supply chains, silos, and enterprise systems cathy dwyer fall 2012 is617 1
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Supply Chains, Silos, and Enterprise
SystemsCathy Dwyer
Fall 2012 IS617
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What Is the Supply Chain?
Also referred to as the logistics network
Suppliers, manufacturers, warehouses, distribution centers and retail outlets – “facilities”
and the
Raw materials
Work-in-process (WIP) inventory
Finished products
that flow between the facilities
Suppliers Manufacturers Warehouses &Distribution Centers
Customers
Material Costs
TransportationCosts
TransportationCosts Transportation
CostsInventory CostsManufacturing Costs
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The Supply ChainSuppliers Manufacturers Warehouses &
Distribution CentersCustomers
Material Costs
TransportationCosts
TransportationCosts
TransportationCostsInventory CostsManufacturing Costs
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The Supply Chain – Another View
Suppliers Manufacturers Warehouses &Distribution Centers
Customers
Material Costs
TransportationCosts
TransportationCosts Transportation
CostsInventory CostsManufacturing Costs
Plan Source Make Deliver Buy
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What Is Supply Chain Management (SCM)?
A set of approaches used to efficiently integrate Suppliers Manufacturers Warehouses Distribution centers
So that the product is produced and distributed In the right quantities To the right locations And at the right time
System-wide costs are minimized and
Service level requirements are satisfied
Plan Source Make Deliver Buy
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Why Is SCM Difficult?
Uncertainty is inherent to every supply chain Travel times Breakdowns of machines and vehicles Weather, natural catastrophe, war Local politics, labor conditions, border issues
The complexity of the problem to globally optimize a supply chain is significant Minimize internal costs Minimize uncertainty Deal with remaining uncertainty
Plan Source Make Deliver Buy
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The Importance of Supply Chain Management
Dealing with uncertain environments – matching supply and demand Boeing announced a $2.6 billion write-off in 1997 due
to “raw materials shortages, internal and supplier parts shortages and productivity inefficiencies”
U.S Surgical Corporation announced a $22 million loss in 1993 due to “larger than anticipated inventories on the shelves of hospitals”
IBM sold out its supply of its new Aptiva PC in 1994 costing it millions in potential revenue
Hewlett-Packard and Dell found it difficult to obtain important components for its PC’s from Taiwanese suppliers in 1999 due to a massive earthquake
U.S. firms spent $898 billion (10% of GDP) on supply-chain related activities in 1998
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The Importance of Supply Chain Management
Shorter product life cycles of high-technology products Less opportunity to accumulate historical data on
customer demand Wide choice of competing products makes it difficult to
predict demand
The growth of technologies such as the Internet enable greater collaboration between supply chain trading partners If you don’t do it, your competitor will Major buyers such as Wal-Mart demand a level of “supply
chain maturity” of its suppliers
Availability of SCM technologies on the market Firms have access to multiple products (e.g., SAP, Baan,
Oracle, JD Edwards) with which to integrate internal processes
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Today’s Marketplace Requires:
Personalized content and services for their
customers
Collaborative planning with design partners,
distributors, and suppliers
Real-time commitments for design, production,
inventory, and transportation capacity
Flexible logistics options to ensure timely
fulfillment
Order tracking & reporting across multiple
vendors and carriersShared visibility for
trading partners
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Supply Chain Management – Benefits
A 1997 PRTM Integrated Supply Chain Benchmarking Survey of 331 firms found significant benefits to integrating the supply chain
Delivery Performance 16%-28% Improvement
Inventory Reduction 25%-60% Improvement
Fulfillment Cycle Time 30%-50% Improvement
Forecast Accuracy 25%-80% Improvement
Overall Productivity 10%-16% Improvement
Lower Supply-Chain Costs 25%-50% Improvement
Fill Rates 20%-30% Improvement
Improved Capacity Realization 10%-20% Improvement
Source: Cohen & Roussel
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Business processesSequence of tasks or activities that take a set of
inputs and convert them into desired inputs
Key processesProcurementFulfillmentProduction
Figure 1: A generic process
Input Step 1 Step 2 Step 3 Output
Process Steps
Business process - example
Make skateboardsWhat are some parts of a skateboard
Buy partsWhat are some steps in the buying processWho performs these steps
Sell skateboardsWhat are some steps in the selling procesWho performs these steps
Procurement Process
Create Purchase Requisition
Create & Send Purchase Order
(PO)
ReceiveGoods
Receive InvoiceFrom Supplier
Send PaymentTo Supplier
Fulfillment Process
Receive Customer Order
PrepareShipment
SendShipment
Send InvoiceTo Customer
Receive Payment
Functional structureCommon functions
Typical tasks in functional areas
Review steps in procurementWho does what where?Characterize processes - who is responsible for the
process?
Why functional structure?
Functional organizational
Pu
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asin
g
War
eho
use
Fin
ance
& A
cco
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g
Hu
man
Res
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Op
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s
Sal
es &
Mar
keti
ng
Info
rmat
ion
Tec
hn
olo
gy
Res
earc
h &
Dev
elo
pm
ent
Functions vs. processes
The Silo effectCommunication and collaboration between
functionsWhat must be communicated?What information must be exchanged?How is this coordinated
Paper based processes
Processes supported by functional systems
Processes supported by enterprise systems
Paper-based process
Create/Update
Paperwork
Accounting
ReceivePayment
SendInvoice
Create/Update
Paperwork
Warehouse
SendShipment
PrepareShipment
Create/Update
Paperwork
Sales
Receive Customer
Order
Send Paperwork Send Paperwork
Delay! Delay! Delay! Delay! Delay!
Consequences of delaysDelays
Increased lead times Increased cycle times
Excess inventory “just in case”
Lack of visibility across the process Status: “where is my order” How is the process doing
Why accept these delays?
Delays are no longer acceptable
Why?Globalization Increased competitionPressure to do better
Reliance on technology!
Process using functional systems
Accounting
ReceivePayment
SendInvoice
Warehouse
SendShipment
PrepareShipment
Sales
Receive Customer
Order
Send Paperwork Send Paperwork
Delay! Delay!
Enter/UpdateData
Enter/UpdateData
Enter/UpdateData
Sales Information
System
Warehouse Information
System
AccountingInformation
System
Enter/UpdateData
Enter/UpdateData
Processes using Enterprise Systems
EnterpriseInformation
System
Accounting
ReceivePayment
SendInvoice
Warehouse
SendShipment
PrepareShipment
Sales
Receive Customer
Order
Enter/UpdateData
Enter/UpdateData
Enter/UpdateData
Enter/UpdateData
Enter/UpdateData
Framework: Key process flowsInformation Flow
Data & Document Flow
Physical Flow
EnterpriseInformation
System
Types of Enterprise Systems
Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 27
The ES Application SuiteEnterprise Resource Planning (ERP)Supply Chain Management (SCM)Supplier Relationship Management (SRM) Product Lifecycle Management (PLM)
Other classificationsBest of breed vs. Niche applicationsSoftware as a service (SaaS)
The application suite
Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 28
SAP ERP Solution Map
Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 29
Sh
are
d S
erv
ice D
eliv
ery
SA
P N
etW
eaver
End-User Service Delivery
Analytics Financial Analytics Operations Analytics Workforce Analytics
FinancialsFinancial Supply Chain Management
TreasuryFinancial Accounting
Management Accounting
Corporate Governance
Human Capital Management
Talent ManagementWorkforce Process Management
Workforce Deployment
Procurement and Logistics Execution
ProcurementInventory and Warehouse Management
Inbound and Outbound Logistics
Transportation Management
Product Development and Manufacturing
Production PlanningManufacturing Execution
Product DevelopmentLife-Cycle Data Management
Sales and Service Sales Order Management Aftermarket Sales and Service Professional-Service Delivery
Corporate ServicesReal Estate Management
Enterprise Asset Management
Project and Portfolio Management
Travel Management
Environment, Health, and Safety Compliance Mgmt.
Quality Management
Global Trade Services
Copyright SAP AG 2008
SAP Supply Chain Management
Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 30
SA
P N
etW
eaver
Demand & Supply Planning
Demand Planning & Forecasting
Safety Stock Planning
Supply Network Planning
Distribution Planning
Service Parts Planning
Procurement Strategic Sourcing Purchase Order Processing Invoicing
ManufacturingProduction Planning & Detailed Scheduling
Manufacturing Visibility & Execution & Collaboration
MRP based Detailed Scheduling
Warehousing
Inbound Processing & Receipt Confirmation
Outbound Processing
Cross DockingWarehousing & Storage
Physical Inventory
Order Fulfillment Sales Order Processing Billing Service Parts Order Fulfillment
TransportationFreight Management
Planning & Dispatching
Rating & Billing & Settlement
Driver & Asset Management
Network Collaboration
Real World Awareness
Supply Chain Event Management Auto ID / RFID and Sensor Integration
Supply Chain Visibility
Strategic Supply Chain Design
Supply Chain AnalyticsSupply Chain Risk Management
Sales & Operations Planning
Supply Network Collaboration
Supplier Collaboration Customer Collaboration Outsourced Manufacturing
Supply Chain Management with Duet
Demand Planning in MS Excel
Copyright SAP AG 2008
SAP Supplier Relationship Management
Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 31
SA
P N
etW
eaver
Purchasing Governance
Global Spend Analysis Category Management Compliance Management
Sourcing Central Sourcing Hub RFx / Auctioning Bid Evaluation & Awarding
Contract Management
Legal Contract Repository
Contract AuthoringContract Negotiation
Contract ExecutionContract Monitoring
Collaborative Procurement
Self-Service Procurement
Services ProcurementDirect / Plan-Driven Procurement
Catalog Content Management
Supplier Collaboration
Web-based Supplier Interaction Direct Document Exchange Supplier Network
Supply Base Management
Supplier Identification & Onboarding
Supplier Development & Performance Management
Supplier Portfolio Management
Copyright SAP AG 2008
SAP Product Lifecycle Management
Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 32
SA
P N
etW
eaver
Product Management
Product Strategy and Planning
Product Portfolio Management
Innovation Management
Requirements Management
Market Launch Management
Product Development and Collaboration
Engineering, R&D Collaboration
Supplier Collaboration
Manufacturing Collaboration
Service and Maintenance Collaboration
Product Quality Management
Product Change Management
Product Data Management
Product Master and Structure Management
Specification and Recipe Management
Service and Maintenance Structure Management
Visualization and Publications
Configuration Management
PLM FoundationProduct Compliance
Product Intelligence
Product CostingTool and Workgroup Integration
Project and Resource Management
Document Management
Copyright SAP AG 2008
SAP Customer Relationship Management
Magal and Word ! Essentials of Business Processes and Information Systems | © 2009 33
Web
Ch
an
nel
Inte
ractio
n C
en
ter
Partn
er C
han
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Man
ag
em
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t
Trad
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rom
otio
n
Man
ag
em
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Bu
sin
ess C
om
mu
nic
atio
n
Man
ag
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en
t
MarketingMarketing Resource Management
Segmentation & List Management
Campaign Management
Real-Time Offer Management
Lead Management
Sales
Sales Planning & Forecasting
Sales Performance Management
Territory Management
Accounts & Contacts
Opportunity Management
Quotation & Order Management
Pricing & Contracts
Incentive & Commission Management
Time & Travel
Service
Service Order Management
Service Contract Management
Complaints & Returns
In-House Repair
Case Management
Installed Base Management
Warranty Management
Resource Planning
Copyright SAP AG 2008
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Risk/Rewards of ESBenefits of fully integrated information
technology systems
Increases speed, quality, accuracy – others?
Risk? – dependency and changing expectations
Changes in the business environment as companies move to supply chain/value chain systems
(Changes in technology -> changes in org. Structure/social structure)
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ES RisksNY Times news? — Hack of banks in retaliation
for Muslim video (on Blackboard)
(Risk - business continuity planning)
(Security risk assessment - security audits, IT audits)
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ES Risks cont.Internet has become platform for political
protest and civil disobedience
Anonymous on Scientology – http://www.youtube.com/watch?v=JCbKv9yiLiQ
Other actions http://www.youtube.com/watch?v=HrXyLrTRXso
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Green Supply ChainUse of ES have led to expectations that
companies are responsible for who they select as suppliers
Walmart, Starbucks set environmental standards on their suppliers