L22 Erp Scm
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Transcript of L22 Erp Scm
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Role Of ERP in Supply Chain Management
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A Production-Distribution System
raw materialsinventory
finished goodsinventory
work in process
inventory
FACTORY A
FACTORY B
(raw matl delivery:road, rail,sea, air orpipeline)
(customer serviceby wholesale andretail outlets)
small industries
rapid tech.innovation increasing
global comptn
globalisationof markets
Just-in-timeinventory
pressures onpricing
pressures ontime-to-mkt
shorter pdt. life cycles
stress on quality
Demandingdelivery sched.
rapid responsetime-to-market
Individual customized prodn.
Challenges faced by the Indian Manufacturing Sector
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Supply Chain Definitions• Flow of materials, information, payments,
and services, from suppliers through factories and warehouses, to end customers
• Includes all organizations and processes that create and deliver products, information, and services to the end customers
• Supply chain management - planning, organizing, coordinating, and controlling all activities in the supply chain
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The Integrated Supply ChainStage One: BaselineMaterialflow
Customerservice
MaterialControl
Purchasing Production Sales Distribution
Stage Three: Internal IntegrationMaterialflow
Customerservice
ManufacturingManagement
MaterialsManagement Distribution
Stage Two: Functional IntegrationMaterialflow
Customerservice
ManufacturingManagement
MaterialsManagement
Distribution
Stage Four: External IntegrationMaterialflow
Customerservice
Internal SupplyChain
Suppliers Customers
“The management of u
pstream and downstre
am relatio
nships
with suppliers and customers to
deliver superio
r customer v
alue
at less cost to
the supply chain as a whole.”
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Tiered Suppliers
Intra-Company Fabrication
Assembly
Retailers
Distributors
Consumers
Commercial Buyers
Information Flow
Material Flow
Features:• Independent systems to manage the interaction between players in the supply chain.• Great operational flexibility -• Problems - hedging, forecasting uncertainty, visibility limited.. Beer Game type dynamics.
Conventional Multi-EchelonSupply Chain
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Process View of a ConventionalMulti-Echelon Supply Chain
Assembly
Receive orders fromVendors
Place orderswith Vendors
Forecast demandand plan production
Receive orders fromdistribution, retail andcommercial customers
Ship orders to distribution,retail and commercial customers
Distribution
Place orderswith assembly
Forecast demandand plan distribution
Receive orders fromcustomers
Ship orders tocustomers
Update localsystem accordingto changes - new products, prices,customers, etc.
Update localsystem accordingto changes - new products, costs,distribution centers, customers, etc.
Roles with decentralized system: • Change Planning and Implementation• Sales and Operations Planning• Product and Service Delivery
Receive ordersfrom assembly,etc.
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Tiered Suppliers
Intra-Company Fabrication
Assembly
Retailers
Distributors
Consumers
Commercial Buyers
Information Flow
Material Flow
Web Order Processor
ERP System
Features:• Integrated information• System optimization possible• Problems - inflexible - need a much more formal infrastructure to support the system.
Multi-EchelonSupply Chain withERP System
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Execute Business Strategy- Global Business- Change Project Scheduling
Secure Suppliers forServices, Materials, and Contract Manufacturing
Change Informationin Systems
ChangeProductionFacilities
Sales and OperationsPlanning (Global) - SAP-APO
Order, Receive, and StorePurchased Material
ManageProduction
Receive andCommit to Order
Move, Store, andDeliver Product
Receive andProcess Payment
Roles when using centralized ERP: • Change Planning and Implementation• Sales and Operations Planning• Product and Service Delivery
Process View of ERP
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Types of Supply Chains• Integrated Make-to-Stock
– Real-time demand tracking triggers production to restock finished goods
• Continuous Replenishment– Constant inventory replenishment based on expected
stable demand• Build-to-Order
– Customer order triggers production of specific item(s) requested
• Channel Assembly– Build-to-order with some assembly performed within
the distribution channel
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Problems in the Supply Chain• How much are we going to sell? (demand
forecasts)• How long will it take? (for supplies to
arrive; shipments to be received)• What if the supplies are defective? (quality
control)• What if my order gets lost or
miscommunicated?
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Problems in the Supply Chain• Bullwhip Effect
– Wild swings in orders due to lack of coordination and trust among supply chain members
– Information sharing is essential• Phantom Stockouts
– Inventory is reportedly not available, when in fact it is on hand
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Overcoming Supply Chain Problems
• Vertical Integration– Own everything upstream and downstream
• Stockpile Inventory– Eliminate risk and uncertainty by hoarding
massive inventories; very expensive• Improve Supply Chain Management
– Build trust and coordination through IT enabled supply chain support
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Supply chain management (SCM) holds promise for not just improving productivity
but also competitiveness.
SCM has to be leveraged for corporate India’s gain without delay
In consumer durables, the entry of MNCs has increased competition and SCM is
perceived as the vital factor, which differentiates failure from success.
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Customer service
Competitiveness
Integration: Coordination:
Choice of partners Use of information and communication
technologyNetwork organization and inter-organizational
collaboration Process orientation
Leadership Advanced planning
Foundations:
Logistics, marketing, operations research, organizational theory,
purchasing and supply…
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• What is new in SCM?– Two dimensions which differentiate SCM
from traditional concepts:• Organizational Integration and
• Flow Coordination
Stated simply, a supply chain is a network of entities that starts with the suppliers’ suppliers and ends with the customers’ customers for production and delivery of goods and services.
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• First Dimension: Integration of Organizations– Companies seeking opportunities to break
organizational boundaries to work closely with their suppliers and customers
– Companies also overcoming functional boundaries, so that different disciplines and functions are better integrated (such as manufacturing, distribution, marketing, accounting, information, and engineering)
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• Second Dimension: Coordination of multiple flows in a supply chain
• Materials
• Information and
• Finance
These three flows are interdependent and, in some cases, are substitutes of one another.
It is through the coordination of these flows that tremendous gains in overall efficiency of the supply chain can be achieved.
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Supply Chains in India
• Sony India managed to reduce its inventories by 70% just six months after it began its SCM initiative
• Maruti has wired all its suppliers together and 60% of business transactions are now happening online
Source: “Pulling Power”, DATAQUEST; 31 October 2001.
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Supply Chains in India
• Samsung manages a 5,000-dealers' online network with just 15 employees
• Mahindra & Mahindra's tractor division aims for a reduction of 48% in inventories, 30% in logistics costs and a cutback in production cycle from a month to a week
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• Three major developments in global markets and technologies which have brought SCM to the forefront:– The information revolution– Customer demands in areas of product and
service cost, quality, delivery, technology, and cycle time brought about by increased global competition
– The emergence of new forms of inter-organizational relationships
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Information Technology and the Supply Chain
“Information technology (IT) is an inseparable part of supply chain
management, harnessing information flows for decision making.”
INDIA: ERP is no longer a hype
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• The four stages of development
Integrate>Optimize>Connect>Coordinate
• Basic IT Building blocks:
•MRP/ERP>APS>EDI>SCM/CRM
• 85% of the companies are still in stage 1
• A manufacturing supply chain example
Supply Chain from an IT Perspective
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New Internet-Based Processes
Planning Procurement
AP
Production
CustomerServices
OrderMgmt
AR
Production
Exchangesrequisition
e-invoice
confirmationauction
bid
debitnotification
creditnotification
FinancialInstitutions
Vendor Information
P.O. Tracking / History
Bidding & RFQ Process
Vendor Performance
Product Data Mgmt
Blanket Agreements
Production Requirements, Schedules,Delivery Dates, Status
Customer Information
Order Mgmt
Quotation Process
Performance Info
Product Data Mgmt
Blanket Agreements
Production Requirements, Schedules, Delivery Dates, Status
• Business Directory with Content
ERP ERP
• On-line Tracking, History, & Audit
• Reverse Auction
• Multi-user Aggregate Performance
• Product Design Collaboration
• Multi-user Buying Power
?
Supplier Custmer
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What are the future trends? Information Technology in a Supply Chain: Legacy
Systems
Supplier CustomerRetailerDistributorManufacturer
Strategic
Planning
Operational
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Information Technology in a Supply Chain: ERP Systems
Supplier CustomerRetailerDistributorManufacturer
Strategic
Planning
OperationalERPPotential
ERPPotential
ERP
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Information Technology in a Supply Chain: Analytical Applications
Supplier CustomerRetailerDistributorManufacturer
Strategic
Planning
Operational
SupplierApps
SCM
MES
Dem Plan
Transport execution &WMS
APS Transport & InventoryPlanning
CRM
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Mapping of SAP functions into roles of centralized ERP
• Execute Business Strategy– Product strategy
– Project management
• Change information in systems– Codes, specifications, bills of
material, prices terms, customers
• Secure suppliers for services, materials, and contract manufacturing– Select suppliers
– Negotiate contracts
– Monitor performance
• Change production facilities– Build and modify plant
– Improve plant
• Sales and Operations Planning– In line with the business strategy,
manage supply of product against expected demand
– Decide what to make and when to make it
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Mapping of SAP functions into roles of centralized ERP
• Receive and commit to order– Determine capability to meet
customer order requirements
– Agree to delivery date and quantity and commit to customer order
– Process order
• Order receive, and store purchased materials– Schedule and order materials
– receive and manage purchased materials inventories
– Manage required documentation for customs, EPA, etc.
– Pay purchased materials suppliers
• Manage production– Operate plant
– Produce to plan
– Record production data
– Manage product quality
• Move, store, and deliver product– Arrange transportation
– Load product for shipment
– ensure proper documentation
– Monitor delivery
• Receive and process payment– receive customer payments
– Collect past-due payments
– Resolve invoicing discrepancies
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SAP - Advanced Planner and Optimizer (SAP APO) - Major Functions
• Supply Chain Cockpit - model, monitor and manage the supply chain with a graphical “bird’s eye” view of activities.
• Demand Planning - analyze patterns, etc. to create demand forecasts.
• Supply Network Planning & Deployment - load balancing - match purchasing, production and transportation processes to demand
• Production Planning & Detailed Scheduling - plant-by-plant production scheduling.
• Global Available-to-Promise - match supply to demand for reliable delivery commitments using real-time checks and simulation.
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• ERP growth has slowed down• CRM & Transportation Mgmt Systems poised for
high growth rates• Impact of ERP [not very impressive!!]• Beyond ERP: Advanced Planning and Scheduling
(APS) for better Supply Chain Performance• APS Uses dynamic planners and optimizers
acting on real time data• Bright future for APS vendors (or ERP vendors
who offer plug-ins)
A Few Highlights