Transcript Business Process Reengineering & Infromation Technology

Chapter 8
Supply Chain Management
&
Enterprise Resource Planning
Essentials of the Supply Chains
 Supply Chain
 the flow of material, information, payment, and services from raw material
suppliers through factories and warehouses (Value Chain) to the end
customers (Demand Chain)
 Supply Chain Flows
Materials flows - all physical products, new materials, and supplies that flow along the chain
Information flows - all data associated with demand, shipments, orders, returns and schedules
Financial flows - all transfers of money, payments, credit card information, payment
schedules, e-payments and credit-related data
 E-supply chain
 Supply Chain Management (SCM)
 to plan, organize, & coordinate all the supply chain’s activities
reduce uncertainty and risks in the supply chain
Benefits
positively affect inventory levels, cycle time, business processes, & customer service
increase profitability and competitiveness
An automotive Supply Chain
Supply Chain - Components & Types
 The Components of Supply Chain
 Upstream supply chain
sourcing or procurement from external suppliers occur
 Internal supply chain
where packaging, assembly, or manufacturing take place
 Downstream supply chain
where distribution or dispersal take place, frequently by
external distributors
 Types of Supply Chain
 Integrated make-to-stock
 Continuous replenishment
 Build-to-order
 Channel assembly
Supply Chain
“Supply” Chain
Value Chain
Demand Chain
Supply Chain Problems
UNCERTAINTY
 Demand forecast
 Delivery times
 Quality
POOR COORDINATION
 With Internal units & business partners
 Ineffective customer service
 High inventory costs, loss of revenue & extra
cost for expediting services
 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: P&G’s distortion in SCM for manufacturing of disposable diapers
 Main Solutions
 Vertical integration
 Building inventories
It is difficult to correctly determine inventory level for each product & part.
This can be costly.
Solutions to Supply Chain Problems
 Solution
 Information sharing among supply chain partners (c-commerce)
sometimes referred to as the collaboration supply chain
facilitated by EDI, Extranets & Groupware technology
Example: P&G and War-Mart (vendor-managed inventory,VMI)
 Others
Optimal Inventory Levels
Supply Chain Coordination and Collaboration
Supply Chain Teams
Performance Measurement and Metrics
 Use of IT for measuring areas in need of improvement
– Delivery on time, Quality at unloading area, Cost performance & Lead time
for procurement
Various IT-Assisted Solutions
 wireless technology
 optimal shipping plans
strategic partnerships with suppliers
just-in-time
Other IT-assisted Solutions to SCM Problems
 Other Solutions (Table 8.1, p. 365)
 Use wireless technology to expedite certain tasks in the supply chain - SFA
 Configure optimal shipping plans - Quantitative analysis, DSS, intelligent
systems
 Create strategic partnerships with suppliers - DSS
 Use the just-in-time approach to purchasing
 Use outsourcing rather than do-it-yourself - DSS
 Buy” rather than “make” production inputs when appropriate - DSS
 Reduce the lead time for buying and selling - BI
 Use fewer suppliers - BI
 Improve supplier-buyer relationships - CRM & PRM
 Manufacture only after orders are in
 Achieve accurate demand by working closely with suppliers - Online
collaboration tools
 Automate material flow, information flow, and partner relationship
Computerized Supply Chains
 Computerized systems
 Material requirements planning (MRP)
 essentially integrates production, purchasing, and inventory
management of interrelated products
 Manufacturing resource planning (MRP II)
enhanced MRP methodology by adding labor requirements and
financial planning
 Enterprise resource planning (ERP)
further integrates the transaction processing as well as other routine
activities in the entire enterprise
 Integration continues along several paths
functional areas
Combining transaction processing and decision support
Business intelligence
CRM software
2005 2000 1990 1980 1970 1960
The Evolution of Computerized Aids
Inventory
Purchasing
MRP
MRP II
+
Production
scheduling
+
Finance,
labor
+
All internal
resources
MRP
Production
Management
MRP II
Major
Manufacturing
Resources
ERP
Coordinated
Manufacturing
and Service
Transactions
Internal customers
+ and suppliers
Internal Internal
SCM ERP/SCM
Internal
External suppliers
ERP/SCM + and customers
Extended Extended
SCM/CRM ERP/SCM
ERP/SCM + BI, EC, CRM, KM
Enterprise
Enterprise
Integrated Systems
system
ERP
Why Integration?
 Benefits
 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, and on-time delivery improvement
 Intangible benefits
Information visibility, new/improved processes, customer
responsiveness, standardization, flexibility, globalization, and business
performance.
 Integrating the Supply Chain
 After the introduction of computer-based information, companies
started to integrate the links of the supply chain
 New forms of organizational relationships and the information
revolution, especially the Internet and EC, have brought SCM to
the forefront of management attention
Types of Integration: From Supply to Value Chain
 Types
 Internal integration - to integration between applications inside a company
 External integration - to integration of applications among business
partners
 Value Chain Integration
The process by which multiple enterprises within a shared market
channel collaboratively plan, implement, and manage the flow of goods,
services, and information along the entire chain in a manner that
increases customer-perceived value.
A process of collaboration
 A Supply Chain transforms into an integrated Value Chain
– Extends the chain all the way from sub-suppliers to customers
– Integrates back-office operations with those of the front office
– Becomes highly customer-centric, focusing on demand generation and customer
service
– Seeks to optimize the value added by information and utility-enhancing services
– Is proactively designed by chain members to compete as an “extended enterprise”.
Value Chain Integration
Enterprise Resources Planning (ERP)
 ERP = Process of planning & managing all resources &
their use in the entire enterprise
 Objective
 to integrate all departments and functions across a company onto a
single computer system
 control all major business processes with a single software
architecture in real time
 Leading ERP software producers
 SAP, Oracle, J.D. Edwards, Computer Associates, PeopleSoft
 Functions
 Provides a single interface for managing routine manufacturing
activities
 Facilitates customer interaction & manages relationships with
suppliers & vendors
 Forces discipline & organization around business
 Supports administrative activities
1st Generation ERP
 Objectives
 Automate key office processes
 Support routine transactional activities
 Advantages
 Excelled in transaction management
 Generated reports which provided a snapshot of the business at a
point in time
 Disadvantage
 not support the continues refining and enhancing of plans as changes
and events occur, up to the very last minute before executing the plan
 SCM Integration
 Work with different software products from different vendors (i.e. one
for ERP & one for SCM)
Post- ERP: 2nd Generation ERP
Objectives
 leverage existing systems in order to increase efficiency in handling transactions,
improve decision making, further transform ways of doing business
 A need for planning systems oriented towards decision-making
Integration
 Web-based
 DBMS, spreadsheets in Excel or Lotus 1-2-3, CRM & EC
 ERP/SCM integration model
 companies to quickly assess the impact of their actions on the entire supply
chain, including customer demand
 By providing intelligent decision support and BI capabilities, the analytical
SCM systems complement the ERP system.
 Alternative ways
Emergence of SCM systems that complement ERP systems
 ERP vendors add decision support & BI (Business Intelligence) capabilities
To work with different SW products from different vendors
How can I best take or fulfill your order? Vs. Should I take your order?
Supply Chain Intelligence (SCI) & Componentization
 SCI - the inclusion of BI in supply chain SW solutions
 3 Ways to provide SCI
Use an enhanced ERP package that includes BI capabilities
Integrate the ERP with business intelligence software from a
specialized vendor such as Brio, Cognus, or Comshare.
Use Web services
Create a “best of breed” system by using components from several
vendors that will provide the required capabilities.
 Componentization
 Breaking large ERP systems into individual components 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 with supply chain,
sales force automation solutions, and CRM
ERP Implementation
 To avoid failures, the following factors should be considered
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The customer’s expectations
The ERP product capabilities and gaps
The level of change the customer has to go through to make the system fit
The level of commitment within the customer organization to see the project
through
 The customer’s organization and culture
 The risks presented by politics within the customer organization
 The consultant’s capabilities, responsibilities and role (if applicable)
 Application service providers (ASP) & ERP Outsourcing
 “ASP alternative” - a SW vendor that offers to lease ERP-based
applications to other businesses
 A popular option today for businesses that want ERP functions but lease
applications rather than building systems
 offerings are evident in ERP -added functions such as EC, CRM, datamarts,
desktop productivity, human resources information systems (HRMS), and other
supply chain-related applications
Concept - especially useful in ERP projects, which are expensive to install and
take a long time to implement, and for which staffing is a major problem
Global Supply Chains
 Global Supply Chains = Supply chains that involve
suppliers and/or customers in other countries
 Driver - IT
IT provides EDI, communication options, online expertise in
sometimes difficult and fast-changing regulations
IT can be instrumental in helping businesses find trade partners
IT facilitates outsourcing of products and services, especially IT
programming, to countries with plentiful supply of labor, at low cost
 The issues
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legal issues, customs fees and taxes
language and cultural differences
fast changes in currency exchange rates
political instabilities
EC & SCM
 Buying & Selling along the Supply Chain
 UPSTREAM
improve the upstream supply chain through e-procurement
 INTERNAL SCM
from entering purchase orders, to recording sales, to order fulfillment, to tracking
shipments, are usually conducted over a corporate intranet
 DOWNSTREAM
enhance the activity downstream activities by providing online ordering
 Selling on your own web site, Auctions & Exchange
 Vertical exchanges
combine upstream and downstream EC supply chain activities
 Supply chains in EC
 Order fulfillment
 Integration of EC with ERP
Since most middle-sized and large companies already have an ERP system, and
since EC needs to interface with ERP, it makes sense to interconnect the two.
The problem is that the ERP SW is very complex and inflexible (difficult to
change), so it is difficult to achieve easy, smooth, and effective integration.
Web-based Supply Chain
Order Fulfillment in EC
 Online Order Fulfillment & Logistics
 While order fulfillment is a part of the back-office operations, it is
strongly related to front-office operations.
 Recently, e-Tailors have faced continuous problems in order fulfillment,
especially during the holiday season.
 EC is based on the concept of “pull” operations, which begin with an
order, frequently a customized one.
In the “pull” case it is more difficult to forecast demand.
In a B2C pull model, the goods need be delivered to the customer’s door.
 Deliver small quantities to a very large number of customers
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Innovative Solutions to Supply Chain Problems
Outsourcing order fulfillment
Same-day, even same-hour delivery
Automated Warehouses
 Large-volume EC fulfillment requires special automated warehouses.
 Most B2C is shipped via outsourcers.
 Options for Dealing with Returns
Partner Relationship Management(PRM)
 PRM
 refers to all of the efforts made to apply CRM to all types of business
partners
 Every company that has business partners has to manage the relationships
with them. Information needs to flow between the firms and constantly
updated and shared.
 EC PRM functions
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partner profiles
partner communications
lead management (of clients)
targeted information distribution
connecting the extended enterprise
partner planning
centralized forecasting
group planning
e-mail
price lists
Global Supply Chains
 Supply chains that involve suppliers and/or customers in
other countries are referred to as global supply chains.
 Companies go global (disperse the value chain) for a
variety of reasons.
 lower costs of materials, products, services and labor
 availability of products that are unavailable domestically
 the firm's global strategy
 technology available in other countries
 high quality of products
 intensification of global competition
 the need to develop a foreign presence to increase sales
 fulfillment of counter trade.
 Global supply chains are usually longer than domestic ones, and
more complex. Therefore, additional uncertainties are likely.