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Hour 8: Open Systems - PowerPoint PPT Presentation
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Hour 8: Open Systems. Supply Chain support Lean Manufacturing. Supply Chains. Collections of organizations working together Raw materials – products – retail Old manufacturing: vertical integration Military logistics Now appropriate for e-business. Vertical Integration.
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Presentation Transcript
Supply Chains
- Collections of organizations working together
- Raw materials – products – retail
- Old manufacturing: vertical integration
- Military logistics
- Now appropriate for e-business
Vertical Integration
- Closely coordinate supply chain internally
- Steel, petroleum
- Open form: not one owner group
- Automobiles
- Can tie computer systems together in similar manner
- ERP provides detailed data needed for close coordination
Supply Chain Advantages
- Competitive advantage
- Cost
- Production efficiencies
- Value
- Logistic efficiencies
- Coordinated advertising
- Large scale service
ERP Motivations
- Supply chain relationships provide
- Improved interactions & communications
- With suppliers & customers
- Mabert et al. [2000]:
- 20% of manufacturers surveyed had supply chain extensions to ERP
- 25% more planned to
ERP Restrictions
- Internally focused ERP can constrain supply chain coordination (Davenport [2000])
- Long-run ERP need for supply chain
- In short-run, ERP a hindrance to supply chain (Bowersox et al. [1999])
- ERP systems provide integrated information
- Unless all units use the same system, a barrier to communication
System Openness
- Supply chains require open systems
- Original ERP assumed a small number of users accessing system
- Seat pricing mechanism encouraged
Advanced Planning Systems
- Computer technology makes supply chain capable of dealing with demand uncertainty
- Forecasting
- Inventory reduction
- Optimized transportation costs
- Advanced planning systems use operational data to analyze material flows in supply chain
- Use historical demand for forecasts
- Easy to collect data
- Dynamic nature makes long-range forecasting difficult
ERP Vendor Response
- mySAP.com an open, collaborative system
- Integrates SAP & non-SAP software
- SAP APO
- supports forecasting, scheduling, other logistics activities
- PeopleSoft: Enterprise Performance Management
- JDEdwards
- products for planning & execution
- Oracle’s 11i Advanced Planning & Scheduling
Lean Manufacturing
- Toyota bundle of techniques from 1950s
- Common supply chain philosophy
- Cut waste by eliminating activities that don’t add value
- Continuous product flows without bottlenecks
- Produce to order
- (demand pull, not supply push)
- Emphasize quality
ERP & Lean Manufacturing
- Initial ERP applications did little for efficiency
- Complex bills of material
- Inefficient workflows
- Unnecessary data collection
- Efforts by ERP vendors to support lean manufacturing
- Not all manufacturers were convinced
- Lean manufacturing features
- Demand smoothing
- Kanban replenishment calculation
- Exception reporting
Key TrendsAkkermans et al. (2003)
- Further integration of suppliers & customers
- Focus on ERP system flexibility
- Mass customization
- Standard interfaces across chain
History
- 1997 Hershey’s adopted a $110 million ERP system
- SAP R/3
- Siebel CRM
- Manugistics logistics package
- To replace many legacy systems
- Original 4 year project
- Compressed to 30 months to precede Y2K
- July 1999 three months behind schedule
- Adopted big-bang approach to beat deadline
Hershey Business
- Very seasonal
- Halloween, Thanksgiving
- Sept 1997 serious order processing & shipping problems
- Shipping delays
- Sent incomplete deliveries
- Delivery time formerly 5 days, with ERP 12 days
- Sales revenue dropped 12% from prior year
- Inventory piled up at Hershey warehouses
Problem Diagnosis
- Attempted ERP implementation in supply chain environment
- That can be done
- Confounding factors
- During peak season
- Tried to do too much as once
- Complexity from CRM & Logistics Planning add-ons
- Time pressure
Supply Chain & ERP
- Can be done
- Hershey’s was a bleeding edge pioneer
- Hershey’s seems to have solved problems
Expected Benefits from ERPMabert et al. (2000); Olhager & Selldin (2003)1-not at all; 5-to a great extent
Benefits from ERPMabert et al. (2000); Olhager & Selldin (2003)1-not at all; 5-to a great extent
Lessons Learned
- ERP implementation projects problematic
- Variety of ways to implement
- Benefit assessment problematic
- Different ways to design ERP
- Customization of vendors popular
- Many enhancements available
- Supply chain opportunities
- Requires open systems
Summary
- Vertical integration historically used to make supply chains efficient
- Today supply chain efficiency gained by linking specialists across organizations
- ERP initially focused on integrating internal operations
- High investment, rigid procedures barriers to supply chains
- Trends more supportive
- Advanced Planning Systems
- Vendor software
- Lean manufacturing support
