Hour8

Hour 8: Open Systems: 

Hour 8: Open Systems Supply Chain support Lean Manufacturing

Supply Chains: 

Supply Chains Collections of organizations working together Raw materials – products – retail Old manufacturing: vertical integration Military logistics Now appropriate for e-business

Vertical Integration: 

Vertical Integration Closely coordinate supply chain internally Steel, petroleum Open form: not one owner group Automobiles Can tie computer systems together in similar manner ERP provides detailed data needed for close coordination

Supply Chain Advantages: 

Supply Chain Advantages Competitive advantage Cost Production efficiencies Value Logistic efficiencies Coordinated advertising Large scale service

ERP Motivations: 

ERP Motivations Supply chain relationships provide Improved interactions & communications With suppliers & customers Mabert et al. [2000]: 20% of manufacturers surveyed had supply chain extensions to ERP 25% more planned to

ERP Restrictions: 

ERP Restrictions Internally focused ERP can constrain supply chain coordination (Davenport [2000]) Long-run ERP need for supply chain In short-run, ERP a hindrance to supply chain (Bowersox et al. [1999]) ERP systems provide integrated information Unless all units use the same system, a barrier to communication

System Openness: 

System Openness Supply chains require open systems Original ERP assumed a small number of users accessing system Seat pricing mechanism encouraged

Organizational Openness: 

Organizational Openness

Advanced Planning Systems: 

Advanced Planning Systems Computer technology makes supply chain capable of dealing with demand uncertainty Forecasting Inventory reduction Optimized transportation costs Advanced planning systems use operational data to analyze material flows in supply chain Use historical demand for forecasts Easy to collect data Dynamic nature makes long-range forecasting difficult

Advanced Planning System Providers: 

Advanced Planning System Providers

ERP Vendor Response: 

ERP Vendor Response mySAP.com an open, collaborative system Integrates SAP & non-SAP software SAP APO supports forecasting, scheduling, other logistics activities PeopleSoft: Enterprise Performance Management JDEdwards products for planning & execution Oracle’s 11i Advanced Planning & Scheduling

On-Line MarketplacesManetti [2001]: 

On-Line Marketplaces Manetti [2001]

Lean Manufacturing: 

Lean Manufacturing Toyota bundle of techniques from 1950s Common supply chain philosophy Cut waste by eliminating activities that don’t add value Continuous product flows without bottlenecks Produce to order (demand pull, not supply push) Emphasize quality

ERP & Lean Manufacturing: 

ERP & Lean Manufacturing Initial ERP applications did little for efficiency Complex bills of material Inefficient workflows Unnecessary data collection Efforts by ERP vendors to support lean manufacturing Not all manufacturers were convinced Lean manufacturing features Demand smoothing Kanban replenishment calculation Exception reporting

Discrete Manufacturing Lean Business StrategiesBradford et al. [2001]: 

Discrete Manufacturing Lean Business Strategies Bradford et al. [2001]

Continuous Manufacturing Lean Business StrategiesBradford et al. [2001]: 

Continuous Manufacturing Lean Business Strategies Bradford et al. [2001]

Key TrendsAkkermans et al. (2003): 

Key Trends Akkermans et al. (2003) Further integration of suppliers & customers Focus on ERP system flexibility Mass customization Standard interfaces across chain

ERP & Hershey’s Supply Chain: 

ERP & Hershey’s Supply Chain Stedman [1999] Osterland [2000] Songini [2000]

History: 

History 1997 Hershey’s adopted a $110 million ERP system SAP R/3 Siebel CRM Manugistics logistics package To replace many legacy systems Original 4 year project Compressed to 30 months to precede Y2K July 1999 three months behind schedule Adopted big-bang approach to beat deadline

Hershey Business: 

Hershey Business Very seasonal Halloween, Thanksgiving Sept 1997 serious order processing & shipping problems Shipping delays Sent incomplete deliveries Delivery time formerly 5 days, with ERP 12 days Sales revenue dropped 12% from prior year Inventory piled up at Hershey warehouses

Problem Diagnosis: 

Problem Diagnosis Attempted ERP implementation in supply chain environment That can be done Confounding factors During peak season Tried to do too much as once Complexity from CRM & Logistics Planning add-ons Time pressure

Supply Chain & ERP: 

Supply Chain & ERP Can be done Hershey’s was a bleeding edge pioneer Hershey’s seems to have solved problems

Trends in ERP: 

Trends in ERP Expected benefits Conclusions

Expected Benefits from ERPMabert et al. (2000); Olhager & Selldin (2003)1-not at all; 5-to a great extent: 

Expected Benefits from ERP Mabert et al. (2000); Olhager & Selldin (2003) 1-not at all; 5-to a great extent

Benefits from ERPMabert et al. (2000); Olhager & Selldin (2003)1-not at all; 5-to a great extent: 

Benefits from ERP Mabert et al. (2000); Olhager & Selldin (2003) 1-not at all; 5-to a great extent

Lessons Learned: 

Lessons Learned ERP implementation projects problematic Variety of ways to implement Benefit assessment problematic Different ways to design ERP Customization of vendors popular Many enhancements available Supply chain opportunities Requires open systems

Summary: 

Summary Vertical integration historically used to make supply chains efficient Today supply chain efficiency gained by linking specialists across organizations ERP initially focused on integrating internal operations High investment, rigid procedures barriers to supply chains Trends more supportive Advanced Planning Systems Vendor software Lean manufacturing support