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ERP and Supply Chain Management


peak times, outsource rather than DIY 'Buy' 'make' production when appropriate. ... major SCM projects exploit advanced IT. We need to know that. we have the ... – PowerPoint PPT presentation

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Title: ERP and Supply Chain Management

ERP and Supply Chain Management
Case Dell Reengineering Supply Chain
  • 1993, Compaq cuts prices to drive Dell out of
    market. Dell experiences 65 million loss.
  • business process reengineering
  • pioneered mail order approach to selling PCs
  • re-engineering strategies
  • mass customisation
  • JIT e-orders shipments
  • e-collaboration with major buyers
  • reduction in testing period
  • monitoring of productivity returns on

Dell and Reengineering Supply Chain
  • Results
  • 2001, gt 4 million in computer web sales/ day.
  • leader in Customer Relationship Management (CRM)
  • online tracking of orders shipments
  • user approved configurations pricing
  • customized home pages for clients
  • Intelligent Agents used in production process
  • increased communication with suppliers.
  • 1999, Dell becomes No. 2 PC seller

  • new business model
  • change how business is done.
  • large scale implementation
  • improved logistics system along entire supply
  • improved communications and customer service
  • CRM programme
  • B2B e-Comm with business partners

Aims of SCM
increased competitive advantage profitability
positive affect on inventory levels,
response/cycle times, business processes
customer service quality
collaborate, analyse, develop systems, reduce
uncertainty risks in supply chain.
Components of Supply Chain
The Supply Chain
  • life of a product from birth to death.
  • movement of tangible intangible inputs.
  • all shapes and sizes
  • can be
  • complex bi-directional i.e. return of products
    (reverse logistics)
  • flow of goods/services, info. investment must
    ? added-value
  • Michael Porter - value-added analysis
  • Problems with SCM ? military re-supply,
    litigation company losses e.g. ?????

Supply Chain Problems
  • in demand forecast
  • in delivery times production delays
  • with internal units business partners
  • poor customer service
  • high inventory costs,
  • loss of revenue
  • extra cost for expediting services.
  • Bull Whip Effect
  • persistent SCM problem.
  • erratic orders up/down supply chain.
  • distributor orders fluctuate poor demand
    forecast, price changes, order batching
    rationing e.g. Porter Gambles distortion in
    SCM for disposable diapers.
  • avoidable with Intranet/Extranet eComm groupware

Traditional Solutions
  • Vertical Integration
  • acquire own suppliers - the supply source
  • problem - not "sticking to the knitting"
  • Stock holding
  • Insurance against shortages.
  • difficult to determine inventory level for each
    product part
  • holdling costs and ordering costs

CASE Littlewoods improved its SCM
  • clothing retailer - 136 stores in UK Ireland.
  • overstocking problems in SCM
  • Solution
  • data-mining
  • WWW-based reporting system.
  • merchandising staff better stock, sales
    supplier decisions.
  • 1997 1.2 million saved with strategic price
  • Use IT for measuring working on e.g.
  • delivery on time
  • quality at unloading area
  • cost performance
  • lead time for procurement

Other Solutions
  • peak times, outsource rather than DIY
  • Buy gt make production when appropriate.
  • configure optimal shipping plans.
  • strategic partnerships with suppliers.
  • just-in-time approach to purchasing.
  • reduce the lead time for buying and selling.
  • fewer suppliers.
  • improve supplier-buyer relationships.
  • manufacture only after orders are in.
  • accurate demand - work closely with suppliers.

IT Systems SCM
  • 1950s - 60s the first software to support supply
  • 1970s
  • Material Requirement Protocol (MRP) enhanced to
    become MRP - Material Resource Planning
  • local area networks integrated systems sales
    order processing, stock control, purchase order
    processing etc
  • 1990s
  • systems interconnectivity through accessible
  • Enterprise Resource Planning (ERP) integrate
    transaction processing activities
  • WWW and eCommerce
  • Extended ERP/SCM software.

IT Systems SCM
Systems Integration - Sandoe Saharia (2001)
  • Other
  • unformation visibility
  • customer satisfaction
  • modularisation standardization
  • lean and flexibility
  • globalization business performance
  • Tangibles
  • reduced
  • inventory
  • staff
  • procurement cost
  • improved
  • productivity business processes
  • order mgt
  • financial cycle
  • innovation
  • IT cost? Increase?
  • Revenue/profit increases etc
  • sourcing of requirements

Value Chain Integration
Warner-Lambert - Integrated Supply Chain
  • Problem
  • WL needs to improve demand forecast of products.
  • How
  • bought a Demand Planning Information System
  • to analyse manufacturing, distribution, sales
  • anticipate seasonal or production line problems
  • increases shelf fill rate from 87 to 98
  • 8 million/year additional sales.

Enterprise Resource Planning
  • ERP Process of planning managing all
    resources their use in the entire enterprise.
  • Software producers
  • SAP, Oracle, J.D. Edwards, Computer Associates,
    People Soft
  • single interface for managing routine
    manufacturing logistics activities.
  • aid customer interaction manage supplier
  • force business coordination discipline
  • support admin. activities.
  • ?
  • integrate all company departments functions
    onto one computer system with accessible,
    "mine-able" databases and reporting

2nd Generation ERP
  • late 1990s, some benefits of ERPs being
  • need for planning systems oriented towards
  • SCM systems start to complement ERP systems.
  • intelligent decision support capabilities.
  • overlay existing system pull data from every
    step of supply chain.
  • break large ERP systems into individual
    components that work together.
  • easier for ERP vendors to enhance solutions and
    for customers to upgrade software.
  • vendors extend core ERP with supply chain, sales
    automation customer relationship management

ERP Implementation
  • To avoid failure consider
  • customer expectations.
  • ERP product capabilities, and gaps.
  • level of change the customer has face to make the
    system fit.
  • level of commitment within customer organization
    to see the project thru
  • customer organization culture.
  • risks politics within customer organization
  • consultants capabilities, responsibilities and

Application Service Providers ERP Outsourcing
  • option for businesses wanting ERP functions is to
    lease applications gt build
  • ASP software vendor that leases ERP-based
    applications to other businesses
  • ERP projects are
  • expensive to install
  • take long time to implement
  • staffing is a major problem

Global Supply Chains
  • Issues
  • legal regulation, customs fees, taxes
  • language cultural differences
  • exchange rates fluctuations
  • political instabilities
  • Global Supply Chains involve suppliers and/or
    customers in other countries.

  • rushed to get its "e-product to market
  • Inexperience ? problems with
  • supporting distribution service system
  • merging offline online operations
  • warehouses could not handle distribution to
  • handling returns from overseas
  • invoicing must comply "national" regulations
  • Outcome
  • Lego closed WWW site.
  • One year to solve global eComm-related issues

How EC contributes to SCM
  • digital products (software) - flow of materials
    is expedited
  • replaces paper documents with e-documents e.g.
    order copies, invoices
  • replaces fax, phone with e-messaging
  • support network organisations collaboration
    information sharing e.g. seller and distributor
  • nature and structure of supply chain moves from
    linear to hub.
  • shorter supply chain and minimum stock
  • aids sales response customer service
  • buying sales efficiencies thru. e-marketplaces.

Buying Selling along the Supply Chain
  • aim of eComm is to facilitate buying and selling
    along the supply chain. Activities are
  • upstream
  • internal SCM
  • downstream
  • combined upstream / downstream

Integration of eComm with ERP
  • most medium/large companies have ERP systems
  • eComm needs to interface with ERP so -
    interconnect them
  • extending existing ERP to support e-Comm means
  • more investment in ERP
  • rapid development of eComm applications.
  • but ERP software is complex to construct/modify
  • need expertise or to buy it in .... expensive
  • easy, smooth integration easily hits problems

Order Fulfillment in eComm
  • When selling direct to customers - note
  • pick pack the products to be shipped quickly
  • arrange for prompt and relable delivering to the
  • process payment, in advance (money transfer), COD
    or invoice
  • handle returns - unwanted or defective goods
  • knotty operational activities that require
    effective, efficient systems. They bring problems
    to supply chains.

Online Order Fulfilment Logistics
  • order fulfillment is part of back-office
    operations but strongly related to front-office
  • e-Tailors faced problems in order fulfillment,
    especially at holiday periods
  • Amazon needed physical warehouses to expedite
    deliveries and reduce order fulfillment costs.
  • eComm relies on JIT pull operations - the order
    (even a customised order) pulls the stuff from
    the supply change
  • reliance on pull involves difficult
    forecasting and stocks to meet demand.
  • in B2C pull, goods need be delivered to
    customers door.

Innovation and Supply Chain
  • Webcams to demonstrate product inventory
  • proprietary software to
    collaborate with suppliers efficiently/effectively

Porter - product differenitation and cost
Mail Boxes Etc. logistics system
that determines whether a customer is entitled to
a return refund. Manages a
marketplace. Helps companies with goods to find
"forwarders" who prepare goods for shipping.
Automated order processing and despatch
  • Traditional warehouses
  • deliver large quantities to a stores and plants.
  • B2C eComm
  • send small quantities to many individuals.
  • large-volume eComm fulfillment
  • needs special automated warehouses with robots
    "pick and pack" devices
  • Most B2C is shipped via
  • outsourcers who handle the logistics mail orders
    (incl. online orders).

Dealing with Returns
  • Return items to where they were bought
  • works for a small number of returns.
  • Customer returns go to an independent unit
    (within the company or outsourced) that handles
    matters separately
  • more efficient, but buyer still unhappy.
  • customer physically drops the returned items at
    collection points
  • e.g. a local shop/Post Office

Managerial Issues
  • Ethical SCM project may ? lay-offs transfers
    of work to other countries - matters of
    employment contracts. Are they ethical matters?
  • Data sharing data programs - intellectual
    property - may be shared - a matter of trust
  • Do we integrate or hold ourselves in reserve?
    Total integration thru. ERP, SCM, and
    e-commerce, makes us vulnerable to partner
    failure - big risk. Do we keeping matters under
    our own control?
  • IT complexity major SCM projects exploit
    advanced IT. We need to know that
  • we have the capability (expertise)
  • the systems are reliable and there is a fail-safe
  • we can sustain the systems and up-grade them
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