The Purposes of IT

Means to achieving goals through supply chain management

Electronic commerce levels

Implementation of ERP and DSS

"Best of Breed" versus single vendor ERP solutions

Examples

The implementation of advanced technology requires a change in organizational structure. An employees job description will change due to this technology. The goals of technology is to provide an information trail along the primary activities of Porter’s value chain. This will provide real data for planning, tracking and estimating lead times. The model below illustrates the flow of information and goods in the supply chain:

 The purposes of IT:

- To collect information from raw materials, production, and delivery to purchase  point,    to give visibility to all involved parties.

- To provide a single point of contact where all data can be accessed.

- To to analyze, plan and make trade offs using information from the supply chain.

 Means to achieving goals through supply chain management

The following are the means towards achieving supply chain management goals:

  A - Standardization- IT standards must be established to allow interconnectivity of systems so that they can work together. This will also reduce costs as a whole by lowering the cost to maintain the system; lowering the cost of purchasing, developing and deploying software.  It will also reduce the Price of components, development, and  integration of the system through economies of scale.

Standardization has brought about more affordable software and hardware.  Forms of communication, which exist internally in organizations, can now work across other organizations, such as electronic mail and Electronic Data Interchange (EDI). Examples of standards currently in use are Wintel standard, which is the windows interface on Intel-based computers; Java standards; and web browser.

  B- IT infrastructure- This is a basic component of systems capabilities which provide the communications for a successful SCM. It consists of interface devices, communications, databases and systems architecture.

Database capabilities required for Personal computers, Internet devices, bar-code scanners and voice mail are all interface devices. These devices have helped to allow for the uniform access capabilities provided at anytime and anywhere. Graphical displays of data are also becoming prevalent in companies, and as it becomes more enhanced, graphics are being integrated seamlessly with other systems such as Geographic Information Technology (GIS).

Communications takes place when interface devices are connected to either an internal system ( for example LAN, Intranet and Mainframe) or external network such as extranet and the Internet.

Examples of applications that used are for communications are:

        i.                     Electronic-mail

ii.                   Electronic data Interchange

iii.                  GroupWare

iv.                 Location Tracking

Data is stored in databases and specialized databases are used for each type of data. Some of  the databases used are:

 i.              Legacy databases- the systems are usually built around a hierarchical    or network database with programs written in common business        oriented  language (COBOL). Large amounts of mainly transactional data are stored and extensive processing is performed.

ii.                Relational databases-this allows for standardized reporting and querying of related data as it stores related data, e.g. Structured Query Language (SQL). This type of database may be centralized on a mainframe or server or distributed across a network of PCs.

iii.              Object databases- these can hold  numerical data, character data, graphic structures, and pictures. This database is used to different types of information in a structure that is related to database operations.

iv.                Data warehouse- these involve enterprise data and combine large amounts of data from other databases.

v.                 Datamarts- these are smaller versions of data warehouses and tend to be more departmental in scope.

vi.               GroupWare databases- these are specialized to facilitate group functions.

System Architecture is the is the way databases, interface devices and communications are configured and they are the following:

i.                    Centralized/legacy systems-  computer systems are centered on a mainframe computer (the host) which provides computational power.  Devices such as dumb terminals where information is entered, distributed, stored or communicated,  are connected to the mainframe.  Initially this was used for applications such as word-processing or spreadsheets, but due to the connectivity allowed by Local area networks (LAN) and wide area networks  (WAN) , users can now share files, e-mail and other applications..

ii.                  Client/server- is a distributing process where some tasks are performed centrally and others locally on a user’s PC.  A server provides data, services or access to other systems whereas the client is the system that requests and uses the data, services provided by the server. The Internet is an example of this.

C- Electronic commerce- this is an emerging field, which refers to the replacement of physical processes by electronic ones.  It applies to interactions that take place within the organization and externally with other organizations. Internet standards are used both internally and externally. It offers numerous advantages such as global presence, improved competitiveness and quality of service as these are made accessible at any time and place. It provides detailed information on clients and reduces transactional costs. There are various levels of e-commerce and these are:

Electronic commerce levels

Level 1-One-way communication. - Communication takes place in one way, where the other party does not respond in real time. 

Level 2- Database Access. A user to access a database for personal use enters data through a data entry form. Personal requests and personal orders can be made through the Internet, and purchasing made by the use of credit cards. This level includes use of vendor catalogs, searches in company knowledge bases for obscure error messages.

Level 3- Data exchange. This involves business-to–business transactions, which require computers on both ends to facilitate exchange of information.  Electronic Data Interchange (EDI) is the main standard used. 

Level 4- Sharing processes.  This occurs when different entities share processes electronically.  This level is still being developed, as standards are required so that companies use the similar communication applications.

Manugistics supply chain compass model

Manugistics developed a model that describes the stages of IT development in SCM.  The stages are as follows:

Stage I: The Fundamentals- Focus on quality. The organization concentrates on producing dependable, consistent, quality products at the lowest cost, by automating existing functions and tasks.

Stage II: Cross-Functional Teams-Serve our customers.  Consolidation of supply chain takes place; e.g. distribution and transportation are combined into logistic manufacturing and purchasing into operations. The goal of this stage is to meet customer demand. Planning is performed using point tools.

Stage III: Integrated Enterprise-Drive business efficiency. The goal of this level is to be highly customer responsive. Company aims to quickly deliver quality products and services at the lowest cost. At this stage IT is integrated with enterprise supply chain-planning systems.

Stage IV: Extended Supply Chain-Create market value.  The main goal in this stage is to increase market share. Emphasis is placed on profitable growth. This growth is achieved by using customer tailored products, services, and value added information.

Stage V: Supply Chain Communities- Be a market leader. The focus is on market leadership. Companies consolidate into supply chain communities, which share common goals and objectives. IT is networked with all partners outside the organization to allow for synchronized supply chain planning.

Manugistics Supply Chain Compass

 Implementation of ERP and DSS 

Implementation of a system that supports supply chain integration requires both infrastructure and DSS. A company needs to decide which system it will install first. ERP takes longer and are more expensive to implement.

Supply Chain Systems Inc. has developed a methodology, which should be followed when implementing ERP:

1.     Top management should participate in the whole project. The scope of the project       should fit with the available resources and time required. Functional managers should be responsible for their respective parts of the project.

2.    Senior management should define supply chain policies that will specify how the         business will operate; these set the parameters for ERP.

3.    A discipline process for resource planning should be defined.

4.     A process should be implemented that will generate feasible production schedules. The operational planning process must be mapped and finite capacity scheduling models (for production and inventory plans) developed

5.   The processes and maps should be used to determine what management reports are required.

6.   Data elements should be identified that will be used in planning models. A plan for   building a data warehouse and interfaces to the legacy system is needed.

7.     Delineate the ERP parts and determine when each can be implemented, with the help of an implementation team.

8.  An implementation schedule is developed and critical success factor problems should be raised to appropriate senior management so that they are solved immediately.

9.    A Gap Analysis is conducted between system capability and functionality. As functionality begins to appear more critical it should be implemented.

ERP and DSS for Supply Chain Management

"Best of Breed" versus single vendor ERP solutions

There are four ways a company may decide to implement its ERP and these are as follows:

  1.    Build a best of breed solution where the best fit solution in each category is     purchased from a different vendor

 2.      Purchase ERP and supply chain DSS as a total solution from one vendor.

 3.      Use a dominant ERP vendor and outsource or build in-house functionality not          provided by vendor

4.       Build in house

Best of Breed versus Single-Vendor and Proprietary

Examples:

A - Green Mountain

Green Mountain Coffee Roasters invested in Enterprise solutions from Darkhorse Peoplesoft,an ERP system when they found they lacked the tools for building a three –tier client/server system. It purchased 17 modules which deal in applications such as, general ledger, bill of materials and routing, cost management, and inventory management. The Enterprise Solutions runs on an Oracle Corp database, which sits on a Windows NT server. The server runs atop a Compaq Computer Corp. Proliant 5000 which is equipped with two 200MHz Pentium Pro processors, 28 GB of storage on a RAID 5 stack and 640MB of RAM

B- Starbucks

Starbucks needed a new SCM system that would help facilitate its growth. The company had problems with its Bill of material, where too many were being processed than needed. There was also a problem of forecasting which was done manually and with the use of merchandise inventory system called JDA software that ran on an AS/400.  The company decided to revamp its SCM technology with the objectives of reducing costs, improving customer service and maintaining consistent quality.

The company decided to take a best of breed approach when implementing their ERP, as it felt that none of the ERP packages could meet its needs. The IT supply chain developed was as follows:

  TBD*= to be determined

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