1. Chapter 8 Supply Chain Management & Enterprise Resource Planning

2. Essentials of the Supply Chains
the flow of material, information, payment, and services from raw material suppliers through factories and warehouses (Value Chain) to the end customers (Demand Chain)
Supply Chain Flows
Materials flows - all physical products, new materials, and supplies that flow along the chain
Information flows - all data associated with demand, shipments, orders, returns and schedules
Financial flows - all transfers of money, payments, credit card information, payment schedules, e-payments and credit-related data
E-supply chain
Supply Chain Management (SCM)
to plan, organize, & coordinate all the supply chain’s activities
reduce uncertainty and risks in the supply chain
positively affect inventory levels, cycle time, business processes, & customer service
increase profitability and competitiveness
Benefits

3. An automotive Supply Chain

4. Supply Chain - Components & Types
The Components of Supply Chain
Upstream supply chain
sourcing or procurement from external suppliers occur
Internal supply chain
where packaging, assembly, or manufacturing take place
Downstream supply chain
where distribution or dispersal take place, frequently by external distributors
Types of Supply Chain
Integrated make-to-stock
Continuous replenishment
Build-to-order
Channel assembly

5. Supply Chain
“Supply” Chain
Value Chain
Demand Chain

6. Supply Chain Problems UNCERTAINTY POOR COORDINATION
Demand forecast
Delivery times
Quality
POOR COORDINATION
With Internal units & business partners
Ineffective customer service
High inventory costs, loss of revenue & extra cost for expediting services
The Bull Whip Effect - The most persistent SCM problem
Erratic shifts in orders up & down the supply chain
Distributor orders fluctuate because of poor demand forecast, price fluctuation, order batching & rationing with supply chain.
Example: P&G’s distortion in SCM for manufacturing of disposable diapers
Main Solutions
Vertical integration
Building inventories
It is difficult to correctly determine inventory level for each product & part. This can be costly.

7. Solutions to Supply Chain Problems
Information sharing among supply chain partners (c-commerce) sometimes referred to as the collaboration supply chain
facilitated by EDI, Extranets & Groupware technology
Example: P&G and War-Mart (vendor-managed inventory,VMI)
Others
Optimal Inventory Levels
Supply Chain Coordination and Collaboration
Supply Chain Teams
Performance Measurement and Metrics
Use of IT for measuring areas in need of improvement
Delivery on time, Quality at unloading area, Cost performance & Lead time for procurement
Various IT-Assisted Solutions
wireless technology
optimal shipping plans
strategic partnerships with suppliers
just-in-time

8. Other IT-assisted Solutions to SCM Problems
Other Solutions (Table 8.1, p. 365)
Use wireless technology to expedite certain tasks in the supply chain - SFA
Configure optimal shipping plans - Quantitative analysis, DSS, intelligent systems
Create strategic partnerships with suppliers - DSS
Use the just-in-time approach to purchasing
Use outsourcing rather than do-it-yourself - DSS
Buy” rather than “make” production inputs when appropriate - DSS
Reduce the lead time for buying and selling - BI
Use fewer suppliers - BI
Improve supplier-buyer relationships - CRM & PRM
Manufacture only after orders are in
Achieve accurate demand by working closely with suppliers - Online collaboration tools
Automate material flow, information flow, and partner relationship

9. Computerized Supply Chains
Computerized systems
Material requirements planning (MRP)
essentially integrates production, purchasing, and inventory management of interrelated products
Manufacturing resource planning (MRP II)
enhanced MRP methodology by adding labor requirements and financial planning
Enterprise resource planning (ERP)
further integrates the transaction processing as well as other routine activities in the entire enterprise
Integration continues along several paths
functional areas
Combining transaction processing and decision support
Business intelligence
CRM software

10. The Evolution of Computerized Aids
Inventory
Purchasing
Production
scheduling
MRP
1960
Production Management +
Finance,
labor
MRP II
1970
Major Manufacturing Resources
All internal
resources
ERP
1980
Coordinated Manufacturing and Service Transactions
Internal customers
and suppliers
Internal
SCM
1990
ERP/SCM
External suppliers
and customers
Extended
SCM/CRM
2000
BI, EC, CRM, KM
Enterprise
Integrated
system
2005
Systems

11. Why Integration? Benefits Integrating the Supply Chain
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, and on-time delivery improvement
Intangible benefits
Information visibility, new/improved processes, customer responsiveness, standardization, flexibility, globalization, and business performance.
Integrating the Supply Chain
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 EC, have brought SCM to the forefront of management attention

12. Types of Integration: From Supply to Value Chain
Internal integration - to integration between applications inside a company
External integration - to integration of applications among business partners
Value Chain Integration
The process by which multiple enterprises within a shared market channel collaboratively plan, implement, and manage the flow of goods, services, and information along the entire chain in a manner that increases customer-perceived value.
A process of collaboration
A Supply Chain transforms into an integrated Value Chain
Extends the chain all the way from sub-suppliers to customers
Integrates back-office operations with those of the front office
Becomes highly customer-centric, focusing on demand generation and customer service
Seeks to optimize the value added by information and utility-enhancing services
Is proactively designed by chain members to compete as an “extended enterprise”.

13. Value Chain Integration

14. Enterprise Resources Planning (ERP)
ERP = Process of planning & managing all resources & their use in the entire enterprise
Objective
to integrate all departments and functions across a company onto a single computer system
control all major business processes with a single software architecture in real time
Leading ERP software producers
SAP, Oracle, J.D. Edwards, Computer Associates, PeopleSoft
Functions
Provides a single interface for managing routine manufacturing activities
Facilitates customer interaction & manages relationships with suppliers & vendors
Forces discipline & organization around business
Supports administrative activities

15. 1st Generation ERP Objectives Advantages Disadvantage SCM Integration
Automate key office processes
Support routine transactional activities
Advantages
Excelled in transaction management
Generated reports which provided a snapshot of the business at a point in time
Disadvantage
not support the continues refining and enhancing of plans as changes and events occur, up to the very last minute before executing the plan
SCM Integration
Work with different software products from different vendors (i.e. one for ERP & one for SCM)

16. Post- ERP: 2nd Generation ERP
Objectives
leverage existing systems in order to increase efficiency in handling transactions, improve decision making, further transform ways of doing business
A need for planning systems oriented towards decision-making
Integration
Web-based
DBMS, spreadsheets in Excel or Lotus 1-2-3, CRM & EC
ERP/SCM integration model
companies to quickly assess the impact of their actions on the entire supply chain, including customer demand
By providing intelligent decision support and BI capabilities, the analytical SCM systems complement the ERP system.
Alternative ways
Emergence of SCM systems that complement ERP systems
ERP vendors add decision support & BI (Business Intelligence) capabilities
To work with different SW products from different vendors
How can I best take or fulfill your order? Vs. Should I take your order?

17. Supply Chain Intelligence (SCI) & Componentization
SCI - the inclusion of BI in supply chain SW solutions
3 Ways to provide SCI
Use an enhanced ERP package that includes BI capabilities
Integrate the ERP with business intelligence software from a specialized vendor such as Brio, Cognus, or Comshare.
Use Web services
Create a “best of breed” system by using components from several vendors that will provide the required capabilities.
Componentization
Breaking large ERP systems into individual components that work together.
Makes it easier for ERP vendors to enhance their solutions and for customers to upgrade their software.
Helps vendors extend the core ERP system with supply chain, sales force automation solutions, and CRM

18. ERP Implementation
To avoid failures, the following factors should be considered
The customer’s expectations
The ERP product capabilities and gaps
The level of change the customer has to go through to make the system fit
The level of commitment within the customer organization to see the project through
The customer’s organization and culture
The risks presented by politics within the customer organization
The consultant’s capabilities, responsibilities and role (if applicable)
Application service providers (ASP) & ERP Outsourcing
“ASP alternative” - a SW vendor that offers to lease ERP-based applications to other businesses
A popular option today for businesses that want ERP functions but lease applications rather than building systems
offerings are evident in ERP -added functions such as EC, CRM, datamarts, desktop productivity, human resources information systems (HRMS), and other supply chain-related applications
Concept - especially useful in ERP projects, which are expensive to install and take a long time to implement, and for which staffing is a major problem

19. Global Supply Chains
Global Supply Chains = Supply chains that involve suppliers and/or customers in other countries
Driver - IT
IT provides EDI, communication options, online expertise in sometimes difficult and fast-changing regulations
IT can be instrumental in helping businesses find trade partners
IT facilitates outsourcing of products and services, especially IT programming, to countries with plentiful supply of labor, at low cost
The issues
legal issues, customs fees and taxes
language and cultural differences
fast changes in currency exchange rates
political instabilities

20. EC & SCM Buying & Selling along the Supply Chain Supply chains in EC
UPSTREAM
improve the upstream supply chain through e-procurement
INTERNAL SCM
from entering purchase orders, to recording sales, to order fulfillment, to tracking shipments, are usually conducted over a corporate intranet
DOWNSTREAM
enhance the activity downstream activities by providing online ordering
Selling on your own web site, Auctions & Exchange
Vertical exchanges
combine upstream and downstream EC supply chain activities
Supply chains in EC
Order fulfillment
Integration of EC with ERP
Since most middle-sized and large companies already have an ERP system, and since EC needs to interface with ERP, it makes sense to interconnect the two.
The problem is that the ERP SW is very complex and inflexible (difficult to change), so it is difficult to achieve easy, smooth, and effective integration.

21. Web-based Supply Chain

22. Order Fulfillment in EC
Online Order Fulfillment & Logistics
While order fulfillment is a part of the back-office operations, it is strongly related to front-office operations.
Recently, e-Tailors have faced continuous problems in order fulfillment, especially during the holiday season.
EC is based on the concept of “pull” operations, which begin with an order, frequently a customized one.
In the “pull” case it is more difficult to forecast demand.
In a B2C pull model, the goods need be delivered to the customer’s door.
Deliver small quantities to a very large number of customers
Innovative Solutions to Supply Chain Problems
Outsourcing order fulfillment
Same-day, even same-hour delivery
Automated Warehouses
Large-volume EC fulfillment requires special automated warehouses.
Most B2C is shipped via outsourcers.
Options for Dealing with Returns

23. Partner Relationship Management(PRM)
refers to all of the efforts made to apply CRM to all types of business partners
Every company that has business partners has to manage the relationships with them. Information needs to flow between the firms and constantly updated and shared.
EC PRM functions
partner profiles
partner communications
lead management (of clients)
targeted information distribution
connecting the extended enterprise
partner planning
centralized forecasting
group planning
price lists

24. Global Supply Chains
Supply chains that involve suppliers and/or customers in other countries are referred to as global supply chains.
Companies go global (disperse the value chain) for a variety of reasons.
lower costs of materials, products, services and labor
availability of products that are unavailable domestically
the firm's global strategy
technology available in other countries
high quality of products
intensification of global competition
the need to develop a foreign presence to increase sales
fulfillment of counter trade.
Global supply chains are usually longer than domestic ones, and more complex. Therefore, additional uncertainties are likely.