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

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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?
1950-1980s Manufacturing
Parts
$5,000
• 50 years ago, U.S. is the only country
that can manufacture cars.
Labor
4000
Overhead
2000
● 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.
Management
Marketing
3000
Total Cost
$14,000
Value Chain Analysis
Benefits of Value Chain Analysis Disintermediation to the Consumer
Cost/
Sweate
r
Manufacturer
Manufacturer
Manufacturer
Distributor
Retailer
Customer
$48.50
Retailer
Customer
$40.34
Customer
$20.45
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
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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

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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:

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Sales and order entry
Raw materials, inventory, purchasing,
production scheduling, and shipping
Accounting
Human resources
Resource and production planning
Major ERP Systems

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SAP R/3
Oracle
PeopleSoft (have been merged by
Oracle)

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Toyota uses PeopleSoft and SAP
Microsoft Dynamics (formerly Microsoft
Business Solutions - Great Plains)
E-Business and ERP Systems


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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 ebusinesses involved adding Web access to an existing
ERP system
E-Business and ERP Systems

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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

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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:
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Planning
Vendor selection
Manufacturing
Logistics
Customer relationship
Supply Chain Management
(SCM) Systems
Supply Chain Management
(SCM) Systems

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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

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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
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i2’s strength began with its powerful
Advanced Planning and Scheduling (APS)
Manugistics
Oracle
SAP
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Advanced Planner and Optimizer (APO)
SAP Advanced Planner and
Optimizer (APO)
Supply Network Design (SND)
Levels of SAP APO
The Supply Chain Cockpit (SCC)
Demand Planning (DP)
Supply Network Planning (SND)
Collaborative Planning,
Forecasting, and Replenishment
(CPFR)
…
SAP R/3
Oracle Supply Chain Planning
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Oracle Supply Chain Planning is part of the
Oracle E-Business Suite's family of Supply
Chain Management solutions
It includes
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Demand Planning
Collaborative Planning
Inventory Optimization
Manufacturing Scheduling, and
Global Order Promising
Customer Relationship
Management (CRM) Systems

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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

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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
Your Data
Finds
Patterns
Query, Reporting,
Analysis
Performs
Predictions
Data Mining
Why
What
How
Integrate

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Data acquisition from
source systems and
integration
Data transformation
and synthesis
Analyze
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Data enrichment,
with business logic,
hierarchical views
Data discovery via
data mining
Report
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Data presentation
and distribution
Data access for
the masses
SQL Server 2005 Algorithms
Decision Trees
Sequence
Clustering
Clustering
Time Series
Association
Naïve Bayes
Neural Net
Plus: Linear
and Logistic Regression
Relationship among SCM, ERP,
CRM
SCM
ERP
Broader SCM
CRM
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
Fund Accounting
DOE DISCAS
Fixed Assets
Paper
receivers
Off-site Vendor
Custody
batch file
Paper
Purchase
Requisition
Paper
milestone
definitions
Catalog
Inventory Control
System
Bar Coding
Purchasing
General Ledger
Work Order
System
Pump/Motor Run
Time
Paper
parts
order
batch file
Bench Stock
Control
Paper
Stock
level
decision
Paper
Contract
Logistics Support
Analysis
MRP Models
Engineering
Change Control
Log
Journal
Entry
Request
Paper
Paper
Invoices
Payroll
Personnel
Paper
Legend
Accounts Payable
Real Property
Paper
ECP
Legacy System
Training
batch file
batch file
Disbursements
Security
Centra EDM/PDM
Paper
checks
DOE FIMS
P rim a v e ra
S c h e d u le s
A rt e m is P ro je c t
F u n d A c c o u n tin g
D O E D IS C A S
F ix e d A s s e ts
P aper
re c e iv e rs
O f f -s ite V e n d o r
C u s to d y
b a t c h f ile
P aper
P u rc h a s e
R equisition
P aper
m ile s to n e
d e f n it io n s
C a ta lo g
I n v e n to ry C o n t ro l
S y s tem
B a r C o d in g
P u rc h a s in g
G e n e ra l L e d g e r
W o rk O rd e r
S y s tem
P um p/M otor R un
T im e
P aper
p a rts
o rd e r
b a t c h f ile
B enc h S toc k
C o n tro l
P aper
S toc k
le v e l
d e c is io n
P aper
C o n tra c t
L o g is tic s S u p p o rt
A n a ly s is
M R P M o d e ls
E n g in e e rin g
C h a n g e C o n t ro l
Log
J o u rn a l
E n t ry
R eques t
P aper
P aper
I n v o ic e s
P a y ro ll
P e rs o n n e l
P aper
R e c o rd s
Legend
A c c o u n ts P a y a b le
R e a l P ro p e rt y
P aper
EC P
Legac y S y s tem
T ra in in g
b a t c h f ile
b a t c h f ile
D is b u rs e m e n ts
S e c u rity
C e n tra E D M / P D M
P aper
c hec k s
D O E FIM S
H um an
G lu e
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
MM
PP
Financial
Sales &
Distribution Accounting
Materials
Mgt.
QM

AM

Fixed
Assets
Mgt.
SAP R/3
Single Central
Database Project
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System
Plant
Maintenance
PM
CO
Controlling
Production
Planning
Quality
Mgt.
SAP R/3
FI
Human
Resources
HR
Workflow
Exec.
Information
& Report
Writer
WF
PS
Omni-functional
Fully integrated
Process-oriented
Off-the-shelf
1
Some SAP Products
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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
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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 supplychain 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?

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Hardware considerations
Database requirements
VI. Information Technology for
for E-Business
TOOLS FOR WEB PAGE DEVELOPMENT &
SITE MAINTENANCE
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Languages:
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HTML
CGI (Common Gateway Interface)
CSS (Cascading Style Sheets)
Javascript
Java (Java Applet)
XML/XSL
Software:
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Front Page
Microsoft Word
Macromedia Flash Player
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http://www.macromedia.com/software/flash/
Macromedia Dreamweaver
V. Hardware Considerations
for SCM systems
Intranet vs. Extranet

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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)
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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
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Time differences
Language issues
Currency exchange rates
Tax
Different accounting systems
Internet and security restrictions
Culture and religion holidays
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Chapter 1 Information Technology and Supply Chain