lecture: supply chain management and erpn

OverviewOverview

BackgroundEssentials of Supply ChainsEnterprise Resource Planning and the

Internal Supply ChainSupply Chain ManagementSCM for E-Commerce

BackgroundBackground

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 continually refueled by strategically located gas tanker planes

Essentials of Supply ChainsEssentials of Supply Chains


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

material suppliers through factories and warehouses to the end customers

Supply Chain Management (SCM) To plan, organize, and coordinate all the supply chain’s

activities A total systems approach for coordinating all of a supply

chain’s activities


Demand Chains/Demand Chain ManagementSimilar to SCM, but more of a focus on ...

customer touchpoints“pull” orientation

ToolsCustomer Relationship Management technologies


The Components of Supply Chains Upstream supply chain

includes the organization’s first-tier suppliers and their suppliers

Internal supply chainincludes all the processes used by an organization in

transforming the inputs of the suppliers to outputs Downstream supply chain

includes all the processes involved in delivering the products to final customers


PUSH PULL

ManufacturerManufacturer

Retail Distribution Center


Retail StoreRetail Store

CustomersPurchase Merchandise ManufacturerManufacturer



Retail StoreRetail Store

CustomersPurchase Merchandise


Forward Supply Chain The supply chain that manufactures and delivers new

products to end customers Reverse Supply Chain

A supply chain for defective or returned products that are being sent from the customer back to the retailer/distributor/manufacturer to wherever they will be refurbished/junked

Reverse logistics concerns the reverse flows of these items along the supply chain


Green Supply Chains/Green Manufacturing Designing environmentally friendly supply chains Supports manufacturing stage, use of products, and

disposal of products

Essentials of Supply ChainsEssentials of Supply ChainsA Generic Supply ChainA Generic Supply Chain

2nd TierSuppliers2nd Tier

Suppliers


Suppliers


Suppliers

1st TierSuppliers1st Tier

Suppliers

1st TierSuppliers1st Tier

Suppliers

Assembly/Manufacturing and

Packaging

Assembly/Manufacturing and

PackagingDistribution

CentersDistribution

Centers RetailersRetailers CustomersCustomers

The

Gen

eric

Pro

cess

Upstream Internal Downstream

Essentials of Supply ChainsEssentials of Supply ChainsTypical “Push” Supply ChainTypical “Push” Supply Chain

CorrugatePaper Co.CorrugatePaper Co.

LumberCompanyLumber

Company

LabelManufacturing

LabelManufacturing

GrainProducerGrain

Producer ProcessingFacility

ProcessingFacility Distribution

CentersDistribution

Centers StoresStores CustomersCustomers

The

Cer

eal

Man

ufac

turi

ng P

roce

ss

PackagingPackaging

Grain CerealPackagedCereal

BoxPaperboard

Labels

Upstream Internal Downstream

Enterprise Resource Planning Enterprise Resource Planning and the Internal Supply Chainand the Internal Supply Chain

Internal Supply ChainInternal Supply ChainEvolution of Manufacturing Info. SystemsEvolution of Manufacturing Info. Systems

Inventory

Purchasing

Productionscheduling MRP

1960 Production

Management+

MRPFinance,

laborMRP II

1970 Major

Manufacturing Resources

+

MRP IIAll internalresources

ERP

1980

Coordinated Manufacturing and Service Transactions

+

ERPInternal customers

and suppliersInternal

SCM1990 Internal

ERP/SCM+

InternalERP/SCM

External suppliersand customers

ExtendedSCM20

00 ExtendedERP/SCM+


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 enterprise’s needs

Results productivity improvement better profitability increases customer satisfaction


Pros provides a single interface for managing all the routine activities

performed in manufacturing can integrate several hundred applications plays 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 vendor’s format

never meant to fully support supply chains (SCM) never meant to support CRM difficult to build, operate, change and maintain

Enterprise Resource Planning (ERP) Enterprise Resource Planning (ERP)

Generations of ERPGenerations 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


ERP TechnologiesERP 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)


ERP ImplementationERP Implementation ERP Implementation Approaches

Vendor Specific Use ERP software components from a single vendor Using 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 for various

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

Enterprise Resource Planning (ERP) Enterprise Resource Planning (ERP)

ASPs and ERP OutsourcingASPs 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

Supply Chain ProblemsSupply Chain Problems

Supply Chain ProblemsSupply Chain ProblemsProblems Along Supply ChainsProblems Along Supply Chains

Uncertainties 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 SCM poor customer service, which hinders people from getting the

product or service when and where needed, or gives them a product of poor quality

High cost, low (or no) profit The “Bullwhip Effect”

Supply Chain ProblemsSupply Chain ProblemsProblems Along Supply ChainsProblems Along Supply Chains

Retailer Distributor Wholesaler ManufacturerConsumer Demand

Poor demand forecasts

Demand fluctuations

Special sales

Price fluctuations

Orderbatching

Rationing ofsupply

Pricefluctuations

Orderbatching

Rationingof supply

Rationing ofsupply

Retailer Distributor Wholesaler

Manufacturer

“The BullwhipEffect”

Supply Chain ProblemsSupply Chain ProblemsThe Bullwhip EffectThe Bullwhip Effect

A SmallDemand

ShiftLeads To

Huge Variation inOrders and Inventories

Huge Variation in On-Hand Inventory

and Manufacturing

Supply Chain ManagementSupply Chain Management

Supply Chain ManagementSupply Chain ManagementOrganizational BenefitsOrganizational Benefits

reduce uncertainty and risks in the supply chain

reduce uncertainty and risks in the supply chain

positively affecting inventory levels, cycle time, business processes, and customer service

positively affecting inventory levels, cycle time, business processes, and customer service

increase profitabilityand competitiveness

increase profitabilityand competitiveness

Supply Chain ManagementSupply Chain ManagementPotential Solutions to ProblemsPotential 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

Supply Chain ManagementSupply Chain ManagementIntegrate Information Along Supply ChainIntegrate Information Along Supply Chain

Supply Chain Integration 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 electronic commerce, have brought SCM to the forefront of management attention

Supply Chain ManagementSupply Chain ManagementBenefits of Information SharingBenefits 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

Supply Chain ManagementSupply Chain ManagementBenefits of Information SharingBenefits of Information Sharing

Intangible benefits information visibility new/improved processes customer responsiveness standardization flexibility globalization business performance.

Supply Chain ManagementSupply Chain ManagementSuccess Story: P&G and Wal-MartSuccess Story: P&G and Wal-Mart

Wal-Mart provides access to sales data for every item P&G makes for Wal-Mart

P&G obtains similar data from other retailers

By monitoring inventory position at all retailers, P&G can know what is selling, what to make, and how quickly to make it

Supply Chain ManagementSupply Chain ManagementFailure Story: CiscoFailure Story: Cisco

Cisco supply chain was touted as an amazing feat in SCM When Cisco needed something, the order was sent out via the SCM

system 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 that vendors ended up with

What Cisco didn’t realize was that their ordering system was flawed … Vendors could not communicate with each other The total SCM system didn’t control the MRP process further down the

supply 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 to 2500 units being moved into Cisco’s supply chain

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

Supply Chain ManagementSupply Chain ManagementIT Integrates Global Supply ChainsIT 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

Supply Chain ManagementSupply Chain ManagementIT Integrates Global Supply ChainsIT 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

Supply Chain ManagementSupply Chain ManagementFuture Managerial IssuesFuture 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 against

supply variability Greater breadth of shipping channels will need to be used to

ensure enough supplies can get to factories on time

Supply Chain ManagementSupply Chain ManagementTrendsTrends

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 other knowledge-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 together seamlessly

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

SCM for E-CommerceSCM for E-Commerce

SCM for E-CommerceSCM for E-CommerceDigital Supply ChainsDigital Supply Chains

E-Commerce sites themselves are supply chains for digital services When you click on a URL, it is a request for a service When 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)

SCM for E-CommerceSCM for E-CommerceIssuesIssues

E-Commerce technologies can help to improve the functioning 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 activities

provided to customers and to supply chain partners Facilitate a hub structure for new supply chain designs Facilitate real-time knowledge about on-hand inventory

positions and locations of inventories E-marketplaces can help clear markets, or dump

inventories that were mistakenly produced by the supply chain

SCM for E-CommerceSCM for E-CommerceIssuesIssues

E-Commerce also makes SCM more challenging Customers expect faster response times Order fulfillment problems have been rampant in E-Commerce

due to 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

lecture: supply chain management and erpn

Documents

downstream supply chain

generic supply chain

supply chains scm

supply chainsactivities

supply chains activities

customers reverse supply

friendly supply chains

erp internal customers