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Chapter 1 Information Technology and Supply Chain Management
SCM 614Dr. 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
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 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.
Benefits of Value Chain Analysis - Disintermediation to the Consumer
Manufacturer
Manufacturer
Manufacturer
Distributor Retailer
Retailer
Customer
Customer
Customer
Cost/
Sweater
$48.50
$40.34
$20.45
Service
The concept of Supply Chain Management is also applied to Service.
Business Process Management or Business Process Reengineering
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.
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)
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 e-businesses 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
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 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)
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
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 e-CRM 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
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 Explores Your DataYour Data
Finds Finds PatternsPatterns
Performs Performs PredictioPredictio
nsnsQuery, Reporting,
AnalysisData Mining
Why
HowWhat
Data acquisition from Data acquisition from source systems and source systems and integrationintegration
Data transformation Data transformation and synthesisand synthesis
Data enrichment, Data enrichment, with business logic, with business logic, hierarchical viewshierarchical views
Data discovery via Data discovery via data miningdata mining
Data presentation Data presentation and distributionand distribution
Data access for Data access for the massesthe masses
IntegrateIntegrate AnalyzeAnalyze ReportReport
SQL Server 2005 Algorithms
Decision TreesDecision Trees ClusteringClustering Time SeriesTime Series
Sequence Sequence ClusteringClustering
AssociationAssociation Naïve BayesNaïve Bayes
Neural NetNeural NetPlus: Linear and Logistic Regression
BEFORE SAP R/3
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
Pump/Motor RunTime
Work OrderSystem
Catalog
Accounts Payable
Disbursements
Real Property
DOE FIMS
DOE DISCAS
Purchasing
General Ledger
Bench StockControl
Bar Coding
Fixed Assets
Inventory ControlSystem
Off-site VendorCustody
PayrollPersonnel
Paper
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
Logistics SupportAnalysis
Pump/Motor RunTime
Work OrderSystem
Catalog
Accounts Payable
DisbursementsSecurity
Real Property
DOE FIMS
DOE DISCAS
Purchasing
General Ledger
Bench StockControl
Bar Coding
Fixed Assets
Inventory ControlSystem
Off-site VendorCustody
PayrollPersonnel
PaperRecords
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
Training
Paperchecks
Artemis ProjectFund Accounting
PrimaveraSchedules
Papermilestonedefnitions
HumanGlue
PROCESS EFFICIENCY
Realized through ability to reduce the personnel requirements to perform the process
Transfer into processes that were able to meet customer requirements
11
SAP R/3SAP R/3 Omni-functionalOmni-functional Fully integratedFully integrated Process-orientedProcess-oriented Off-the-shelfOff-the-shelf
THE KEY ENABLER: ONE SYSTEM
SAP R/3SAP R/3Single CentralSingle Central
DatabaseDatabase
FinancialFinancialAccountingAccounting
ControllingControlling
FixedFixedAssetsAssetsMgt.Mgt.
WorkflowWorkflow
Exec.Exec.InformationInformation& Report& Report
WriterWriter
MaterialsMaterialsMgt.Mgt.
Sales &Sales &DistributionDistribution
ProductionProductionPlanningPlanning
QualityQualityMgt.Mgt.
ProjectProjectSystemSystem
PlantPlantMaintenanceMaintenance
HumanHumanResourcesResources
FIFI
COCO
AMAM
PSPS
MMMM
PMPM
HRHR
WFWF
PPPP
SDSD
QMQM
Some SAP Products
R/3 APO Customer Relationship Management
(CRM) Business process improvement (BPI) Strategic Enterprise Management
(SEM) Business Warehouse (BW)
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 supply-chain 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.
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
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
PSDN
VPN