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ERP Systems & Supply Chain

ERP Systems & Supply Chain. Capital Cost. Value Contribution. Operational Targets of SCM. R&D . Cost reduction Manufacturing Material Transportation Processes. Selling, gen.& adm. Cost. COGS. Profit. Profit [%]. Sales. Sales improvement New service offerings

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ERP Systems & Supply Chain

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  1. ERP Systems & Supply Chain

  2. Capital Cost Value Contribution Operational Targets of SCM R&D • Cost reduction • Manufacturing • Material • Transportation • Processes Selling, gen.& adm. Cost COGS Profit Profit [%] Sales • Sales improvement • New service offerings • Avoid stock out losses • Improve service level • New sales channels Sales Return on capital empl.[%] Sales Capitalturnover Acc. payab. • Capital employed reduction • Inventories • Accounts receivable • Fixed assets • Working capital Fixed assets Capital empl. Acc. receiv. Inventories Cash Operational Financial Targets

  3. Targets are Influenced by Different SCM Levels Targets Typical levers • Improve manufacturing stability • Supplier partnership, price reduction • Improve manufacturing yield, cut waste • Partnering with logistic service provider • Redesign business processes Cost reduction Sales improvement • Improve planning process to avoid stockouts • Cut delivery times • Offer attractive service packages • Support new sales channels (e-Commerce) • Achieve “preferred supplier“ status Capital employed reduction • Consolidate manufacturing network • Outsource non core activities • Reduce time to cash through better logistics performance • Reduce working capital by cutting leadtimes

  4. Core Processes for SCM PLANNING PROCESS ORDER PROCESS CONTROLLING AND MONITORING PROCESS

  5. Detailed Core Processes Demand planning For products and parts business Distribution planning Supply planning Scheduling Distri-bution Sourcing -make -buy Order intake Order monitoring and controlling Cost monitoring and controlling Performance monitoring and controlling

  6. Planning Process Target and Activities • Target: • Provide reliable data for order unspecific production or purchasing from suppliers • Activities: • Based on market information and statistical evaluations the expected demand is planned (Demand Planning) • To satisfy the demand a concrete plan is set up to define the supply through purchasing, production and distributing (Supply Planning) • The Supply plan is the basis for schedules of how to use the resources for forecast driven and order specific production and transportation (Scheduling) • Target: • Fulfil concrete customer orders efficiently, quick and reliable Order Process • Activities: • Translate the customer’s wish into a clearly specified order (Order Intake) • Provide the goods specified in the order from down production ex stock or external suppliers (Sourcing) • Target: • Have actual comprehensive and up to date information on the supply performance and the order processing status • Activities: • Monitor compare the order process versus defined milestones, metrics and procedures to ensure on time competition and accurate (Monitoring) • Control cost and performance in the supply chain against defined targets and ensure target achievement if necessary by practicallytriggering supportive actions (Controlling) Monitoring/Controlling

  7. ERP Systems do not Support SCM Effectively Weaknesses ERP Strengths ERP • Automate/support administrative processes-Finance & Accounting-Purchasing-Human Resources-Production-Controlling-... • Create commoncustomer/product-database • Manage inventory • Transacation oriented “Enterprise Back-Bone” • No holistic planning and optimization over supply network • No support for supp-lier/customer integration (single plant focused) • Slow and sequential planning, no simulation and optimization, no Available-to-Promise • Infinite material and capacity assumptions • Limited transportation planning • Priorities in scheduling poorly supported Finance & Accounting HumanResources Purchasing Production Controlling Data-bases ERP-System(Packaged or Legacy* Systems) *Packaged Systems: Commercially available programs *Legacy Systems: Custom build systems

  8. SCM Tools are an Add-on to ERP Systems Strategic Supply Chain Planning Operational Supply Chain Planning Demand Planning Supply Planning Scheduling Weaknesses ERP Strengths ERP Supply Chain Execution • Automate/support administrative processes-Finance & Accounting-Purchasing-Human Resources-Production-Controlling-... • Create commoncustomer/product-database • Manage inventory • Transaction oriented “Enterprise Back-Bone” • No holistic planning and optimisation over supply network • No support for supp-lier/customer integration (single plant focused) • Slow and sequential planning, no simulation and optimisation, no Available-to-Promise • Infinite material and capacity assumptions • Limited transportation planning • Priorities in scheduling poorly supported Finance & Accounting HumanResources Purchasing Production Controlling Data-bases ERP-System(Packaged or Legacy* Systems) *Packaged Systems: Commercially available programs *Legacy Systems: Custom build systems

  9. SCE Planning and Execution Tools Strategic Supply Chain Planning Operational Supply Chain Planning Demand Planning Supply Planning Scheduling Supply Chain Execution Strategic SCP Supports design of Supply Chain according to company´s business targets. Gives basis for decisions about Make or Buy, Manufacturing-, Supplier- and Distribution Network and Product Structure. SSCP Operational SCP • Plans Demand for company´s products (Demand Planning) • Generates Plans how resources should be used to satisfy demand (Supply Planning) • Based on plans and actual orders production schedules are generated (Scheduling) OSCP SC Execution Support decisions in actual business processes and help to steer or automate them. Similar functionality as ERP but on inter-company level.

  10. The players SCM Software Market Leading best-of-breed SCM-Tools vendors Supply Chain Management Vendors i2 • Clear market leader • The “Rhythm”-suite is focused on high-tech, semiconductors, automotive, consumer goods and industrial products As of 4/99 Challengers Leaders Manugistics • Former market leader • Experienced difficult sales situation in 1998 • Focus on consumer goods, chemistry, pharma, high-tech, auto., ind.-products Ability toExecute i2 Manugistics Baan Paragon SAP PeopleSoft Leading ERP-Vendors SAP • Develops his own SCM-suite (a bit late) • Focus on automotive, chemistry, pharma, high-tech, consumer goods • Focus on Supply Chain Execution Niche Players Visionaries Completeness of Vision Source: GartnerGroup 1999 and ADL Baan • Acquired a number of SCM vendors • Integration of acquired tools still critical • Focus: auto, high-tech, industry products • Primarly Supply Chain Planning

  11. Impact of New Information Technologies Computing performance Application Integration Massive increases in computing performance • high performance hardware and software components • high speed & volume memories • ... New application integration technologies • Middleware technology including business process automation • Internet based Software and communication • Real-time processing of data- and calculation intensive functions • Planing with complete, current, correct and consolidated data within seconds • Reconsideration of all supply chain parameters and planing scenarios within seconds using real-time simulation • Rapid linking of IT-applications within a company • Rapid integration of multiple, cross-company supply chain sites working together as one virtual unit online and real-time • high level business process integration New SCM-Applications • Whole Supply Chains can be managed in real-time with automated and optimised processes • Massively improved customer fulfilment (In time delivery as promised to the customer… ) • Customer order inquiry can be answered immediately within seconds (available / capable to promise) • ... • Increased ROCE (cost reduction, sales improvement, capital employed reduction)

  12. SCM OLTP/ERP D/W Integration Issues SCM solutions need to be integrated in existing IT Systems SCM cannot replace ERP.On the contrary, they extend planning tasks

  13. Interfaces E-Markets E-Procurement Supplier´s and Customer´s ERP-System Supply Chain Integration/ EDI Numerous Interfaces in Today's IT-Infrastructure Strategic Supply Chain Planning Operational Supply Chain Planning Demand Planning Supply Planning Scheduling Supply Chain Execution Finance & Accounting HumanResources Purchasing Customer Relationship Management E-Selling/ E-Markets Production Controlling Data-base ERP-System(Packaged/Legacy systems)

  14. Supplier´s and Customer´s ERP-System E-Markets E-Procurement Supply Chain Integration/ EDI XML is a State-of-the-art Solution Strategic Supply Chain Planning Operational Supply Chain Planning Demand Planning Supply Planning Scheduling Supply Chain Execution Middleware/XML Finance & Accounting HumanResources Purchasing Customer Relationship Management E-Selling/ E-Markets Production Controlling Data-base ERP-System(Packaged/Legacy systems) • Single point for administration, data tracking and auditing • Data consistency assured • Standard interfaces are integrated, other can be programmed

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