intro to scm

7/29/2019 Intro to SCM

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22-Sep-13 Sarthak Chandra 1

Post graduate Diploma In Logistics &

Supply Chain2011-12

St. Xavier’s college, Kolkata

Introduction to SCM

By,

Sarthak ChandraPGDM – IIM (B), SAP SD SCM - Certified Consultant (SAP AG Germany)

CEO – SARV




Course Overview

Evolution & Process of SCMBusiness Process Re-engineering

Reengineering and relevance to SCM?

Why reengineer? Benefits of Reengineering?

Operational Innovation

What is the right Supply chain for a

product ?




The New Paradigm of Business ProcessManagement

Rapid, endless change is a cornerstone of business success, notan exceptional event

• Processes of excellence are able to adapt to change

• Constant change is required for business survival

Ability to define, measure, analyze, improve and controlprocesses are the keys to business innovation and growth

Processes must allow different people with different skills - ITdeveloper, manager, business analyst, marketing personnel - toeach view and manipulate the output in different ways




Supply Chain Management

What is SCM?

Where does it start from?

Where does it end?

What are the components and management elements thatform a part of the supply chain?

Finance, Marketing, Operations, Sales, HR, Projects, Admin., etc. ??




The first supply chain was the barter system

Traces of outsourcing was seen when Charles S. Rollsbecame selling agent for cars made by F. Henry Royce

The essence of SCM was understood with the first phasecharacterized as an inventory „push‟ era that focusedprimarily on physical distribution of finished goods

Ancient Times

1904

1960-1975

1975-1990

1980 Emergence of SCM1985 WalMart introduced the concept of Cross Docking

Internet revolutionized the distribution system of the business

1996

Concept of e-commerce changed the definition of

business1998

Companies began migrating from an inventory push toa customer pull channel




Customer could be an internal customer or anexternal customer

Next, we see the processes performed in a supply chain as a CYCLICAL view




Cycle I

Cycle III

Customer

Distributor

Manufacturerupplier

Retailer

Outsourcing




A push-based SCM takes longer to react to thechanging market place

In a push-based supply chain, production decisionsare usually based on long-term forecasts

In push-based strategies, SCM experience increasedtransportation costs, high inventory levels and highmanufacturing costs

In a pull-based supply chain, manufacturing is demand driven

so that it is coordinated with actual external customer demandrather than a forecast

Push View of SCM

Pull View of SCM

Lead-time reduction occurs as the variabilitiesare better monitored in pull-based SCM

Pull-based systems are often difficult to implement when lead timesare so long that it is impractical to react to demand information




What is Re-engineering?

Definition – “The fundamental rethinking andradical redesign of business processes to bringabout dramatic improvements in performance.”

Radical change, fast A fundamental rethinking and transformation of an

integrated set of business processes

Aims for dramatic business results

Unlike quick hits and incremental improvement,reengineering is a form of organizational change

Characterized by dramatic process transformation

Is forgetting how work was done at the times of mass

markets and how it can be done best now.




Reengineering isn‟t…

Reengineering isn‟t an idea imported from

China

Reengineering isn‟t a program to hike employee

or worker‟s moral or motivate the sales force It won‟t push an old computer system to work

faster

Reengineering isn‟t about Fixing anything

Business Reengineering means starting all overagain from the scratch.




Process Reengineering for Change

Relies on reevaluating the purpose of the

process and questioning both the purpose

and the underlying assumptions

Requires reexamination of the basic

process and its objectives

“Out of the box” thinking for the creation

of solutions to old and new problems




The term process in the context of reengineering

A process is a series of related activitiesthat:

takes an input

adds value to it produces an output for a customer to

generate value for him




BPR Methodology

A Methodology for Business Process

Reengineering (Fitzgeraldand Murphy 1996)

Select process to be reengineered

Establish process team

Understand current process

Dev elop a v ision of improved process

entif y actions needed to mov e to new process

Negotiate/execute plan to accomplish actions




Why BPR projects are failing?

Lack of senior management sponsorship

Failure to make an ongoing commitment to the toughmanagement decisions needed to effect these changes to the

work environment

Lack of motivation

Lack of Knowledge & capitalizing on ignorance




Methodologies: Issues

SELECTION; Many companies are developing their ownBPR methodologiesTIME; The need to test the project empirically so that it canbe validated and modified as appropriate. In the case of BPR,this poses a problem since a typical reengineering project

can last 1-2 yearsBPR efforts cannot be uniformly applied across differentcultures but need to be tailored to the specific contingenciesof the situation




Methodology:

A consolidatedmethodology has beendeveloped from thefive methodologies

and a model wasdeveloped to provide astructured approachand to facilitateunderstanding(Muthu, Whitmanand Cheraghi 1999).




Future Trends

Area of supply chain management and logistics.

Although currently fading, however BPR may increase inimportance again, in some form or known by some other name; the BPR phenomenon would be of enduringimportance.

SCM to take a lot of significance for organizations

Operational efficiency the key differentiator between aceperforming companies and mediocre companies




Operational Innovation

Operational Improvement, Operational Excellence & OperationalInnovation

Some of the Greatest Success stories – Operational Innovation – Wal-Mart, Toyota, Dell etc.

“Dell Business Model”

“Toyota Production System”

Wall-mart

$ 44 Million – 1972

$ 44 Billion - 1992

2 reasons to tell these stories

1 – Its worth telling, as it has generated extraordinary results

2 – Not many stories, not more than 10% of the largeorganizations




A Powerful Weapon

Strategic benefits Marketplace benefitsHigher Customer retention Lower PricesGreater market Share Greater Customer SatisfactionAbility to execute strategies Differentiated OfferingsAbility to enter new Markets Stronger customer relationships

Greater agility

Operational benefitsLower Direct costBetter use of assets

Faster Cycle timeIncreased accuracyGreater customization & precisionMore added valueSimplified processes




Why Operational Innovation

Most companies are struggling with:

Low growth

Stagnation

Over Capacity production & competition

No pricing power

The Solution

Take market share from competition

Lower costs

Extraordinary Quality & Service

Operation Excellence and Operational Improvements areobsolete terms




Challenges for operational Innovation

Business culture Undervalues operations

Out of Sight & Out of mind

Nobody owns it




Making it work

Need to start at the grassroots level

Find a leader

Look for role models

Identify & defy a constraining assumption

Make the special case into the norm

Rethink critical dimensions of work

Implement in phases/step change

Can you answer “is it sustainable?”




What is the right supply chain for your product ?Devising a SCM strategy

Before devising a supply chain

Analyze the nature of demand for the product

Primarily 2 types of products

Functional Products

Primarily Innovative products




Types of Products

Functional Products

Staples – e.g. Grocery, petrol, gas etc.

Satisfy Basic needs

Don‟t change much over time Have stable, predictable demand & long life cycles

Innovative products

Any functional product where some innovation isdone

E.g. Fashion apparel, computers, mobile phones




Enterprise

R esource

Planning

http://images.google.co.in/imgres?imgurl=http://www.extolcorp.com/images/EC%20ERP%20System%20overview.jpg&imgrefurl=http://www.extolcorp.com/solution/sea_ecerp.html&usg=__80oa-BwUSrDbyce6YFNYUcwEai4=&h=424&w=392&sz=129&hl=en&start=1&sig2=nVTILnx6NGHBX66zOZWQFA&tbnid=aj0PI2VYzk3PCM:&tbnh=126&tbnw=116&prev=/images?q=ERP&gbv=2&hl=en&ei=to3ISaiJLNGIkQWa-JXSAg




ERP

General Concepts




ERP – General Concepts

What is ERP?

The Current Scenario

Why ERP?

Definition

Evolution

Expectations

BPR & ERP

BPR & ERP – The Stages




What is ERP?

facilitates company-wide integrated informationsystems, covering all functional areas

performs core Corporate activities and increasescustomer service augmenting Corporate Image

ERP is a solution, which




The Current Scenario

Islands of Information

Difficult to get timely & accurate information

Heterogeneous Hardware & Software

platforms & practices

Poor connectivity between different

organizational locations

Sticking with obsolete technology

Resist to change

Lack of proven man-power to develop

integrated software




Information Islands




ERP - Definition

“Software solution that addresses the Enterprise needs, taking a process view of the overall organization to meet the goals,

by tightly integrating all functions andunder a common software platform”




Why ERP?

For Management – to know what is happening

in the company

One solution for better Management

For cycle time reductionTo achieve cost control & low working capital

To marry latest technologies

To shun the geographical gaps

To satisfy the customers with high expectations

To be Competitive & for survival




Evolution of ERP

1960’s - Systems Just for Inventory Control

1970’s - MRP – Material Requirement Planning(Inventory with material planning & procurement)

1980’s - MRP II – Manufacturing Resources Planning(Extended MRP to shop floor & distribution Mgnt.)

Mid 1990’s - ERP – Enterprise Resource Planning

(Covering all the activities of an Enterprise)2000 onwards – ERP II – Collaborative Commerce(Extending ERP to external business entities)




Benefits of ERP

Benefits of ERP

• Help reduce operating costs and transaction costs

• Facilitate Day-to-Day Management

• Support Strategic Planning• Support supply chain management

• quicker response time

• improve the accuracy of the information

• improve the efficiency of the supply chain

• improve production

• improve supplier relationship and reliability

• bargaining power of trading partners




ERP implementation challenges

Lack of top management commitment

Lack of MRP II education for the users of the system

Inaccurate data

Poorly managed MPS

Over-sophistication/Addition of fancy options

Lack of user control

Time consuming implementation process delayed payback

Behavioral problems




Why Implement an ERP?

To support business goals

Integrated, on-line, secure, self-service processes for

Business, thereby Integrating all the functions

Eliminate costly mainframe/fragmented technologies

Improved Integration of Systems and Processes

Lower Costs

Empower Employees

Integrating the systems running in all the locationsEnable Partners, Customers and Suppliers

Transparency of information using a single data sourceacross the organization




How to Implement an ERP?

Obtain the right mix of people, processes andtechnology!People

Project Structure

Should be aligned to processes

ProcessImplementation Process (outlined in detail)

Adapt your processes to those of the ERP.

TechnologyHardwareSoftware

Integrated Systems




BPR & ERP

Just automating the existing business practiceswill not help ERP to achieve the anticipated results

Business Process Re-engineering [BPR] brings out the

deficiencies of the existing setup

BPR and ERP will give way to implement newsystems and the long pending improvements in theexisting systems

BPR may be time consuming but the scope can berestricted & controlled by the Management




Pre Implementation Stages

The implementation of an enterprise resource planningsystem was an expensive, difficult and time taken task.

In-house/outsource development.

Adaptation of standardize package

1. Set up Steering CommitteeRepresentative from Senior ManagementDepartment ManagersInformation System Manager Consultant




2. ERP TrainingFor the relevant personnel to understandintegrated computer system.For the relevant personnel to understand ERP

and its advantage and disadvantage.3. Feasibility Study

DriversInhibitors

4. Requirement analysisOperation requirement of individual departmentComputer access and control of individual staff within

different department.ReportsData exchange between individual department as well as

outside parties.Physical layout of computer equipments

5. Preparation of Testing DataExtract the critical and/or representative data from the

major operation (department) required for the

selection of standardize package




6. Development of the system or selection of standardizepackage

Functions and features should capable for the futuredevelopment (atleast can lasted for three years) of

the organizations.Ability of the solution provider on future development and

maintenance.Data and procedures set up and standardization.Implementation methods and qualities.




Implementation Stages

Typical tasks

The sample schedule in this section is at a high level but indicates relativetime frames for individual tasks and overall project accomplishment. It isintended to suggest the type of tasks that make up the schedule.

You should break the high level tasks into detailed steps complete withresponsibilities and timeframes that fit your company's specific project.

1. Change managementWho are the resistance individuals and/or groups?

What are their needs?What beliefs and values do they have?What are their interest?Effective communicationProject management

Project championMonitoring and evaluation of performance




2. DurationExperience has shown that selection and implementation of these types of systems takes 6 months or less depending on

what is being installed and the condition of the

company's data.This depends on the system and the user's motivation.

3. Information/Data PreparationOne of the most important tasks in implementing an ERP

system is getting the information or data that the

system requires in a condition that will allow the systemto function properly.

4. Site PreparationAnother important area that needs specific attention is

preparation of the physical site for acceptance of the new system.

Here again the magnitude of this task is dependent on whatis being installed and the current condition of the facility.

However, the following items usually will needattention as a result of the system implementation -

a. Network b. Hardware




5. Converting and Loading DataConverting and loading all required data into the new

system is a formidable task. Before you begin it isadvisable to understand the magnitude of the entire

task. As part of your system search be sure to understand fromthe vendor what assistance they can offer your

particular conversion effort.If you are converting from a computerized system, find out

if they have conversion programs that can formatand move the data from your old system to the new.

If not, ask what other options are available.It is important to understand the total logistics of this task.




Success factors for an ERP implementation

Clear understanding of strategic goals

Commitment by top management

Business process reengineering (BPR) and minimum

customization

Data accuracy

Extensive education and training

Focused performance measures Use of consultants




ERP – Options

OPTION 1 – MAKE [Using Internal resources]

Developing a custom-built ERP package, specific to therequirements of the organization, with the help of thein-house IT department

OPTION 2 - BUY

Going for Tailor-made ERP packages available in the market likeSAP, Oracle applications, Baan, PeopleSoft etc.

OPTION 3 –

MAKE [using External resources]

Developing a custom-built ERP package, specific to therequirements of the organization, with the help of asoftware solution provider




Building ERP solutionsusing

Internal Sources




ERP – Building using Internalresources – The Facts

Lack of adequate & qualified manpower Not driven with clear focus on expectations,

time & cost Poor software project management Lack of seriousness with the Management & the

IT Team High employee turnover Lot of schedule gaps during Project execution

Normally project life is more Frequent change in the scope with the approval

of the Management




Tailor-made

ERP

Solutions




Tailor-made ERP solutions

About this option Execution Phases ERP product selection phase Product selection - Parameters

Preparation Phase ERP product acceptance - Options Gap Analysis Production Phase

Implementation Phase Post-Implementation Phase Pitfalls & Points of Concern Critical Success factors




About

Generalized off the shelf application s/w packagesModules based on rich functionalities for all businessfunctionsUser tested with lot of installationsNo lead time requirement for software developmentTuned for more users/networks with adequate & in-built securityParameterized for flexibility

Can sit on latest hardware & software platformsUpgradation of functionalities with version control




Execution phases

ERP product selection

Preparations

Production

Implementation

Post-Implementation




ERP Product selection Phase

ERP Team formation for selection

Appointment of Consultants [if needed]

Scoping study

Product selection

Implementation partners selection

Hardware/Communication cost estimation




Product Selection - Parameters

Reputation of the ERP product

No.of installations in the geographical vicinity

% of the overall functional availability

Customization possibilities

After sales support

Your investment plan & budget

Implementation partner’s track record




Technology

Support

Costs

5 Strategic

Requirement

Levels

FunctionalityGoal:

To select the

Most Suitable Software

Package Solution

Vendor

ERP Product selection Criteria




Preparation Phase

Framing ERP Implementation Strategies

Formation of Apex & Steering committees

Functional & IT team formation

Training on ERP functions & features

Scope finalization

GAP analysis

Action plan to resolve the gaps




ERP product acceptance - options

1. Adapting directly, all the functions available inthe ERP Product [Applicable for startup companies]

2. Change the way the firm does the business to fitthe product [Compromising]

3. Customize the ERP product to suit the businessProcesses. [Customization]




GAP Analysis

This is the process to identity the gaps by mappingthe expectations of the company with thecapabilities of the ERP product

Results of Gap Analysis

Directly SupportedWorkaround suggested

Extension requiredChange in business process – suggestedNot full supportedManual – not under the scope of ERP




Production Phase

Installing the software & hardware

Tuning the software to meet thecustomization needs

Master & Control data arrival as perthe Product data structures

Location & people specific roles & rightsallocation for module access & security




Implementation Phase

Conference Room Pilot [Parallel run]

Resolving the Parallel run issues

Training the end users Live run




Post-Implementation Phase

Regular monitoring

Tuning [hardware/software] for patchingthe performance issues

Maintenance




Pitfalls & Points of concern

Costly comparing to custom-built options Lot of hidden costs Chances of cost & time overrun are high The Level of customization/Indianization

Compulsion to pay for redundant modules/features Vigorous involvement of all during implementation Non-availability of special practices like Customer

Complaint, Logistics Linking historical data – offline & painful

The requirement of Change Management is a must Dependency on outsiders is high IT department – Poor grip on the Implemented systems




Critical Success Factors

The firm & optimistic approach of the Management- on adapting the ERP product driven methodologies- on customization- on monetary commitments

The dedicated Team Good Training Strict adherence to the Project schedules Right technical infra-structure

Change Management




Custom-built

ERP

Solutions

using external resources




Building ERP using Ext.sources

About this option

The Principle!

The Steps

Why? Points of Concern

Software Vendor selection

Critical Success factors




About

Here the whole package is designed & built

by keeping a specific enterprise & its businessPractices in mind

by incorporating the improvements/additions with due integration without compromising or changing the current way

of doing the business and

providing flexibility to accommodate your businessfluctuations




The Principle!

The best as seen elsewhere, need not be thethe best for you.

What is your best is what

can be successfully implemented




The Steps

1. Software vendor selection2. Detailed study by the vendor3. Scope & platform finalization4. Freezing the commercials

5. Development6. Hardware addition/upgradation7. Old master/transaction data migration8. Parallel run with Integration & connectivity check

9. Implementation10.Maintenance




Why?

Very economical while comparing the cost of implementing

tailor-made ERP solutions

Less prone for hidden-cost hits

The company can opt for its choice of Hardware, Software &

communication platforms based on the skill availability

The company and the software vendor have the direct

relationship during the project execution. The proximity

would be high & convenient.

IT department has good control over the Project What is required only would be considered under the scope –

No redundancy




Why? - Cont.

The requisite flavor of E-Biz & work-flow components

can be embraced towards value edition

The existing practices & applications can be tuned and

linked with the proposed package

Maintenance & improvements are easy & less costlier.

Even IT team can maintain the setup after getting the

source code




Points of Concern

Software development vendor selection

Requirement/scope finalization [high chances of retaining the islands as it is]

Less chances of Value addition

Not time tested

Chances of Prolonged project duration




The following traits should be considered while selectingthe software vendor for building the ERP application

Technical expertise

Domain knowledge

Adequate manpower

Project management skills

Long existence in the field

Extra skills [e-biz & workflow]

Software Vendor Selection




The Critical Success Factors

• Clear Vision & support of the Management• Capabilities of the software development vendor• Scope & Expectations finalization towards

meeting the ERP concepts

• Strict implementation schedules & periodicalmonitoring

• The involvement of the IT & functional teams




Key ProcessIntegrationvia ERP

ProductLifecycle

Management

Supply ChainManagement

Customer Management

Supplier Collaboration

DesignPartners

Consumersand Channels

Beyond ERP

http://www.iconbazaar.com/computer/server03.gif




R/3

FIFinancial

Accounting

COControlling

PSProjectSystem

WFWorkflow

IS

IndustrySolutions

MMMaterials

Mgmt.

HR

HumanResources

SDSales &

Distribution

PPProductionPlanning

QMQuality

Management

PMPlant Maintenance

SMServiceManage-

ment Integrated Solution

Client / Server

Open Systems

ECEnterpriseControlling

AMFixed Assets

Mgmt.




Supply Chain Process

Customer Order Picking Goods Issue

BillingAccounts ReceivableFinal Payment









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