ERPSCM INTEGRATION N R Srinivasa Raghavan Assistant Professor

ERP/SCM INTEGRATION N. R. Srinivasa Raghavan Assistant Professor Department of Management Studies IISc raghavan@mgmt. iisc. ernet. in 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

The E-Quations E-SRM = E-SCM + E-ERP + E-CRM + E-SEM + E-LOGISTICS + E-PDM E-SCM = E-PROCUREMENT + E-MANUFACTURING + E-DISTRIBUTION 10 th August 2001 E-PLANNING N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Information Systems in SCM *Stgc Strategic Alliance Planing formulation *Devp of Core Competence *VRP& Schg Decision OPT *Invy. Control *NPD Analysis Tools *SCN Design *FMS *Virtual/Vertical Integration *Fin. Mgmt. *Cust. Serv. Mmt. Mgmt *Cost/Asset Mgmt. * Productivity Mmt. Control *Vendor Mgmt. *Quality Mmt. ERP *ODP * Shipping * CRM *Inventory Assignment * Pricing + Inventory *Payrolls etc. 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Integration @ what levels? Transaction level Management control level Decision analysis level Strategic planning level 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Need for Integration: Strategic motivation Excess Inventory I Revenue R O A Expenses Assets Unnecessary Prod. /Purchase Late Deliveries Poor usage of capacities Infeasible Plan Premium transportation costs Premium purchase costs Late Resynchronisation Demand plan & PDN plan not synchronizer. Prod. plan & Purchase plan not synchronizer. PDN. plan & Capacity plan not synchronizer. Qualityissues costs Quality 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Need for Integration: Operational motivation Customers Sudden 20% raise in retail demand B/D of logistics operations Distribution Centers M/C 2010 is down. Will be up again in 3 days Factory Lockout forces prodn. to be shut Supplier 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Solutions due to ERP are myopic An ERP System would react by: *Adapting the schedule of machine 2010 and reschedule other manufacturing orders. * Send orders through EDI to the distribution centre *Arrange for alternate fleet to route finished goods. Impact on total supply chain is ignored 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

S/W Modules covering the SCP SOURCE Long term 10 th August 2001 DISTRIBUTE SALES STRATEGIC NETWORK PLANNING Medium term Short term MAKE MASTER PLANNING Prodn. Planning Dristbn. Planning Scheduling Transport Planning MRP Demand Planning Demand &ATP N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Global SCN Formulation �Maximize Sum of the global after tax discounted yearly profits ($, Rs, etc) �S. t. , for every planning period: ¶ Supplier's capacity ¶ Production capacity at plants and DC's ¶ Transportation capacity of channels ¶ Customer demand constraints, BOM ¶ Minimum profit for SBU's on a country basis �Solution: MILP: Use ILOG/CPLEX/NEOS etc. 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Global SCN Formulation: Data requirements �Average capacities available at various entities (at any granularity desired: eg. Machine-Shopfloor. Factory) �Availability and utilization of logistics fleet �Estimates/Forecasts of customer demand by region, product etc �Average per unit costs incurred for various resources �BOM All obtainable from OLTP systems 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

ATP Computations * Provide promised dates for customers - influences leadtime + on time delivery * Generate fast & reliable order promises (esp. in Ebusiness environment) * Helps in retaining customers & increasing market share * Complexity increases as : # of parts increase; PLC decr. ; #of customers increase; flexible pricing policies; demand gets uncertain. Should be based on status of ALL SCN facilities 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Scheduling * Generate detailed prodn. /procurement/tptn schedules for all facilities over a rlatively short interval of time. * Specify start & end time of various activities * Identify bottlenecks & provide efficient means of prompt delivery of customer desired products & right place & time objectives * makespan. *sum of lateness/tardiness * sum of flow times * sum of set up times * max. lateness/tardiness 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Phases in Scheduling 1. Model building-ILP, queueing model, NLP 2. Extracting required data from ERP system- (set up time, cycle time m/c breakdown data, resource requirements) 3. Generating scenarios (input cases) 4. Iterative creation/adjustment of schedules 5. Approve a scenario 6. Executing the schedule via ERP system. 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

SCM Solutions: i 2 RHYTHM Source Long term Mid term Short term 10 th August 2001 Make Deliver Sales SC Strategist Demand planner SC Planner Factory planer Optimal scheduler Tptn. -Modeler -Optimizer -Manager Demand fulfillment N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

SCM Solutions: J. D. Edward's Source Long term Mid term Make Deliver Sales Enterprise Planning Production and Distribution Planning Demand planner P&DP Short term 10 th August 2001 Production Scheduling Vehicle Routing P&DP N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

SCM Solutions: SAP's APO Source Make Deliver Sales Long term Mid term Supply Network Planning Short term Production Planning and Detailed Scheduling 10 th August 2001 Deployment Demand planning Global ATP N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Integration Issues SCM solutions need to be integrated in existing IT Systems SCM OLTP/ERP D/W SCM cannot replace ERP. On the contrary, they extend planning tasks 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Integration with ERP * ERP has transactional data * SCM solution regularly has to talk to several ERP/OLTP systems of various SC entities. Two models required A. Integration model-(what) Defines - Which objects are exchanged (eg. BOM’s, routings, inventory levels, Customer Order, PO, etc) - Their origin - Which planning tasks performed on which system. 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Integration with ERP (contd) B. Data exhange model (how) Specifies how the flow of data & info between systems is organized. Most solutions provide a macro language to define these models An SCM solution should: * Match data items from ERP system & structure it * Provide Import/Export formats (eg. ASCII format with fixed field size or csv files) 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Data exchange model Two types - Initial transfer Incremental transfer Master data (Long term changes, new facility, new shifts, new suppliers, etc. ) 10 th August 2001 Transactional data (for implementation of plans) N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Data exchange model (contd. ) ERP BOM, Inv. levels, routing, . . Master data Transactional data 10 th August 2001 SCM Initial tranfer Incremental tranfer Model building Model adjustment Planning data N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Integration with D/W ERP Real time data Transactional purposes D/W Historical snap shots Decision support purposes KDD/Data mining/OLAP D/W are mainly used in demand planning: Finding patterns in demand using stats OLAP tools help in fast and powerful reporting on data 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Data warehouses and SCM � � Collect data from various companies; Ensure consistency of data from disparate transactional systems SCM D/W Historical data 10 th August 2001 OLAP tools KDD data mining tools Model building Time series analysis N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

Classification of SCM integration techniches Vendor specific technology Standard Technology Standard middleware pdt eg. CORBA Internal interfaces eg. SAP R/3, APO Vendor specific middleware eg. i 2 Rhythm. Link Open only for pdts of vendor 10 th August 2001 Open for other systems N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in

SCM Solution Providers: A Glance 10 th August 2001 N. R. S. Raghavan, raghavan@mgmt. iisc. ernet. in