GPM – Chapter 4

Copyright © 2006. All rights reserved by International Freight Consultants (S) Pte.Ltd.
Global Information
Systems
Chapter 4

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 GPM – Chapter 4
Learning Objectives
➢ Overview of the e-Supply Chain Information

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systems
➢ Identify the drivers of new supply chain
systems and applications
➢ Discuss Enterprise Resource Planning Systems
and other collaborative systems
➢ Discuss purchasing database and data
warehouse
➢ Discuss the relevance of Electronic Data
Interchange (EDI) in today’s modern MNCs
➢ Explain how EDI can help in inventory
management thru Vendor Managed Inventory
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 GPM – Chapter 4
Overview of E-SC Information Systems
Solution Time Focus Primary Use of Systems
Period
MRP-DRP 1970s Internal/inventory Inventory planning, inventory
control and distribution efficiencies
EDI 1980s External Electronic transmission of Purchase
documents
ERP 1990s Internal Integration of all business ( multi
plants multi divisions)functions for
processing and reporting
SRM & CRM 2000s External Managing and controlling the
interface between buyers, suppliers
and customers
Collaborative 2000s External-Internal CPFR systems permit constant
communication within the supply
chain via RFID and point of sales
systems
Advanced 2010 and External-Internal Sourcing Analytics and computerised
sourcing beyond negotiations
Analytic
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 GPM – Chapter 4
A stand-alone Purchasing System

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 GPM – Chapter 4
SCM Map
Based on Strategic, Tactical or Operations decisions

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 GPM – Chapter 4 Kahoot

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Drivers for eSCM needs

1. Internal and External Strategic Integration

2. Globalisation and Communication
3. Consistent Data Information Management
4. New Business Processes ( “E”)
5. Replacement of Legacy Systems
6. Strategic Cost Management

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 GPM – Chapter 4

Enterprise Resource Planning (ERP)

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ERP is a packaged business software system that
processes transactions on a single software
platform and a single database

kairoticsoft.com

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 GPM – Chapter 4

What does an ERP system do?

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➢ Integrates information across all departments
➢ Facilitates the flow of information among the
different functions and processes of an
enterprise
✓ functions: manufacturing, finance, HR
✓ processes: order entry
➢ Tracks a wide range of events in the enterprise
in an integrated fashion
➢ Plans future activities based on these events
➢ Supports analysis of trends in these events, to
improve the performance of the enterprise.
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 GPM – Chapter 4
What does an ERP system do?

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Allows users to:
❑ input data in one
location, that can be
processed with
other data and
accessed as
informational
reports in a real-
time environment
❑ share common data
and practices across
the entire
enterprise
❑ Re-engineer the
majority of its
processes
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 GPM – Chapter 4

A Single Platform

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 GPM – Chapter 4
Purchasing Process in an ERP

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 GPM – Chapter 4

Copyright © 2006. All rights reserved by International Freight Consultants (S) Pte.Ltd.
ERP Market
One of the fastest growing
markets in software industry
34.5% of companies with
revenues over $1 billion plan to
purchase or upgrade
Small and Medium Size
companies following suit
$28 billion in sales in 2006
Maybe as much as $48billion by
2010
Source: AMR Research 2007

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 GPM – Chapter 4

Steps in implementing an eSCM System

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➢ Development and implementation of an eSCM system is a
complex process
➢ Multiple resources are required
➢ Project may take months or years to complete
➢ Project will go thru a life cycle with different stages
✓ Planning, Analysis and Design, Implementation and
Operation

Stage 1 Stage 2 Stage 3 Stage 4

Analysis
Planning ImplementationOperation
& Design

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 GPM – Chapter 4
Planning Phase

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Stage 1 Stage 2 Stage 3 Stage 4

Analysis Implemen
Planning Operation
& Design tation

❑ Establishing the needs ❑ Establish a control

❑ Recognizing the problem mechanism-
❑ Define the problem ❑ Steering committee/
Project Team
❑ Set system objectives
❑ Tools
❑ Establish system ❖ Bar Chart/Gantt Chart
constraints ❖ Network chart
❑ Prepare Study Project ❖ Project repository
Proposal
❑ Approve__________________________________________
the Study Project
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 GPM – Chapter 4
Set up a Steering Committee

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❑ Establish organization objectives
❑ Set priorities for each stage/milestones
❑ Assign resources for different departments
❑ Organize the project team
❑ Approve project plan and budget
❑ Approve organization
change

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 GPM – Chapter 4

Roles and Responsibilities of

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Steering Committee members
➢ Support Change
❑Change in process, incentives, and workflow
➢ Exercise leadership
❑Management (CEO, CIO, CFO, etc.) to kick-off
projects
➢ Make long-term judgment
❑Examine each recommendation for long term
benefits
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 GPM – Chapter 4
Analysis & Design Phase

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Stage 1 Stage 2 Stage 3 Stage 4

Analysis Implemen
Planning Operation
& Design tation

❑ Announcement of system ❑ Approval of proposal by

study Steering Committee
❑ Organise for the study
❑ Finalise system objectives
❑ Design the system
❑ Prepare implementation
proposal
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 GPM – Chapter 4
Implementation Stage

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Stage 1 Stage 2 Stage 3 Stage 4
Analysis Implemen
Planning Operation
& Design tation

❑ Project implementation ❑ Cutover to new

announcement systems
❑ Supplier selection to provide ❑ System in use
systems. Purchaser involvement
❑ Install system & Programming
❑ Prepare the database
❑ Prepare the physical facilities
❑ Educate __________________________________________
the users
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 GPM – Chapter 4 Kahoot

Different Ways to Cut-Over

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Type of Pros Cons Application
Cutover
Cold Turkey Less efforts to Very high risk From manual
( Direct) maintain 2 system
systems
Parallel Least risky Most effort Mission
needed critical
Phase Systematic Constraint by Most common
Software ( based on
functions)
Pilot Allow for Take longer Large
mistake time organization
( different
sites)
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 GPM – Chapter 4

Operation Stage

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Stage 1 Stage 2 Stage 3 Stage 4

Analysis Implemen
Planning Operation
& Design tation

❑ Post installation audit or ❑ Cost Benefit Analysis

survey ❑ Has the system met its
❑ Operate the system objectives?
❑ Maintaining the system

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 GPM – Chapter 4

ERP implementation

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Main Challenge
Moving away from
functional silos
and creating
effective cross-
functional
processes that are
truly integrated
via an ERP system
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 Kahoot
GPM – Chapter 4

Copyright © 2006. All rights reserved by International Freight Consultants (S) Pte.Ltd.
What are the main challenges in
technology adoption?

❑ Resistance to change

❑ Complexity of technology

❑ Lack of visibility into benefits to the user!

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 GPM – Chapter 4

Electronic Data Interchange

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The transmission of documents

from one computer directly

to another computer

using standardized formats...

No paper, No human touch, No delay ( real time)
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 GPM – Chapter 4
Electronic Data Interchange (EDI)

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Direct computer transmission of orders and
other transaction information based on an
agreed standards set.

In purchasing, EDI is usually used for the

electronic transmission of orders, invoices,
and payment between buyer and seller.

The main elements of an EDI system are:

❑ computer hardware,
❑ ERP software,
❑ EDI Translator
❑ Internet
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 GPM – Chapter 4

Paper Purchase Order to EDI

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To: 1047689 PO#5905
General Supply Co. 1/31/02
240 E. Main Street
Anywhere, IN 60143

Bill to: A/P 410 Ship to: 2442

Uniform Code Council Paul Smith
Box 1741 635 Elm Street
Dayton, OH 35168 Cicero, IL 60303

vendor unit of price per

Qty Description UPC # style # measure unit
3 V Architecture Guide 614141000500 003082 each 50.00

2 EDI 2001 614141004232 004232 each 250.00

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 GPM – Chapter 4
PAPER Purchase Order EDI 850 PO
ST*850*0001

Copyright © 2006. All rights reserved by International Freight Consultants (S) Pte.Ltd.
PO# Date
BEG**00*5905**20020131
5905 1/31/02
Ordered from: N1*SE*General Supply Co.
General Supply Co.#1047689 N3*240 East Main
240 East Main N4*Anywhere*IN*60143
Anywhere, IN 60143
N1*BT*Uniform Code Council
Bill To: Convert to EDI N3*Box 1741
Uniform Code Council A/P 410
Box 1741
Format N4*Dayton*OH*35168

Dayton, OH 35168 N1*ST*Paul Smith

Ship To: N3*635 Elm Street
Paul Smith 2442 N4*Cicero*IL*60303
635 Elm Street
PO1**3*EA*50**UP*614141000500*VA*003082
Cicero, IL 60303
PID*F**08***V Architecture Guide

3 ea V Architecture Guides
upc# v style price PO1**2*EA*250**UP*614141004232*VA*004232
614141000500 003082 50.00 PID*F*08***EDI 2001

2 ea EDI 2001 CTT*2

SE*17*0001
upc# v style price
614141004232 004232 250.00 EDI Format Message
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 GPM – Chapter 4

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 GPM – Chapter 4
To do EDI you need….

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Agreement
(Contract)
P.O 123

Transaction Sets
(the format required)
❑ (Ex Purchase Order).
There are different
EDI Translation formats
software
(Change to
different Data Transmission
format) Using Internet

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 GPM – Chapter 4

Ways to implement EDI

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(Direct Method)

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 GPM – Chapter 4

Ways to implement EDI

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Using Value Added Network (VAN)

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 GPM – Chapter 4
EDI usage in Practice

Copyright © 2006. All rights reserved by International Freight Consultants (S) Pte.Ltd.
❑ 34% of purchase orders are transmitted electronically
in North America.
❑ In Europe and Middle East (EMEA), 36% of orders are
transmitted electronically
❑ In Asia Pacific (APAC) 41% of orders are transmitted
electronically.
❑ They also report that the average paper requisition to
order costs a company :-
✓ US$37.45 in North America,
✓ US$42.90 in EMEA and
✓ US$23.90 in APAC.
❑ With an EDI requisition to order costs are reduced to
✓ US$23.83 in North America,
✓ US$34.05 in EMEA and
✓ US$14.78 in APAC.
Source: Aberdeen report 2008
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 GPM – Chapter 4
Using EDI in VMI

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 GPM – Chapter 4 Kahoot
VMI Benefits To Supplier

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Improved Forecast:
❑ Enabling suppliers to plan production to meet
customer demand. The goal is to have an
improvement in fill rates from the manufacturer and
to the end customer. This will result in a decrease in
stock-outs and a decrease in inventory levels.
Improve Service Level:
❑ The overall service level is improved by having the
right product at the right time. The supplier is more
focused than ever in providing great service.
Higher Switching cost :
❑ Due to higher interactivity between Supplier and
Customer, there is a higher switching cost for the
customer to change to another supplier.
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 GPM – Chapter 4

VMI Benefits To Customer

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Better Inventory Management:
❑ Customers (e.g. retailers) are able to manage
their inventory level better and more
efficient.
Better Visibility to Stock Levels:
❑ helps to identify priorities (replenishing for
stock or a stock-out?)
❑ Before VMI, a retailer may have no visibility
to the quantity and the products that are
ordered.
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 GPM – Chapter 4

VMI Benefits to Both Parties

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Reduced Data entry errors :
❑ Reduced errors due to computer to
computer communications. Speed of the
processing is also improved.
Better Service:
❑ Both parties are interested in giving better
service to the end customer. Having the
correct item in stock when the end customer
needs it, benefits all parties involved.
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 GPM – Chapter 4

VMI Benefits to Both Parties

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True Partnership:
❑ A true partnership is formed between the
Customer and the Suppliers. They work
closer together and strengthen their ties for
win-win collaborations.
Stabilize the timing of Purchase Orders -
PO’s are now generated on a predefined basis.

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 GPM – Chapter 4

VMI – Implementation Pitfalls

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❑Need Extensive testing – Long time to
validate data being sent by both parties.
Many rounds of testing needed.
❑Acceptance by all: Make sure that all
employees involved in
the process fully
understand and
accept this new way
of doing business.
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 GPM – Chapter 4

VMI – Implementation Pitfalls

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❑Effects of Promotions/Events: Anything
that adds or takes away from the normal
ordering pattern must be properly
communicated.
❑Need Time to stabilise: Both parties
involved must understand that this is a
learning process. Errors will occur.

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 GPM – Chapter 4

VMI – Implementation Pitfalls

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❑Change in Customer Base: Any large
customers, either gained or lost, must be
communicated to the manufacturer. The
distributor must guide
the manufacturer on
how this will affect
sales.

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 GPM – Chapter 4

VMI – Implementation Pitfalls

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❑Effects of Over/Obsolete Stock: An
agreement must exist between the
manufacturer and the distributor on
what to do if an overstock does occur
(or in the case of an ordering error).
Also, both parties must agree on how
to handle obsolete stock.

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VILAS HDSCM TOT Programme HCMC/Vietnam May - June 2019 (Thomas SIM)
 GPM – Chapter 4

More information on VMI

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http://www.vendormanagedinventory.com

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 GPM – Chapter 4

Copyright © 2006. All rights reserved by International Freight Consultants (S) Pte.Ltd.
Questions ?
[email protected]
Prepared & Edited by Thomas SIM – June 2019

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 GPM – Chapter 4

Copyright © 2006. All rights reserved by International Freight Consultants (S) Pte.Ltd.
Thomas Sim
[email protected]
Prepared & edited by Thomas SIM – June 2019
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