FINAL
Project
MIS
Supply
chain management role in enterprise planning
Submission Date:
10th
of August 2012
TABLE OF
CONTENTS
1. Table of Contents ………………………………………………...2
2. Introduction..………………………………………………………3
3.
Review …………………………………………………………….4
4. Supply chain management role in enterprise planning .….…..……8
5. Conclusion ……...….…………………………………….………15
6. References….……………….……………………………………17
2. INTRODUCTION:
Supply chain management (SCM) is the management of a network of
interconnected businesses involved in the provision of product and service
packages required by the end customers in a supply chain.
Also, is the combination of art and science that goes into improving the
way your company finds the raw components it needs to make a product or service
and deliver it to customers.
In the past few years, companies have integrated strategic applications
at an unprecedented rate. New initiatives in resources planning, electronic
commerce and extended supply chain push the trend among corporations towards
integrating strategic business applications. EP and SCM have been growing in
popularity across various segments of the electronic industry, particularly the
manufacturing and distribution sectors. This research examines these two
important concepts in business applications in terms of their evolution,
function and current development.
Enterprise planning (EP) systems assist enterprises in automating and
integrating corporate cross-functions such as inventory control, procurement,
distribution, finance, and project management. In recent years as many
companies began to search for ways to replace their existing applications
running on mainframes that no longer meet the growing corporate needs, EP systems
have become fixtures to provide a basis for business process management
integration across business functions.
Supply-chain management (SCM) enables supply-chain partners to work in
close coordination through information sharing to facilitate supplier-customer
interactions and minimize transaction cost. This is how demand for improved
supply-chain efficiencies will increase as business enterprises adopt SCM applications.
As the global commercial market involves greater complexity into the
management of both internal and external corporate supply chains, the market
competition and the benefits from the advance in technology will increasingly
encourage the use of SCM system applications.
3. REVIEW:
What is Supply Chain Management?
Since the term “supply chain” contains the word “supply”, many
people naturally assume that supply chain must have something to do with
suppliers (i.e. purchasing or procurement). While it is true that supply chain
management does encompass the purchasing and procurement functions, supply
chain management actually extends well beyond those areas. Supply chain
management is the practice of manufacturing and distributing physical goods as
efficiently as possible.
Supply chain management encompasses the
entire process of manufacturing and distributing physical goods, from
supplier’s supplier to customer’s customer. Business functions that are within
the realm of supply chain management include: forecasting and planning,
procurement and purchasing, manufacturing and assembly, warehousing and
distribution, shipping and transportation, returns and refurbishment, inventory
management and order management. Or, stated more simply, supply chain
management includes the functions: plan, buy, make, store, move, sell and
return.
Another definition is provided by the APICS Dictionary when it
defines SCM as the "design, planning, execution, control, and monitoring
of supply chain activities with the objective of creating net value, building a
competitive infrastructure, leveraging worldwide logistics, synchronizing
supply with demand and measuring performance globally."
Also, Supply chain
management is a complex field encompassing every process involved in
manufacturing a product. Supply chain management software assists enterprises
in controlling streamlining the process through several logistical areas.
What
is the Supply Chain Management Profession?
How should we define the ideal supply chain management
professional? What is the role of this professional? What responsibilities
should he or she have? How might supply chain professionals be utilized within
a corporation’s supply chain, and what skills and experiences should they have
at their disposal?
First and foremost, a SCM professional should have experience in
multiple supply chain functions and must be able to lead the design,
implementation, and management of cross-functional supply chain solutions.
While these solutions could be completely internal, they generally extend
outside of the enterprise and involve multiple tiers of suppliers and
customers. These solutions require the integration and coordination of
multiple processes including:
▪
Product/service development launch.
▪
Supplier relationship collaboration.
▪
Manufacturing customization.
▪
Demand planning responsiveness.
▪
Order fulfillment/service delivery.
▪
Customer relationship collaboration.
▪
Life cycle support.
▪
Reverse logistics.
At a senior level, a SCM professional evaluates the trade-offs
between supply chain functions and organizations. To effectively identify and
evaluate these trade-offs, he or she must blend sufficient depth of functional
knowledge with the understanding of cross-functional and cross-organizational
collaboration. For example, a SCM professional must be able to balance customer
service and quality with total supply chain costs. To perform this balancing
act successfully, the professional must consider all of the supply chain
planning, management, and measurement activities involved in purchasing,
manufacturing, and logistics management. Importantly, this assessment includes
products, services and solutions, and related information.
What is Supply Chain Management Software?
The
deciding factor in the success or failure of any given product is in the
efficiency with which it can be brought to the market place. If the revenue
derived from the sale of a product does not create a required profit margin
over the cost of its production then that product is doomed to failure, and the
health of the enterprise that manufactures the product will suffer. With that
in mind it is clear that the most important factor in the life cycle of a
product is the budget and time frame within which it is manufactured. The
discipline of supply chain management and the ranges of software used to
control it have been developed in order to make this cycle more efficient and
cost effective. The Council of Supply Chain Management Professionals (CSCMP)
leads the field.
What is Enterprise
planning?
Enterprise planning is a methodology (backed up by
a system) that assists an organization with creating an overall strategic plan.
This system assists the organization in breaking down activities into
initiatives that create a road map to assist in planning, monitoring and
achieving your annual plan. Before we describe what enterprise planning can do
for your organization, let’s talk about what planning is. The definition of
planning is; the act of formulating a program for a definite course of action.
A planning system is an integrated application that enables companies to
effectively implement their strategic and tactical plans. In addition, it helps
groups of people agree and align on a set of strategies and objectives.
Planning provides a basic process and allows any group working together to
easily track their collective efforts to implement their plans.
What is Enterprise Planning
Software?
An
integrated suite of software applications typically handling the manufacturing,
logistics, distribution, inventory, shipping, and invoicing in larger
businesses. EP is "back office" software, which focuses on the key
business functions of manufacturing, supply chain management, CRM, financial
management and Project Management. A well-implemented EP solution will improve
the efficiency of the enterprise, reduce money tied up in stock/work in
progress, and run a Just in Time inventory system.
Supply chain management is a complex field
encompassing every process involved in manufacturing a product. Supply chain
management software assists enterprises in controlling streamlining the process
through several logistical areas.
4.
SUPPLY CHAIN MANAGEMENT ROLE IN
ENTERPRISE PLANNING
This study is concluded with the imminent development of SCM and EP
systems and the industrial trend toward their integration.
In a global business perspective, companies are actively expanding
outside of their original area to seek new opportunities over the world. While
the dynamic and fast changing external environment has put great pressures on
companies’ operations and decisions, how to react quickly to external changes
and how to compete effectively in the global environment become a crucial
issue.
Customer Service Management: Customer relations provide
information to the manufacturer on the level of demand for the product, and
also provide feedback to the customer on promised delivery schedules.
Supply chain management software provides
reporting modules to track both current demand and answer a range of ‘what if’
questions to assist in the prediction of future demand depending on changes in
strategy.
Procurement
Process: Strategies are
developed with suppliers to ensure that materials can be provided on time to
meet both current demand and predicted demand for the future, avoiding the
bottlenecking of resources that comes with inadequate procurement planning.
Supply chain management software can assist in resource planning for the
manufacture of products, recommending order schedules to reduce manufacturing
cycle times.
Product
Development and Commercialization: Product
development managers must work to identify customer needs and preferences in
developing new products, and then work closely with suppliers and the
manufacturers to reduce cycle times and ensure that customer needs are met.
While supply chain management software cannot advise on the development of new
products it can be used to ensure best practices for their manufacture and
distribution.
Manufacturing
Flow Management: The primary aim of
manufacturing flow management is ensure that the manufacture of goods is optimized
to operate on a just-in-time (JIT) basis, manufacturing orders to precisely
meet customer demand so as to maximize efficiency and reduce excess stock.
Supply chain management software can assist in this process by analyzing past
performance and future predictions to suggest the optimal manufacturing
schedule, while ensuring that materials to meet that schedule are procured and
available in time to synchronize with the manufacturing schedule.
Distribution:
Once the product has been manufactured it is vital that there be an adequate
structure in place to distribute it to the customer. Supply chain management
software should assist in the process of planning and implementing an efficient
distribution schedule by optimizing manufacturing schedules to allow for the
best possible distribution of the product.
Outsourcing
& Partnerships: It is a fact that it is often more cost
effective in the development, manufacturing and distribution of a product to
form partnerships with other enterprises. Especially in the case of overseas
outsourcing, it is often the case that another enterprise can perform a
function or process at a lower cost or a higher level of efficiency than the
enterprise manufacturing the product.
In these cases it would be wise from a
business standpoint to form a partnership rather than perform the process
in-house, enabling the enterprise to focus its attention and resources on those
activities in which it has an advantage.
One of the most common usages of
partnerships is in the provision of transport and distribution services. Rather
than devote effort and resources to building an in-house supply chain it can
often be much more cost-effective to form a partnership with a shipping
company, and allow them to perform the job of distribution at a lower cost than
the enterprise could manage itself.
Supply chain management software can offer
financial reporting functions, allowing project managers to analyze areas of
the supply chain in which the enterprise could gain be outsourcing to an outside
firm.
Performance Measurement: Performance measurement performs a vital function in
any supply chain. By continuously analyzing the performance of the enterprise
over a range of functions it enables managers to identify areas of weakness and
opportunities for improvement. Through customer perception measurement and best
practice benchmarking it is possible to create a positive feedback loop,
continually improving supply chain processes to deliver improved services and
increased profits.
Inside a dispersed company, it requires building integrated information
systems, which allow data transmission across the border of a geographic area
to another. Furthermore, the enterprise demands more effective communication
between head office and local units. Even within an area, companies want to
build corporate applications through which different departments can cooperate
more efficiently with each other. In one word, they need to establish a
streamline business process, which can significantly enhance the communication
and cooperation among functional departments.
To achieve this goal, functional integration is required, which is the
process of integrating all business functions to work together, e.g. a firm’s
logistics or distribution functions must integrate with supply-management,
manufacturing, and information technology before the functional integration can
be extended to other companies in the supply chain.
From the standpoint of technology, information system architecture has
been moving from a two-tier to a three-tier client server. Old legacy systems
need to be converted to new, more powerful and flexible systems, and old data
need to be migrated into new forms. Faced with all these needs, companies are
seeking integrated business and technology solutions. The settlement would fall
into EP and SCM, which in essence combines business processes with
state-of-the-art technology to provide solutions for the whole enterprise.
EP aims to improve internal efficiency by integrating different parts in
the organization, while SCM focuses on external relationships with trading
partners in the supply chain. Indeed, the proliferation of EP systems forces
companies to provide communication and information flow between supply-chain
agents, overcoming natural boundaries. Therefore, integration of EP and SCM is
a natural and necessary process in strategic and managerial consideration.
Technologically, EP is said to be the backbone of SCM. Because they both rely
on very similar framework, such as intranet, extranet and electronic data
interchange; it is very possible and feasible for their integration. Most EP system
providers have been enhancing their products to include sales-force automation,
data warehousing, document management, and after-sales service and support. And
the most important trend today is the integration with SCM.
The future of EP is to improve the supply chain and foster greater
collaborating across multiple enterprises. The core of ERP, an integrated set
of applications that link together such back-office operations as
manufacturing, financials and distribution, will become a subclass of a much
bigger and broader enterprise business system. EP will extend into
transportation, warehousing, sales-force automation, and even beyond that into
engineering with computer-aided design and product data management systems
(McGee, 1998). Consequently, it is feasible and possible for the integration of
these two technologies.
In this sense, EP system applications originally linking back-office
applications into a single system would extend beyond their core functionality
to include, not only sales-force automation, but data warehousing, document
management, and after-sales service but also SCM to increase efficiency and productivity
for the key customers.
Major problems associated with EP solutions:
· Problems with implementation
The time and cost associated with EP implementations can be enormous, EP
implementation is more complex due to cross- module integration, data
standardization, adoption of the underlying business model, compressed
implementation schedule, and the involvement of a large number of stakeholders.
The EP industry as discussed earlier has not been performing as originally
expected. The average EP implementation takes 23 months (Wheatley, 2000). For
example, the implementation of the R/3 system on average takes about one year
to one and a half years. Some have even exceeded three years. During this long
implementation period, software and user specification change and the
technicians who are implementing the package must constantly adapt and make
adjustments in order to accommodate these changes.
Another problem associated with implementation is the speed the systems
themselves operate at. EP systems run on cycle updates, rather than on real
time processing. Accurate analysis necessary for quick decision-making is lost
in these cyclical updates. Therefore, the system may become reactive instead of
proactive. To be successful enterprises require being proactive and responding
to change quickly and effectively with the right information to guide them. A
reactive system is more likely to pose a serious threat to a major corporation
· Problems with hidden cost
Cost is a critical part of an EP implementation for both large and small
businesses alike. While the range of EP implementation becomes broader with the
introduction of fast upgrading software applications, enterprises adopting EP systems
are more costly than before. Companies that install EP systems may
underestimate cost that is hidden. In addition to a long implementation time as
pointed out previously, an EPR system has an average total cost of ownership of
$15 million but rewards the business with an average negative net present value
of $1.5 million.
· Problems with process automation and system complexity
An imperative hidden cost often incurred by businesses implementing EP is
the loss of efficient process due to an inability to automate their business
processes. Frequently, EP venders offer their system packages as a solution to
making the company more efficient without first looking at the corporate
business processes per se. Automating an inefficient process would only
generate more problems and unnecessary spending. Moreover, removing efficient
processes rather than integrating them highlights the problem of inflexibility
that can arise with an EP implementation (Mendel, 1999).
As for the complexity of system process, it does not just involve
purchasing a software package but rather an extensive and complex business
process. In some cases, organizations must change how they do business in order
to benefit from a migration to enterprise solutions. Because the systems are
complex, organizations typically do not have the required expertise in-house to
implement the systems and implementation can take a long time to complete (c.f.
Davenport, 1998a; Mendel, 1999). As discussed earlier, they instead must rely
on consultants or employees of the software vendor, and such experts’ help
would be very expensive.
Methods of integration
between SCM and EP:
Many EP providers have quickly recognized the integration of EP and SCM
system applications as a necessity to remain competitive and maintain sales.
The SCM system applications soon were added to existing EP solutions to act as
modular enhancements. Three methods of integrating SCM software with EP packages
have been recognized. First is the notion of conformity. It requires all of the
members of the supply chain to embrace the same system.
In a large supply chain this form of integration should be viewed as
impractical. Issues of trust and security further complicate any chance of
success with this method. The second integration method is middleware.
This method, though very practical, is very expensive. Programmers are
required to establish links between various systems. The benefits are strong,
but the cost must be weighed. The third method, and the latest, is to use
specialized integration technologies or software (SIS) to extend EP functionality.
The mapping of different packages is already done in these technologies. The
software is preprogrammed to integrate SCM software with EP system packages. By
doing this, the EP system will become a business-services framework, a central
information repository, and a data-distribution facility.
In other words, this integration solution depends upon how data are kept
consistent between EP and SCM systems. I2 uses SAP’s application link enabler
to exchange data between R/3 and Rhythm (I2’s SCM product suite). Oracle and
the other EP vendors also have APIs with which I2 and other vendors can use
common denominator middleware to interface.
However, this means that system providers have to change their
middleware interface software quite often, which is often a trial and error
process and does not usually perform well (Allen, 1998). SIS is designed
specifically to allow EP and other systems to share processes and data. It
removes the chore of developing an interface to every other vendor’s software.
For example, a major company in this area is CrossWorlds Software. This
software, which runs on Windows NT, claims to work by simply pointing and
clicking on a sending application (such as SAP) and a receiving application
(such as Manugistics) and then selecting the processes to link together. Table
II summaries the integration methods.
Supply Chain Management solutions:
·
Providing proactive
solutions:
Perhaps
the principal problem EP system solutions face is their inability to process
data real time.
The
packages are often overburdened with information and are forced to process
information in cycles, rather than in real time. This forces ERP systems to be
reactive instead of proactive.
·
Extending B2B relationship:
Today’s
business environment is changing rapidly in terms of business relationships
that are forming. Companies must have the ability to establish strong
partnerships and clear communication to form an effective supply chain.
·
Reviving EP market:
EP market
growth has been reduced considerably, with analysts estimating annual rates of
15 per cent to 17 per cent.
Initially
the drop was attributed to the Y2K issue, but by now the venders has recognized
that the drop may be related to lack of confidence in the systems. Although EP packages
strive to integrate all the major processes of a firm, customers have discovered
the lack of some essential functionality in EP.
By
examining the problem from two perspectives, the product development and
marketing challenge for the vendor and the implementation and integration problem
for the consumer.
By
integrating SCM modules into existing EP systems, a new market is emergent. The
benefits of SCM software systems would be added to the value of the existing
packages and could help boost many EP venders’ sales. With new business
practices such as JIT and SCM taking shape, it becomes even easier for venders
to show customers potential uses of the new packaged systems.
The
major EPR providers such as SAP and PeopleSoft have put their large stakes in
the SCM software industry. SAP as an example has the unique philosophy of allowing
its customers to have considerable control over what functions their EP systems
perform. The SCM system solutions at SAP are no different. Initially, SAP
attempted to partner with I2 on designing and integrating a software package
into existing SAP systems.
A
benefit is that by linking supply-chain applications with other business
systems, users can trim down cycle times, reduce inventory, and better connect
with suppliers, distributors, and end customers.
As
for cross-enterprise application integration, companies are able to link their EP
systems directly to the disparate applications of their suppliers and
customers.
5. CONCLUSION:
Current
economic recession had impact on almost everything and innovation is supply
chain was not something that was insulated from this. Innovation in Supply
chain also has been impacted by this recession and it did in 2 ways in my view,
I would say - one is negative that due to the cost reduction measures, the
Supply Chain Strategies that needed sizeable investments in both technology or
otherwise, were put on hold and we know that these strategies are normally the
breeding grounds of innovation in the organizations; and the other factor that
in-fact is a positive one in terms of its impact especially on innovation in
supply chain management – this is the continued outsourcing push from
organizations due to recessionary cost reduction pressures.
I
largely think that supply chain innovation will bounce back strongly and that
time is not too far. The positive difference we will see this time is that we
will see focus on improving microelements of supply chain rather than looking
to solve the larger pieces. As we see lot of times, executives complaining that
inventory turns per annum are far from the target or their service levels are
not improving even after increasing the inventory - these statements will now
improve to granular statements wherein the measurement will not be done for
inventory turns or service levels alone but for the root causes like stock
outs, inventory obsolescence, perfect order shipments or on time delivery. This
will in turn improve demand for supply chain visibility improvement systems
that will evolve further due to this intelligence change.
The movement towards B2B e-commerce and SCM has ultimately forced EP system
providers to reevaluate their models. EP venders would have to shift toward
more flexible systems to compensate for the need to adapt to changing business
cultures. The notion of ``plug and play’’ modules to perform specialized tasks is
a very realistic alternative in the near future, as customers increasingly
demand more specialized tasks from EP venders. Point and click systems are also
a near-term direction to support more user-friendly operation and thus reduce
training cost. Perhaps EP venders’ strongest assets are the large customer
bases they possess. In the 1980s TQM was the business fad, then came business
process reengineering in 1990s, now companies are looking at ER and SCM as the
solution.
The trend indicates that EP will adapt through the incorporation of
modular upgrades to current systems and the exploitation of the small- to
medium-sized markets.
Accordingly, the industrial trend between EP and SCM is that the
integration of supply-chain capabilities with EP systems will continue to be
enhanced in the near future. One of the main reasons is that cross- enterprise
integration will continue to be one of the major organizational goals,
especially for those whose business success is directly dependent upon the
success of their supply chain. Driven by the market forces such as shifting
channel power and demand for fast cycle-time-to-market, SCM has created a
critical and influential business success. Consequently, organizations begin to
rely on SCM systems as a new source of competitive advantage.
In conclusion, the core of EP, an integrated set of applications that
link together back-office operations, will become a subclass of a much larger
and broader enterprise business system. The integration of EP and SCM will
create a new spectrum in the information industry, i.e. the integration of all
core business processes through one comprehensive information system and the
cooperation among multiple parties and trading partners in the value chain to
create a collaborative business and operational environment.
7.
REFERENCES:
Further information
regarding supply chain management can be found at CIO’s supply chain management
research centre, NIST and the National Science Foundation.
CIO Magazine: Supply Chain
Management Definition and Solutions
E-Book:
Purchasing and Supply Chain Management: Analyses, Strategy, Planning and
Practice. – On the following link : ARJAN VAN WEELE.
Bingi,
P., Sharma, M. and Godla, J. (1999), ``Critical issues affecting an EP implementation’’,
Information Systems Management, Vol. 16 No. 3, Summer, pp. 7-14.
Davenport,
T. (1998a), ``Serving up EP value’’, CIO, Vol. 11 No. 8, February, pp.
26-9.
Davenport,
T. (1998b), ``Putting the enterprise into the enterprise system’’, Harvard Business Review, Vol. 76 No. 4, July-August, pp. 121-31.
Ferguson,
B. (2000), ``Implementing supply chain management’, Production and Inventory
Management Journal, Vol. 41
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