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INTRODUCTION
As a result, the packaged enterprise systems from the leading vendors now
include not only the basic ERP functionalities but also Customer Relationship
Management (CRM), Supply Chain Management (SCM), Business Intelligence
Systems (BIS) and Corporate Performance Management (CPM) functionalities.
These are now called Enterprise Systems (ES) or ERP-II systems.
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ERP is a fully integrated business management system covering logistics
(materials, production, sales and distribution, plant maintenance, quality
management, project management, production planning, etc.) accounting (finance
and controlling) and human resources, while at the same time incorporating
industry-specific solutions and the best business practices. It provides real-time,
online information for decision-making or analysis.
That is, whenever data is entered into the system, it is processed and stored
immediately. Since the transactions are simultaneous, the information or data
based on these transactions is also up to date and readily available at any given
time.
It streamlines a company’s data flow and provides the top management with
direct access to a wealth of real-time operating information and consolidated
current reports.
The software must be capable of giving functionality to one unit that would
commonly have to use multiple systems. For example, a system that was able to
combine two elements into a whole, such as a system that combined payroll with
accounting, would be an Enterprise Resource Planning System.
However, ERP can be much more complex than this. The reason why it is so
powerful is because it reduced the need to have an outside interface available for
two separate systems. In addition to this, the cost of maintenance is lower, and a
standard is created. Another powerful aspect of ERP is that the reporting
functions of the system are greatly improved.
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There are a number of organizations that could greatly benefit from using
ERP applications. Some of these organizations are supply chains, financial
companies, and human resources. The most important aspect of ERP is integration.
The information or data from various parts of an organization must be compressed
into a single entity.
The best way to accomplish this is to have the ERP connected to one
database. In most cases, a number of software modules will be used in
conjunction with this. Each module will provide various forms of data from
different departments within the organization. It is possible for an organization to
only use certain portions of an ERP unit.
They can create an interface for systems that are stand-alone. As of this
writing, it is quite rare for a company to use a total ERP system. Most of the
institutions that use ERP are very large, and they have specific needs that
standard systems cannot meet.
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ERP can be represented diagrammatically as shown below :
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HISTORY AND EVOLUTION OF ERP
In most cases, one department may not have been interested in the various
aspects of another department. While this may have seemed logical at first, it
gave rise to a number of problems. If the two departments didn’t work together
on specific issues, it could lead to complications that could disrupt the operations
of the company, thus leading to a loss in profits or the productivity of employees.
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In the 1970s, the focus shifted to MRP systems which translated the master
schedule built for the end items into time-phased net requirements for the sub-
assemblies, components and raw materials planning and procurement.
The cost involved with ERP has only allowed it to be adopted mostly by
multinational corporations. However, it is possible for medium sized business to
use it. If a company uses the services of a professional, an ERP system can be
implemented in about six months.
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There are number of similarities between ERP systems and logistics
automation and supply chain maintenance. In some cases, these elements can be
used to extend the capabilities of ERP. The process of setting up ERP is very
important. In most cases, the company will have to hire an ERP vendor.
Consultants are commonly used as well. The consultation process of ERP will
generally be comprised of three categories, and these are top level architecture,
process consulting, and technical consulting.
The systems architect is the individual who will be responsible for dealing
with the flow of data. The business consultant will analyze the existing processes
of the company, and they will compare them with ERP processes. This will modify
the ERP system in a way that makes it useful to the organization. The software will
need to be altered in a way that allows it to be useful for the company.
A number of sources have stated that the most challenging part of ERP is
customizing it to suit the needs of the organization that wishes to utilize it. Because
of these challenges, it can be quite costly. A number of ERP systems available on
the market today were not originally designed to be modified. That is why “best
practices” must be used when the system is actually implemented.
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IMPLEMENTATION OF ERP
1) Speed
2) Scope
3) Resources
4) Risk
5) Complexity
6) Benefits
1) Speed
The speed of the project in the context is how much time the company
would like to take in implementing the system. The amount of time that the
company actually takes may be dramatically different. The amount of time that the
company would like to take should be the figure used when developing a project
plan.
2) Scope
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The scope of the project includes all of the functional and technical
characteristics that the company wants to implement. A company installing a full-
fledged ERP system would have a much greater scope than a company installing a
few modules.
3) Resources
Resources are everything that is needed to support the project. This includes
people, hardware systems, software systems, technical support and consultants. All
the different resources of an implementation have one thing in common – money.
4) Risk
The risk of a project is a factor that impacts the overall success of the ERP
implementation. Success is measured by factors such as overall user acceptance,
return on investment (ROI) , time to implement, etc. High-risk situations are less
likely to possess these characteristics.
5) Complexity
Implementation
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Enterprise resource planning software systems can be quite complex.
Installing such a system almost certainly requires major changes within the
company’s work practices. A specialist will typically have to be employed in order
to soothe the transition; as such systems are not typically in house skills.
How long it takes to install such a system depends on how large the
business is, as well as the extent of the changes being made. Smaller projects can
be installed within a period of three months. In order to install a large system,
however, it could take several years. What is most important, however, is for the
company who has purchased the enterprise resource planning system to eventually
take control over it. First, they will generally have to employ a consulting company
to help them. Consulting companies generally help the company in three phases:
consulting, customization, and support.
The consulting phase takes care of the enterprise resource planning system
implementation and helps the system go live. The tailoring involve might include
product training, the creation of process triggers as well as workflow optimization,
advice on how to improve the way the system is being used in the business, the
optimization of the overall system, as well as help with writing reports or assisting
in the implementation of Business Intelligence. The consulting operation also
includes planning and testing the system. This part of the process should not be
forgotten about – it is of vital importance for the system’s future functionality.
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The process of technical consulting might include programming operations.
Most of the businesses that sell enterprise resource planning system software will
allow their software to be modified in order to suit particular business needs.
The customization process involves changing how the firm’s system works
via the writing of new user interfaces as well as application codes. Typically, these
operations are not included in the enterprise resource planning system software and
must be done by a specialist team.
Once the system has been successfully implemented, your consultant should
provide you with support in order to assist your company with any enterprise
resource planning system related problems that may occur in the future. This
ensures that the system stays running. It is advisable to create a committee to be
headed by the consultant using a participative management approach throughout
the design stage in order to provide hands on management control and minimize
additional costs for the units that are going to be affected by the new enterprise
resource planning system.
Usually, a maintenance agreement program supplies the business with all the
patches of the current version, including major and minor releases. Your staff
should be allowed to make support calls whenever necessary. The price of this type
of agreement is usually around twenty percent of the enterprise resource planning
system’s user licenses.
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ADVANTAGES OF ERP
1) Integration
2) Efficiency
3) Cost reduction
4) Less personnel
5) Accuracy
1) Integration
Integration can be the highest benefit of them all. The only real project
aim for implementing ERP is reducing data redundancy and redundant data entry.
If this is set as a goal, to automate inventory posting to G/L, then it might be a
successful project.
2) Efficiency
Generally, ERP software focuses on integration and tends to not care about
the daily needs of people. I think individual efficiency can suffer by implementing
ERP. The big question with ERP is whether the benefit of integration and
cooperation can make up for the loss in personal efficiency or not.
3) Cost reduction
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It reduces cost only if the company took accounting and reporting
seriously even before implementation and had put a lot of manual effort in it. If
they didn't care about it, if they just did some simple accounting to fill mandatory
statements and if internal reporting did not exists of has not been financially-
oriented, then no cost is reduced.
4) Less personnel
5) Accuracy
No People are accurate, not software. What ERP does is makes the lives of
inaccurate people or organization a complete hell and maybe forces them to be
accurate (which means hiring more people or distributing work better), or it falls.
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DISADVANTAGES OF ERP
1) Expensive
2) Not very flexible
1) Expensive
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Top 10 ERP Vendors
•SAP
•PeopleSoft
•Oracle
•Computer Associates
•Baan
•J. D. Edwards
•System Software
•Associates
•IBM
•JBA Holdings
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A supply chain is a system of organizations, people, technology, activities,
information and resources involved in moving a product or service from supplier to
customer. Supply chain activities transform natural resources, raw materials and
components into a finished product that is delivered to the end customer. In
sophisticated supply chain systems, used products may re-enter the supply chain at
any point where residual value is recyclable. Supply chains link value chains.
In the 1980s, the term Supply Chain Management (SCM) was developed to
express the need to integrate the key business processes, from end user through
original suppliers. Original suppliers being those that provide products, services
and information that add value for customers and other stakeholders. The basic
idea behind the SCM is that companies and corporations involve themselves in a
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supply chain by exchanging information regarding market fluctuations and
production capabilities.
There is often confusion over the terms supply chain and logistics. It is now
generally accepted that the term Logistics applies to activities within one
company/organization involving distribution of product whereas the term supply
chain also encompasses manufacturing and procurement and therefore has a much
broader focus as it involves :::::
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Supply chain management (SCM) is the management of a network of
interconnected businesses involved in the ultimate provision of product and service
packages required by end customers (Harland, 1996). Supply Chain Management
spans all movement and storage of raw materials, work-in-process inventory, and
finished goods from point of origin to point of consumption (supply chain).
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Fig. Supply Chain Management
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Definitions of SCM
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Key Components of SCM / Key Issues in SCM
We identified these twelve areas. Each area represents a supply chain issue
facing the firm.
1) Location
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1) Location
This category encompasses all issues related to the flow of goods through
the supply chain, including transportation, warehousing, and material handling.
This category includes many of the current trends in transportation management
including vehicle routing, dynamic fleet management with global positioning
systems, and merge-in-transit. Because of globalization and the spread of
outsourced logistics, this category has received much attention in recent years.
However, we will define a separate category to examine issues specifically related
to outsourcing and logistics alliances.
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4) Marketing and channel restructuring
Some firms are putting part specifications on the web so that dozens of
suppliers can bid on jobs. GE, for instance, has developed a trading process
network that allows many more suppliers to bid than was possible before. The
automotive assemblers have developed a similar capability; and independent
Internet firms, such as Digital Market, are providing services focused on certain
product categories. Other firms are moving in the opposite direction by reducing
the number of suppliers.
Determining the number of suppliers and the best way to structure supplier
relationships is becoming an important topic in supply chains. Much of the
research in this area makes use of game theory to understand supplier relationships,
contracts, and performance metrics.
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6) The information and electronic mediated environments
Thus if the French version selling well, but the German version is not,
German product can be quickly shipped to France and customized for the French
market. For these problems, we find an interface with engineering and
development, with clear implications for product cost and inventory savings.
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8) The service and after sales support
While industry practice still shows much room for improvement, several
well-known firms have shown how spare parts can be managed more effectively.
Thierry, Salomon, Van Nunen, & Van Wassenhove (1995) note that product
recovery management attempts to recover as much economic value as possible,
while reducing the total amount of waste. They also provide a framework and a set
of definitions that can help managers think about the issues in an organized way.
These authors examine the differences among various product recovery options
including repair, refurbishing, remanufacturing, cannibalization, and recycling. The
whole process of manufacturing begins, of course, with product design. Today,
firms are beginning to consider design for the environment (DFE) and design for
disassembly (DFD) in their product development processes. Unfortunately, AT&T
discovered that designing products for reuse can result in more materials and
complexity, thereby violating other environmental goals.
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10) Outsourcing and strategic alliances
It examines how all of the above categories are affected when companies
operate in multiple countries. This category goes beyond country specific issues, to
encompass issues related to cross boarder distribution and sourcing.
For example, currency exchange rates, duties & taxes, freight forwarding,
customs issues, government regulation, and country comparisons are all included.
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SUPPLY CHAIN MANAGEMENT PROBLEMS
2) Distribution Strategy:
The above activities must be well coordinated in order to achieve the lowest
total logistics cost. Trade-offs may increase the total cost if only one of the
activities is optimized. For example, full truckload (FTL) rates are more
economical on a cost per pallet basis than less than truckload (LTL) shipments. If,
however, a full truckload of a product is ordered to reduce transportation costs,
there will be an increase in inventory holding costs which may increase total
logistics costs. It is therefore imperative to take a systems approach when planning
logistical activities. This trade-offs are key to developing the most efficient and
effective Logistics and SCM strategy.
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4) Information:
5) Inventory Management:
6) Cash-Flow:
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DEVELOPMENTS IN SUPPLY CHAIN MANAGEMENT
1. Creation Era
The term supply chain management was first coined by a U.S. industry
consultant in the early 1980s. However, the concept of a supply chain in
management was of great importance long before, in the early 20th century,
especially with the creation of the assembly line. The characteristics of this era of
supply chain management include the need for large-scale changes, re-engineering,
downsizing driven by cost reduction programs, and widespread attention to the
Japanese practice of management.
2. Integration Era
This era of supply chain management studies was highlighted with the
development of Electronic Data Interchange (EDI) systems in the 1960s and
developed through the 1990s by the introduction of Enterprise Resource Planning
(ERP) systems. This era has continued to develop into the 21st century with the
expansion of internet-based collaborative systems. This era of supply chain
evolution is characterized by both increasing value-adding and cost reductions
through integration.
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3. Globalization Era
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5. Specialization Era—Phase Two: Supply Chain Management as a Service
Specialization within the supply chain began in the 1980s with the inception
of transportation brokerages, warehouse management, and non-asset-based carriers
and has matured beyond transportation and logistics into aspects of supply
planning, collaboration, execution and performance management.
At any given moment, market forces could demand changes from suppliers,
logistics providers, locations and customers, and from any number of these
specialized participants as components of supply chain networks. This variability
has significant effects on the supply chain infrastructure, from the foundation
layers of establishing and managing the electronic communication between the
trading partners to more complex requirements including the configuration of the
processes and work flows that are essential to the management of the network
itself.
Outsourced technology hosting for supply chain solutions debuted in the late
1990s and has taken root primarily in transportation and collaboration categories.
This has progressed from the Application Service Provider (ASP) model from
approximately 1998 through 2003 to the On-Demand model from approximately
2003-2006 to the Software as a Service (SaaS) model currently in focus today.
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6. Supply Chain Management 2.0 (SCM 2.0)
Building on globalization and specialization, the term SCM 2.0 has been
coined to describe both the changes within the supply chain itself as well as the
evolution of the processes, methods and tools that manage it in this new "era".
Web 2.0 is defined as a trend in the use of the World Wide Web that is meant
to increase creativity, information sharing, and collaboration among users. At its
core, the common attribute that Web 2.0 brings is to help navigate the vast amount
of information available on the Web in order to find what is being sought. It is the
notion of a usable pathway. SCM 2.0 follows this notion into supply chain
operations. It is the pathway to SCM results, a combination of the processes,
methodologies, tools and delivery options to guide companies to their results
quickly as the complexity and speed of the supply chain increase due to the effects
of global competition, rapid price fluctuations, surging oil prices, short product life
cycles, expanded specialization, near-/far- and off-shoring, and talent scarcity.
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BENEFITS OF SUPPLY CHAIN MANAGEMENT
Supply chain software can offer tremendous value to any company that
relies on the smooth planning and execution of related operations to achieve long-
term profitability and maintain a solid competitive edge. That’s why more and
more organizations are purchasing and implementing supply chain applications. In
fact, the market for supply chain and related software’s is expected to reach $7.4
billion in 2008, according to a report by ARC Advisory Group.
Supply chain softwares provide complete, 360 degree visibility across the
entire supply chain network – something that cannot be easily achieved with
disjointed manual processes.
With supply chain, users can monitor the status of all activities across all suppliers,
production plants, storage facilities, and distribution centers. This enables more
effective tracking and management of all related processes, from the ordering and
acquisition of raw materials, through manufacturing and shipping of finished goods
to customers or retail outlets. So the status of mission-critical activities can be
tracked at all times, and potential inefficiencies or problems can be identified and
corrected immediately, before they become unmanageable.
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2)Minimized Delays
Many supply chains – particularly those that haven’t been enhanced with a
supply chain application – are plagued by delays that can result in poor
relationships and lost business. Late shipments from vendors, slow downs on
production lines, and logistical errors in distribution channels are all common
issues that can negatively impact a company’s ability to satisfy customer demand
for its products.
With supply chain software, all activities can be seamlessly coordinated and
executed from start to finish, ensuring much higher levels of on-time delivery
across the board.
3)Enhanced Collaboration
Imagine having the ability to know exactly what your suppliers and
distributors are doing at all times – and vice versa.
Supply chain software’s make that possible, bridging the gap between disparate
business software’s at remote locations to dramatically improve collaboration
among supply chain partners. With supply chain software’s, all participants can
dynamically share vital information – such as demand trend reports, forecasts,
inventory levels, order statuses, and transportation plans – in real-time. This type
of instantaneous, unhindered communication and data-sharing will help keep all
key stakeholders informed, so supply chain processes can run as flawlessly as
possible.
4)Reduced Costs
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HOW HAS ERP FACILITATED SUPPLY CHAIN FUNCTIONS?
Supply chain is an important process that includes the controlling and deciding the
direction of resource movement in an organization.
It also includes all other sub process involved in coordinating them.
The concept of supply chain and its management is not a new one. It has
been in existence from yester years. However ERP has helped to reduce their
inaccuracies and increased the performance of "the chain /plan of action". It is
important to know about ERP and supply chain management.
1)Manages change
By and large the whole process of ERP is known for the umpteen numbers
of changes in all areas right from organizational structure to the rules and
regulations. In this context the headache of managing changes is an important issue
for the senior management.
Now the real difficulty lies in the hands of the organization. How do they measure
or map change? What are the ways to implement the required measures? How can
one find the rate and pace at which the organization is getting accosted to the
mammoth change namely ERP? Supply chain management is the one phrase
answer to all these three questions.
Supply chain is the tool which indicates how things go about in the
organization. This has increased the prospects of ERP supply chain software
market.
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meaning to this process by way of rendering technical expertise not only in
managing resources but also in handling crisis.
2)Identify mistakes
Errors are a part of human life. No organization however big and successful
can curb them once for all. The difference lies in identifying and rectifying them.
Organizations which don't identify them will find that they will never fulfill their
objectives even if means managing their supply chain flawlessly. The simple
reason is that their supply chain is itself not devoid of any errors and hence the
results will only be negative even because it is nothing better than rightly
managing a wrong process. There was no solution to this till erp and supply chain
management came together.
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3) Set metrics
ERP helps these organizations to deliver the necessary results. It also helps
in the functioning of the supply chain process. The supply chain process will
continue uninterrupted whether or not ERP exists in the organization. ERP helps to
increase the results, productivity and helps to ease the supply chain process.
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4 WAYS AN INTEGRATED ERP SYSTEM IMPROVES
SUPPLY CHAIN PERFORMANCE
Here are four ways an integrated ERP system can help improve supply chain
performance.
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1)Develop better customer insight and interaction
Beyond having the right data for internal operations, manufacturers must also
be able to provide customers with visibility into inventory and product availability.
In a demand-driven world, real-time intelligence—not nightly batch updates—is
required to make timely and effective decisions. This now means systems must be
open to the new ways of working—including mobile and radio frequency
identification (RFID) technologies and support for tracing and other regulatory
compliance requirements. The right ERP system can help meet your needs in all
these areas.
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3)Lean manufacturing, global sourcing, and supplier integration
Today, lean operations are driving an increase in speed and response time for
all supply chain participants. Unfortunately for most manufacturers, the new lean
business processes are not supported by their legacy systems and must be
implemented as manual processes, which can defeat the information visibility
crucial to state-of–the-art supply chains.
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Integrated ERP systems today include business analytics that enable
executives to standardize metrics across the organization and monitor production
and profitability. In fact, ERP systems can provide actionable information to
employees at all levels of the organization and make it accessible through their
familiar desktop tools, bringing speed and quality to their decision making.
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CONCLUSION
ERP and supply chain management have greatly helped the manufacturing
sector. The shortcomings of ERP in manufacturing supply chain have to be
rectified in order to make it more effective.
ERP has a major impact on Supply Chain and most of that impact is
positive. During the boom period of the late 1990s, investors seem to throw money
at ERP without much of its appropriateness. Economic realities since 2000 have
proven the need for sound analysis.
ERP is not best for everyone. There are ways to implement it and not all
organizations need what it provides. However, the market has evolved to provide
very flexible products so that the firms can choose systems appropriate to them.
The findings fo the present study is related to the role of ERP in improving
the SCM. The general conclusion can be that one should not expect too much from
ERP for Supply Chain Management in extended enterprises.
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Once ERP is installed, there exists a process-oriented enterprise transaction
backbone, which can support within single firm developments in new area
including SCM. But ERP systems have never designed just to support SCM, and
certainly not across multiple enterprises. Their architecture advantage of being
fully integrated for one firm and becomes a strategic advantage in this new
business environment. Generally, ERP software focuses on integration and tends
to not care about the daily needs of people. I think individual efficiency can suffer
by implementing ERP.
Supply chain software can offer tremendous value to any company that
relies on the smooth planning and execution of related operations to achieve long-
term profitability and maintain a solid competitive edge. That’s why more and
more organizations are purchasing and implementing supply chain applications.
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ABBREVIATIONS
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BIBLIOGRAPHY
WEBSITES
1) www.google.com
2) www.wikipedia.org
3) www.scribd.com
4) www.erpwire.com
5) www.exforsys.com
6) www.erp.com
7) www.supplychainmanagement.in
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