INN600 Advanced Readings and Special Topics on Supply Chain Management  <ul><li>ERPs and SCM Systems </li></ul><ul><li>Fac...
Overview <ul><li>Enterprise Resource Planning (ERP) systems supported by various supply chain management (SCM) components ...
Enterprise Resource Planning (ERP) <ul><li>ERP is  one of the most important considerations for business organizations . <...
Few case studies … Company Associated benefits Western Reserve University <ul><li>Integrating payroll and finance function...
Supply Chain Management (SCM) <ul><li>Managing supply chain  plays an important role in business. If carefully planned and...
ERP to SCM <ul><li>Unit of analysis </li></ul><ul><ul><li>Single organization </li></ul></ul><ul><ul><li>Network of organi...
ERP to SCM <ul><ul><li>Result of analysis     SCM introduction </li></ul></ul><ul><ul><li>Modern business operations requ...
ERP Benefits vs. Firm Competence of SCM
ERP Benefits vs. Firm Competence of SCM ERP Benefit Type Firm Competence of SCM Organizational performance of SCM Operatio...
SAP SCM – Overview and Benefits <ul><li>Overview of current business environment </li></ul><ul><li>Global Business Challen...
The Benefits of SAP SCM Activity Benefit Demand and supply planning- Demand planning and forecasting Use state-of-the-art ...
Marico –  Results obtained from Implementation <ul><li>The forecasting accuracy improved 80 percent in the first year of i...
SAP’ SCM Successful Practices… <ul><li>Successful stories: </li></ul><ul><ul><li>Marico – Retail and consumer </li></ul></...
Marico -  Overview <ul><li>Marico, Mumbai based , Indian manufacturing company producing 9 major brands with leading marke...
Marico –  Business Challenge <ul><ul><li>Poor forecasting and planning </li></ul></ul><ul><ul><li>Disintegrated Internal o...
Marico –  Results obtained from Implementation <ul><li>The forecasting accuracy improved 80 percent in the first year of i...
Telefonica  -  Overview <ul><li>Telefonica, S.A., is a Spanish telecommunication company operating globally in 25 countrie...
Telefonica  –  Business Challenge <ul><ul><li>Demand and Supply Planning: </li></ul></ul><ul><ul><li>When considering the ...
Telefonica  –  Business Challenge
Telefonica  –  Business Challenge <ul><li>Collaborative Engineering Design :  while establishing the network node during i...
Telefonica  –  Results obtained from Implement. <ul><li>Telefonica has reduced its investment in unused ADSL network inven...
Conclusion <ul><ul><ul><li>ERP systems poses limited capability in collaborative demand and supply planning, and lack of v...
 
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Supply Chain Management

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  • ERP: for a single organization/ For operational end users or for staffs who execute the process/ integrate the core business. SCM: for a network of organizations/ For people who what to use ERP data do better analysis and strategies decisions/ supported be ERP
  • The driver to change ERP to SCM. markets have become more transparent and customized in their manner to become increasingly distinct in order to meet product demand . Network economy and inventory cost reduction. ERP 1(traditional ERP) to ERP extended which contains SCM module etc. Positive or negative influence of ERP on SCM?
  • The driver to change ERP to SCM. markets have become more transparent and customized in their manner to become increasingly distinct in order to meet product demand . Network economy and inventory cost reduction. ERP 1(traditional ERP) to ERP extended which contains SCM module etc. Positive or negative influence of ERP on SCM?
  • Industry field: http://www.sap.com/solutions/business-suite/scm/customers/casestudies.epx SAP companies: http://www.cel.cmich.edu/onlineMBA/CompaniesWhoUseSAP.pdf SAP SCM SOLUTION: http://www.supplychainnetwork.com/sap-set-to-release-next-generation-scm-solution/
  • References: 1.SAP SCM Solution overview: http://www.sap.com/solutions/business-suite/scm/index.epx 2.SAP SCM Solution map: http://solutioncomposer.sap.com/socoview(bD1lbiZjPTAwMSZkPW1pbg==)/render.asp?sap-unique=183509&amp;sap-params=aWQ9NUY3MzU4MTE4QUE2RDUxMUIxQTgwMDkwMjcwRjZGODcmcGFja2FnZWlkPURFMDQyOTg0REIzNzI1RjE5NTE1MDAxQTY0RDNGNDYy
  • Supply Chain Management

    1. 1. INN600 Advanced Readings and Special Topics on Supply Chain Management <ul><li>ERPs and SCM Systems </li></ul><ul><li>Faculty of Science and Technology </li></ul><ul><li>Brisbane, Australia 2009 </li></ul>
    2. 2. Overview <ul><li>Enterprise Resource Planning (ERP) systems supported by various supply chain management (SCM) components are considered as an important contribution to the improvement of a business overall efficiency. </li></ul><ul><li>Research Question: D oes an organization in fact gain substantial benefits by having a SCM system, in addition to an Enterprise System? </li></ul><ul><li>Research Methodology: </li></ul><ul><ul><li>Exploring different roles of ERPs and SCMs inside organizations </li></ul></ul><ul><ul><li>Reviewing different industrial based practices and showing how the use of SCM technology added a competitive advantage </li></ul></ul>
    3. 3. Enterprise Resource Planning (ERP) <ul><li>ERP is one of the most important considerations for business organizations . </li></ul><ul><li>Streamlining of organizational processes and operations . </li></ul><ul><li>ERP investments are not necessarily advantageous </li></ul><ul><ul><li>Business Requirements misunderstanding.. </li></ul></ul><ul><ul><li>Higher costs associated with ERP’s.. </li></ul></ul><ul><ul><li>Time-schedule.. </li></ul></ul><ul><ul><ul><li>Go/NoGo ERP decision must be based on an “options thinking logic”  Value Assessment </li></ul></ul></ul><ul><ul><ul><li>Examples : SAP, Oracle, Microsoft Dynamics.. </li></ul></ul></ul>
    4. 4. Few case studies … Company Associated benefits Western Reserve University <ul><li>Integrating payroll and finance functions along with some aspects of purchasing and accounts payable. </li></ul><ul><li>Streamlining and assist in updating the university’s business processes ( for example HR activities) </li></ul><ul><li>Improving communications among faculty, students and staff, with the primary aim of Increasing productivity and efficiency levels. </li></ul>Fairmont Supply <ul><li>Managing complex business functions. </li></ul><ul><li>Highly utilizing GUI feature which is considered as a major factor that determines the effectiveness of the ERP system. </li></ul><ul><li>Providing support for improvements in the company’s supply chain. </li></ul>
    5. 5. Supply Chain Management (SCM) <ul><li>Managing supply chain plays an important role in business. If carefully planned and deployed, it enables businesses to maintain competitive advantage and generate more profit. </li></ul><ul><ul><li>Technology (e.g. IT infrastructure, Internet) </li></ul></ul><ul><ul><li>Globalization. </li></ul></ul><ul><ul><li>Business/IT alignment. </li></ul></ul><ul><ul><li>Organizational processes. </li></ul></ul><ul><ul><li>Operation issues (e.g. Bullwhip effect, forecasting, distribution) </li></ul></ul><ul><ul><li>SCM systems improve efficiency and effectiveness in </li></ul></ul><ul><ul><li>The communication channels between a business and its customers. </li></ul></ul><ul><ul><li>Integrating communications among customers, suppliers and business partners. </li></ul></ul>
    6. 6. ERP to SCM <ul><li>Unit of analysis </li></ul><ul><ul><li>Single organization </li></ul></ul><ul><ul><li>Network of organizations </li></ul></ul>
    7. 7. ERP to SCM <ul><ul><li>Result of analysis  SCM introduction </li></ul></ul><ul><ul><li>Modern business operations require a mix of cross-functional strategic planning and enterprise-wide corporate negotiation. </li></ul></ul><ul><ul><li>ERP is functionally tied to the integration, standardization, extension and assurance of future flexibility for corporate processes and failed to offer organization an extended business model. </li></ul></ul><ul><ul><li>ERP as a transactional system has limited capability of forecasting and planning. </li></ul></ul><ul><li>Positive or negative influence of ERP on SCM? </li></ul>
    8. 8. ERP Benefits vs. Firm Competence of SCM
    9. 9. ERP Benefits vs. Firm Competence of SCM ERP Benefit Type Firm Competence of SCM Organizational performance of SCM Operational Benefits <ul><li>Cost Reduction </li></ul><ul><li>Cycle Time Reduction </li></ul><ul><li>Productivity Improvement </li></ul><ul><li>Quality Improvement </li></ul><ul><li>Customer Service Improvement </li></ul>Operational Process Integration Business Process Management Benefits <ul><li>Better Resource Management </li></ul><ul><li>Improved Decision Making and Planning </li></ul><ul><li>Performance Improvement </li></ul>Planning and Control Process Integration Strategic IT Planning Benefits <ul><li>Building Business Flexibility </li></ul><ul><li>IT Cost Reduction </li></ul><ul><li>Increased IT infrastructure capability </li></ul>Customer and Relationship Integration
    10. 10. SAP SCM – Overview and Benefits <ul><li>Overview of current business environment </li></ul><ul><li>Global Business Challenges </li></ul><ul><ul><li>Meet a high levels of demand accuracy, visibility, increase variety and short product lifetimes, etc. </li></ul></ul><ul><li>Companies’ solution </li></ul><ul><ul><li>SAP apps  SAP SCM solution </li></ul></ul><ul><li>Benefits of SAP SCM Solutions in practice </li></ul><ul><ul><li>Report and survey results </li></ul></ul><ul><ul><li>Sample Activities and Benefits </li></ul></ul>
    11. 11. The Benefits of SAP SCM Activity Benefit Demand and supply planning- Demand planning and forecasting Use state-of-the-art forecasting algorithms for product life-cycle planning and trade promotion planning Production planning and detailed scheduling <ul><li>Generate optimized schedules for machine, labor, and overall capacity utilization </li></ul><ul><li>Address problems of unequal allocation of constrained materials and capacity, due-date commitments, and sequencing of incoming orders without disrupting existing plans </li></ul>Manufacturing-Manufacturing visibility, execution, and collaboration <ul><li>Meet and deliver on your production plans by managing production processes and the deployment of the workforce and resources on the shop floor </li></ul><ul><li>Document, monitor, and dispatch inventory across the production life cycle </li></ul><ul><li>Share information with partners to coordinate production and increase visibility and responsiveness on the shop floor </li></ul>Transportation-Planning and dispatching Optimize, create, and manage planning processes using best-in-class optimization, dynamic routing and scheduling, and continuous-move optimization Supply chain visibility-Sales and operations planning <ul><li>Align your company’s financial goals, marketing efforts, and inventory targets in one consolidated plan </li></ul><ul><li>Gain access to relevant data, including aggregated, role-specific information about time, organization, product, geography, and units of measure </li></ul>Supply network collaboration-Supplier collaboration Connect to and collaborate with your suppliers by providing them easy and seamless access to supply chain information, which facilitates your ability to synchronize supply with demand
    12. 12. Marico – Results obtained from Implementation <ul><li>The forecasting accuracy improved 80 percent in the first year of implementation and further reached to 90 percent in the next following year. The planning cycle time reduced to 10days from the initial indicative plan to production plan. </li></ul><ul><li>The stock outs associated at distributor level decreased by half due to which loss in sales to retailers also reduced by more than half. </li></ul><ul><li>The excess inventory which was initially forced to distributors to meet the sales targets (based on push strategy) was reduced by 50 percent because of effective demand forecasting and new planning process embedded within the company. </li></ul><ul><li>The total operating costs and costs associated with distribution of supply to right places within the network reduced by having the visibility of inventory levels of various distributors. </li></ul>
    13. 13. SAP’ SCM Successful Practices… <ul><li>Successful stories: </li></ul><ul><ul><li>Marico – Retail and consumer </li></ul></ul><ul><ul><li>Telefonica, S.A – Telecommunication </li></ul></ul><ul><ul><li>Parbury FHS- Manufacturing </li></ul></ul><ul><ul><li>MG Industries - Gas producer </li></ul></ul><ul><ul><li>Palm, Inc - Mobile and handheld computer </li></ul></ul><ul><ul><li>Canada Post - Postal service provider </li></ul></ul><ul><li>Business challenges </li></ul><ul><li>Results obtained from Implementation </li></ul>
    14. 14. Marico - Overview <ul><li>Marico, Mumbai based , Indian manufacturing company producing 9 major brands with leading market positions, mostly second and third place. </li></ul><ul><li>Product Range – Non durable consumer goods including coconut oil, fabric, refined edible oil, nature care and health care </li></ul><ul><li>Company’s supply chain </li></ul><ul><ul><li>20 production units </li></ul></ul><ul><ul><li>32 warehouses and 1000 distribution centres </li></ul></ul><ul><ul><li>1.6 million retail outlets ( less than 2% organized retailers spanning across rural area consisting of 70% of population) </li></ul></ul>
    15. 15. Marico – Business Challenge <ul><ul><li>Poor forecasting and planning </li></ul></ul><ul><ul><li>Disintegrated Internal operations – Due to stand-alone application and lack of integration, data used for forecasting is quite inadequate </li></ul></ul><ul><ul><li>Excel sheet to maintain sales data at various ends of supply chain has increased the length of planning horizon and change in market dynamics is not being captured </li></ul></ul><ul><ul><li>Lack of visibility in the Sales data – causing high stocks, poor service level and wastage of inventory </li></ul></ul><ul><ul><li>Distribution - Due to non – availability of the stock information at various depots wrong shipment decisions are caused resulted in extra storage space hire, inter depot stock transfer, increasing transportation cost, inventory build-ups and expired products </li></ul></ul>
    16. 16. Marico – Results obtained from Implementation <ul><li>The forecasting accuracy improved 80 percent in the first year of implementation and further reached to 90 percent in the next following year. The planning cycle time reduced to 10days from the initial indicative plan to production plan. </li></ul><ul><li>The stock outs associated at distributor level decreased by half due to which loss in sales to retailers also reduced by more than half. </li></ul><ul><li>The excess inventory which was initially forced to distributors to meet the sales targets (based on push strategy) was reduced by 50 percent because of effective demand forecasting and new planning process embedded within the company. </li></ul><ul><li>The total operating costs and costs associated with distribution of supply to right places within the network reduced by having the visibility of inventory levels of various distributors. </li></ul>
    17. 17. Telefonica - Overview <ul><li>Telefonica, S.A., is a Spanish telecommunication company operating globally in 25 countries. </li></ul><ul><li>Third largest in its industry in terms of number of clients only behind China Mobile and Vodafone and holds a top five position in market value </li></ul><ul><li>Product Range – Fixed lines, Broadband internet connectivity, Mobile telephony, Internet content services </li></ul><ul><li>Its customer base exceeds 260 million globally, with annual sales of more than 27.5 Billion Euros. </li></ul><ul><li>The company’s growth strategy is focused on the markets where they have the strong foothold especially Spain, Latin America and Europe. </li></ul>
    18. 18. Telefonica – Business Challenge <ul><ul><li>Demand and Supply Planning: </li></ul></ul><ul><ul><li>When considering the planning aspect, the company needed to capture detailed market insights and historical trends. The planning horizon currently spans across three months due to which any real changes in the Market dynamics during the time is not included into the plan. </li></ul></ul><ul><ul><li>The internal departments within the company follows their own plan for and there is no joint execution. </li></ul></ul><ul><ul><li>The order placed to suppliers is adhoc and manual. Company requires a system in place to process robust algorithms to calculate procurement needs based on forecast demand, ADSL bandwidth inventory, ADSL disconnect rates, supplier lead times, safety stock and lead time for network implementation. </li></ul></ul><ul><ul><li>There exists a lack of collaborative demand and supply planning between supplier, company and customers and thus lot of infrastructure is being built to meet customer demands before even receiving the customer requests yielding to additional cost of capital and assets. </li></ul></ul>
    19. 19. Telefonica – Business Challenge
    20. 20. Telefonica – Business Challenge <ul><li>Collaborative Engineering Design : while establishing the network node during infrastructure implementation – the company and the supplier does not contribute to collaborative work and information such as product configuration, bill of materials and exchanging the required data is done manually and leads to long procurement lead times. </li></ul><ul><li>System Integration : the suppliers usually the manufacturers of network equipments have high operational expenses including high inventory carrying cost, logistics and obsolescence cost. The costs at suppliers end can be minimised when processes gets integrated with company’s business systems. Cost efficiency can be also achieved at organisation level when new technology enables process change to add specific value. </li></ul>
    21. 21. Telefonica – Results obtained from Implement. <ul><li>Telefonica has reduced its investment in unused ADSL network inventory by 20% to 40% </li></ul><ul><li>Increased in the productivity of employees by 30% to 40% due to elimination of various manual communications </li></ul><ul><li>Telefonica reduced its operating costs by receiving reduction in the range of 5% on products from their main supplier Alcatel. Alcatel has transferred some of their savings to the company because of the new business process of collaborative supply and demand planning implemented. </li></ul><ul><li>Telefonica achieved on –time installation for 90% of its customers while maintaining the service level agreement of having a lead time of 10 days. </li></ul>
    22. 22. Conclusion <ul><ul><ul><li>ERP systems poses limited capability in collaborative demand and supply planning, and lack of visibility into supply chain events. </li></ul></ul></ul><ul><ul><ul><li>ERP systems are transactional based systems while SCM systems primarily used for planning and provide visibility, collaboration, and control across and beyond the enterprise. </li></ul></ul></ul><ul><ul><ul><li>SCM systems are suitable for accurate demand forecasting and supply network planning, ERPs have limited decision-making over these functionalities. </li></ul></ul></ul><ul><ul><ul><li>SCM systems capture various market constraints and risk elements simultaneously to develop a collaborative plan where ERP can handle supply and demand constraints individually. </li></ul></ul></ul><ul><ul><ul><li>Our research of ERP and SCM roles inside organisations, its linkage and associated benefits, and various industry-based reviews found that SCM can provide substantial benefits to the organisation in addition to its ERP system. </li></ul></ul></ul>

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