Intro To SCM

Post graduate Diploma In Logistics & Supply Chain 2011-12
St. Xaviers college, Kolkata Introduction to SCM

By,
Sarthak Chandra
PGDM IIM (B), SAP SD SCM - Certified Consultant (SAP AG Germany) CEO SARV
22-Sep-13 Sarthak Chandra 1
Course Overview
Evolution & Process of SCM Business Process Re-engineering Reengineering and relevance to SCM?
Why reengineer? Benefits of Reengineering?
Operational Innovation What is the right Supply chain for a product ?

The New Paradigm of Business Process Management

Rapid, endless change is a cornerstone of business success, not
an exceptional event Processes of excellence are able to adapt to change Constant change is required for business survival
Ability to define, measure, analyze, improve and control
processes are the keys to business innovation and growth

Processes must allow different people with different skills - IT
developer, manager, business analyst, marketing personnel - to each view and manipulate the output in different ways
Supply Chain Management

What is SCM? Where does it start from?
Where does it end?

What are the components and management elements that
form a part of the supply chain?

Finance, Marketing, Operations, Sales, HR, Projects, Admin., etc. ??
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Ancient Times
The first supply chain was the barter system
1904
1960-1975
Traces of outsourcing was seen when Charles S. Rolls became selling agent for cars made by F. Henry Royce
The essence of SCM was understood with the first phase characterized as an inventory push era that focused primarily on physical distribution of finished goods Companies began migrating from an inventory push to a customer pull channel Emergence of SCM
1975-1990 1980
1985
1996
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1998
WalMart introduced the concept of Cross Docking Internet revolutionized the distribution system of the business Concept of e-commerce changed the definition of business Sarthak Chandra 5
Customer could be an internal customer or an external customer
Next, we see the processes performed in a supply chain as a CYCLICAL view
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Cycle I
Supplier
Manufacturer
Customer
Retailer Cycle III

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Distributor Outsourcing
7
Push View of SCM A push-based SCM takes longer to react to the changing market place In a push-based supply chain, production decisions are usually based on long-term forecasts In push-based strategies, SCM experience increased transportation costs, high inventory levels and high manufacturing costs Pull View of SCM In a pull-based supply chain, manufacturing is demand driven so that it is coordinated with actual external customer demand rather than a forecast Lead-time reduction occurs as the variabilities are better monitored in pull-based SCM Pull-based systems are often difficult to implement when lead times are so long that it is impractical to react to demand information
What is Re-engineering?
Definition The fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance.

Radical change, fast A fundamental rethinking and transformation of an integrated set of business processes Aims for dramatic business results Unlike quick hits and incremental improvement, reengineering is a form of organizational change Characterized by dramatic process transformation Is forgetting how work was done at the times of mass markets and how it can be done best now.
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Reengineering isnt
Reengineering isnt an idea imported from China Reengineering isnt a program to hike employee or workers moral or motivate the sales force It wont push an old computer system to work faster Reengineering isnt about Fixing anything Business Reengineering means starting all over again from the scratch.
Process Reengineering for Change

Relies on reevaluating the purpose of the process and questioning both the purpose and the underlying assumptions
Requires reexamination of the basic process and its objectives Out of the box thinking for the creation of solutions to old and new problems
The term process in the context of reengineering

A process is a series of related activities that: takes an input adds value to it produces an output for a customer to generate value for him
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BPR Methodology
Select process to be reengineered
Establish process team
Understand current process
A Methodology for Business Process Reengineering (Fitzgerald and Murphy 1996)
Dev elop a v ision of improv ed process
Identif y actions needed to mov e to new process
Negotiate/execute plan to accomplish actions
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Why BPR projects are failing?
Lack of senior management sponsorship
Failure to make an ongoing commitment to the tough management decisions needed to effect these changes to the work environment
Lack of motivation Lack of Knowledge & capitalizing on ignorance
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Methodologies: Issues
SELECTION; Many companies are developing their own BPR methodologies TIME; The need to test the project empirically so that it can be validated and modified as appropriate. In the case of BPR, this poses a problem since a typical reengineering project can last 1-2 years BPR efforts cannot be uniformly applied across different cultures but need to be tailored to the specific contingencies of the situation
Methodology:
A consolidated methodology has been developed from the five methodologies and a model was developed to provide a structured approach and to facilitate understanding (Muthu, Whitman and Cheraghi 1999).
Future Trends
Area of supply chain management and logistics. Although currently fading, however BPR may increase in importance again, in some form or known by some other name; the BPR phenomenon would be of enduring importance. SCM to take a lot of significance for organizations Operational efficiency the key differentiator between ace performing companies and mediocre companies
Operational Innovation
Operational Improvement, Operational Excellence & Operational Innovation Some of the Greatest Success stories Operational Innovation Wal-Mart, Toyota, Dell etc. Dell Business Model Toyota Production System Wall-mart $ 44 Million 1972 $ 44 Billion - 1992
2 reasons to tell these stories 1 Its worth telling, as it has generated extraordinary results 2 Not many stories, not more than 10% of the large organizations
A Powerful Weapon
Strategic benefits
Higher Customer retention Greater market Share Ability to execute strategies Ability to enter new Markets
Marketplace benefits
Lower Prices Greater Customer Satisfaction Differentiated Offerings Stronger customer relationships Greater agility
Operational benefits
Lower Direct cost Better use of assets Faster Cycle time Increased accuracy Greater customization & precision More added value Simplified processes
Why Operational Innovation

Most companies are struggling with:

Low growth Stagnation Over Capacity production & competition No pricing power
The Solution

Take market share from competition Lower costs Extraordinary Quality & Service Operation Excellence and Operational Improvements are obsolete terms
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Challenges for operational Innovation

Business culture Undervalues operations Out of Sight & Out of mind Nobody owns it
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Making it work
Need to start at the grassroots level Find a leader Look for role models Identify & defy a constraining assumption Make the special case into the norm Rethink critical dimensions of work Implement in phases/step change Can you answer is it sustainable?
What is the right supply chain for your product ?

Devising a SCM strategy
Before devising a supply chain
Analyze the nature of demand for the product
Primarily 2 types of products

Functional Products Primarily Innovative products
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Types of Products
Functional Products
Staples e.g. Grocery, petrol, gas etc. Satisfy Basic needs Dont change much over time Have stable, predictable demand & long life cycles
Any functional product where some innovation is done E.g. Fashion apparel, computers, mobile phones
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Innovative products
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Enterprise
Resource Planning
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ERP General Concepts
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ERP General Concepts

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What is ERP? The Current Scenario Why ERP? Definition Evolution Expectations BPR & ERP BPR & ERP The Stages
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What is ERP?
ERP is a solution, which
facilitates company-wide integrated systems, covering all functional areas information
performs core Corporate activities and increases customer service augmenting Corporate Image
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The Current Scenario

Islands of Information Difficult to get timely & accurate information Heterogeneous Hardware & Software platforms & practices Poor connectivity between different organizational locations Sticking with obsolete technology Resist to change Lack of proven man-power to develop integrated software
Information Islands
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ERP - Definition
Software solution that addresses the Enterprise needs, taking a process view of the overall organization to meet the goals, by tightly integrating all functions and under a common software platform
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Why ERP?
For Management to know what is happening in the company One solution for better Management For cycle time reduction To achieve cost control & low working capital To marry latest technologies To shun the geographical gaps To satisfy the customers with high expectations To be Competitive & for survival
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Evolution of ERP
1960s - Systems Just for Inventory Control 1970s - MRP Material Requirement Planning (Inventory with material planning & procurement) 1980s - MRP II Manufacturing Resources Planning (Extended MRP to shop floor & distribution Mgnt.) Mid 1990s - ERP Enterprise Resource Planning (Covering all the activities of an Enterprise) 2000 onwards ERP II Collaborative Commerce (Extending ERP to external business entities)
Benefits of ERP
Benefits of ERP Help reduce operating costs and transaction costs Facilitate Day-to-Day Management Support Strategic Planning
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Support supply chain management quicker response time improve the accuracy of the information improve the efficiency of the supply chain improve production improve supplier relationship and reliability bargaining power of trading partners
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ERP implementation challenges

Lack of top management commitment Lack of MRP II education for the users of the system Inaccurate data Poorly managed MPS Over-sophistication/Addition of fancy options Lack of user control Time consuming implementation process delayed payback Behavioral problems
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Why Implement an ERP?

To support business goals Integrated, on-line, secure, self-service processes for Business, thereby Integrating all the functions Eliminate costly mainframe/fragmented technologies Improved Integration of Systems and Processes
Lower Costs Empower Employees Integrating the systems running in all the locations Enable Partners, Customers and Suppliers Transparency of information using a single data source across the organization
How to Implement an ERP?

Obtain the right mix of people, processes and technology!
People
Project Structure Should be aligned to processes

Process
Implementation Process (outlined in detail) Adapt your processes to those of the ERP.
Technology
Hardware Software 22-Sep-13 Integrated Systems Sarthak Chandra
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BPR & ERP

Just automating the existing business practices will not help ERP to achieve the anticipated results Business Process Re-engineering [BPR] brings out the deficiencies of the existing setup BPR and ERP will give way to implement new systems and the long pending improvements in the existing systems BPR may be time consuming but the scope can be restricted & controlled by the Management
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Stages of an ERP Implementation

Pre-implementation stage Implementation stage Post Implementation stage
BPR - Steps
Step 1 Understand Understand the existing systems associated with all the functionalities Step 2 Simplify/Improve Draft & frame the possibilities & ways to simplify or Improve or eliminate the processes
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Step 3 Automate Implement with the help of ERP

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Pre Implementation Stages

The implementation of an enterprise resource planning
system was an expensive, difficult and time taken task.

In-house/outsource development.
Adaptation of standardize package
1.
Set up Steering Committee Representative from Senior Management Department Managers Information System Manager Consultant
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2.
ERP Training
For the relevant personnel to understand integrated computer system. For the relevant personnel to understand ERP and its advantage and disadvantage.
3. 4.
Feasibility Study
Drivers Inhibitors
Requirement analysis
Operation requirement of individual department Computer access and control of individual staff within different department. Reports Data exchange between individual department as well as outside parties. Physical layout of computer equipments
5.
Preparation of Testing Data

Extract the critical and/or representative data from the major operation (department) required for the standardize package Sarthak Chandra 46
selection 22-Sep-13 of
6.
Development of the system or selection of standardize package

Functions and features should capable for the future development (atleast can lasted for three years) of organizations. Ability of the solution provider on future development and maintenance. Data and procedures set up and standardization. Implementation methods and qualities.
the
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Implementation Stages
Typical tasks
The sample schedule in this section is at a high level but indicates relative time frames for individual tasks and overall project accomplishment. It is intended to suggest the type of tasks that make up the schedule. You should break the high level tasks into detailed steps complete with responsibilities and timeframes that fit your company's specific project.
1.
Change management
Who are the resistance individuals and/or groups? What are their needs? What beliefs and values do they have? What are their interest? Effective communication Project management Project champion Sarthak Chandra Monitoring and evaluation of performance
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2.
Duration
Experience has shown that selection and implementation of these types of systems takes 6 months or less depending on what is being installed and the condition of the data. This depends on the system and the user's motivation. One of the most important tasks in implementing an ERP system is getting the information or data that the requires in a condition that will allow the system function properly.
company's
3.
system to
Information/Data Preparation
4.
the new
Site Preparation
Another important area that needs specific attention is preparation of the physical site for acceptance of system. Here again the magnitude of this task is dependent on what is being installed and the current condition of the facility. However, the following items usually will need a result of the system implementation a. Network b. Hardware
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attention as
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5.
Converting and Loading Data

Converting and loading all required data into the new system is a formidable task. Before you begin it is to understand the magnitude of the entire As part of your system search be sure to understand from the vendor what assistance they can offer your conversion effort. If you are converting from a computerized system, find out if they have conversion programs that can format the data from your old system to the new. If not, ask what other options are available. It is important to understand the total logistics of this task.
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advisable task.
particular
and move
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Success factors for an ERP implementation
Clear understanding of strategic goals Commitment by top management Business process reengineering (BPR) and minimum customization Data accuracy Extensive education and training Focused performance measures Use of consultants
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ERP Options
OPTION 1 MAKE [Using Internal resources] Developing a custom-built ERP package, specific to the requirements of the organization, with the help of the in-house IT department
OPTION 2 - BUY
Going for Tailor-made ERP packages available in the market like SAP, Oracle applications, Baan, PeopleSoft etc.
OPTION 3 MAKE [using External resources]

Developing a custom-built ERP package, specific to the requirements of the organization, with the help of a software solution provider
Building ERP solutions using Internal Sources
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ERP Building using Internal resources The Facts

Lack of adequate & qualified manpower Not driven with clear focus on expectations, time & cost Poor software project management Lack of seriousness with the Management & the IT Team High employee turnover Lot of schedule gaps during Project execution Normally project life is more Frequent change in the scope with the approval of the Management
Tailor-made ERP Solutions
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Tailor-made ERP solutions

About this option

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Execution Phases ERP product selection phase Product selection - Parameters Preparation Phase ERP product acceptance - Options Gap Analysis Production Phase Implementation Phase Post-Implementation Phase Pitfalls & Points of Concern Critical Success factors
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About
Generalized off the shelf application s/w packages Modules based on rich functionalities for all business functions User tested with lot of installations No lead time requirement for software development Tuned for more users/networks with adequate & inbuilt security Parameterized for flexibility Can sit on latest hardware & software platforms Upgradation of functionalities with version control
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Execution phases
ERP product selection
Preparations Production Implementation
Post-Implementation
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ERP Product selection Phase

ERP Team formation for selection
Appointment of Consultants [if needed]

Scoping study Product selection
Implementation partners selection

Hardware/Communication cost estimation
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Product Selection - Parameters

Reputation of the ERP product No.of installations in the geographical vicinity % of the overall functional availability Customization possibilities After sales support Your investment plan & budget Implementation partners track record
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ERP Product selection Criteria

Goal: To select the Most Suitable Software Package Solution Functionality
5 Strategic Requirement Levels
Technology
Vendor
Support
Costs
Preparation Phase
Framing ERP Implementation Strategies
Formation of Apex & Steering committees

Functional & IT team formation Training on ERP functions & features
Scope finalization
GAP analysis Action plan to resolve the gaps
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ERP product acceptance - options

1. Adapting directly, all the functions available in the ERP Product [Applicable for startup companies]
2. Change the way the firm does the business to fit the product [Compromising] 3. Customize the ERP product to suit the business Processes. [Customization]
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GAP Analysis
This is the process to identity the gaps by mapping the expectations of the company with the capabilities of the ERP product
Results of Gap Analysis

Directly Supported Workaround suggested Extension required Change in business process suggested Not full supported Manual not under the scope of ERP
Production Phase
Installing the software & hardware Tuning the software to meet the customization needs Master & Control data arrival as per the Product data structures Location & people specific roles & rights allocation for module access & security
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Implementation Phase
Conference Room Pilot [Parallel run] Resolving the Parallel run issues Training the end users Live run
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Post-Implementation Phase
Regular monitoring Tuning [hardware/software] for patching the performance issues Maintenance
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Pitfalls & Points of concern

Costly comparing to custom-built options Lot of hidden costs Chances of cost & time overrun are high The Level of customization/Indianization Compulsion to pay for redundant modules/features Vigorous involvement of all during implementation Non-availability of special practices like Customer Complaint, Logistics Linking historical data offline & painful The requirement of Change Management is a must Dependency on outsiders is high IT department Poor grip on the Implemented systems
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Critical Success Factors

The firm & optimistic approach of the Management - on adapting the ERP product driven methodologies - on customization - on monetary commitments The dedicated Team Good Training Strict adherence to the Project schedules Right technical infra-structure Change Management
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Custom-built
ERP
Solutions
using external resources
Building ERP using Ext.sources

About this option The Principle! The Steps Why? Points of Concern Software Vendor selection Critical Success factors
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About
Here the whole package is designed & built by keeping a specific enterprise & its business Practices in mind by incorporating the improvements/additions with due integration without compromising or changing the current way of doing the business and providing flexibility to accommodate your business fluctuations
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The Principle!
The best as seen elsewhere, need not be the the best for you.
What is your best is what can be successfully implemented
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The Steps
1. Software vendor selection 2. Detailed study by the vendor 3. Scope & platform finalization 4. Freezing the commercials 5. Development 6. Hardware addition/upgradation 7. Old master/transaction data migration 8. Parallel run with Integration & connectivity check 9. Implementation 10. Maintenance
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Why?
Very economical while comparing the cost of implementing tailor-made ERP solutions Less prone for hidden-cost hits The company can opt for its choice of Hardware, Software & communication platforms based on the skill availability The company and the software vendor have the direct relationship during the project execution. The proximity would be high & convenient. IT department has good control over the Project What is required only would be considered under the scope No redundancy
Why? - Cont.
The requisite flavor of E-Biz & work-flow components can be embraced towards value edition The existing practices & applications can be tuned and linked with the proposed package Maintenance & improvements are easy & less costlier. Even IT team can maintain the setup after getting the source code
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Points of Concern
Software development vendor selection Requirement/scope finalization [high chances of retaining the islands as it is] Less chances of Value addition Not time tested Chances of Prolonged project duration
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Software Vendor Selection

The following traits should be considered while selecting the software vendor for building the ERP application Technical expertise Domain knowledge Adequate manpower Project management skills Long existence in the field Extra skills [e-biz & workflow]
The Critical Success Factors

Clear Vision & support of the Management Capabilities of the software development vendor Scope & Expectations finalization towards meeting the ERP concepts Strict implementation schedules & periodical monitoring The involvement of the IT & functional teams
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Beyond ERP
Supplier Collaboration
Supply Chain Management
Key Process Integration via ERP

Product Lifecycle Management
Customer Management
Design Partners
Consumers and Channels
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SD
Sales & Distribution
FI
Financial Accounting
MM PP SM
Service Management
Materials Mgmt.
CO
Controlling
Production Planning
R/3
HR
Human Resources
AM
Fixed Assets Mgmt.
EC
Integrated Solution Quality Client / Server Management PM Plant Maintenance Open Systems
QM IS
Enterprise Controlling
PS WF
Project System Workflow
Industry Solutions
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Supply Chain Process
Customer Order
Picking
Goods Issue
Final Payment
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Accounts Receivable
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Billing
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Post graduate Diploma In Logistics & Supply Chain 2011-12

St. Xaviers college, Kolkata Introduction to SCM

Why reengineer? Benefits of Reengineering?

Operational Innovation What is the right Supply chain for a product ?

The New Paradigm of Business Process Management

processes are the keys to business innovation and growth

Supply Chain Management

Where does it end?

form a part of the supply chain?

The first supply chain was the barter system

Customer could be an internal customer or an external customer

Next, we see the processes performed in a supply chain as a CYCLICAL view

Retailer Cycle III

Process Reengineering for Change

The term process in the context of reengineering

Establish process team

Understand current process

A Methodology for Business Process Reengineering (Fitzgerald and Murphy 1996)

Dev elop a v ision of improv ed process

Identif y actions needed to mov e to new process

Negotiate/execute plan to accomplish actions

Why BPR projects are failing?

Lack of senior management sponsorship

Lack of motivation Lack of Knowledge & capitalizing on ignorance

Why Operational Innovation

Challenges for operational Innovation

What is the right supply chain for your product ?

Before devising a supply chain

Analyze the nature of demand for the product

Primarily 2 types of products

Functional Products Primarily Innovative products

ERP General Concepts

ERP General Concepts

The Current Scenario

ERP implementation challenges

Why Implement an ERP?

22-Sep-13 Sarthak Chandra 41

How to Implement an ERP?

Project Structure Should be aligned to processes

Hardware Software 22-Sep-13 Integrated Systems Sarthak Chandra

BPR & ERP

Stages of an ERP Implementation

Step 3 Automate Implement with the help of ERP

Pre Implementation Stages

system was an expensive, difficult and time taken task.

Adaptation of standardize package

Preparation of Testing Data

Development of the system or selection of standardize package

Converting and Loading Data

Success factors for an ERP implementation

OPTION 3 MAKE [using External resources]

Building ERP solutions using Internal Sources

ERP Building using Internal resources The Facts

Tailor-made ERP Solutions

Tailor-made ERP solutions

ERP Product selection Phase

Appointment of Consultants [if needed]

Implementation partners selection

Product Selection - Parameters

ERP Product selection Criteria

5 Strategic Requirement Levels

Formation of Apex & Steering committees

ERP product acceptance - options