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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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hour 8 open systems

Hour 8: Open Systems

Supply Chain support

Lean Manufacturing

supply chains
Supply Chains
  • Collections of organizations working together
    • Raw materials – products – retail
    • Old manufacturing: vertical integration
    • Military logistics
    • Now appropriate for e-business
vertical integration
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
Supply Chain Advantages
  • Competitive advantage
    • Cost
      • Production efficiencies
    • Value
      • Logistic efficiencies
      • Coordinated advertising
      • Large scale service
erp motivations
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
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
System Openness
  • Supply chains require open systems
  • Original ERP assumed a small number of users accessing system
    • Seat pricing mechanism encouraged
advanced planning systems
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
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
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
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 trends akkermans et al 2003
Key TrendsAkkermans et al. (2003)
  • Further integration of suppliers & customers
  • Focus on ERP system flexibility
  • Mass customization
    • Standard interfaces across chain
erp hershey s supply chain

ERP & Hershey’s Supply Chain

Stedman [1999]

Osterland [2000]

Songini [2000]

history
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
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
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
Supply Chain & ERP
  • Can be done
  • Hershey’s was a bleeding edge pioneer
  • Hershey’s seems to have solved problems
trends in erp

Trends in ERP

Expected benefits

Conclusions

expected benefits from erp mabert et al 2000 olhager selldin 2003 1 not at all 5 to a great extent
Expected Benefits from ERPMabert et al. (2000); Olhager & Selldin (2003)1-not at all; 5-to a great extent
benefits from erp mabert 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
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
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