.
Functions of ERP
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Functions of ERP
Provides a single interface for managing routine manufacturingactivities.
Facilitates customer interaction & manages relationships with
suppliers & vendors.
Forces discipline & organization around business.
Supports administrative activities.
Post ERP 2nd Generation ERP
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Post- ERP: 2nd Generation ERP
By the late 1990s, the major benefits of ERPs had beenfully exploited.
There was a need for planning systems oriented towardsdecision-making.
Emergence of SCM systems that complement ERPsystems.
Provide intelligent decision support capabilities.
Overlay existing system & pull data from every step of thesupply chain.
How is SCM Integration Achieved?
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How is SCM Integration Achieved?
SECOND APPROACH
ERP vendors adddecision support and
business intelligencecapabilities.
Creation of 2nd
generation ERP.
FIRST APPROACH
Work with different
software productsfrom different
vendors (i.e. one for
ERP & one for SCM).
3 Ways to Provide Supply Chain Intelligence
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3 Ways to Provide Supply Chain Intelligence
1) Use an enhanced ERP package that includes businessintelligence capabilities
2) Integrate the ERP with business intelligence software froma specialized vendor such as Brio, Cognus, or Comshare.
3) Create a “best of breed” system by using componentsfrom several vendors that will provide the required
capabilities.
Componentization
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Componentization
Breaking large ERP systems into individualcomponents that work together.
Makes it easier for ERP vendors to enhance their solutions and for customers to upgrade their software.
Helps vendors extend the core ERP system withsupply chain, sales force automation solutions, andcustomer relationship management (CRM).
ERP Implementation
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To avoid failures, the following factors should be considered;
The customer‟s expectations.
The ERP product capabilities, andgaps.
The level of change the customer
has to go through to make thesystem fit.
The level of commitment withinthe customer organization to seethe project through.
The customer‟s organizationand culture.
The risks presented by politics
within the customer organization.
The consultant‟s capabilities,
responsibilities and role (if applicable).
Application Service Providers & ERP Outsourcing
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Application Service Providers & ERP Outsourcing
“ASP alternative” = A popular option today for businessesthat want ERP functions but lease applications rather thanbuilding systems.
Application Service Provider (ASP) is a software vendor that offers to lease ERP-based applications to other businesses.
The ASP concept is especially useful in ERP projects,
which are expensive to install and take a long time toimplement, and for which staffing is a major problem.
Global Supply Chains
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Global Supply Chains = Supplychains that involve suppliers
and/or customers in other countries.
Some of the issues involved in
global supply chains;
legal issues, customs feesand taxes
language and culturaldifferences
fast changes in currencyexchange rates
political instabilities.
CASE: LEGO Struggles with Global Issues
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CASE: LEGO Struggles with Global Issues
Problem: In a rush to get its innovative product to market, Lego did
not first solve all necessary issues, for example; The need for a supportive distribution & service system. Merging the offline and online operations
Existing warehouses were not optimized to handle distribution toindividual customers How to handle returns around the globe. Invoicing must comply with the regulations of many countries.
Results:
Lego closed the Web site for business. It took almost ayear to solve all global trade-related issues.
How EC contributes to SCM
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How EC contributes to SCM
Digitizes products such assoftware, which expedites theflow of materials.
Replaces all paper documents
with electronic documents.
Replaces faxes, phone &telegrams with electronicmessaging system.
Enhances collaboration &information sharing.
Change the nature and structureof the supply chain from linear toa hub.
Results in shorter supply chain
and minimum inventories.
Facilitates customer service.
Introduces efficiencies in buying& selling through the creation of e-marketplaces.
B i S lli l th S l Ch i
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Buying & Selling along the Supply Chain
A major role of EC is to facilitate buying and selling along the
supply chain. The major activities are;
UPSTREAM
INTERNAL SCM
DOWNSTREAM
COMBINED UPSTREAM / DOWNSTREAM
Integration of EC with ERP
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Integration of EC with ERP
Since most middle-sized and large companies already have anERP system, and since EC needs to interface with ERP, it makessense to interconnect the two.
By extending the existing ERP system to support e-commerce,
organizations not only leverage their investment in the ERPsolution, but also speed up the development of EC applications.
The problem is that the ERP software is very complex andinflexible (difficult to change), so it is difficult to achieve easy,
smooth, and effective integration.
Order Fulfillment in EC
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Order Fulfillment in EC
When a company sells direct to customers it is involved in thefollowing activities:
Quickly find the products to be shipped, and pack them.
Arrange for the packages to be delivered quickly to thecustomer‟s door.
Collect the money, either in advance, in COD, or by individualbill.
Handle the return of unwanted or defective products.
Many companies find it very difficult to fulfill these activitieseffectively & efficiently. This reveals that they have problems in their own supply chains.
Online Order Fulfillment & Logistics
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Online Order Fulfillment & Logistics
While order fulfillment is a part of the back-office operations, it isstrongly related to front-office operations.
Recently, e-Tailors have faced continuous problems in order fulfillment, especially during the holiday season.
For example, Amazon.com had to add physical warehouses inorder to expedite deliveries and reduce order fulfillment costs.
EC is based on the concept of “pull” operations, which begin with anorder, frequently a customized one.
In the “pull” case it is more difficult to forecast demand.
Furthermore, in a B2C pull model, the goods need be deliveredto the customer ‟s door.
Innovative Solutions to Supply Chain Problems
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Innovative Solutions to Supply Chain Problems
Galleryfurniture.comUses dozens of cameras,(Webcam) to demonstrate itsproduct inventory on the Web.This is an alternative to paper or
electronic catalogs.
Garden.com Developed proprietary softwarethat allows it to collaborate withits 70 suppliers efficiently andeffectively.
Mail Boxes Etc. & Return.com
Developed a logistics systemthat determines whether a
customer is entitled to a return& refund.
.
Rightfreight.com Manages a marketplace thathelps companies with goods tofind "forwarders" -- theintermediary that prepare goodsfor shipping.
Automated Warehouses
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Automated Warehouses
Traditional warehouses are built to deliver large quantities to a small number of stores and plants. But in B2C EC, companies need tosend small quantities to large number of individuals.
Large-volume EC fulfillment requires special automated warehouses.
This may include robots and other devices that expedite the pickup of products.
Most B2C is shipped via outsourcers.
Fingerhut handles the logistics of mail orders (including onlineorders) for Wal-Mart, Macys, and many others.
Options for Dealing with Returns
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Options for Dealing with Returns
Return an item to the place where it was purchased. This only works when there is a small amount of returns.
Returns are shipped to an independent unit and handled separatelyinside the company.
May be more efficient, but the buyer is still unhappy. Allow the customer to physically drop the returned items at collection
stations.
Such as convenience stores or Mail Boxes, Etc.
Completely outsource returns.
Several outsourcers, including UPS provide such services.
MANAGERIAL ISSUES
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MANAGERIAL ISSUES
Ethical issues. Conducting a supply chain management project mayresult in the need to lay off, retrain, or transfer employees. Other ethicalissues may involve sharing of personal information and computer programs.
How much to integrate? While companies should consider extremeintegration projects, including ERP, SCM, and electronic commerce,they should recognize that integrating sometimes results in failure.
Role of IT. Almost all major SCM projects use IT. However, it isimportant to remember that technology plays a supportive role toorganizational and managerial issues.
SCM Benefits
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• Faster, more accurate order processing
• Reductions in inventory levels
• Quicker times to market
• Lower transaction and material costs
• Strategic relationship with suppliers
Causes of SCM Failures
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• Lack of proper demand planning knowledge, tools and
guidelines
• Inaccurate or overoptimistic demand forecasts
• Inaccurate production, inventory and other business
data provided by a company’s other informationsystems
• Lack of adequate collaboration among marketing,production, and inventory management departments
within a company
• Immature, incomplete or hard to implement SCMsoftware tools
Trends in SCM
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Summary
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• Customer relationship management is a
cross-functional enterprise system that
integrates and automates many of the
customer-serving processes in sales,
marketing, and customer services thatinteract with a company’s customers.
Summary
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• Enterprise resource planning is a cross-
functional enterprise system that
integrates and automates many of the
internal business processes of a
company, particularly those within themanufacturing, logistics, distribution,
accounting, finance, and human resource
functions of the business.
Summary
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• Supply chain management is a cross-
functional inter-enterprise system that
integrates and automates the network of
business processes and relationships
between a company and its suppliers,customers, distributors, and other
business partners.
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Chapter