Transcript Ch.1 Enterprise Resource Planning and Supply Chain Managment

Lecture 4
Ch.1 Enterprise Resource Planning
and Supply Chain Management
&
p. 155, pp. 201-205
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Agenda
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(to p3)
1. Defining ERP
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2. History and Evolution of ERP
(to p10)
3. Defining SCM
(to p22)
4. Managing the Supply Chain
(to p24)
5. Supply Chain Strategies
(to p26)
6. E-procurement
(to p28)
7. Selecting an ERP System
(to p31)
8. ERP and E-Commerce
(to p32)
9. Successful Applications
(to p34)
10. Supply Chain Capabilities
(to p35)
11. Questions to Ponder
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1. Defining ERP
• ERP is the short form for Enterprise
Resource Planning
• ERP is a packaged business software
system
• SAP (System, Applications, and Products in
data processing)
 SAP R/2 – Mainframe version
 SAP R/3 – Client/Server version
• mySAP ERP 2005 (SAP’s new product)
(to p4)
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ERP Products for Small Business
• Microsoft Dynamics GP (formerly
Microsoft Business Solutions Great Plains)
• Quick Book Enterprise Solutions
• SAP Business One
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The aim of ERP is twofold:
1. To maintain transaction information to
initiate activities and track performance.
2. To develop an integrated enterprise.
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ERP and its add on value in industrial software packages
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Popular ERP Modules and Add-ons
• Modules
 Production Planning
 Materials
Management
 Sales and Distribution
 Financial and
Accounting
Management
 Human Resource
• Add-ons
Customer
Relationship Mgmt
(CRM)
 Supply Chain
Mgmt (SCM)
 Product Lifecycle
Mgmt (PLM)
(to p7)
Semantic view of ERP platform
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An Overview of an ERP System
ERP
Modules
Data Base
Planning and
Decision
Models
Architecture
Industry Solutions
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Popular mySAP ERP Process Modules
Internet Assignment: Visit and explore the
mySAP ERP Web site and see if you can
identify its process modules.
(to p2)
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2. History and Evolution of ERP
• 1960s – Material Requirements
Planning (MRP) (Planning and scheduling of
materials)
• 1980s – MRP II (planning and controlling
shop floor and distribution activities)
• 1990s – ERP (dealing with the entire range of
company activities)
• Today – ERP/SCM/e-strategy
(Synchronizing supply chain planning)
(to p2)
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3 Defining SCM
1. The Process View
2. The Policy View
3. The Performance View
4. The Problem View
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3.1. The Process View
• SC = a sales-production-distribution
network (see next slide)
• M = enabling conditions and enhancing
trust for supply chain excellence
• The aim is to develop supply chain
confidence.
(to p12)
• Example
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A sales-production-distribution network
Cash Flow
SC Processes and Activities
Customer##
Supplier##
Factory
DC
Customer##
Supplier##
Vendor
Customer##
Material Flow
Information Flow
Different processes/activities involved
(to p13)
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SC Processes and Activities
• Production (Parts Received, Goods Produced,
Goods Packaged)
• Fulfillment (Order Received, Order Processed, Order
Delivered)
• Replenishment (Order Submitted, Good Received,
Invoice Paid)
Parties involved
(to p14)
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SC Actors and Activities
Suppliers
QC Person
Production
Activities
Fulfillment
Activities
Replenishment
Activities
Raw
Materials
Received
Production
Planner
Goods
Produced
Orders
Processed
Goods
Received
Inventory
Manager
Sales
Person
Accountant
Goods
Packaged
Inventory
Status
Customer
Orders
Received
Order
Submitted
Invoice Paid
System structure
(to p15)
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Supply Chain Management – The SAP
(Process) View
Employees
Business
Partners
Suppliers
Order to Cash
Procure to Pay
Idea to Project
Hire to Retire
Customers
SAP R/3
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3.2. The Policy View
• Strategic – Design of SC networks based
on predefined parameters such as location,
size, distribution center
• Tactical – Optimizing flow of goods across
time horizon (monthly or daily)
• Operational – Labor, equipment, materials
(daily, hourly basis)
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3.3. The Performance View
Chen and Paulraj (2004) create eight
constructs for supply chain
management and performance based
on a literature review of four hundred
articles.
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Chen, I.J., Paulraj, A., 2004. Towards a theory of supply chain management:
the constructs and measurements. Journal of Operations Management 22,
119-150.
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These constructs are:
1) environmental uncertainty,
2) customer focus,
3) top management support,
4) supply strategy,
5) information technology,
6) supply network structure,
7) managing buyer-supplier relationships, and
8) logistics integration.
(to p19)
How they are applied?
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They need to be managed effectively to
have positive impacts on supply chain
performances.
The aim is to “create value and achieve
satisfaction of intermediate and final
customers in the market place.”
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3.4. The Problem View
Supply Chain Management (SCM) is about
dealing with production and SC
problems/concerns.
Examples
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Categories of Production and SC
Problems
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Location
Transportation and logistics
Inventory and forecasting (example: Optional)
Marketing and channel restructuring
Sourcing and supplier management
Information
Product design and new product introduction
Service and after sales support
Reverse logistics and green issues
Outsourcing and strategic alliances
Metrics and incentives
Global Issues
Source: Madu and Kuei 2004, Johnson and Pyke 2000
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(to p10)
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4. Managing the Supply Chain
Samples of issues included the following:
– Selection of suppliers
– Information sharing
– Partnership
– Establishing liaison with suppliers
– Product life cycle
– Total integration
– Inventory management
(to p23)
When considering them in the system concept format ……
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Managing the Supply Chain
0. Plan/ Product ideas
1. Demand/Create
2. Buy
Factory
Suppliers
3. Make
5. Support
Manufacturer’s and/or
Customer’s DC
6. Kaizen
Customers
4. Move
(to p2)
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7. Return
5. Supply Chain Strategies
• Many suppliers – conventional AVL failed to develop a long term
relationship
• Partnering with suppliers – from AVL to long term relationship
• Vertical integration – 2 forms: forward (making parts) & backward (buy
up parts suppliers)
• Keiretsu networks – maintains partnership with few vendors while
maintaining their vertically integrated
• Virtual companies – services rendered by suppliers by distance such as
hiring personnel for say operator calls
(to p25)
Exercise
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Supply-Chain Operations ReferenceModel
Internet Assignment: Visit and explore the
Internet site for the supply chain council
(www.supply-chain.org). Briefly describe
the Supply-Chain Operations Referencemodel (SCOR). Discuss the five building
blocks of the SCOR model: Plan,
Source, Make, Deliver, and Return.
(to p2)
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6. E-procurement
• E-procurement is an Internet-based
purchasing system that offers electronic
purchase order processing and improved
administrative functions for both the buyer
and the seller.
• The use of e-procurement ensures that the
best value is obtained for each product or
service.
(to p27)
• The effect onto SCM
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E-procurement and SCM
• Suppliers do not only compete on the
basis of price but also on the basis of
speed, quality, and the environmental
content of the product.
• Supply chain management and eprocurement are closely linked and both
the buyer and the seller should work
together.
(to p2)
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7. Selecting an ERP System
Sample Issues:
• Does the cost fit with the budget for ERP?
• Will the organization readily adapt to the ERP
system?
• Does the ERP system adequately address the
functional needs of the organization and the
different needs of the business units and
functional departments?
• Is the ERP system flexible and can it be
adapted to the changing business
environment?
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What is the learning curve for the ERP
system?
Is it feasible and cost effective to integrate the
ERP with other third party software?
Does the ERP software cover the needs of the
particular industry your organization is in?
Does the software come with the requisite
materials such as training manuals,
guarantees, consultant services, and ongoing
technical support?
(to p30)
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What assistance is offered by the vendor to get
the program running and at what cost?
Does the program run through the different
application system providers ?
How user friendly is the system?
Can the system be easily customized to meet
specific needs?
How long will it take to fully implement the ERP
system?
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8. ERP and E-Commerce
• ERP aims to integrate the firm's back office
processes and information flows.
• E-commerce is the use of computer systems
and packaged software applications protected
by network security measures to conduct online
transactions.
• There is a challenge to ensure that ERP and ecommerce systems are fully integrated so
information can flow directly and freely to the
different application areas.
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9. Successful Applications
Enterprise
Vendor Applications
Cisco
Systems,
Inc.
Pace U.
Oracle
Manufacturing,
Supply Chain
Financial, Order Entry Networks
SCT
Banner
Student, Human
Resource, Finance
Multi - Campus
Atofina
Chemicals
SAP R/3
Material Mgt.,
Production Planning,
Order Mgt., Financial
Reporting
12 Business Units
Starwood
Hotels
Oracle
Payroll, Accounts
Payable, General
Ledger
750 Hotels
Example
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Organization
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Order Fulfillment Process Before and
After the ERP/SCM Implementation
Before ERP/SCM
PC
Produce/Price
Enquiry
Local/Distributed Information Systems
Order Entry
Credit
Checking
Inventory
Order
Confirmed
ERP
Order Entry
Credit Checking
PC
Produce/Price
Enquiry
Inventory
SC Applications
Order
Confirmed
Delivery
Arrangement
Time
After
ERP/SCM
(to p2)
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Supply Chain Capabilities
(p155)
The abilities to:
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Manage supply chain inventory
Meet promised delivery date
Fulfill orders with improved accuracy
Forecast sales with greater accuracy
Issue advanced shipping notice on shipping delays
Respond to requests in a timely manner
Make high quality products
Deliver high quality services
Respond to the needs of key customers
Work with key suppliers
Design environmentally conscious processes
Have better asset utilization
Enhance supply chain’s position in terms of integrity and
social responsibility
(to p2)
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10. Questions to Ponder
What are the key objectives of ERP/SCM in
the new economy? How does ERP/SCM
help an organization? How can an
organization successfully adopt
ERP/SCM? Discuss the costs and benefits
associated with ERP/SCM?
(to p2)
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5. Descriptive Model
Eddie is considering three early-sales
inventory policies, namely, ordering 65, 80,
or 95 notebooks daily.
Eddie is eager to know, in general, what
impact the adoption of these early-sales
inventory policies would have on the
supply chain’s inventory behavior
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Eddie can follow the following solution
steps
• Identifying variables and parameters of interest,
• Gathering data and establishing the probability
distribution for each variable,
• Building flow diagrams for simulation model,
• Determining or specifying the value(s) of
parameters,
• Implementing the model in Excel, and
• Analyzing the results.
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To facilitate the analysis procedure, discrete
distributions and inventory process steps
are implemented directly in Microsoft
Excel.
Figures 12.10 and 12.11 (in our Text)
illustrate an Excel simulation model for
Eddie’s inventory example. Specific
formula and values used in the
spreadsheets are presented in table 12.20
for quick references.
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The results show that the overstocking
policy (e.g. ordering 95 notebook
computers daily) would result in higher
ending inventory levels, while the understocking policy (e.g. ordering 65 notebook
computers) would lead to higher levels of
lost sales.
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Interfaces
For the applications of the advanced
descriptive models in a real life setting,
see the following article published by
Interfaces: Saltzman, R.M., and Mehrotra,
V., “A Call Center Uses Simulation to Drive
Strategic Change,” Interfaces, 31(3), 2001,
pp.87-101
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How to Conduct a Successful Simulation
Study?
Internet Assignment: Go to the Winter
Simulation Conference site’s tutorial section
(http://www.informs-cs.org/wscpapers.html)
and find the following conference papers:
 How
to Conduct a Successful Simulation
Study?
 Introduction to Modeling and Simulation
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