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.
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.
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.
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.
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.
WAXING PHILOSOPHICAL ABOUT SCM
IT managers are finding that successful SCM isn't so much a business reengineering project as it is a philosophy. Beyond enabling the timely and cost-effective movement of goods through the pipeline, SCM implementations can now be entirely customer-driven and grounded in communicating customer demand back to the supplier. The most effective SCM solutions combine a well-thought supply-chain strategy, which supports the corporation's high-level business strategy and corresponding business process reengineering with a select portfolio of enabling applications and the distributed IT infrastructure.
By addressing the mission-critical functions within the manufacturing enterprise and outside the firm, including suppliers, partners and customers, companies build efficient and secure customer-centric productivity networks that were not previously feasible. SCM is a potent tool because of the seamless structure it affords for supporting globally dispersed operations and different competencies. It functions as a coherent, customer-satisfying tool whose boundaries appear invisible to the customer.
Advances in information technology make it a straightforward process for companies to develop and cost-effectively maintain an agile organization, one that responds quickly to changing demands and conditions. This is accomplished, in part, by optimizing the core competencies of the solution partners in each area. Over time, software providers have developed and implemented best practices into their code which significantly boost users' corporate performance measured at year's end. Because there are endless varieties of corporate cultures and market environments, critical success factors will blend solution components in near-endless variety. The good news is that solution providers seem to be well-equipped to answer the challenges.
Manager, HP's Manufacturing Industry Business Unit
Extended-ERP/SCM Providers That Have AlliancesWith Hewlett-Packard
|i2 Technologies |
909 E. Las Colinas Blvd
|Rhythm ||Rhythm encompasses the planning and scheduling of manufacturing and . related logistics, including demand forecasting, raw materials procurement, work-in-process, distribution and transportation across multiple enterprises. |
|Manugistics Group, Inc. |
2115 East Jefferson St.
|Manugistics6 ||Manugistics6, the newest generation of Manugistics' supply chain optimization applications, is designed to help users anticipate customer needs, then orchestrate actions both within and across. Manugistics' suite is a component-based solution, integrated into the entire enterprise, specifically to optimize each of the key supply chain business processes. |
655 Bay Street
|Numetrix/3 || |
Numetrix/3 can dynamically model business relationships which facilitates complete inter-enterprise collaboration. The Numetrix/xtr@ product supports this collaboration across the Internet.
|SynQuest, Inc. |
3500 Parkway Lane
|SynQuest Supply Chain |
|The SynQuest Supply Chain Performance Series is a suite of products for optimizing and executing a competitive supply chain. Using the suite, managers design and deploy the best strategy for maximizing return on investment in plants, warehouses, inventories, transportation and other assets. |
470 E. Paces Ferry Road
|Logility Value ||Logility's Value Chain Solutions (Demand Chain Voyager, Supply Chain Chain Solutions, Voyager, Demand Planning, Inventory Planning, Replenishment Planning, Event Planning, Transportation Planning and Management, WarehousePRO and Value Chain Designer) deliver collaborative planning and synchronization between demand opportunities, supply constraints and logistics operations. |
|Paragon Management Systems, Inc. |
5933 W. Century Blvd.
Los Angeles, CA
|Paragon Applications Suite ||Paragon Applications (Global Strategic Planner, Demand Planner, Global & Dynamic Scheduler and Real-time Event Real-time ATP, Supply Chain Planner, Material & Capacity Planner, Reactive Monitor) are designed for real-time production and inventory control, from the multi-plant/warehouse enterprise to shop floor operations. |
| || || |
Enterprise Resource Planning
|BAAN Company |
6710 BG Ede,
+31 318 696 6666
The Baan Company has dual headquarters in Barneveld, The Netherlands and Reston, Virginia, USA.
|BAAN IV ||BAAN IV is an integrated system of coordinated applications and tools supporting business processes in finance, production, distribution, transportation, service, maintenance, as well as administration of complex projects. It is suitable for both discrete manufacturing organizations as well as for the processing industry. |
|JD Edwards & Company |
One Technology Way
Denver, CO 80237
|OneWorld ||OneWorld provides multinational, integrated enterprise software for distribution, finance, human resources, manufacturing and supply chain management. |
|Oracle Corp |
500 Oracle Pkwy.
Redwood City, CA 94065
|Oracle Applications ||Oracle Applications (Oracle Financials, Human Resources, Projects, Manufacturing, Supply Chain, and Front Office), comprise 45+ software modules, includes a consumer packaged goods industry, energy, financial ser- vices, higher education, and public sector modules. |
|PeopleSoft Inc |
4440 Rosewood Dr.
|PeopleSoft Applications ||Primary products include PeopleSoft HRMS (human resources), PeopleSoft |
69190 Walldorf, Germany
|R/3 ||SAP's R/3 suite offers functionality that companies use at every stage of their supply and value chains. Recently, SAP decoupled the R/3 System, creating individual components within a Business Framework. With the resulting 16 modules, and third-party applications that can be added to SAP software, customers can tap the portfolio of independent components for specific industry requirements. |
6450 Via Real
Carpinteria, CA 93013
|MFG/PRO ||QAD's primary product, MFG/PRO, is designed to streamline the manufactur ing process in the electronics, food and beverage, automotive, medical and packaged goods industries. MFG/PRO helps manage accounts payable, inventory, repetitive manufacturing and purchasing and it schedules everything from work orders to procurement. |