Lecture 5 Information Technology and Supply Chain Management

Lecture 5 Information Technology and Supply Chain Management

Supply Chain Management (SCM) Systems n n SCM is the process of effectively managing the components of an extended value chain--from suppliers, through manufacturing and distribution chain, and to the consumers. SCM information systems use technology to more effectively manage supply chains

I. What is SCM?

Why Supply Chain Management? 1950 -1980 s Manufacturing Parts $5, 000 • 50 years ago, U. S. is the only country that can manufacture cars. Labor 4000 ● You buy a car from GM, all the money will go to the GM. Overhead 2000 1980 -2000 s Supply Chain Management • Today, foreign parts and labors are much cheaper than that in US. ● You buy a car from GM, only a portion of money will go to the GM. Management Marketing 3000 Total Cost $14, 000

Value Chain Analysis

Benefits of Value Chain Analysis - Disintermediation to the Consumer Cost/ Sweater Manufacturer Distributor Retailer Customer $48. 50 Retailer Customer $40. 34 Customer $20. 45

Service n n The concept of Supply Chain Management is also applied to Service. Business Process Management or Business Process Reengineering

Stockless Inventory Compared to Traditional and Just-in-time Supply Methods

Business Process Reengineering n n From an article published in Harvard Business Review Radical business redesign initiatives that attempt to achieve dramatic improvements in business processes by questioning the assumptions, or business rules of the company.

II. Information Systems for SCM

Information Technology for Supply Chain Management n Software Systems n n n n Electronic Data Interchange (EDI) Material Requirements Planning (MRP) Manufacturing Resource Planning (MRP II) Enterprise Resource Planning (ERP) Supply Chain Management Systems (SCM) Customer Relationship Management (CRM) Internet-based Software Network Infrastructure n n Wide Area Network Internet (for E-commerce: B 2 B, B 2 C)

III. ERP

Enterprise Resource Planning (ERP) Systems n Enterprise resource planning (ERP) is a term used to refer to a system that links individual applications (for example, accounting and manufacturing applications) into a single application that integrates the data and business processes of the entire business.

Origins of ERP Systems n n ERP systems grew out of a function called materials requirements planning (MRP) which was used to allocate resources for a manufacturing operation MRP systems software ultimately became very complex allowing for efficiencies of scale not previously possible Even more sophisticated MRP II systems began to replace MRP systems in the 1980 s By the early 1990 s, other enterprise activities were being incorporated into ERP systems

Origins of ERP Systems n Today, an ERP system can encompass, but is not limited to, the following functions: n n n Sales and order entry Raw materials, inventory, purchasing, production scheduling, and shipping Accounting Human resources Resource and production planning

Major ERP Systems n n n SAP R/3 Oracle People. Soft (have been merged by Oracle) n n Toyota uses People. Soft and SAP Microsoft Dynamics (formerly Microsoft Business Solutions - Great Plains)

E-Business and ERP Systems n n n An e-business must keep track of and process a tremendous amount of information Businesses realized that much of the information they needed to run an e-business — stock levels at various warehouses, cost of parts, projected shipping dates — could already be found in their ERP system databases A major part of the online efforts of many ebusinesses involved adding Web access to an existing ERP system

E-Business and ERP Systems n n Many e-businesses want the same things from their business infrastructure Thus, rather than custom build applications, many companies prefer to use prepackaged ERP system software, which is often more efficient and less expensive to implement

Cost of Implementing ERP Systems n n n Most businesses need extensive help from consultants to configure their ERP system software around their existing business practices, or to suggest changes in business practices in order to better fit the ERP system requirements This process of mutual adaptation is called systems integration The consultants who supervise the integration process are often referred to as systems integrators

Outsourcing ERP Systems n n One response to the challenge of managing a complex ERP system is to outsource it Some businesses choose to outsource not only the installation but also the ERP system software

IV. Supply Chain Systems

Supply Chain Management (SCM) Systems n A typical SCM system might address the following issues: n n n Planning Vendor selection Manufacturing Logistics Customer relationship

Supply Chain Management (SCM) Systems

Supply Chain Management (SCM) Systems n n n With the advent of the Internet, e-businesses began to demand different things from their SCM systems Most importantly, SCM systems vendors (largely the same vendors that provide ERP systems software) had to modify their products to include a Web-based interface The ultimate goal of a business ERP system is complete optimization of internal business processes

Supply Chain Management (SCM) Systems n n n The two basic types of SCM system software are: Supply Chain Planning software (SCP): uses mathematical models to predict inventory levels based on the efficient flow of resources into the supply chain Supply Chain Execution software (SCE): is used to automate different steps in the supply chain such as automatically sending purchase orders to vendors when inventories reach specified levels

Major Supply Chain Planning (SCP) Players n i 2 Technologies n n i 2’s strength began with its powerful Advanced Planning and Scheduling (APS) Manugistics Oracle SAP n Advanced Planner and Optimizer (APO)

SAP Advanced Planner and Optimizer (APO)

Supply Network Design (SND) Levels of SAP APO The Supply Chain Cockpit (SCC) Demand Planning (DP) Supply Network Planning (SND) Collaborative Planning, Forecasting, and Replenishment (CPFR) … SAP R/3

Oracle Supply Chain Planning n n Oracle Supply Chain Planning is part of the Oracle E-Business Suite's family of Supply Chain Management solutions It includes n n n Demand Planning Collaborative Planning Inventory Optimization Manufacturing Scheduling, and Global Order Promising

Customer Relationship Management (CRM) Systems n n Customer relationship management (CRM) systems, sometimes called e-CRM systems, use technology to help an e-business manage its customer base CRM allows an e-business to match customer needs with product plans and offerings, remind customers of service requirements, and determine what products a customer has purchased

V. CRM

Salesforce. com

Muiti-channels CRM

Data Mining/Web Mining/Business Intelligence n n Data mining is the process of using mathematical techniques to look for hidden patterns in groups of data, thereby discovering previously unknown relationships among the many pieces of information stored in a database A data warehouse is a database that contains huge amounts of data, such as customer and sales data

What does Data Mining Do? Explores Your Data Finds Patterns Query, Reporting, Analysis Performs Predictions Data Mining Why What How

Integrate l l Data acquisition from source systems and integration Data transformation and synthesis Analyze l l Data enrichment, with business logic, hierarchical views Data discovery via data mining Report l l Data presentation and distribution Data access for the masses

SQL Server 2005 Algorithms Decision Trees Sequence Clustering Plus: Linear and Logistic Regression Clustering Time Series Association Naïve Bayes Neural Net

Relationship among SCM, ERP, CRM SCM ERP Broader SCM CRM

V. SAP R/3

PARTIAL SAP CLIENT LIST Spacenet

BEFORE SAP R/3 Systems didn’t talk to the extent processes required, in spite of 20 years of IS labor n Human glue was required: n to fill-in where systems don’t talk n to reconcile multiple views of data to arrive at an “answer” n to monitor “hold-points” to ensure procedures are followed amidst the disorganization of being part paper and part automated n to bridge systems and paper processes n

Primavera Schedules Artemis Project Fund Accounting DOE DISCAS Fixed Assets Off-site Vendor Custody batch file Paper Purchase Paper milestone definitions Paper receivers Requisition Catalog Inventory Control System Bar Coding Purchasing Pump/Motor Run Time General Ledger Work Order System Paper parts order batch file Bench Stock Control Paper Stock level decision Paper Contract Logistics Support Analysis MRP Models Engineering Change Control Log Journal Entry Request Paper ECP Paper Invoices Payroll Personnel Paper Legend Accounts Payable Real Property Legacy System Training batch file Disbursements Security Centra EDM/PDM Paper checks DOE FIMS

PROCESS EFFICIENCY Realized through ability to reduce the personnel requirements to perform the process n. Transfer into processes that were able to meet customer requirements n

THE KEY ENABLER: ONE SYSTEM SD MM PP Financial Sales & Distribution Accounting Materials Mgt. Production Planning Quality Mgt. QM SAP R/3 CO Controlling AM SAP R/3 Single Central Database Project System Human Resources HR Workflow Exec. Information & Report Writer WF n n Fixed Assets Mgt. Plant Maintenance PM FI n n PS Omni-functional Fully integrated Process-oriented Off-the-shelf 1

Some SAP Products n n n R/3 APO Customer Relationship Management (CRM) Business process improvement (BPI) Strategic Enterprise Management (SEM) Business Warehouse (BW)

VI. SCM/ERP for Small Businesses – Microsoft Dynamics

Microsoft Dynamics Screenshot

Microsoft Dynamics n n Formerly Microsoft Business Solutions – Great Plains With Microsoft Dynamics, you can bring supply-chain functions online and make information available for team collaboration—wherever your employees, vendors, partners and suppliers are. Business portal functionality lets you provide supplychain functions, documents, and information to people across the chain, both inside and outside of the organization. And you can use the same portal technology to let your executives review and augment performance— when, where, and how they need to.

Why Microsoft Dynamics is for small businesses? n n Hardware considerations Database requirements

VI. Information Technology for E-Business

TOOLS FOR WEB PAGE DEVELOPMENT & SITE MAINTENANCE n Languages: n n n n HTML CGI (Common Gateway Interface) CSS (Cascading Style Sheets) Javascript Java (Java Applet) XML/XSL Software: n n n Front Page Microsoft Word Macromedia Flash Player n n http: //www. macromedia. com/software/flash/ Macromedia Dreamweaver

V. Hardware Considerations for SCM systems

Intranet vs. Extranet n n Intranet is to use Internet technology and protocol (TCP/IP) for the internal communications Extranet is to use Internet technology and protocol for the internal and suppliers’ communications

Network Infrastructure: Wide Area Networks (WANs) n WAN Technologies n Ordinary telephone line and telephone modem. n Point-to-Point Leased lines (such as T 1 line) n Public switched data network (PSDN) n n Such as ATM, Frame Relay Send your data over the Internet securely, using Virtual Private Network (VPN) technology PSDN VPN

Global Considerations in Using SCM/ERP Systems n n n n Time differences Language issues Currency exchange rates Tax Different accounting systems Internet and security restrictions Culture and religion holidays

End of lecture