Integrating Supply Chain Management & ERP

IT provides the vital connection between Supply Chain Management (SCM) and process-oriented Enterprise Resource Planning (ERP) tools. The SCM/ERP pairing is a critical combination, paving the way for the virtual enterprise networks now emerging. It bridges traditional, transactional ERP systems, legacy systems and adds levels of decision-support intelligence and planning engines.

• 01/31/1999

Thus, SCM system users control the ERP systems. For example, almost any overnight tripyou take these days puts you in contact with one SCM solution developed by JasperFurniture Company (Jasper, Indiana).

The Rhythm Method

As a custom-designed furniture manufacturer for hotels and motels, Jasper's armoiresand desks grace the hotels of the Kimball Lodging Group. Yet it experienced the classicsymptoms of a pre-existing business system being pressed beyond its limits. But Jasper'sIT team was clear about the solution: The software solution Jasper envisioned with i2Technologies' (Irving, Texas) Rhythm was first intended to supplement Jasper's Avalon ERPRDBMS, adding specific capabilities such as checking the validity of delivery dates andenabling scheduling personnel to see the effect of order changes.

The goal was expanded to support general needs for advanced scheduling, demandplanning, manufacturing planning and order promising. Jasper's IT Group saw Rhythm as aCPU engine that could simultaneously evaluate the effect of customer changes to materialsand manufacturing capacity, then produce reports in time to successfully execute revisedplans. In this operational concept, it's the blending of servers with the solutioncomponents, Rhythm and the Avalon ERP system, that's key to fully optimized manufacturingand business profitability.

The new supply chain solution supported a 26% increase in sales without subsequentincreases to staffing. Work-in-progress and raw materials were reduced by 33%. The HP andi2 Rhythm-based solution replaced mainframe technology with a HP 9000 K420 server that hassince been upgraded to a 4-way, HP K450.

Cookie Monsters

Grupo Gamesa (Monterrey, Mexico), a subsidiary of the PepsiCo Company, is Mexico'sleading producer of cookies and crackers. With sales of more than $500 million operatingfrom six plants, 12 distribution centers, 96 local warehouses and with more than 10,000employees, Gamesa recently completed a reengineering around Rhythm. Aimed at reducing theplanning cycle time from four to 1.5 days and doubling the performance of customerservices. The company makes and distributes more than 250 SKUs representing over 40 brandsthat entail more than 1,000 product changes and new product launches annually --necessitating a complex manufacturing and distribution environment.

"The company's objectives were quite consistent and representative of the consumerproducts industry," says Steve Weller, European Industry marketing director for i2Technologies. "Gamesa's managers also clearly understood the importance ofinvestigating opportunities for optimizing the size of its inventory, hastening deliveryto assure product freshness and using IT for supporting product innovation. In addition,Gamesa aimed to solve slow and often complex promotion coordination processes, improveforecasting and deal with network management issues."

Gamesa markets products to more than 5,000 point-of-sale locations throughout Mexicoand exports products to the U.S. and Central America. This dispersed market and wideproduct variety presented a growing challenge in an atmosphere of high inflation and lowproduct margins.

"One reason that Group Gamesa has been so successful at their reengineering,"explains Weller, "is that the logistics team realized that competition for them is nolonger between companies. Instead they see true competition as being between supplychains. As such, they aimed to enhance data resources and streamline data being usedthroughout the entire extended enterprise."

The team also acted quickly. They implemented key Rhythm Factory Planner functionalityin eight weeks across the entire network of six manufacturing plants, improving on earlyestimates that it might take 12 weeks to make a deployment at one plant.

From Rhythm Factory Planner, managers can create material and capacity-feasible plansfor manufacturing operations. This facilitates process coordination from packagingmaterial deliveries from suppliers to baking of cookies. The fact that Rhythm includeswhat-if simulation capability enables planners to weigh multiple planning options.

Both the Factory Planner and capacity planning modules are supported on HP 9000K-series servers. The solution also enables integration with Oracle GEMMS, Oracle's newtransaction system and with other proprietary, legacy systems that were developed in-houseand which are still required for business. Yet i2's Rhythm provides a single point of usercontact to decision-making information.

Then again, consider Nestle, USA Inc. (Glendale, Calif.). Nestle aimed to optimize itssupply chain for all U.S. operations around its customers, integrating SCM and othercritical business applications, including SAP R/3 for ERP. With several hundred productsunder dozens of brand names, the global corporation has an extensive supply chain.Freshness of its products drives the clock faster, perhaps, than for most otherindustries.

Nestle's Makes The Very Best

Logistics managers selected Manugistics 5. For such customer-centric businesses, SCMoften proves to be the technology enabler. From business process reengineering incumbentto SCM solutions, a company can align business processes to best meet customer demandswhile streamlining and automating logistics and distribution and link these to otherprocesses within the traditional ERP domain.

The approach connects the supply chain to customers in many ways. Not only doesdecision-support intelligence model "what-if?" scenarios and other advancedplanning routines, these new systems can interface a promise-date with the scheduling andplanning systems already being used elsewhere in the factory.

This means that manufacturing managers can schedule jobs with every assurance thatthey'll deliver on customer promises. Any bottleneck to information flowing acrossorganizations and geographies represents a serious limitation to developing global SCMstrategies.

Internet Trix

What happens for companies after working with Numetrix (Toronto, Ont., Can.) tostreamline communications both inside and outside their corporations using the Internet?Studies in various industries show the importance of improvement to this particular aspectof supply-chain performance overall when trading partners can more accurately estimateconsumer demand and plan supply accordingly.

The Numetrix/3 solution was a prominent distribution logistics solution when JosefSchengili, Numetrix President, advanced the case for a more holistic view of enterprisesolutions and extended supply chains in a published article, Beyond the Walls of theFactory, APICS Magazine, January 1996. Since then, barriers to progress that Schengilioutlined have tumbled and corporate executives face various new challenges. Among these isthe need to conduct business processes in real time, which fosters simultaneousnetwork-wide collaborations among suppliers, production, distribution and customers.

A case in point is the higher priority placed on programs in the agendas of corporateexecutives: real-time sales and operations planning (S&OP), vendor managed inventory(VMI/ECR), available-to-promise (ATP) and capable-to-promise (CTP). Prerequisite to thesecapabilities is access to up-to-the-second information passing across the supply/demandnetworks, both company WANs and the Internet.

This access requirement spells a new kind of SCM solution to support distributeddatasets, local processing, real-time messaging and a high degree of configurability."Here is a very complex environment," describes Schengili, "and wedeveloped a distributed object messaging architecture (DOMA) specifically to enable allusers in the supply/demand network to be able to work concurrently with real-time,synchronized data. The fact that this network is more and more frequently the Internetposes an important technological barrier, but this too is something we solve forcorporations using Numetrix/xtr@."

What Numetrix calls true Collaborative Enterprise Networking (CEN) in its applicationincreases the velocity of material and information flow through the supply chain. For theworld's larger corporations, Nabisco and General Electric for example, data integrationand velocity are exponentially critical.

Consider how SCM solutions incorporate Alert Lists. The process pushes messages aboutproblems in the supply/demand chain to alert pre-specified users or groups in the companywith authority or responsibility to deal with the problem. When problems are solved, thealerts disappear.

XTR@ Strength

For larger companies, the problem with software using a traditional approach is thatusers are required to query the system and gather details about the problem. This cangenerate massive network traffic and force trouble-shooting activity to be done in batchmode. In contrast, these corporations that are using xtr@ "message-aware"software, can dynamically send and receive messages between users and systems so thatusers have real-time information updates and indications of problems to be addressed.

Integration is also an application requirement, especially for corporations withextensive investment in legacy database systems, many of which are distinct, autonomoussystems. Numetrix, like other solutions providers, have supplemented their SCM solutionswith tools. In Numetrix's case, the xtr@ solution needs to interface transparently withautonomous, non-xtr@ systems and the company developed Collaborative Enabler agents thatare configured to work with common supply-chain and ERP solutions. Each agent ispre-configured and installed on trading partners' machines, attaching itself to datasubsets and enables the xtr@ application to monitor key planning information throughoutthe supply/demand network (and eliminating costly EDI-based alternatives).

Managers In The Know

How does an IT manager know when the company is fully leveraging a supply-chaintechnology? You can invest in almost any SCM solution, but without accurately modeling thesupply-chain environment and also allocating resources in an optimal configuration,"it's a bit like assembling a fine concert orchestra and expecting to hear greatmusic without a conductor," says SynQuest's (Atlanta, GA.) Manager of CorporateMarketing Jamie Muir. The company has developed software for Fortune 1000 manufacturers tooptimize financial performance from their supply chains and reduce total supply-chainoperating costs on the order of 10% to 20%.

Viracon (Owatonna, Minn.), a fabricated glass manufacturer that supplies glass for 20-to 30-story high-rise buildings, expects to realize a 233% cumulative growth rate by theturn of the century. To meet that goal, the company is equipping itself with SynQuestsoftware, running on a HP 9000 Enterprise Server, to increase glass production capacity by25% without adding labor. "Manufacturing more than 25 million square feet of glassannually, which accounts for 60% to 65% of the architectural glass market, Viracon facesunique customer circumstances," observes Muir. Viracon's glass shines for visitors atthe Rock and Roll Hall of Fame (Cleveland, Ohio) and Opryland Hotel (Nashville, Tenn).

The company caters to construction engineers at high-rise building sites and, driven bywidely variable circumstances, constantly needs to revise delivery dates. Bad weather at asite, for example, can force contractors to ask Viracon to delay delivery till the weatherimproves, by days or weeks. But if construction is ahead of schedule, Viracon must be ableto quickly reschedule manufacturing and enable delivery earlier than originally planned.

To improve Viracon's responsiveness, the SynQuest solution currently being deployedwill specifically help company planners synchronize manufacturing activities. This is aflow-type environment, one in which the increased visibility and control of materials andwork-in-progress, combined with production synchronization, are expected to support thecompany's aggressive goals for business growth.

Improved production capacity alone won't quite be enough, however. The job requiresgaining share in a new market for medium-performance fabricated glass where time-to-marketis critical and a supply-chain solution plays a fundamental role.

Viracon plans to launch a program using SynQuest to model manufacturing operations andoptimize it for this new market. Even with the increased production volumes that areanticipated for the medium-performance glass market, Viracon's success with on-timecustomer shipments can be maintained through optimization with SynQuest -- optimizingplans and schedules vs. just making feasible ones.

The SynQuest Supply Chain Performance Series helps define the optimum mix of sourcing,manufacturing and distribution and answers the questions "What should you sell andwhat could you sell, to make the most money?" One component, ManufacturingManagement, combines advanced planning and scheduling with manufacturing execution forreal-time control of operational activities. The advanced planning engine usesoptimization that does not stop calculating at the first feasible plan or schedule, butcontinues processing until it calculates the best scenario.

Closing the gap between Supply-Chain Management and Enterprise Resource Planning hasbecome a vital objective for IT managers -- from hotel room chairs to chocolate chips --an all-encompassing strategy is crucial in a competitive environment.

Extended-ERP/SCM Providers That Have AlliancesWith Hewlett-Packard

Enterprise Resource Planning