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?
Parts $5,000
1950-1980s Manufacturing
• 50 years ago, U.S. is the only Labor 4000
country that can manufacture cars. Overhead 2000
● You buy a car from GM, all the
money will go to the GM. Management

1980-2000s Supply Chain Marketing 3000

Management
Total Cost $14,000
• 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.
Value Chain Analysis
 Benefits of Value Chain Analysis -
Disintermediation to the Consumer

Cost/

Sweater

Manufacturer Distributor Retailer Customer $48.50

$40.34
Manufacturer Retailer Customer

Manufacturer $20.45
Customer
Service
 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
 Network Infrastructure
 Wide Area Network
 Internet (for E-commerce: B2B, B2C)
III. ERP
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
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)
 Supply Network Design
(SND)
Levels of SAP The Supply Chain Cockpit
APO (SCC)
Demand Planning (DP)
Supply Network Planning
(SND)
Collaborative Planning,
Forecasting, and
Replenishment (CPFR)
…

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
V. CRM
Salesforce.com
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 Finds Performs

Your Data Patterns Predictio
ns
Query, Reporting, Data Mining
Analysis
Why
What How
 Integrate Analyze Report

 Data acquisition from  Data enrichment,  Data presentation

source systems and with business logic, and distribution
integration hierarchical views  Data access for
 Data transformation  Data discovery via the masses
and synthesis data mining
 SQL Server 2005 Algorithms

Decision Trees Clustering Time Series

Sequence Association Naïve Bayes

Clustering

Neural Net
Plus: Linear
and Logistic Regression
Relationship among SCM,
ERP, CRM

SCM ERP CRM

Broader SCM
V. SAP R/3

References: available on request

PARTIAL SAP CLIENT LIST

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

Paper batch file

Purchase
Requisition
Paper
milestone Catalog
Inventory Control
definitions Bar Coding
System
Purchasing

General Ledger batch file

Work Order
System
Pump/Motor Run Bench Stock
Time Paper Control
Stock
Paper level
Paper decision
parts
Contract
order Logistics Support
Analysis

MRP Models
Engineering
Change Control
Log
Journal
Entry Personnel
Payroll
Request Paper
Paper Legend
Paper
Accounts Payable
Invoices
Real Property
Paper
Legacy System
ECP
Training

batch file batch file

Disbursements
Security
Centra EDM/PDM

Paper DOE FIMS

checks
 P r im a v e ra
S c h e d u le s
A r t e m is P r o j e c t D O E D IS C A S P aper O f f - s ite V e n d o r
F ix e d A s s e ts
F u n d A c c o u n tin g re c e iv e rs C u s to d y

Paper b a t c h f ile
P u rc h a s e
R e q u is it io n
Paper
m il e s t o n e C a t a lo g
In v e n to ry C o n tr o l
d e f n i t io n s B a r C o d in g
S y s te m
P u r c h a s in g

G e n e ra l L e d g e r b a tc h file
W o rk O rd e r
S y s te m
P u m p /M o to r R u n B e n c h S to c k
T im e P aper C o n tro l
S to c k
P aper le v e l
Paper d e c is io n
p a rts
C o n tra c t
o rd e r L o g is t i c s S u p p o r t
A n a ly s is

M R P M o d e ls
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
P e rs o n n e l
E n tr y
P a y ro ll Paper
R equest
Paper
R e c o rd s Legend
P aper
A c c o u n t s P a y a b le
I n v o ic e s
R e a l P ro p e rty
Paper
L e g a c y S y s te m
E C P
T r a in i n g

b a t c h f il e b a tc h file H um an
D is b u rs e m e n ts G lu e
S e c u r ity
C e n tr a E D M / P D M

Paper D O E F IM S
checks
PROCESS EFFICIENCY

Realized through ability to reduce

the personnel requirements to
perform the process
Transfer into processes that were

able to meet customer requirements

THE KEY ENABLER: ONE
SYSTEM
SD FI
MM Sales & Financial
SAP R/3
Distribution Accounting
CO  Omni-functional
PP Materials Controlling
AM
Mgt.
Fixed
 Fully integrated
Production Assets
Planning
SAP R/3
Mgt.  Process-oriented

1
Single Central  Off-the-shelf
Quality Database System
Project
Mgt.
Plant
QM Maintenance Workflow PS
Exec.
Human
PM Information
Resources & Report WF
Writer
HR
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 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.
Why Microsoft Dynamics is
for small businesses?
 Hardware considerations
 Database requirements
VI. Information Technology
for for E-Business
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
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

PSDN
VPN
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