Impact of ERP on Supply Chain Efficiency


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In modern supply chain management ERP is used for transactional data while tools like Advanced Planning and Optimization is used for forecasting, planning, scheduling and confirmation. Further, in processes such as production planning there is a technique termed SNP optimizer. This is used for calculation of costs and Total cost is calculated as the sum of Delay cost, Non-delivery cost, storage cost and production cost. An ERP-enabled Supply Chain Process helps the organization to create a supply chain that is reliable, flexible and responsive. It also enables in enhancing the visibility across the supply chain.

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Impact of ERP on Supply Chain Efficiency

  1. 1. Impact of ERP on Supply Chain effectiveness Shailesh Harsora
  2. 2. Agenda• Usage of ERP for transactional data• Usage of APO for forecasting, planning & scheduling and Confirmation.• Integration of SAP/APO for end to end integration of Demand-Supply.• Usage of Business Intelligence for Analysis
  3. 3. Supply Chain complexity: Suppliers Manufacturers Warehouses & Customers Distribution Centers Transportation Transportation Costs Costs Transportation Material Costs Manufacturing Costs Inventory Costs Costs 3
  4. 4. Demand ChainSU CP UP SL Inbound OutboundI Logistics PLANT Logistics T OE meR 3PL 3PL Fixed Schedules, rS Supplier Kanban.
  5. 5. The Integrated Demand Chain SAPSU CP USP TL SRM R3 & SCM DMS & O CRMI ME ERR SS
  6. 6. SAPSCM (APO)APO (Advanced Planning and Optimization) It offers planning and optimization functionalities in different business processes of• Demand Planning & Forecasting• Supply Net work Planning• Production Planning Detailed Scheduling• Global Available to Promise (GATP)• Transportation Management
  7. 7. System ToolBusiness Requirement IT Solution Dealers Forecast Demand Planning (DP) Monthly/Weekly /Daily Despatch & Production Supply Network Planning (SNP) planWeekly day wise planning Production Planning (PP) and sequencing Detailed Scheduling (DS) Delivery Commitment to Global Availability To Promise customer (GATP) 7
  8. 8. Demand Planning & Forecasting• This module helps demand forecasting thro collaboration with customers.• Geographical, product and business hierarchy can be configured for facilitating collaborative forecasting.• It also provides statistical tools for demand forecasting.
  9. 9. Demand Planning & Forecasting• Demand Capturing 1. Direct & Indirect Orders from Customers 2. Demand based on Forecast• Demand Propagation 1. Sales orders Creation 2. Stock transfer Order(STO) creation 3. Multi Plant Demand distribution scenario
  10. 10. Supply Network PlanningThis module can be used for• Demand Propagation• Network optimisation• Distribution planning (Deployment)• Production planning
  11. 11. Supply Network Planning Planning Processes in SNP module Network Production Procurement planning planning planning
  12. 12. Supply Network Planning Demand propagation on plant Dealer-5 Dealer-1 Dealer-2 Dealer-3 Dealer-4 Ex plant Billing Ex warehouse Billing Stock Yard Stock Yard Dealer-6 1 2 Stock norms Tr. Lead time PlantNetwork Production Procurementplanning planning planning
  13. 13. Supply Network Planning Network Planning-Demand Propagation Tue W ed Thu F ri S at Sun Mon Tue W ed Thu F ri 06/02 07/02 08/02 09/02 10/02 11/02 12/02 13/02 14/02 15/02 16/02S to ckY ard D 1 req m t 5 5 5 5 5 5 5 D 2 req m t 3 3 3 3 3 3 3 S to ck 6 N etR eq m t 2 8 8 8 8 8 8R eq m t o n p lan t 26 8 8 8 8 0 8 8 8 8T arget D ays supply 3 D aysT ransit Lead tim e 3 D aysNetwork Production Procurementplanning planning planning
  14. 14. Supply Network Planning Planning Processes in SNP module Network Production Procurement planning planning planning
  15. 15. Supply Network PlanningProduction Planning horizon PPDS planning Horizon of 3 weeks for RFD. Every week, 3rd week SNP plan will be converted to PPDS plan SNP Planning Horizon (4 months) W1 W2 W3 W4 M1 M2 SNP Production Horizon, PPDS Plan orders Where SNP will not plan SNP Plan orders being a frozen period. Network Production Procurement planning planning planning
  16. 16. How constraints are defined?– Hard constraints- thru Work centers mapped in SAP • Resource capacity, currently TCF line • Aggregate hard constraints like engine, Axle & Transmission • Supplier hard constraints– Soft Constraints- thru MRP master data updation in SAP • Parts can be arranged with lead time, which will consider the availability like stock, expected receipts (Schedule lines on time lines)
  17. 17. Production planning• SNP Optimizer• Capable To Match(CTM)
  18. 18. SNP Optimizer• SNP Optimizer is a method of planning where in there are costs attached to all orders (delay, non-delivery, storage and production costs). The optimizer tries to plan orders by minimizing the overall total cost. It uses linear programming logic for optimization Total cost = Delay Cost + Non-Delivery Cost + Storage Cost + Production Cost
  19. 19. Capable To Match(CTM)• CTM is a method of planning where the SAP plans as per priorities given to orders (e.g. FIFO of Ordering date)• CTM is Multi-level Finite order based planning
  20. 20. Supply Network Planning Production Planning: Objective-  To meet the demand by producing vehs as close to the demand.  Minimum delay if capacity < Demand.  Model prioritisation in case of Capacity or Material constraint.  Build ahead considering future high demand for selected models indicated by Marketing.Network Production Procurementplanning planning planning
  21. 21. Supply Network Planning Production Planning by SNP optimiser  Resource constraints  Component availability Cost Modeling like Storage cost Delay cost Non delivery cost * Production cost (All cost are the relative costs) * Also termed as Acquisition Cost and has intangible benefit or Loss depend on Product demand and customer profile Hence it is most significant cost elementNetwork Production Procurementplanning planning planning
  22. 22. Supply Network Planning Production Planning: SNP optimiser- Works on the principle of reducing total cost where, Total cost = Sum of {Non Delivery (ND) + Delay cost (DC) + Storage cost (SC) + Production cost (PC)} SNP optimiser uses linear programming to solve the above equation. A comprehensive cost model is developed to meet business requirements.Network Production Procurementplanning planning planning
  23. 23. Supply Network Planning Planning Processes in SNP module Network Production Procurement planning planning planningNetwork Production Procurementplanning planning planning
  24. 24. Supply Network Planning Procurement planning… Component planning is based on Production plan • Netting off the stock and expected receipts (Schedule lines/open PO) • In transit stock based on ASN • Planned Lead time • Lot size, safety stock norms • Fresh purchase requisitions will be generatedNetwork Production Procurementplanning planning planning
  25. 25. PPDS activities• Convert SNP plan orders to PPDS plan orders as per rule based sequencing.• It generates time based sequence which can be used for JIT supplies• PPDS Plan orders flows to R3, (can be used for MRP)• Actual production as per PPDS plan orders• Backlog run for aligning the variation/loss of production.
  26. 26. GATP (Global Availability to Promise)BOP (Back order Processing)• This module matches the Requirements with Receipts elements based on business rules.• It provides confirmation dates to firm demand based on the stocks and plan orders.
  27. 27. PROCESS FLOW CHART Dealer’s Own No Dealer Creates Triggering ofCustomer Stock and Order Confirm P.O./ OTF S.O. in R/3 POs Yes Yes Dealer’s Stk. YardDelivery Date Receipt +Commitment. Stock GATP CHECK no Dealer to System to create formalise his recpt and forecast in next update SO / STO weekly planning run 27
  28. 28. Business Inteligence• The SAP BW Business Intelligence provides flexible reporting and analysis tools for strategic analyses, operational reporting, and decision- making support within a business. These tools include query, reporting, and analysis functions.• As an employee with access authorization you can evaluate past or current data on various levels of detail, and from different perspectives, not only on the Web but also in MS Excel
  29. 29. BW Dashboards
  30. 30. Supply Chain Process with ERP• Supply Chain Reliability• Supply Chain Responsiveness• Supply Chain Cost• Supply Chain Flexibility• Supply Chain VisibilityAgile Customer Centric Supply Chain
  31. 31. Thank You