SC Management vs. Traditional ERP
Are you using Enterprise Resource Planning (ERP)?
This technology presents a valuable approach to reengineering your SC. ERP applications contain capabilities such as inventory management, material planning, order processing, procurement, shop floor management and finance. ERP systems allow companies to streamline and integrate business processes by improving information flow between a company's departments as well as between the company and its SC partners.
The problem is that traditional ERP systems use a sequential approach to derive a plan. First, a Master Production Schedule (MPS) is created, which provides the basis for Material Requirements Planning (MRP). After this step, performance of Capacity Requirements Planning (CRP) is attempted. Unfortunately, such an approach considers materials and capacity as independent variables at each stage. This can result in an infeasible plan. To eliminate such a problem, MRP’s logic advocates iterating this sequence multiple times to adjust for changes made at each step. Soon these actions become very confusing due to the complexity of the planning problem and the scope of product mix being planned. Consequently, the planner starts planning with more slack to protect the feasibility of his plan.
SC management takes classic ERP to the next step. The key advancements are integration and transparency of all components of the SC for efficient decision making.
The business processes of most companies are organized around the stages of production, people or organization structures. Many large corporations are organized by functional areas including purchasing, manufacturing, finance, logistics and sales/marketing. Information, control and management flow nicely within each of the functional areas.
However, the value to the customer comes from moving information, products and services quickly and efficiently across functions from the supplier to the customer.
Purchasing, procurement, transportation, warehousing, order processing, and inventory management must not only link together but must link horizontally with other enterprise functions (engineering, manufacturing) and with customers and suppliers. The focus must be on how the activities of one function impact and influence the activities of other functions and other companies.
Reducing costs and improving customer satisfaction can be achieved by integrating suppliers and customers into the supply chain based on the state-of-the-art information technology and business modeling techniques.
