Achieving Operational
Excellence and Customer
Intimacy:Enterprise
Applications
Chapter 9 (10E)
Three Systems
• Our focus is on the following enterprise
applications
– Enterprise resource planning systems
(ERP
– Supply chain management systems
(SCM)
What Are Enterprise
Systems?
Enterprise System Architecture
Figure 11-1
ERP
• 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
marketing
• 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
making
Supply Chain and Supply Chain
Management
• 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
them.
• 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
customers
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
• 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
product.
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
Measurement
• 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
product
Intranets and Extranets Play a
Major Role in SCM
Ovals represent extranet users.
Figure 11-6
Advantages of Internet SCM
Applications
• 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
Models
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
systems
Vendors
• Microsoft
(http://www.microsoft.com/dynamics/ax/product/supplyc
hain.mspx )
• SAP (SAP United States - Business Management
Software | Enterprise Application Integration)
• Oracle
(http://www.oracle.com/applications/procurement/intro.h
tml)
• 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
systems
• 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
choices.
• Extensive collaboration and planning across functional
areas and between firms.
• Huge education and training needs.