ERP in Supply Chain Management

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ERP in Supply Chain Management

• Henry C. Co
• Technology and Operations Management,
• California Polytechnic and State University

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What is the Supply Chain?

• Management of flow of materials, information, and
  funds across the entire supply chain.
• Products or services usually flow from supplier
  to customer. Design and demand information
  usually flow from customer to supplier.

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Features

• Includes all activities and processes to supply a
  product or service to a final customer.
• Any number of companies can be linked in the
  supply chain.
• A customer can be a supplier to another customer
  so the total chain can have a number of
  supplier-customer relationships.
• Depending on the products and markets, the
  distribution system can be direct (supplier to
  customer) or indirect (involving distributors,
  warehouses, and retailers).

Supply Chain Management Primer,
www.clarkstongroup.com
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Why Is SCM Important?

• U.S. inventory investment ? 20 - 25 of GDP
• U.S. grocery pipeline ? 75 - 100 billion
• U.S. transportation warehousing expense ? 10
  of GDP
• U.S. companies 25 of corporate budgets on SCM
• Inventory carrying, transportation, warehousing,
  order management, supply chain financing, related
  IT expenses

Benchmarking Partners, June 1999
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High Leverage

• Impact on profit
• increase sales by 12 1 savings in the supply
  chain
• Impact on sales
• trend towards competing on service surrounding
  the product (high quality, low cost assumed)
• High availability
• Delivery speed
• Order status (eg, Internet order tracking)
• Impact on stock price
• profit? assets? ? ROA??

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Increasing Challenges

• Shrinking product life-cycles
• Increasing product variety
• Food product introductions
• 1980 2,000
• 1991 18,000
• 1997 25,000

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Opportunities

• Average on-time delivery performance in the
  United States is probably in the 50 to 60 percent
  range, at a time when competition consumer
  pressure are driving requirements up to the 99
  percent range. (Conway, R.W. 1996, Linking MRP
  II and FCS, APICS The Performance Advantage,
  June, 40-44)
• Material idle 80 of factory throughput time
  (Vollmann, Berry, Whybark 1997)
• Best-in-class (e.g., Dell, Wal-Mart) SCM expense
  about 12 of corporate budget (versus overall
  average of 25) (World Research Advisory Fax
  Newsletter 1/22/99)

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Opportunities

• Improving supply chains globally judged a major
  trend by 78 of 2,500 CEOs of companies with
  revenues gt 100 million (Business Week, 12/12/98)
• Deloitte Consulting survey - SCM ranked as
  critical to very important to companys success
  by 91 of senior managers at 240 North American
  manufacturers (CIO, 7/1/99)
• Only 2 ranked their supply chain as world-class

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Enterprise Resources Planning
Record day-to-day transactions of running a
business and provide near real-time access to
information in a consistent manner throughout the
organization
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SAP Systemanalyse und Programmentwicklung

• SAP AG is the largest software company
  headquartered in the EU (Waldorf, Germany) and is
  the third largest software enterprise in the
  world in terms of revenues. The company was
  founded in 1972 as Systemanalyse und
  Programmentwicklung by five former IBM engineers.
• SAP's main product is SAP ERP. SAP R/3, SAP
  ERP's predecessor hints at its functionality the
  "R" stands for real time, and the number 3
  relates to a 3-tier architecture database,
  application server and client (SAPgui).

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Enterprise Resource Planning

• SAP's primary products focus on Enterprise
  Resource Planning (ERP), which it helped to
  pioneer.  
• ERP systems attempt to integrate several
  organizational data sources and processes into a
  unified system. The two key components of an ERP
  system are a common database and a modular
  software design. 
• The common database allows every department in a
  company to store and retrieve information in
  real-time. An ERP modular software design enables
  a variety of programs to be added to improve the
  efficiency of the business.

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• Ideally, ERP includes a single database that
  contains all data needed to support
• Manufacturing
• Supply Chain Management
• Financials
• Projects
• Human Resources
• Customer Relationship Management
• Data Warehouse

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Business Week, 3/12/97

• Sales rep from Intl Sneaker takes an order for
  1000 shoes from a Brazilian retailer.
• From her portable PC, she taps into the R/3 sales
  module back at headquarters, which checks the
  price, including any discounts the retailer is
  eligible for, and looks up the retailers credit
  history.
• Simultaneously, R/3s inventory software checks
  the stock situation notifies the sales rep that
  half the order can be filled immediately from a
  Brazilian warehouse.
• The other sneakers will delivered in 5 days
  direct from ISCs factory in Taiwan.

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• R/3s manufacturing software schedules the
  production of the sneakers at the Taiwan factory,
  meanwhile alerting ISCs warehouse manager in
  Brazil to ship the 500 purple tennis shoes to the
  retailer. An invoice gets printed upin
  Portuguese.
• Thats when R/3s HR module identifies a shortage
  of workers to handle the order alerts the
  personnel manager of the need for temporary
  workers.
• R/3s materials planning module notifies the
  purchasing manager that its time to reorder
  purple dye, rubber, and shoelaces.

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• The customer logs on to ISCs R/3 system through
  the internet sees that 250 of the 500 shoes
  coming from Taiwan have been made dyed. He
  also sees there are 500 orange tennis shoes in
  stock places a follow-up order on the net.
• Based on data from R/3s forecasting financial
  modules, the CEO sees that colored sneakers are
  not only in hot demand but are also highly
  profitable. She decides to add a line of
  fluorescent footwear.

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SAP at Cal Poly, Pomona

• SAP is the world leader in Enterprise Systems
  software. Over 85 of Fortune 1000 companies
  have implemented SAP and are using SAP to help
  run their businesses.
• In 2011, the Technology and Operations Management
  (TOM) Department at Cal Poly, Pomona became a
  member of the SAP University Alliance. As a
  member of the SAP University Alliance, TOM
  students will acquire hands-on experience in
  Enterprise Systems software using SAP.
• The SAP University Alliance provides TOM students
  a unique opportunity to enhance their
  marketability.

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• The TOM department offers 6 courses with
  significant SAP components
• EBZ 305 Enterprise Resources Planning
• EBZ 303 Customer Relationship Management
• EBZ 304 Supply Chain Management
• TOM 434 Purchasing Management
• TOM 420 Supply Chain Technologies and Operations
  Strategy
• TOM 432 Production and Distribution Management

http//cit.georgiasouthern.edu/is/sapform.html

• Upon completing any 3 of these courses, TOM
  students will receive a certificate issued by the
  SAP University Alliance. It is a certificate of
  distinction that is only held by the select few
  who complete these programs.