Enterprise Applications and Business Process Integration

Achieving Operational
Excellence and Customer
Chapter 9 (10E)
Three Systems
• Our focus is on the following enterprise
– Enterprise resource planning systems
– Supply chain management systems
What Are Enterprise
Enterprise System Architecture
Figure 11-1
• ERP systems are comprised of independent
software modules with a common central database
that support basic internal business processes for
finance and accounting, human resources,
manufacturing and production, and sales and
• The common database enables data to be used by
multiple functions and business process for precise
organizational coordination and control
Business Value of ERP
• A more uniform organization
• More efficient operations and customer-driven
business processes
• Firm wide information for improved decision
Supply Chain and Supply Chain
• A firm’s supply chain is a network of organizations and
business processes for procuring raw materials,
transforming into products, and distributing them to
customers. Materials, information, and payments flow
through the supply chain in both directions.
• Supply chain management attempts to Coordinate the
business processes to speed information, product, and
fund flows up and down a supply chain to reduce time,
redundant effort, and inventory costs
A Supply Chain
Figure 11-3
Parts of the Supply Chain
• Upstream –includes the organization's suppliers and their
suppliers and the process for managing relationships with
• Internal supply chain – includes process for transforming
the materials, components, and services furnished by
suppliers into finished goods and for managing materials
and inventory
• Downstream – consists of the organizations and process
for distributing and delivering products to the final
Five Major SC Processes
• Planning: Balancing demand and supply to meet
sourcing, production, and delivery requirements
• Sourcing: Procurement of goods and services
needed to create a product or service
• Making: Processes that transform a product
into a finished state
• Delivering: Processes to manage order
transportation and distribution
• Returning: Processes associated with product
returns and post delivery customer support
• Logistics concerns all factors that will have an impact on
transporting the correct product/service to where it is
needed on time and at the least cost.
• Particularly important in the transportation of raw
materials in the upstream portion of the supply chain and
transportation of finished goods in the downstream
portion of the supply chain.
• Logistics counts for 12-14% of a manufacturer’s costs
Key Supply Chain Management Processes
Figure 11-4
SCM Applications (Systems)
The primary goal of all supply chain management systems is
to automate flow of information between company and
supply chain partners.
Two major types:
Supply chain planning systems: Generate demand
forecasts for a product (demand planning) and help
develop sourcing and manufacturing plans for that
Supply chain execution systems: Track the physical
status of goods, the management of materials,
warehouse and transportation operations, and financial
information involving all parties.
Supply Chain Planning and
Execution Systems (Examples)
Supply Chain Performance
• Metrics for measuring supply chain performance
– Fill rate (the ability to fill orders by the
due date)
– Average time from order to delivery
– The number of days of supply in inventory
– Forecast accuracy
– The cycle time for sourcing and making a
Intranets and Extranets Play a
Major Role in SCM
Ovals represent extranet users.
Figure 11-6
Advantages of Internet SCM
• Provide standard set of tools
• Facilitate global supply chains
• Reduce costs
• Enable efficient customer response
• Allow concurrent supply chains
Demand-Driven Supply Chains
• Push-based model: Production master schedules
based on forecasts of demand for products,
and products are “pushed” to customers
• Pull-based model: Supply chain driven by
actual customer orders or purchases (Dell)
Push- versus Pull-Based SC
Figure 11-7
Business Value of SCM Systems
• Improved customer service and responsiveness
(product availability)
• Cost reduction (supply chain costs represent
75% of operating expenses for many firms;
reducing sc costs can have major impact)
• Cash utilization (improved cash flows)
Challenges of Implementing
Enterprise Systems
• High total cost of ownership
• Organizational change requirements
• Realizing organizational goals
• Seventy percent of organizations have not
obtained the promised benefits of enterprise
• Microsoft
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• SAP (SAP United States - Business Management
Software | Enterprise Application Integration)
• Oracle
• JDA (http://www.jda.com/solutions/strategic-supplydemand-solutions-overview.html )
Why Do Enterprise Projects Fail
So Often?
• Enterprise systems software requires people to adopt
new work methods
• People often don’t agree that the Enterprise systems
way of doing things is better than existing processes
• Either people resist or force IT to customize Enterprise
• Customization makes the software unstable and harder
to maintain
• The mistake companies make is assuming that changing
people's habits will be easier than customizing the
software. There is a delicate balance between these two
• Extensive collaboration and planning across functional
areas and between firms.
• Huge education and training needs.