Grenoble Ecole de Management MEDFORIST SCM course

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MEDFORISTSupply Chain ManagementInformation
technology for SCMSession 5
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Session 5 topics

• Overview of the IT tools for SCM
• ERP
• other SCM applications
• ERP SCM implementation
• Key success factors

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Customers demand centers sinks
Field warehouses stocking points
Regional warehouses stocking points
Sources plants vendors ports
Supply
Inventory warehousing costs
Production/ purchase costs
Transportation costs
Transportation costs
Inventory warehousing costs
Source Simchi-Levi al 2000
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Information Technology in a Supply Chain

• Information Technology (IT) consists of the
  hardware and software used throughout a Supply
  Chain to gather and analyze information
• IT systems can be segmented according to the
  stages in the Supply Chain on which they focus
  and the phase of Supply Chain decisions for which
  they are used
• IT map

Source Chopra Meindl 2001
5
The IT map
Source Chopra Meindl 2001
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The strategic level

• Long term
• Help deciding what product to make plant number
  and location distribution system
• Very broad information requirements
• Analytical IT systems

Source Chopra Meindl 2001
7
The planning level

• Short to long term (several months to one year)
• Help decisions for allocating available resources
  to best meet anticipated demand
• Information requirements costs capacities and
  demand at an aggregate level
• Analytical IT systems

Source Chopra Meindl 2001
8
The operational level

• Short term
• Records transactions and deals with time frame
• Operational IT systems are involved with setting
  weekly production and delivery schedules
• Non analytical

Source Chopra Meindl 2001
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IT Levels of functionality
Source Chopra Meindl 2001
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Legacy systems

• Systems with older technologies that have been
  used for a long time (past their intended life
  span)
• Have difficulties communicating with other
  systems
• Legacy systems usually have a very narrow scope
  but have the advantages of getting the operations
  done and requiring less incremental investment.

Source Chopra Meindl 2001
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Enterprise Resource Planning systems
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Enterprise Resource Planning systems

• ERP systems are operational IT systems that
  gather information from across all of a companys
  functions resulting in the entire enterprise
  having a broader scope
• ERP systems monitor material orders schedules
  finished goods inventory and other information
  throughout the entire organization

Source Chopra Meindl 2001
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ERP in the IT map
Source Chopra Meindl 2001
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Many views of ERP
Hardware view - client-server
Software view - Application modules distributed
processes database engine
Source Jacobs 2000
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Enterprise Resource Planning
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Enterprise Resource Planning systems

• ERP systems typically have many modules which are
  linked together.
• Each of them covers different functions within a
  company
• Finance
• Logistics
• Manufacturing
• Order fulfillment
• Human resources
• Supplier management

Source Chopra Meindl 2001
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ERP modules
Source Jacobs 2000
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Enterprise Resource Planning systems

• ERP are good at monitoring transactions but
  generally lack the analytical capability to
  determine what transaction ought to happen
• operational area of the IT map
• Companies often have to adapt their processes to
  the ERP modules which can lead to the adoption of
  less performant processes

Source Chopra Meindl 2001
19
Enterprise Resource Planning systems

• Allow companies to automate processes (firms
  should review their processes before implementing
  ERP systems)
• Increase efficiency and reduce errors
• Create the opportunity to share data across firms
  so that managers have visibility across the
  entire supply chain

Source Chopra Meindl 2001
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Source Jacobs 2000
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Source Jacobs 2000
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ERP advantages

• All data stored in a single fully integrated
  database.
• All modules can interact seamlessly in real
  time
• Consistent user interface common look feel
• Software oriented towards processes not
  functions
• Standardization common hardware software
  databases interfaces
• One stop shopping if all modules from same
  vendor

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ERP Benefits - from a Lilly presentation on their
SAP R/3 project.

• Process Improvements
• eliminate redundant transactions and multiple
  reconciliations.
• More efficient job rotation process
• More efficient staff and succession planning
• Information Technology
• Reduced support costs.
• Reduced infrastructure costs.
• Strategic Direction
• Improved resource allocation
• More flexible organization.
• Better future decision making

• Related initiatives
• Better focus reduced spending

• Project highlights
• 45 global sites
• implementation by 2002 delayed to 2004!
• single client servers in Indianapolis
• approx. 70 person implementation now over 100
  involved

Source Jacobs 2000
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ERP strategic issues

• What are compelling reasons to do this
• Is it a qualifier in certain industries
• Are the efficiencies real
• How much are we willing to change the
  organization
• Are these practices really better than what we
  are currently doing
• Do we lose or gain a strategic advantage
• If everyone is doing this how can we gain an
  advantage

Source Jacobs 2000
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ERP tactical issues to stress

• Different roles especially when much of the
  decision making is centralized
• Efficient use of data how many times do you
  need to enter the same data for different
  jobs/tasks
• Training issues how do we get people to use the
  new system
• Many other issues security sharing data mutual
  (collaborative) decision making

Source Jacobs 2000
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Analytical Applicationsother tools for SC SCM
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Analytical applications

• Analytical Applications are not focused at an
  operating level but rather on planning and
  strategic decisions
• analysis of information supplied by legacy or
  ERP systems
• Analytical Applications are not as broad as ERP
  applications in their horizontal scope
• focus on a particular function within a supply
  chain stage

Source Chopra Meindl 2001
28
Analytical applications (1)Procurement and
Content cataloging applications

• Focus on the relationship between a manufacturer
  and its suppliers and the procurement process
  that takes place between them

Source Chopra Meindl 2001
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Analytical applications (1)Procurement and
content cataloging applications

• Streamline procurement process
• Replace the suppliers catalog
• Keep track of parts specifications prices
  order processes and the suppliers themselves

Source Chopra Meindl 2001
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Analytical applications (1)Procurement and
content cataloging applications

• Supplier Management systems allow analytical
  comparisons between the suppliers
• help make decisions on whom to buy from and what
  to buy

Source Chopra Meindl 2001
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Analytical applications map
Demand Planning
Demand Planning
Source Chopra Meindl 2001
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Analytical applications (2)Advanced Planning
and Scheduling (APS)

• Produce schedules for what to make where and
  when to make it and how to make it
• Highly analytical systems encompassing the
  functions of strategic supply chain planning
  inventory planning and available to promise (ATP)

Source Chopra Meindl 2001
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Analytical applications map
Demand Planning
Demand Planning
Source Chopra Meindl 2001
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APS Modules
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ERP versus APS systems
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Analytical applications (3)Transportation
Planning and Content systems

• Perform the analysis to determine how when
  where and in what quantity materials ought to be
  transported
• As this system performs a comparison of
  different carriers modes routes and freight
  plans it needs content which will be provided by
  specific content vendors

Source Chopra Meindl 2001
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Analytical applications map
Demand Planning
Demand Planning
Source Chopra Meindl 2001
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Analytical applications (4)Demand Planning and
Revenue Management

• Demand Planning help companies forecast their
  demand using proprietary analytical tools
• should take into account demand trends
  seasonality and modifications for promotions
• Revenue Management deals with using price
  discrimination to maximize the amount of consumer
  surplus one can get from product sales

Source Chopra Meindl 2001
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Analytical applications map
Demand Planning
Demand Planning
Source Chopra Meindl 2001
40
Analytical applications (5)Customer
Relationship Management (CRM) and Sales Force
Automations (SFA)

• Automate relations between sellers and buyers by
  providing product and price information
• Also allow for customer information and product
  specifications to be available in real time

Source Chopra Meindl 2001
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Analytical applications map
Demand Planning
Demand Planning
Source Chopra Meindl 2001
42
Analytical applications (6)Supply Chain
Management

• Combination of many of the preceding
  applications
• ex. an SCM system can come with APS demand
  planning transportation planning and inventory
  planning
• SCM systems have the ability to produce planning
  solutions and strategic level decisions
• SCM systems are the only systems to reach into
  the strategic level of functionality

Source Chopra Meindl 2001
43
Analytical applications map
Demand Planning
Demand Planning
Source Chopra Meindl 2001
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Other applications

• The following applications have more of an
  operational focus
• Inventory Management Systems
• produce a recommended stocking policy
• Manufacturing Execution Systems
• similar to operationally focused ERP systems
• Transport Execution
• make transportation plans work operational link
  to the planning tool
• Warehouse Management Systems
• execute inventory planning commands and keep
  track of inventories

Source Chopra Meindl 2001
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Analytical applications map
Demand Planning
Demand Planning
Source Chopra Meindl 2001
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Warehouse Management Systems
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Communication Modules
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ERP SCM implementation
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Different approaches in implementation

• Two different approaches exist when implementing
  analytical applications
• Best of Breed approach choice of the best
  application for each individual function or stage
  in the Supply Chain.
• Single Integrator approach choice of one
  single companys package to be used for all
  functions and potentially even all stages of the
  Supply Chain.

Source Chopra Meindl 2001
50
ERP operational issues

• Configuration 8000 switches to set!
• How much do we customize
• Do we customize within the ERP system or link
  stand alone applications to the ERP system
• Should we use the same configuration for all of
  our facilities

Source Jacobs 2000
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ERP operational issues

• Implementation
• Plan vanilla to start
• Populating the data and integrity
• When are the modifications made
• Phased rollout or cut over
• What about add-ons Are they necessary

Source Jacobs 2000
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Choice of technology

• Two technologies are taking over the
  client/server technology
• The browser-based Internet applications users
  utilize the browser to log into the IT system
  over the Internet
• The Application Service Providers (ASPs) they
  are responsible for running generally remotely
  the applications the customer rents
• In both cases the advantages are a little
  up-front investment and the ease of upgrading

Source Chopra Meindl 2001
53
Application Service Providers

• Benefits
• Cost savings - Not necessary to purchase or
  upgrade software
• Staffing - ASP provides technical staff to
  support implementation and maintenance
• Flexibility - Client can remotely access software
  with a web browser

• Risks
• Security - Proprietary information possibly
  vulnerable due to ASP failures
• Infrastructure - ASP requires high-speed internet
  connection
• History - No clear business model yet

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Convergence of Supply Chain Management and B-to-B
Exchanges

• B2B exchanges are electronic marketplaces on the
  Internet where suppliers and buyers interact to
  conduct transactions
• the key to B2B exchanges creating value lies in
  the collaboration between buyers and sellers that
  an electronic market can enable

Source Chopra Meindl 2001
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Key success factors in implementing ERP (1)

• Manage expectations with respect to timeliness
  phasing stability
• Functionality to meet requirements
• Stick with standard software minimize
  modifications
• Efficiency in processes will come after changes
  pain
• Put the best people on the implementation team
• Take a strong experienced project manager
• Measure the improvements with metrics
• Make substantial test and document the new
  process
• Use project management methods tools

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Key success factors in implementing ERP (2)

• Top management support involvement is critical
• Create a group of superusers
• Create a flowchart of operations
• Have a clear ERP implementation roadmap
• Quality of input data is key. Take time to manage
  and validate data accuracy
• Make ERP rollout as a formal company wide event
• Provide employees with a good understanding of
  why ERP is important the plan benefits train
  train