Chapter 1 Information Technology and Supply Chain Management

SCM 614 Dr. Huei Lee Eastern Michigan University
Copyright© 2003-2007, Huei Lee

Supply Chain Management (SCM) Systems

SCM is the process of effectively managing the components of an extended value chain--from suppliers, through manufacturing and distribution chain, and to the consumers.
SCM information systems use technology to more effectively manage supply chains

I. What is SCM?

Why Supply Chain Management?
1950-1980s Manufacturing • 50 years ago, U.S. is the only country that can manufacture cars. ● You buy a car from GM, all the money will go to the GM. 1980-2000s Supply Chain Management • Today, foreign parts and labors are much cheaper than that in US. ● You buy a car from GM, only a portion of money will go to the GM. Parts Labor Overhead Management Marketing Total Cost 3000 $14,000 $5,000 4000 2000

Value Chain Analysis

Benefits of Value Chain Analysis Disintermediation to the Consumer
Cs o t/ S e te wa r

Mn fa tu r a u c re

D trib to is u r

Rta r e ile

C s mr u to e

$8 0 4 .5

Mn fa tu r a u c re

Rta r e ile

C s mr u to e

$0 4 4 .3

Mn fa tu r a u c re

C s mr u to e

$0 5 2 .4


The concept of Supply Chain Management is also applied to Service. Business Process Management or Business Process Reengineering

Stockless Inventory Compared to Traditional and Just-in-time Supply Methods

Business Process Reengineering

From an article published in Harvard Business Review Radical business redesign initiatives that attempt to achieve dramatic improvements in business processes by questioning the assumptions, or business rules of the company.

II. Information Systems for SCM

Information Technology for Supply Chain Management

Software Systems
      

Electronic Data Interchange (EDI) Material Requirements Planning (MRP) Manufacturing Resource Planning (MRP II) Enterprise Resource Planning (ERP) Supply Chain Management Systems (SCM) Customer Relationship Management (CRM) Internet-based Software Wide Area Network Internet (for E-commerce: B2B, B2C)

Network Infrastructure
 


Enterprise Resource Planning (ERP) Systems

Enterprise resource planning (ERP) is a term used to refer to a system that links individual applications (for example, accounting and manufacturing applications) into a single application that integrates the data and business processes of the entire business.

Origins of ERP Systems

ERP systems grew out of a function called materials requirements planning (MRP) which was used to allocate resources for a manufacturing operation MRP systems software ultimately became very complex allowing for efficiencies of scale not previously possible Even more sophisticated MRP II systems began to replace MRP systems in the 1980s By the early 1990s, other enterprise activities were being incorporated into ERP systems

Origins of ERP Systems

Today, an ERP system can encompass, but is not limited to, the following functions:
 

  

Sales and order entry Raw materials, inventory, purchasing, production scheduling, and shipping Accounting Human resources Resource and production planning

Major ERP Systems
  

SAP R/3 Oracle PeopleSoft (have been merged by Oracle)

Toyota uses PeopleSoft and SAP

Microsoft Dynamics (formerly Microsoft Business Solutions - Great Plains)

E-Business and ERP Systems
 

An e-business must keep track of and process a tremendous amount of information Businesses realized that much of the information they needed to run an e-business — stock levels at various warehouses, cost of parts, projected shipping dates — could already be found in their ERP system databases A major part of the online efforts of many ebusinesses involved adding Web access to an existing ERP system

E-Business and ERP Systems

Many e-businesses want the same things from their business infrastructure Thus, rather than custom build applications, many companies prefer to use prepackaged ERP system software, which is often more efficient and less expensive to implement

Cost of Implementing ERP Systems

Most businesses need extensive help from consultants to configure their ERP system software around their existing business practices, or to suggest changes in business practices in order to better fit the ERP system requirements This process of mutual adaptation is called systems integration The consultants who supervise the integration process are often referred to as systems integrators

Outsourcing ERP Systems

One response to the challenge of managing a complex ERP system is to outsource it Some businesses choose to outsource not only the installation but also the ERP system software

IV. Supply Chain Systems

Supply Chain Management (SCM) Systems

A typical SCM system might address the following issues:
    

Planning Vendor selection Manufacturing Logistics Customer relationship

Supply Chain Management (SCM) Systems

Supply Chain Management (SCM) Systems

With the advent of the Internet, e-businesses began to demand different things from their SCM systems Most importantly, SCM systems vendors (largely the same vendors that provide ERP systems software) had to modify their products to include a Web-based interface The ultimate goal of a business ERP system is complete optimization of internal business processes

Supply Chain Management (SCM) Systems
 

The two basic types of SCM system software are: Supply Chain Planning software (SCP): uses mathematical models to predict inventory levels based on the efficient flow of resources into the supply chain Supply Chain Execution software (SCE): is used to automate different steps in the supply chain such as automatically sending purchase orders to vendors when inventories reach specified levels

Major Supply Chain Planning (SCP) Players

i2 Technologies

i2’s strength began with its powerful Advanced Planning and Scheduling (APS)

  

Manugistics Oracle SAP

Advanced Planner and Optimizer (APO)

SAP Advanced Planner and Optimizer (APO)

Levels of SAP APO

Supply Network Design (SND) The Supply Chain Cockpit (SCC) Demand Planning (DP) Supply Network Planning (SND) Collaborative Planning, Forecasting, and Replenishment (CPFR) …


Oracle Supply Chain Planning

Oracle Supply Chain Planning is part of the Oracle E-Business Suite's family of Supply Chain Management solutions It includes
    

Demand Planning Collaborative Planning Inventory Optimization Manufacturing Scheduling, and Global Order Promising

Customer Relationship Management (CRM) Systems

Customer relationship management (CRM) systems, sometimes called eCRM systems, use technology to help an e-business manage its customer base CRM allows an e-business to match customer needs with product plans and offerings, remind customers of service requirements, and determine what products a customer has purchased


Muiti-channels CRM

Data Mining/Web Mining/Business Intelligence

Data mining is the process of using mathematical techniques to look for hidden patterns in groups of data, thereby discovering previously unknown relationships among the many pieces of information stored in a database A data warehouse is a database that contains huge amounts of data, such as customer and sales data

What does Data Mining Do?

Explores Your Data

Finds Patterns

Performs Predictio ns
Data Mining Why

Query, Reporting, Analysis




 

Data acquisition from source systems and integration Data transformation and synthesis

Data enrichment, with business logic, hierarchical views Data discovery via data mining

Data presentation and distribution Data access for the masses

SQL Server 2005 Algorithms

Decision Trees


Time Series

Sequence Clustering


Naïve Bayes

Neural Net

Plus: Linear and Logistic Regression

Relationship among SCM, ERP, CRM




Broader SCM

V. SAP R/3

References: available on request



Systems didn’t talk to the extent processes required, in spite of 20 years of IS labor  Human glue was required:

to fill-in where systems don’t talk  to reconcile multiple views of data to arrive at an “answer”  to monitor “hold-points” to ensure procedures are followed amidst the disorganization of being part paper and part automated  to bridge systems and paper processes

Primavera Schedules Artemis Project Fund Accounting DOE DISCAS Fixed Assets Paper receivers Off-site Vendor Custody

Paper Purchase Paper milestone definitions

batch file

Catalog Purchasing

Inventory Control System

Bar Coding

Pump/Motor Run Time

Work Order System

General Ledger

batch file Bench Stock Control

Paper parts order

Paper Contract

Paper Stock level decision Logistics Support Analysis

Engineering Change Control Log Journal Entry Request Paper Paper Invoices Accounts Payable Real Property Payroll Personnel Paper

MRP Models


Paper ECP

Legacy System Training

batch file Disbursements Security Centra EDM/PDM Paper checks DOE FIMS

batch file

A r t e m is P r o j e c t F u n d A c c o u n tin g

P r im a v e ra S c h e d u le s


F ix e d A s s e ts

P aper re c e iv e rs

O f f - s ite V e n d o r C u s to d y

Paper P u rc h a s e Paper m il e s t o n e d e f n i t io n s
R e q u is it io n

b a t c h f ile

C a t a lo g P u r c h a s in g

In v e n to ry C o n tr o l S y s te m

B a r C o d in g

P u m p /M o to r R u n T im e

W o rk O rd e r S y s te m

G e n e ra l L e d g e r

b a tc h file B e n c h S to c k C o n tro l

P aper p a rts o rd e r

Paper C o n tra c t

P aper S to c k le v e l d e c is io n L o g is t i c s S u p p o r t A n a ly s is

E n g in e e r in g C h a n g e C o n tr o l Log J o u rn a l E n tr y R equest Paper P aper I n v o ic e s A c c o u n t s P a y a b le R e a l P ro p e rty P a y ro ll P e rs o n n e l Paper R e c o rd s

M R P M o d e ls


Paper E C P

L e g a c y S y s te m T r a in i n g

b a t c h f il e D is b u rs e m e n ts S e c u r ity C e n tr a E D M / P D M Paper checks D O E F IM S

b a tc h file

H um an G lu e

Realized through ability to reduce the personnel requirements to perform the process Transfer into processes that were able to meet customer requirements

Fixed Assets Mgt. Financial Sales & Distribution Accounting

   

Materials Mgt.


Production Planning

Quality Mgt.

SAP R/3 Single Central Database System Project
Workflow Exec. Information & Report Writer

Omni-functional Fully integrated Process-oriented Off-the-shelf


Plant Maintenance



Human Resources




Some SAP Products
     

R/3 APO Customer Relationship Management (CRM) Business process improvement (BPI) Strategic Enterprise Management (SEM) Business Warehouse (BW)

VI. SCM/ERP for Small Businesses – Microsoft Dynamics

Microsoft Dynamics Screenshot

Microsoft Dynamics
 

Formerly Microsoft Business Solutions – Great Plains With Microsoft Dynamics, you can bring supply-chain functions online and make information available for team collaboration—wherever your employees, vendors, partners and suppliers are. Business portal functionality lets you provide supplychain functions, documents, and information to people across the chain, both inside and outside of the organization. And you can use the same portal technology to let your executives review and augment performance— when, where, and how they need to.

Why Microsoft Dynamics is for small businesses?
 

Hardware considerations Database requirements

VI. Information Technology for for E-Business


     

HTML CGI (Common Gateway Interface) CSS (Cascading Style Sheets) Javascript Java (Java Applet) XML/XSL Front Page Microsoft Word Macromedia Flash Player

  

Macromedia Dreamweaver

V. Hardware Considerations for SCM systems

Intranet vs. Extranet

Intranet is to use Internet technology and protocol (TCP/IP) for the internal communications Extranet is to use Internet technology and protocol for the internal and suppliers’ communications

Network Infrastructure: Wide Area Networks (WANs)

WAN Technologies
  

Ordinary telephone line and telephone modem. Point-to-Point Leased lines (such as T1 line) Public switched data network (PSDN)

Such as ATM, Frame Relay

Send your data over the Internet securely, using Virtual Private Network (VPN) technology

Global Considerations in Using SCM/ERP Systems
      

Time differences Language issues Currency exchange rates Tax Different accounting systems Internet and security restrictions Culture and religion holidays

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