Lecture Supply Chain Management and Erpn3286

7/30/2019 Lecture Supply Chain Management and Erpn3286

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MD240Supply Chain Management (SCM) and

Enterprise Resource Planning (ERP)


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Overview

Background

Essentials of Supply Chains

Enterprise Resource Planning and the

Internal Supply Chain

Supply Chain Management

SCM for E-Commerce


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Background

Supply Chain Management is an Old Concept

Clercus of Sparta (401 BC)

Napoleon vs. Russia

Germany vs. Russia (WWII)

Gulf War Supply chain consisted of strategically placed bases of soldiers

and materiel (inventory)

Half of this supply chain was closed during the 1990s Present Day US Military

Air Bridge a supply chain of transport planes continuallyrefueled by strategically located gas tanker planes


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Supply Chain The flow of material, information, and services from

raw material suppliers through factories andwarehouses to the end customers

Supply Chain Management (SCM)

To plan, organize, and coordinate all the supply chainsactivities

A total systems approach for coordinating all of asupply chains activities


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Demand Chains/Demand Chain Management

Similar to SCM, but more of a focus on ...

customer touchpoints

pull orientation

Tools

Customer Relationship Management technologies


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The Components of Supply Chains

Upstream supply chain

includes the organizations first-tier suppliers and their

suppliers Internal supply chain

includes all the processes used by an organization intransforming the inputs of the suppliers to outputs

Downstream supply chainincludes all the processes involved in delivering theproducts to final customers


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PUSH PULL

Manufacturer

Retail Distribution

Center

Retail Store

Customers

Purchase Merchandise Manufacturer

Retail Distribution

Center

Retail Store

Customers

Purchase Merchandise


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Forward Supply Chain

The supply chain that manufactures and delivers newproducts to end customers

Reverse Supply Chain

A supply chain for defective or returned products thatare being sent from the customer back to theretailer/distributor/manufacturer to wherever they will

be refurbished/junked Reverse logistics concerns the reverse flows of these

items along the supply chain


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Green Supply Chains/Green Manufacturing

Designing environmentally friendly supply chains

Supports manufacturing stage, use of products, anddisposal of products


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A Generic Supply Chain

2nd

TierSuppliers

2nd TierSuppliers

2nd TierSuppliers

1st TierSuppliers

1st TierSuppliers

Assembly/Manufacturing and

Packaging

DistributionCenters

Retailers Customers

T

heGenericProce

ss

Upstream Internal Downstream


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Essentials of Supply ChainsTypical Push Supply Chain

CorrugatePaper Co.LumberCompany

LabelManufacturing

GrainProducer Processing

FacilityDistribution

CentersStores Customers

TheCereal

Manufac

turingProcess

Packaging

GrainCereal

PackagedCereal

BoxPaperboard

Labels

Upstream Internal Downstream


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Enterprise Resource Planningand the Internal Supply Chain


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Internal Supply ChainEvolution of Manufacturing Info. Systems

Inventory

Purchasing

Production

schedulingMRP

1960 Production

Management+

MRP Finance,labor

MRP II1970

MajorManufacturingResources

+

MRP IIAll internal

resourcesERP

1980 Coordinated

Manufacturingand Service

Transactions

+

ERPInternal customers

and suppliers

Internal

SCM1990

InternalERP/SCM+

Internal

ERP/SCM

External suppliers

and customers

Extended

SCM20

00

Extended

ERP/SCM+


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ERP

A process of planning and managing all resources and their use in

the entire enterprise

Objective

To integrate all departments and functions across a company onto a

single computer system that can serve all of the enterprises needs

Results

productivity improvement

better profitability

increases customer satisfaction


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Prosprovides a single interface for managing all the routine

activities performed in manufacturing

can integrate several hundred applicationsplays critical role in getting small- and medium-sized

manufacturers to focus on business processes

Cons

may need to change existing business processes to fit SAP,PeopleSoft or other ERP vendors format

never meant to fully support supply chains (SCM)

never meant to support CRM

difficult to build, operate, change and maintain


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Enterprise Resource Planning (ERP)Generations of ERP

First Generation ERP

Supported routine transactional activities

Excelled in transaction management

Generated reports which provided a snapshot of the business at a

point in time

Did not support the continuous refining and enhancing of plans as

changes and events occur, up to the very last minute before executing

the plan

Second Generation ERP Adds decision support and business intelligence capabilities

Integration of database management systems (DBMS) and

spreadsheets in Excel or Lotus 1-2-3

Web-based

Integrates CRM and EC


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Enterprise Resource Planning (ERP)ERP Technologies

ERP Application Vendors

SAP

Oracle PeopleSoft

ERP Integration Tools

Message-oriented Middleware (e.g. IBM MQSeries,

Microsoft MSMQ)

WWW technologies

Web Services technologies (.NET/J2EE)


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Enterprise Resource Planning (ERP)ERP Implementation

ERP Implementation Approaches

Vendor Specific

Use ERP software components from a single vendorUsing a single vendor speeds up implementation times, reduces

incompatibility problems, reduces the need for middleware to

connect different vendors ERP components

Best of Breed

Pick and choose the best software components available forvarious ERP tasks

Picking best-of-breed components allow you to choose ERP

processes that work better for your business, and to have the

best available components, at the possible cost of additional

implementation time and maintenance costs


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ASPs and ERP Outsourcing Application Service Providers (ASP)

Some ASPs offer to lease ERP-based applications to other

businesses over long-term (>5 year) contracts Offerings evident in ERP-added functions

Electronic commerce

Customer relationship management (CRM)

Datamarts

Desktop productivity

Human resources information systems (HRMS)

Other supply chain-related applications


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Supply Chain Problems


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Problems Along Supply ChainsUncertainties demand forecasts

influenced by competition, prices, weather conditions, technological

development, and customers general confidence delivery times

depend on several factors ranging from machine failures to road

conditions and traffic jams, that way interfere with shipments

Symptoms of poor SCMpoor customer service, which hinders people from getting theproduct or service when and where needed, or gives them aproduct of poor quality

High cost, low (or no) profit

The Bullwhip Effect


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Problems Along Supply Chains

Retailer Distributor Wholesaler ManufacturerConsumer

Demand

Poor demand

forecasts

Demand

fluctuations

Special

sales

Price

fluctuations

Order

batching

Rationing of

supply

Price

fluctuations

Order

batching

Rationing

of supply

Rationing of

supply


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Retailer Distributor Wholesaler

Manufacturer

The Bullwhip

Effect

Supply Chain ProblemsThe Bullwhip Effect

A Small

Demand

Shift

Leads To

Huge Variation inOrders and Inventories

Huge Variation

in On-Hand Inventory

and Manufacturing


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Organizational Benefits

reduce uncertainty and risks

in the supply chain

positively affecting inventory levels,

cycle time, business processes, and

customer service

increase profitability

and competitiveness


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Potential Solutions to Problems Vertical integration - building inventories

Coordination of all different activities

Use outsourcing rather than do-it-yourself during demand

peaks Buy rather than make production inputs whenever

appropriate

Configure optimal shipping plans

Create strategic partnerships with suppliers Use just-in-time approach to purchasing

Use fewer suppliers

Use IT to support the above, to integrate

processes and to communicate better


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Integrate Information Along Supply Chain

Supply Chain Integration

After the introduction of computer-based information,

companies started to integrate the links of the supplychain

New forms of organizational relationships and the

information revolution, especially the Internet and

electronic commerce, have brought SCM to the forefront

of management attention


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Supply Chain ManagementBenefits of Information Sharing

Tangible benefits inventory reduction

personnel reduction

productivity improvement

order management improvement

financial-close cycle improvements

IT cost reduction

procurement cost reduction cash management improvements

revenue/profit increases

transportation logistics cost reduction

maintenance reduction

on-time delivery improvement


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Benefits of Information Sharing Intangible benefits

information visibility

new/improved processescustomer responsiveness

standardization

flexibilityglobalization

business performance.


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Success Story: P&G and Wal-MartWal-Mart provides access to sales data for

every item P&G makes for Wal-Mart

P&G obtains similar data from otherretailers

By monitoring inventory position at all

retailers, P&G can know what is selling,what to make, and how quickly to make it


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Failure Story: Cisco Cisco supply chain was touted as an amazing feat in SCM

When Cisco needed something, the order was sent out via the SCMsystem to all of the various vendors

In order to get the vendors to work with the SCM system, Cisco

guaranteed that they would pay for any unused inventories thatvendors ended up with

What Cisco didnt realize was that their ordering system was flawed Vendors could not communicate with each other

The total SCM system didnt control the MRP process further down thesupply chain

When an order (say 100) was offered to the vendors, the vendors (say 25)would each place an order for 100 sets of required components, leading to2500 units being moved into Ciscos supply chain

Eventually, Cisco had to re-write their SCM system and write off $1Billion for inventories that they did not need


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IT Integrates Global Supply Chains Integration

IT provides EDI, communication options, online

expertise in sometimes difficult and fast-changing

regulations

Collaboration

IT can be instrumental in helping businesses find trade

partners Outsourcing for Flexibility/Cost, etc.

IT facilitates outsourcing of products and services,

especially IT programming, to countries with plentiful

supply of labor, at low cost


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Supply Chain ManagementIT Integrates Global Supply Chains

Example: Li & Fung, Hong Kong (lifung.com)

Supplies The GAP, many other US companies

Very competitive markets

Now up to 7 different apparel seasons per year

Maintain a huge network of manufacturers throughout

Southeast Asia, Africa, Eastern Europe

Have used IT -- built on top of existing supplier

relationships -- to thoroughly integrate supply chain

Can ship orders in very short times

Have used the Internet to extend their capabilities to even

small US clothing retailers


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Supply Chain ManagementFuture Managerial Issues

SCM was necessitated/facilitated by past 10 years of

globalization

Uncertainty about future globalization (after 9/11/2001)

will change SCM directions

Less willingness to take risk in foreign supply sources

Longer time/costs for nations to inspect and accept goods from

foreign sources

More backup inventories will need to be held to hedge againstsupply variability

Greater breadth of shipping channels will need to be used to ensure

enough supplies can get to factories on time


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Supply Chain ManagementTrends

Integrating CRM to ERP and SCM

Business Intelligence Building knowledge about what is going on in your business by

using DSS, EIS, data mining, intelligent support systems, and otherknowledge-oriented IT

Supply Chain Intelligence Business intelligence technologies embedded in SCM applications

Componentization A component architecture takes advantage of modularity the

ability to mix-and-match different modules that work togetherseamlessly

Componentization saves money on maintenance and upgrading,since each module/component/object can be upgraded individually,in a manner that does not affect other modules


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SCM for E-Commerce


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SCM for E-CommerceDigital Supply Chains

E-Commerce sites themselves are supply chains

for digital services

When you click on a URL, it is a request for a serviceWhen you get a page in your browser as a response to a

click on a URL, it is the result of an N-Tier architecture

that serves as a supply chain for digital content

The process by which the digital content is generated can span

one organization (an internal supply chain) or several

organizations (an upstream supply chain for content)


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SCM for E-CommerceIssues

E-Commerce technologies can help to improve thefunctioning of traditional supply chains Formalizes (e.g. using XML) and speeds up supply

chain communication Faster response to customer demands

Better information about supply chain activitiesprovided to customers and to supply chain partners

Facilitate a hub structure for new supply chain designs

Facilitate real-time knowledge about on-hand inventorypositions and locations of inventories

E-marketplaces can help clear markets, or dumpinventories that were mistakenly produced by thesupply chain


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SCM for E-Commerce

Issues E-Commerce also makes SCM more challenging

Customers expect faster response times

Order fulfillment problems have been rampant in E-Commerce dueto lack of knowledge of historical demands, and inability to ramp

up capacity to serve actual demands Customers are more knowledgeable about their rights by law,

supply chains must react in certain manners to customer orders companies can be fined if they do not

customers can keep anything they did not order

A variety of IT has been employed to provide better information to

customers about where their order is in the shipping process Quick delivery (online)

Integrated warehouses (bar coding)

Order tracking and shipment tracking

Documents

Lecture Supply Chain Management and Erpn3286