1. Chapter 9 ERP & Supply Chains
Supply Chain support
Lean Manufacturing

2. Supply Chains Collections of organizations working together
Raw materials – products – retail
Old manufacturing: vertical integration
Military logistics
Now appropriate for e-business

3. Vertical Integration Closely coordinate supply chain internally
Steel, petroleum
Open form: not one owner group
Automobiles
Can tie computer systems together in similar manner
ERP provides detailed data needed for close coordination

4. Supply Chain Advantages
Competitive advantage
Cost
Production efficiencies
Value
Logistic efficiencies
Coordinated advertising
Large scale service

5. ERP Motivations Supply chain relationships provide
Improved interactions & communications
With suppliers & customers
Mabert et al. [2000]:
20% of manufacturers surveyed had supply chain extensions to ERP
25% more planned to

6. ERP Restrictions
Internally focused ERP can constrain supply chain coordination (Davenport [2000])
Long-run ERP need for supply chain
In short-run, ERP a hindrance to supply chain (Bowersox et al. [1999])
ERP systems provide integrated information
Unless all units use the same system, a barrier to communication

7. System Openness Supply chains require open systems
Original ERP assumed a small number of users accessing system
Seat pricing mechanism encouraged

8. Organizational Openness
Extended Enterprise
Cooperative Enterprise
Traditional Company
Profile
Agile
Lean
Profit focus
Strategy
Adaptive
Value maximizing
Cost minimizing
Goal Emphasis
Flexibility
Effectiveness
Efficiency
Operations
Collaborative, open
Selective sharing
Limited sharing
Planning
Joint performance measure
From push to pull
Push
Relationships
Extended alliances
Qualified relationships
Technology
Linked
Selected SCM
No ERP link

9. Advanced Planning Systems
Computer technology makes supply chain capable of dealing with demand uncertainty
Forecasting
Inventory reduction
Optimized transportation costs
Advanced planning systems use operational data to analyze material flows in supply chain
Use historical demand for forecasts
Easy to collect data
Dynamic nature makes long-range forecasting difficult

10. Advanced Planning System Providers
Manugistics
Numetrix
CAPS logistics
BAAN
SCM components
J.D. Edwards
Oracle
11i
PeopleSoft
Enterprise Performance Management
SAP
SAP APO

11. ERP Vendor Response mySAP.com an open, collaborative system SAP APO
Integrates SAP & non-SAP software
SAP APO
supports forecasting, scheduling, other logistics activities
PeopleSoft: Enterprise Performance Management
JDEdwards
products for planning & execution
Oracle’s 11i Advanced Planning & Scheduling

12. On-Line Marketplaces Manetti [2001]
TARGET MARKET
Vertical
Deep & narrow product access
Multivertical
Multiple vertical sites
Horizontal
Broader, more extensive linkage
TRANSACTION METHOD
Auction based
Exchange for simultaneous bids
Future contract variants
For risk reduction
Pure auction systems
To establish prices for buyers
Reverse auctions
To establish prices for sellers
Metacatalogs
Reduce search costs
Mall-based
Access multiple suppliers at single site

13. Lean Manufacturing Toyota bundle of techniques from 1950s
Common supply chain philosophy
Cut waste by eliminating activities that don’t add value
Continuous product flows without bottlenecks
Produce to order
(demand pull, not supply push)
Emphasize quality

14. ERP & Lean Manufacturing
Initial ERP applications did little for efficiency
Complex bills of material
Inefficient workflows
Unnecessary data collection
Efforts by ERP vendors to support lean manufacturing
Not all manufacturers were convinced
Lean manufacturing features
Demand smoothing
Kanban replenishment calculation
Exception reporting

15. Discrete Manufacturing Lean Business Strategies Bradford et al. [2001]
Build-to-stock
Customer orders filled from existing finished goods inventory
Configure-to-order
Products assembled to order from pre-built components
Assemble-to-order
Batch formulated to fill specific order from pre-built components
Engineer-to-order
Each order designed to customer specifications

16. Continuous Manufacturing Lean Business Strategies Bradford et al
Make-to-Stock
Customer orders filled from existing inventory
Configure-to-Order
Batches mixed in common, packaged & processed for specific orders
Make-to-Order
Batch formulated to specific order

17. Key Trends Akkermans et al. (2003)
Further integration of suppliers & customers
Focus on ERP system flexibility
Mass customization
Standard interfaces across chain

18. Summary
Vertical integration historically used to make supply chains efficient
Today supply chain efficiency gained by linking specialists across organizations
ERP initially focused on integrating internal operations
High investment, rigid procedures barriers to supply chains
Trends more supportive
Advanced Planning Systems
Vendor software
Lean manufacturing support