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Chapter 1 InformationTechnology and Supply

Chain Management

SCM 614Dr. Huei Lee

Eastern Michigan University

Copyright 2003-2007, Huei Lee

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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 tomore effectively manage supply chains

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I. What is SCM?

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Why Supply Chain

Management?Parts $5,000

Labor 4000

Overhead 2000

Management

Marketing 3000

Total Cost $14,000

1950-1980s Manufacturing

50 years ago, U.S. is the only countrythat can manufacture cars.

You buy a car from GM, all the moneywill go to the GM.

1980-2000s Supply ChainManagement

Today, foreign parts and labors aremuch cheaper than that in US.

You buy a car from GM, only a portionof money will go to the GM.

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Value Chain Analysis

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Benefits of Value Chain Analysis -

Disintermediation to the Consumer

Manufacturer

Manufacturer

Manufacturer

Distributor Retailer

Retailer

Customer

Customer

Customer

Cost/Sweate

r

$48.50

$40.34

$20.45

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Service The concept of Supply Chain

Management is also applied to Service.

Business Process Management orBusiness Process Reengineering

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Stockless Inventory Compared to Traditional andJust-in-time Supply Methods

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Business Process Reengineering From an article published in Harvard

Business Review

Radical business redesign initiatives thatattempt to achieve dramaticimprovements in business processes byquestioning the assumptions, orbusiness rules of the company.

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II. Information Systems forSCM

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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

Network Infrastructure Wide Area Network

Internet (for E-commerce: B2B, B2C)

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III. ERP

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Origins of ERP Systems ERP systems grew out of a function called materialsrequirements planning (MRP) which was used toallocate resources for a manufacturing operation

MRP systems software ultimately became verycomplex allowing for efficiencies of scale notpreviously 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

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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

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Major ERP Systems

SAP R/3

Oracle

PeopleSoft (have been merged byOracle)

Toyota uses PeopleSoft and SAP

Microsoft Dynamics (formerly MicrosoftBusiness Solutions - Great Plains)

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E-Business and ERP Systems

An e-business must keep track of and process atremendous amount of information

Businesses realized that much of the information theyneeded to run an e-business stock levels atvarious warehouses, cost of parts, projected shippingdates could already be found in their ERP systemdatabases

A major part of the online efforts of many e-businesses involved adding Web access to an existingERP system

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E-Business and ERP Systems

Many e-businesses want the samethings from their business

infrastructure Thus, rather than custom build

applications, many companies prefer

to use prepackaged ERP systemsoftware, which is often more efficientand less expensive to implement

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Cost of Implementing ERPSystems

Most businesses need extensive help fromconsultants to configure their ERP systemsoftware around their existing businesspractices, or to suggest changes in businesspractices in order to better fit the ERP systemrequirements

This process of mutual adaptation is calledsystems integration

The consultants who supervise theintegration process are often referred to as

systems integrators

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Outsourcing ERP Systems

One response to the challenge ofmanaging a complex ERP system is to

outsource it Some businesses choose to outsource

not only the installation but also the

ERP system software

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IV. Supply Chain Systems

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Supply Chain Management(SCM) Systems

A typical SCM system might address thefollowing issues:

Planning

Vendor selection

Manufacturing

Logistics Customer relationship

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With the advent of the Internet, e-businessesbegan to demand different things from their

SCM systems Most importantly, SCM systems vendors

(largely the same vendors that provide ERPsystems software) had to modify their

products to include a Web-based interface

The ultimate goal of a business ERP system iscomplete optimization of internal business

processes

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The two basic types of SCM system software are:

Supply Chain Planning software (SCP): usesmathematical models to predict inventory levelsbased on the efficient flow of resources into thesupply chain

Supply Chain Execution software (SCE): is usedto automate different steps in the supply chain such

as automatically sending purchase orders to vendorswhen inventories reach specified levels

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Major Supply Chain Planning(SCP) Players

i2 Technologies

i2s strength began with its powerful

Advanced Planning and Scheduling (APS)

Manugistics

Oracle

SAP

Advanced Planner and Optimizer (APO)

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SAP Advanced Planner andOptimizer (APO)

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Supply Network Design (SND)

The Supply Chain Cockpit (SCC)

Demand Planning (DP)

Supply Network Planning (SND)

Collaborative Planning,Forecasting, and Replenishment(CPFR)

Levels of SAP APO

SAP R/3

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Oracle Supply Chain Planning

Oracle Supply Chain Planning is part of theOracle E-Business Suite's family of Supply

Chain Management solutions It includes

Demand Planning

Collaborative Planning

Inventory Optimization

Manufacturing Scheduling, and

Global Order Promising

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Customer RelationshipManagement (CRM) Systems

Customer relationship management (CRM)systems, sometimes called e-CRM systems,

use technology to help an e-business manageits customer base

CRM allows an e-business to match customerneeds with product plans and offerings,

remind customers of service requirements,and determine what products a customer haspurchased

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V. CRM

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Salesforce.com

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Muiti-channels CRM

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Data Mining/WebMining/Business Intelligence

Data mining is the process of usingmathematical techniques to look for

hidden patterns in groups of data,thereby discovering previously unknownrelationships among the many pieces of

information stored in a databaseA data warehouse is a database that

contains huge amounts of data, such as

customer and sales data

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What does Data Mining Do?

ExploresYour Data

FindsPatterns

PerformsPredictions

Query, Reporting,Analysis

Data Mining

Why

HowWhat

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Data acquisition fromsource systems andintegration

Data transformationand synthesis

Data enrichment,with business logic,hierarchical views

Data discovery viadata mining

Data presentationand distribution

Data access forthe masses

Integrate Analyze Report

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SQL Server 2005 Algorithms

Decision Trees Clustering Time Series

SequenceClustering

Association Nave Bayes

Neural NetPlus: L inearand Logist ic Regression

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Relationship among SCM, ERP,CRM

SCM ERP CRM

Broader SCM

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V. SAP R/3

References: available on request

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PARTIAL SAP CLIENT LIST

Spacenet

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BEFORE SAP R/3

Systems didnt talk to the extent processesrequired, in spite of 20 years of IS labor

Human glue was required: to fill-in where systems dont talk

to reconcile multiple views of data to arrive at ananswer

to monitor hold-points to ensure procedures are

followed amidst the disorganization of being partpaper and part automated

to bridge systems and paper processes

Primavera

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Pump/Motor RunTime

Work OrderSystem

Catalog

Accounts Payable

Disbursements

Real Property

DOE FIMS

DOE DISCAS

Purchasing

General LedgerBench Stock

Control

Bar Coding

Fixed Assets

Inventory ControlSystem

Off-site VendorCustody

Payroll PersonnelPaper

JournalEntry

RequestPaper

Paperreceivers

PaperInvoices

Paperpartsorder

PaperPurchaseRequisition

Legacy System

Legend

Centra EDM/PDM

EngineeringChange Control

Log

PaperECP

PaperContract

MRP Models

batch file

batch filebatch file

batch file

PaperStocklevel

decision

Security

Training

Paperchecks

Artemis ProjectFund Accounting

PrimaveraSchedules

Papermilestonedefinitions

Logistics SupportAnalysis

Primav era

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Logistics Support

Analys is

Pump/Motor RunTime

Work Order

System

Catalog

Accounts Payable

DisbursementsSecurity

Real Property

DOE FIMS

DOE DISCAS

Purchasing

General Ledger

Bench StockControl

Bar Coding

Fixed Assets

Inventory Control

System

Off -site Vendor

Custody

Payroll

Personnel

Paper

Records

JournalEntry

Request

Paper

Paper

receivers

Paper

Invoices

Paper

partsorder

PaperPurchaseRequisition

Legacy Sy stem

Legend

Centra EDM/PDM

Engineering

Change Control

Log

Paper

ECP

PaperContract

MRP Models

batch file

batch filebatch file

batch file

PaperStock

leveldecision

Training

Paperchecks

Artemis Project

Fund Accounting

Primav era

Schedules

Papermilestone

defnitions

HumanGlue

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PROCESS EFFICIENCY

Realized through ability to reduce thepersonnel requirements to perform the

processTransfer into processes that were able tomeet customer requirements

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1SAP R/3

Omni-functional

Fully integrated

Process-oriented

Off-the-shelf

THE KEY ENABLER: ONE SYSTEM

SAP R/3Single Central

Database

FinancialAccounting

ControllingFixed

Assets

Mgt.

Workflow

Exec.Information& Report

Writer

MaterialsMgt.

Sales &Distribution

ProductionPlanning

QualityMgt. ProjectSystem

PlantMaintenance

Human

Resources

FICO

AM

PS

MM

PMHR

WF

PP

SD

QM

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Some SAP Products

R/3

APO

Customer Relationship Management(CRM)

Business process improvement (BPI)

Strategic Enterprise Management (SEM)

Business Warehouse (BW)

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VI. SCM/ERP for Small Businesses Microsoft Dynamics

f

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Microsoft DynamicsScreenshot

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Microsoft Dynamics

Formerly Microsoft Business Solutions GreatPlains

With Microsoft Dynamics, you can bring supply-chainfunctions online and make information available forteam collaborationwherever your employees,vendors, partners and suppliers are.

Business portal functionality lets you provide supply-chain functions, documents, and information topeople across the chain, both inside and outside ofthe organization.

And you can use the same portal technology to letyour executives review and augment performancewhen, where, and how they need to.

Wh Mi f D i i f

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Why Microsoft Dynamics is forsmall businesses?

Hardware considerations

Database requirements

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VI. Information Technologyfor for E-Business

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TOOLS FOR WEB PAGE DEVELOPMENT &SITE MAINTENANCE

Languages: HTML CGI (Common Gateway Interface) CSS (Cascading Style Sheets) Javascript Java (Java Applet) XML/XSL

Software: Front Page Microsoft Word Macromedia Flash Player

http://www.macromedia.com/software/flash/

Macromedia Dreamweaver
http://www.macromedia.com/software/flash/http://www.macromedia.com/software/flash/

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V. Hardware Considerationsfor SCM systems

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Intranet vs. Extranet

Intranet is to use Internet technologyand protocol (TCP/IP) for the internal

communications Extranet is to use Internet technology

and protocol for the internal and

suppliers communications

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Network Infrastructure: WideArea 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, usingVirtual Private Network (VPN) technology

PSDN

VPN

Gl b l C id ti i U i

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Global Considerations in UsingSCM/ERP Systems

Time differences

Language issues

Currency exchange rates

Tax

Different accounting systems

Internet and security restrictions

Culture and religion holidays

Documents

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