Learning Objectives

◼How do enterprise systems help businesses achieve operational excellence?

◼What are the challenges posed by enterprise applications and how are enterprise
applications taking advantage of new technologies?
◼How do supply chain management systems coordinate planning, production, and
logistics with suppliers?
◼How do customer relationship management systems help firms achieve customer
intimacy?
 Enterprise Systems

Enterprise systems
feature a set of integrated
software modules and a
central database that
enables data to be shared
by many different
business processes and
functional areas
throughout the
enterprise.
 Enterprise Systems
◼An enterprise system is a packaged application that supports and automates
business processes and manages business data.
◼Suite of integrated software modules and a common central database
◼Collects data from many divisions of firm for use in nearly all of firm’s internal
business activities
◼Information entered in one process is immediately available for other processes
◼Management could obtain information at any point in time about how the
business was operating.
◼The system could also generate enterprise-wide data for management analyses of
product cost and profitability.
 Characterisitcs of Enterprise Systems
◼Widespread performance, often across many physical locations
◼Scalability & Robustness
◼Critical to the mission of the enterprise
◼Have a direct, and often paradoxical, impact on a company's organization and
culture.
On the one hand, by providing universal, real-time access to operating and
financial data, the systems allow companies to streamline their management
structures, creating flatter, more flexible, and more democratic organizations.
On the other hand, they also involve the centralization of control over
information and the standardization of processes, which are qualities more
consistent with hierarchical, command-and-control organizations with uniform
cultures.
 KM and Enterprise Systems
◼Enterprise Systems for Knowledge Management
Implemented Enterprise Systems can serve as a main source for Knowledge
Management.
As Enterprise Systems support various areas of a company such as procurement,
manufacturing etc…, an analysis of the run-time data (transactions, involved
organizational units) can provide the knowledge manager cost effectively with useful
data about the current process performance.
◼Knowledge Management for Enterprise Systems.
The management and especially the implementation of an ES solution requires
a substantial amount of specific knowledge and expertise.
Thus, a separate ES-related Knowledge Management can be identified that
covers the entire management of knowledge in an ES project.
 Business Value of Enterprise Systems
◼An ES streamlines a company's data flows and provides management
with direct access to wealth of real-time operating information
◼Increase operational efficiency and provide firm-wide information to
support decision making
◼Reduce order cycle times, which in return might lead to improved
throughput, customer response times and delivery speeds
◼Include analytical tools to evaluate overall organizational performance
◼Enterprise systems foster further innovations directly based on the
benefits they provide.
 Operational Benefits of Enterprise Systems
◼Cost reduction - Labor cost reduction, Inventory cost reduction,
Administrative expenses reduction
◼Cycle time reduction in customer support activities, employee support
activities and supplier support activities
◼Productivity improvement
Production per employee, production by labour hours, production by
labour costs, increased work volume with same workforce and
reduced overtime.
◼Quality improvement - Error rate, data reliability to data accuracy.
◼Customer service improvement - Ease of data access and inquiries.
 Managerial Benefits of Enterprise Systems
◼Better resource management - better asset, inventory, production and workforce
management
◼Improved decision making and planning
Improved strategic decisions for greater market responsiveness
Improved management decisions for flexible resource management,
Improved customer decisions with flexible customer services.
◼Performance improvement in a variety of ways in all levels of the organizations
Financial performance by lines of business, by product, by customers, by
geographies or by different combinations.
Manufacturing performance
Overall operational efficiency and effectiveness management.
 Strategic Benefits of Enterprise Systems
◼Support business growth in transaction volume, processing capacity
and capability, in products or services and in new markets.
◼Support business alliance by efficiently and effectively consolidating
newly acquired companies into standard business practice and
integrating resources with acquired companies.
◼Building business innovation by enabling new market strategy,
reaching business economies of scale in operation, and building new
process chains.
◼Building cost leadership by building a lean structure with streamlined
processes and shared services
 Strategic Benefits of Enterprise Systems
◼Generating product differentiation by providing customized product or
services and lean production with make-to-order capabilities
◼Enabling worldwide expansion with centralized world operation, global
resource management and global market penetration.
◼Enabling e-commerce by attracting new customers or getting closer to
customers through the web integration capability.
Interactive customer service.
Building virtual corporations with virtual supply and demand consortia.
Providing real-time and reliable data enquiries.
◼Generating or sustaining competitiveness by maintaining competitive
efficiency and building competitive advantage with quick decision making.
 Organizational Benefits of Enterprise Systems
◼Changing work pattern with shifted focus
◼Facilitating business learning and broaden employee skills through shortened
learning time and broadened employee skills.
◼Empowerment through
Accountability, more value-added responsibility, working autonomously.
Greater employee involvement in business management.
◼Building common visions
◼Shifting work focus with focus on customer and market, business process and
overall performance.
◼Increased employee morale and satisfaction:
◼Satisfied users with better decision-making tools, increased work efficiency
 IT Infra Benefits of Enterprise Systems
◼Building business flexibility by rapid response to internal and external changes
at lower cost and providing a range of options in reacting to changing
requirements.
◼IT cost reduction in
Total cost of maintaining and integrating legacy systems
IT staff reductions and technology research and development.
◼Increase IT infrastructure capability by stable and flexible support for current
and future business changes in process and structure
Stability: Reliable platforms, Global platforms with global knowledge
pipeline, continuous improvement in process and technology.
Flexibility: Modern technology adaptability, Extendibility to external parties,
Expandability to a range of applications.
 Enterprise Systems Software
◼Software products designed to integrate computer systems that run all phases of
a businesses' operations to increase internal coordination of work and
cooperation across an enterprise.
◼Built around thousands of predefined core business processes that reflect best practices.
 Enterprise Systems Software
◼An implementation might involve a single application, or portions of a
single application, or an enterprise system could control all major business
processes in real time, via a single software architecture on a client/server
platform
◼Two major activities of Enterprise Software
The display, manipulation, and storage of large amounts of complex data.
The support and/or automation of business processes that rely on this data.
◼To implement enterprise software, companies
first select the functions of the system they wished to use
then map their business processes to the predefined business processes in
the software.
 Enterprise Systems Software
◼Enterprise software is typically hosted on servers and provides
simultaneous services to a large number of users, typically over a computer
network
◼Uses the configuration tables provided by the software manufacturer to
tailor a particular aspect of the system to the way it does business.
◼Companies can rewrite some of the software to support the way their
business processes work
But, extensive customization may degrade system performance, compromising
the information and process integration that are the main benefits of the system
◼Enterprise software can be categorized by business function. E.g.
Enterprise Resource Planning (ERP), Content Management System (CRM),
Enterprise Asset Management (EAM), Supply Chain Management (SCM)
Supply Chain Management Systems
Case : A Beauty Company
Supply Chain Management
 Supply Chain Management
◼SCM - Network of organizations and processes for procuring materials,
transforming them into products, and distributing the products
It links suppliers, manufacturing plants, distribution centers, retail outlets, and customers to
supply goods and services from source through consumption.
◼Supply chains fall victim to the problems of inefficiencies, inexcusable rigidity,
and failure to recognize the growing demands of consumers.
For a supply chain to achieve its maximum level of effectiveness and efficiency, material
flows, money flows and information flows throughout the entire chain must be managed in
an integrated and holistic manner, driven by the overall service and cost objectives
◼Ultimate goal of SCM system is to optimize Inventory
As a solution for successful SUPPLY CHAIN MANAGEMENT SYSTEM, sophisticated software
systems with Web interfaces are competing with Web-based application service providers (ASP)
who promise to provide part or all of the SCM service for companies who rent their service
 Supply Chain Management
◼Materials, information, and payments flow
through the supply chain in both directions.
Upstream supply chain - Firm’s
suppliers, suppliers’ suppliers, processes
for managing relationships with them
Downstream supply chain -
Organizations and processes responsible
for delivering products to customers
◼Companies that manufacture also manage their
own internal supply chain processes for
transforming materials, components, and
services their suppliers furnish into finished
products or intermediate products (components
or parts) for their customers and for managing
materials and inventory.
Supply Chain Flow – Toys Making
Nike’s Supply Chain
◼Major entities in Nike’s supply chain and the flow of
information upstream and downstream to coordinate the
activities involved in buying, making, and moving a product.
SCM Components
 SCM - Drivers
◼ Facilities - processes or transforms inventory into another
product, or it stores the inventory before shipping it to the next
destination
◼ Inventory - offsets discrepancies between supply and demand.
 Cycle inventory – the average amount of inventory held to
satisfy customer demands between inventory deliveries
 Safety inventory – extra inventory held in the event demand
exceeds supply

◼Transportation - moves inventories between

the different stages in the supply chain -
Global inventory management system
◼Information - an organization must decide how
and what information it wants to share with its
supply chain partners
SCM Drivers. E.g. Walmart
Functions of SCM – Strategic Level
Functions of SCM – Tactical Level
Functions of SCM – Operational Level
Decision Phases in Supply Chain Systems
Key Issues in SCM

BULL WHIP EFFECT

 Key Issues in SCM – BULL WHIP Effect
◼Information about the demand for a product gets
distorted as it passes from one entity to the next
across the supply chain.
◼A slight rise in demand for an item might cause
different members in the supply chain—
distributors, manufacturers, suppliers, secondary
suppliers (suppliers’ suppliers), and tertiary
suppliers (suppliers’ suppliers’ suppliers) to
stockpile inventory to have enough just in case.
◼These changes ripple throughout the supply
chain, magnifying what started out as a small
change from planned orders and creating excess
inventory, production, warehousing, and shipping
costs
 Minimizing BULL WHIP Effect
◼Value Chain Management - Focus on the activities an organization performs in
order to deliver valuable products to consumers.
Optimizing Inventory Levels: Sharing critical dynamic information about inventory levels etc..
with other members of the supply chain to understand customer demand and plan for sourcing
Developing a Sales Strategy: keep prices steady during unfavorable market conditions.
Creating ingenious products: Design innovative, versatile products that share common
operations, materials and components with other products
Improving customer relationship and enhancing profitability through efficient logistics and
distribution practices
◼Segment customers based on the service needs of distinct groups and adapt the supply chain to
serve these segments profitably.
Equips a company to develop a portfolio of services tailored to various segments.
The goal is to find the degree of segmentation and variation needed to maximize
profitability.
 Minimizing BULL WHIP Effect
◼Differentiate product closer to the customer and speed conversion across the supply chain.
The key to JIT product differentiation is to locate the leverage point in the manufacturing process where the
product is unalterably configured to meet a single requirement and to assess options, such a postponement,
modularized design, or modification of manufacturing processes, that can increase flexibility.
◼Customize the logistics network to the service requirements and profitability of customer
segments
◼Listen to market signals and align demand planning accordingly across the supply chain,
ensuring consistent forecasts and optimal resource allocation.
◼Manage sources of supply strategically to reduce the total cost of owning materials and
services.
◼Develop a supply chain-wide technology strategy that supports multiple levels of decision
making and gives a clear view of the flow of products, services, and information
◼Adopt channel-spanning performance measures to gauge collective success in reaching the
end-user effectively and efficiently.
Methods for Improving Forecasts
Supply Chain Systems
 Supply Chain Systems
◼Supply chain planning systems
Model existing supply chain, Enable demand planning, Optimize sourcing and
manufacturing plans
Enable to make better decisions like how much to manufacture in a specific
period of time, establishing inventory levels, determining where to store finished
goods and identifying the transportation mode to use for product delivery.
Information about changes is shared among the relevant supply chain
members so that their work can be coordinated.
◼Supply chain execution systems - Manage flow of products through distribution
centers and warehouses
Track the physical status of goods, the management of materials, warehouse
and transportation operations, and financial information involving all parties.
 Supply Chain Systems – Key focus
◼Proactive Use of Big Data - data will prove to be an important aspect of future
supply chains.
◼Inventory Optimization - Service parts supply chain will become more prevalent
than current supply chains..
◼Flexibility - Ability of the supply chain to adapt to the changes within the
market, political climates, and other events, which would otherwise affect the
supply chain.
◼Rapid Fulfillment
◼Customization - How unique supply chain processes may be implemented across
the supply chain to provide consumers with what they want
◼Sustainability
◼Maintaining compliance and visibility
Supply Chain Systems
Supply Chain Systems - DFD
Supply Chain Systems - DFD
 Global Supply Chain Issues
◼Quality levels and defects - Manufacturing processes aren't perfect, so the industry
typically accepts a certain quality level for products.
◼Time zones - Some U.S. firms experience issues when dealing with companies on the
other side of the country
◼Long-range logistics - Purchasing items at a delivered price is easy, but the shipment can be
delayed.
◼Accountability and compliance - Companies should consider social compliance every
time they look at global sourcing.
◼Language barriers - Global partners offer competitive pricing but still often conduct
day-to-day business in a different language.
◼Internet helps manage global complexities - Contract manufacturing,
Outsourcing warehouse management, transportation management and related operations to
third-party logistics providers
 DDSC – Demand-Driven Supply Chain
◼Offers real-time information on demand and inventory levels to all supply chain
participants so that they can react quickly and effectively when unexpected
changes arise.
System of coordinated technologies and processes that senses and reacts to real-time
demand signals across a network of customers, suppliers, and employees.
◼According to recent research by The Boston Consulting Group, some companies
with advanced DDSCs carry 33 percent less inventory, improve their delivery
performance by 20 percent, and reduce supply chain costs dramatically.
◼Goal of a DDSC - Tightly align and coordinate all players across the supply
chain—much like vertical integration but without the investment.
◼Four pillars of DDSC – Visibility, robust infrastructure leading to quick
adaptation, tight coordination among players and optimization of overall supply-
chain performance
 Demand-Driven Supply Chain
◼Traditional SCM systems: Push-based model (build-to-stock) - Schedules based
on best guesses of demand
◼Pull-based model (demand-driven/build-to-order) - Web-based
Customer orders trigger events in supply chain
Transactions to produce and deliver only what customers have ordered move up the supply
chain from retailers to distributors to manufacturers and eventually to suppliers.
Manufacturers use only actual order demand information to drive their
production schedules and the procurement of components or raw materials
◼Internet enables move from sequential supply chains to concurrent supply chains
Creates “digital logistics nervous systems”
Complex networks of manufacturers, logistics suppliers, outsourced manufacturers,
retailers, and distributors are able to adjust immediately to changes in schedules or orders.
Demand-Driven Supply Chain
“Make what we sell, not sell what we make.”
Demand-Driven Supply Chain
Supply Chain Integration – Traditional
Supply Chain Integration – Pull Strategies
SCM – Hybrid Strategies
Choosing Between Push-Pull Strategies
 Emerging Internet-driven SCM
Digital Logistics
Nervous System

Provides multidirectional communication among firms, networks of firms, and e-

marketplaces so that entire networks of supply chain partners can immediately
adjust inventories, orders, and capacities.
Digital Logistics Nervous System
SAP Advanced Planner and Optimizer
SAP APO
• Supply Network Design (SND)
• The Supply Chain Cockpit
(SCC)
• Demand Planning (DP)
• Supply Network Planning
(SND)
• Collaborative Planning,
Forecasting, and Replenishment
(CPFR)

SAP R/3
 Business Value of SCM Systems
◼Optimizes three key flows in the supply chain
Improved product and material flow
Seamless information flow - addresses information distortion and
miscommunication and promotes enhanced collaboration and relationship
value among supply chain stakeholders.
Enhanced financial flow – improving cash flow in the value chain
◼Match supply to demand; reduce inventory levels
◼Improve delivery service and increase business profit level
◼Reduced supply chain costs lead to increased profitability
Total supply chain costs can be 75 percent of operating budget
◼Improve inventory management - Eliminates damage resources by adjusting the
storage space efficiently of finished goods.
 Business Value of SCM Systems
◼Make your system more responsive, you can easily achieve your goals by
examining customer’s requirements.
◼Improve communication, collaboration and coordination with vendors, transportation
and shipping companies, Suppliers and raise bi-directional information flow.
◼Higher cooperation level within the organizational task. Supply chain
management software give you access to track what your supplier and
distributers are doing all the times and vise versa.
◼Lowers Time Delay in processes
◼Reduce indirect and direct labor cost
◼Increase revenue or ROI
◼Reduce warehouse and transportation cost
◼Provide security for investors