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Insight from industry Managing the unmanageable: integrating the supply chain with new developments in software

Forrest B. Green

Introduction
Approaching the crucial holiday period in fall of 1999, Hershey Foods Corp. did not have enough candy bars to stock the shelves of many retailers. This situation prompted stores to replace their usual supplies of candies with other brands. Hershey's chairman and CEO acknowledged that the company's distribution problems led to lost sales and increased costs. A new computer system, still untested and brought on line too late, caused disruptions in the supply chain and affected customer service. Like many organizations, Hershey was seeking a better way to manage its supply and distribution efforts. Since a supply chain involves customers, suppliers, producers, carriers, and retailers; the processes involved extend far beyond the domain of one company or decision maker. A collaborative system is essential with members cooperating to assure that their collective self-interests are realized, improved, and sustained. According to Handfield and Nichols (1999), three major developments in global markets and technologies have brought supply chain management to the forefront. They are heightened customer expectations, the information revolution, and new forms of inter-organizational relationships. Each of these evolutionary developments has contributed to what is now described as an integrated supply chain approach. In particular, firms now recognize the vital importance of information and new technologies that make timely and accurate information available. This paper examines emerging trends in applications software, which enables, supports, and extends the competitive nature of supply chain management (SCM).

The author Forrest B. Green is Professor of Management, Radford University, Radford, Virginia, USA. Keywords Supply-chain management, Logistics, Planning, Software development, Expert systems, Optimization Abstract Unlike management in a traditional organization, supply chain management is a collaborative effort among various organizations or entities whose well being relies on dependency relationships within a value chain. As such, shared information and the ability to analyze it effectively are crucial to the effort. Supply chain management software is evolving rapidly in three major areas: supply chain planning and execution, warehouse management, and transportation management systems. Emerging trends, which include third party software systems, collaborative technology, increased optimization, and use of expert systems, provide the potential for considerable adjustment and improvement in supply chain strategies. Electronic access The research register for this journal is available at http://www.mcbup.com/research_registers The current issue and full text archive of this journal is available at http://www.emerald-library.com/ft

ERP vs SCP
In the 1990s client/server architecture, relational databases, and Internet technology opened the door for a new generation of software which has come to be known as enterprise resource planning (ERP), or simply enterprise software. Concurrently, developments focusing on the supply chain gave rise to supply chain planning (SCP). The pace of technological evolution has evolved 208

Supply Chain Management: An International Journal Volume 6 . Number 5 . 2001 . pp. 208211 # MCB University Press . ISSN 1359-8546

Managing the unmanageable

Forrest B. Green

Supply Chain Management: An International Journal Volume 6 . Number 5 . 2001 . 208211

with applications directed toward managing entire supply chains with links to facilitate the delivery of seamless information both internally and inter-organizationally. While there is some confusion with regard to ERP and SCP, the goal of each is:
to have information from any source entered into the computer system only once and the information made available for all to see (Hazan, 1999, p. 36).

In addition to being planning systems, both ERP and SCP allow for execution as well. Orders are placed, purchases are made, inventory is moved, work orders are released, specifications are configured, resources are dispatched, and bills are paid. The distinction between ERP and SCP is somewhat blurry. As an example, one company (Q-CIM) provides an ERP package, which may be described as somewhat typical. It includes the following application modules: customer service, materials, quality, production, planning, distribution, costing, regulatory compliance, open financials, and productivity tools. Another package marketed by a different vendor as SCP (Bridgestone) includes the following: demand management, sales and operations planning, manufacturing planning, master production scheduling, and distribution requirements planning. The degree of overlap is evident. However, ERP generally covers the full range of manufacturing, sales and accounting software sufficient to perform virtually all of the information technology transactions required by an enterprise. ERP systems provide information and decision support for most of the core processes as well (Shtub, 1999). SCP, on the other hand, tends to be more oriented to specific logistics functions with specialized systems devoted to demand forecasting, production, transportation, delivery and distribution. The next decade will see a merger of these capabilities into expanded systems for which the names Integrated Resource Management or Enterprise Resource Management may apply. Some of the major companies involved in the marketing of supply chain management software include Manugistics, Numetrix, Chesapeake, Logility, i2 Technologies, SynQuest, Red Pepper, and Bridgestone. In some cases, it is expected that actual mergers will take place between ERP and SCP providers. In other cases, partnerships are

being formed to assure compatibility between ERP and SCP so that customers will have access to the best capabilities of both. The output of one system becomes the input for another, and more expert systems will be incorporated into extended software offerings. Examples include pre-configured plug-ins called Open Application Integration by Manugistics (Rogers, 2001); order fulfillment and configuration applications as part of the Rhythm package from i2 Technologies; and a Supply Chain Performance Series suite by SynQuest.

SCM software
According to Atkinson (1998), SCM software is becoming more prominent as companies widen their choices. SCM encompasses both supply chain planning, the forecasting of component and product availability, and supply chain execution through manufacturing and distribution. Some of the applications are fairly basic in that they perform material requirements planning, manufacturing scheduling, and order processing in the traditional, internal environment, but may provide for similar operations across organizational boundaries as well. Many diverse systems have emerged, however, making it nearly impossible to characterize SCM software with any degree of uniformity. Thus, the category of distribution system software referred to as SCM includes three major segments: supply chain planning and execution software, warehouse management systems, and transportation management systems (Modern Materials Handling, 1997). ERP software vendors have no intention of being edged out by SCM. In fact, most industry enterprises are coming to the realization that they need aspects of both. Thus large ERP providers, such as SAP AG and others are rapidly forming partnerships in order to offer supply chain enhancements to ERP systems. Several vendors are introducing advanced planning, inventory optimization, transportation selection, and logistics management as integrated components of ERP. These developments are poised to become effective in the coming half-decade along with other trends toward improved customer service.

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Managing the unmanageable

Forrest B. Green

Supply Chain Management: An International Journal Volume 6 . Number 5 . 2001 . 208211

Emerging trends
One clear trend is the acceptance of third party software and systems support for supply chain applications. Even firms with the inhouse talent to write their own software now recognize the value of developing partnerships with software vendors and consultants. In order for suppliers and customers to share information, the software needs to be compatible and capable of interaction and integration. Related to this trend is the emphasis on modularity, expandability, and third party plug-ins. With these features, supply chain participants are able to add modules and include applied programming interfaces as needs arise without scrapping current systems. Since most SCM software firms have formed partnerships with ERP companies, it will be easier in the future to link their respective systems and applications (Walker and Alber, 1999). SCM software applications have become enormously sophisticated and powerful enough to bring almost immediate benefits to firms using such packages. It is likely that this trend will continue. The i2 software, for instance, has an optimization engine that provides for the most efficient routing of orders, production schedules, and shipments to get the most out of facilities while meeting customer needs (Leibs, 1998). Some companies maintain that the cost of SCM software can be recouped in less than a year. More and more applications make use of artificial intelligence and expert systems. Even the problem of selecting appropriate forecasting models for different products is alleviated by software that quickly tests a number of models and automatically selects the best ones. Forecasts then are used to drive distribution plans to ensure that the right products are at the right place at the right time. As the data base grows, decisions are further refined through advanced planning and optimization, which alerts managers to necessary changes. Numetrix is well known for its linear programming and modeling functions, while Logility software allows a company to calculate the impact of opening a new warehouse. More applications are on the way. Rather than rely exclusively on electronic data interchange for data transmission, more

supply chain software is evolving toward Internet applications that communicate with ERP systems. Both intranet and extranet capabilities extend the sharing of diverse applications with numerous participants. These methods of communication, essential to the development of successful supply chain relationships, will reduce the cost and improve the flow of traffic. Full migration to Internet communication will, according to Leibs (1998), be influenced as much by customer demand as by technology.

Strategic implications
It has now become possible with the Internet to create larger networks and extend supply chain optimization capabilities to numerous partners. Supply chain linkages can be made more easily and at lower cost using Webbased technology. With such features as configurators allowing customers to specify product requests, the widespread development of exchanges to facilitate sourcing, and the protections offered users within intranets and extranets, there is little doubt that ecommerce is transforming SCM. But these are not the only developments affecting network enterprises. The merging of supply chain software with ERP, and other changes in the industry, have enormous implications for potential buyers as well. To meet their supply chain planning and management needs, firms are seeking integrated systems that fulfill multiple requirements, but are wary of the high cost and serious consequences of incompatible or inappropriate choices. According to Carey (2001), choosing the wrong system can cost five to ten times more than picking the right one from the start. Companies are beginning to recognize the value of a needs-analysis, which compares the products of software providers to the specific needs of each firm prior to selection and purchase. Several consulting firms have organized to provide this service. State-of-the-art software developments are proving to be enormously helpful, virtually essential to improvement efforts in supply chain management. In addition, specialty companies known as integrators are filling key linkages in the chain; and software helps to

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Managing the unmanageable

Forrest B. Green

Supply Chain Management: An International Journal Volume 6 . Number 5 . 2001 . 208211

line up the outputs from one link to the inputs for the next. One implication of extended supply chain software capability is the ability to form collaborative relationships known as intelligent supply chains. This means going beyond immediate suppliers and customers to real-time knowledge management of suppliers' suppliers and customers' customers. Such collaborative solutions are expected from leading ERP vendors like SAP, Oracle, PeopleSoft, J.D. Edwards and others (McKendrick, 2001). The ultimate effect should be synchronized product movement between all value-adders in the supply chain. However, this utopian scenario is not likely to be realized soon. In addition to mastering technological challenges, companies will need to determine the degree to which common databases will be shared with enterprise partners. Referred to as the ``trust factor'', shared information is the key to assuring that build and move decisions can be made as soon as demand is realized. The real challenge is that collaborative supply chain business practices involve deeper relationships than traditional forms of business interaction.

References
Atkinson, H. (1998), ``Shippers search for seamless solution'', Journal of Commerce and Commercial, Vol. 418, 4 November, p. 16A. Carey, W. (2001), ``Choosing the right system for your company'', APICS presentation, Roanoke, VA, 13 February. Handfield, R.B. and Nichols, E.L., Jr (1999), Introduction to Supply Chain Management, Prentice-Hall, Upper Saddle River, NJ. Hazan, E. (1999), ``ERP applications gain popularity'', Transmission & Distribution World, April, pp. 36-8. Leibs, S. (1998), ``A little help from their friends'', Industry Week, Vol. 247 No. 3, February, pp. 31- 2. McKendrick, J. (2001), ``Next-generation supply chain management'', Enterprise Systems Journal, Vol. 16 No. 7, July, pp. 62-5. Modern Materials Handling (1997), ``Materials handling and the supply chain'', Modern Materials Handling, Vol. 52 No. 14, December, pp. 16-17. Rogers, A. (2001), ``Supply chain software vendor aims to generate more revenue through existing partnerships'', Computer Reseller News, 2 July 2, p. 62. Shtub, A. (1999), Enterprise Resource Planning (ERP), Kluwer Academic Publishers, Norwell, MA. Walker, W.T. and Alber, K.L. (1999), ``Understanding supply chain management'', APICS the Performance Advantage, Vol. 9 No. 1, January, pp. 38-43.

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