The impact of ERP on supply chain management

The impact of ERP on supply
chain management
• Exploratory findings from a European
Delphi study.
• The study was conducted with 23 dutch supply chain executives of
European multi-nationals.
The object was:Further integration of activities between suppliers
and customers across the entire supply chain.
On-going changes in supply chain needs and requiered flexibility
from IT
More mass customization of products and services leading
increasing assortment while decreasing cycle times and inventories
Locus of the drivers seat of the entire supply chain
Need for worldwide IT systems
Greater transparency of the marketplace
Their insufficient extended enterprise functionality in crossing
organizational boundaries
• One reason for these initiatives may be the substantial cost
reductions to be achieved from improving logistics performances.
In Europe, logistics cost range from 6% to 15% of total turnover
In the USA, american companies spent $670 billion on logistics and
supply cahin-related activities in 1993, corresponding to 10.5% of
Another reason appears to be the advent of the network economy ,
which is triggering profund changes in the scope and impact of
supply chain management.
Market are becoming more transparent, customer demands are
being met in a more customized manner and, in general, the rate of
change in the business world keeps increasing
All these developments are habing a profound impact on the ways
im which supply chains of enterprises are to be managed.
The new business models for the internet age is growing rapidly, in
particular is emphasizing that, as the business environment
changes, supply chain design as opposed to supply chain
coordination is becoming a core competency.
MRP Explosion
Action notices
-releasing new orders
-Adjusting due dates
Priority reports
-dispatch lists
-suppliers schedules
Capacity reports
-capacity requierement
-finite capacity scheduling
Routing and
Manufacturing resources plan
Performance reports
Cost and
Price data
supply chain managemet in the
network economy
• We view a supply chain as a network consisting of suppliers,
manufacturers, disrributors, retailers, and customers.
• The network, in turn, is supported by three pillars:
Financial flow
Information flow
Material flow
An integrated model of the supply chain
• Supply chain design is concerned not only with the specification of
customer zones, selection of manufacturing and distribution facilities,
and allocation of product families to these sites, but also with the
prioritization of the capabilities to be developed and retained
internally, and the forging of new partnerships with other entities
along a supply network.
• This dynamic view is particulary important in a fast-evolving world
where new products and emerging distribution channels necessitate a
contiunuous review of supply chain design decisions.
• This dynamic view may neseccitate different perspectives for supply
chain design. These perspectives include: organizational supply chain,
capability supply chain, and technology supply chain.
• The validity of a particular supply chain solutions is therefore
determined by the clockspeed
Market mediation
Market Mediation
Supply Chain Design
Capability Building
Information deployment
-POS data
-Joint forecasting
-Schedule sharing
Supply Chain Coordination
Channel Alignment
Operational Flexibililty
ERP System
There are different ways of definnig ERP: a business perspective, a
technical perspective or a funtional perspective.
One way of looking at ERP is as a combination of business processes
and information technology.
Worldwide sales of ERP packages together with implemetantion
support, on the other hand, have esceeded 50 billion dollars at the turn
of the century with annual growth rates of over 30%.
In spite of the significandt slowdown in IT spending, ERP is expected to
become a 10 billion dollar industry by 2004.
A recent survey by fortune magazine revealed that seven out of the top
tehn global pharmaceutical and petroleum companies, and all of the
top ten global chemical companies are SAP´s R/3.
the number of local IT system to be replaced by an intefrated ERP
system usually runs into the dozens up to a hundred or more in
multinational companies.
How Companies Benefit from
Improving ERP System
• As the world economy reaccelerates, Ventana Research sees
companies investing selectively in information technology. Ventana
Research advises our clients to assess their major IT system to
determine if there are cost savings that can be achieved, and
determine how well their software/hardware infrastructure supports
existings strategy and business processes.
• We find that companies that evolve their ERP solutions usually do so
for any combination of the fallowing reasons:
-Increase productivity
-address performance management needs
-Implement business process imprvements
-Leverage technology
-Address organizational changes
-Enhance adaptability
-Avoid absolescence
-consolidate instances
Delphi study findings
This section describes the main empirical results from the Delphi
• Key trends in supply chain management for the coming years.
-Just about every panel expert sees futther integration of activites
between suppliers and customer across the entire chain os one of
the three biggest trends in SCM
• Expected impacts of ERP on SCM trends.
• SCM limitations of current ERP systems
-EE funtionality
-Flexibility in adapting to changing supply chain needs
-beyond transactions- more advanced supporting funtionality