MD240 Supply Chain Management SCM and Enterprise Resource Planning ERP

1. MD240Supply Chain Management (SCM) and Enterprise Resource Planning (ERP)

2. Overview Background Essentials of Supply Chains Enterprise Resource Planning and the Internal Supply Chain Supply Chain Management Global Supply Chains SCM and E-Commerce

3. 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 continually refueled by strategically located gas tanker planes

4. Essentials of Supply Chains

5. Essentials 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

6. Essentials of Supply Chains Demand Chains The segment of the supply chain involving the process of taking orders from customers Demand Chain Management Similar to SCM, but more of a focus on ... customer touchpoints “pull” orientation

7. Essentials of Supply Chains The Components of Supply Chains Upstream supply chain includes the organization’s first-tier suppliers and their suppliers Internal supply chain includes 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

8. Essentials of Supply ChainsA Generic Supply Chain

9. Essentials of Supply ChainsPush vs. Pull Orientation

10. Essentials of Supply ChainsTypical “Push” Supply Chain

11. Essentials of Supply Chains 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

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

13. Enterprise Resource Planning and the Internal Supply Chain

14. Internal Supply ChainEvolution of Manufacturing Info. Systems

15. Enterprise Resource Planning (ERP) 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

16. Enterprise Resource Planning (ERP) 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

17. 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 (DSS) and business intelligence (BI) capabilities Integration of database management systems (DBMS) and spreadsheets in Excel or Lotus 1-2-3 Web-based Integrates CRM and EC

18. 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)

19. Enterprise Resource Planning (ERP) ERP 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

20. Enterprise Resource Planning (ERP) 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

21. Enterprise Resource Planning (ERP) If a company installs an ERP system, how will it affect their management of their supply chain problems?

22. Supply Chain Problems

23. Supply Chain Problems History First industry to focus on rationalized management of the supply chain was the retail food industry Multi-tier supply chain structure causes difficulties in inventories and delivery times Manufacturers offer lots of temporary price cuts to move perishables Retailers hold lots of special sales Consumers are willing to stock up and hold inventories All of these together create chaos in this supply chain Efficient Consumer Response (ECR) is the food industry’s version of SCM Developed by large food company consortia Large retailers forced all of their suppliers to adopt ECR, or lose their business

24. Supply Chain ProblemsProblems Along Supply Chains

25. Supply Chain ProblemsProblems 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”

27. Supply Chain Management

29. Supply Chain ManagementPotential 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

34. Supply Chain ManagementSuccess 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 positions at all retailers, P&G can know what is selling, what to make, and how quickly to make it

35. Supply Chain ManagementFailure 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

36. 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 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

37. Global Supply Chains

38. Global Supply Chains Global supply chains exhibit their own unique challenges Local regulations Different labor laws Regional customs (business, religious, etc.) Difficulties of sourcing materials

40. Global Supply Chain ManagementSuccess Story: Li & Fung 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

41. Global 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 against supply variability Greater breadth of shipping channels will need to be used to ensure enough supplies can get to factories on time

42. SCM and E-Commerce

43. SCM and 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 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)

44. SCM and E-CommerceEC Facilitates SCM 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

45. SCM and E-CommerceEC Makes SCM More Competitive 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

46. SCM and E-CommerceEC Necessitates New Supply Chain Types New promises are made to customers at the point of order procurement Same day delivery/Same hour delivery Customized goods/service Order Fulfillment – need to create new supply chains that can fulfill on the above promises Processes for mass customization Automated warehouses for quickly picking and packing orders New delivery processes between warehouse and customer

47. SCM and E-CommerceSome EC Supply Chains Don’t Work Some industries just aren’t made for EC, due to the nature of their supply chain Yes: Books Lightweight, easy to transport long distances Can get dinged a bit, and people still will read them People typically buy them and don’t return them No: Furniture Heavy, difficult and expensive to transport long distances Furniture is usually shipped by the truckload … not by the piece Furniture defects typically make people send the items back Furniture showrooms typically employ many people who can touch up furniture defects so that customers won’t notice