The impact of ERP on supply
chain management
Exploratory findings from a European
Delphi study.
Abstract
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
introduction
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 GDF.
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
MRP
explosion
Action notices
-releasing new orders
-Adjusting due dates
Priority reports
-dispatch lists
-suppliers schedules
Capacity reports
-capacity requierement
planning
-finite capacity scheduling
Routing and
Time
standards
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
Suppliers=>Manufactures=>Distributors=>Customers
Processes
Fig.1
Organizational
Structures
Enabling
Technologies
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
-Contracts
-VMI
-CPFR
Operational Flexibililty
-Postponement
-ATO, MTO
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 SAPs 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 workshop.
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
