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The impact of ERP on supply

chain management
Exploratory findings from a European
Delphi study.

Abstract
The study was conducted with 23 dutch supply chain

executives of European multi-nationals.


The object was:Further integration of activities between
suppliers and customers across the entire supply chain.
On-going changes in supply chain needs and requiered
flexibility from IT
More mass customization of products and services leading
increasing assortment while decreasing cycle times and
inventories
Locus of the drivers seat of the entire supply chain
Need for worldwide IT systems
Greater transparency of the marketplace
Their insufficient extended enterprise functionality in
crossing organizational boundaries

introduction
One reason for these initiatives may be the substantial cost

reductions to be achieved from improving logistics


performances.
In Europe, logistics cost range from 6% to 15% of total turnover
In the USA, american companies spent $670 billion on logistics
and supply cahin-related activities in 1993, corresponding to
10.5% of GDF.
Another reason appears to be the advent of the network
economy , which is triggering profund changes in the scope and
impact of supply chain management.
Market are becoming more transparent, customer demands are
being met in a more customized manner and, in general, the
rate of change in the business world keeps increasing
All these developments are habing a profound impact on the
ways im which supply chains of enterprises are to be managed.
The new business models for the internet age is growing rapidly,
in particular is emphasizing that, as the business environment
changes, supply chain design as opposed to supply chain
coordination is becoming a core competency.

MRP Explosion
MRP
explosion

Action notices
-releasing new orders
-Adjusting due dates

Priority reports
-dispatch lists
-suppliers schedules

Capacity reports
-capacity requierement
planning
-finite capacity scheduling

Routing and
Time
standards
Manufacturing resources plan
Performance reports

Cost and
Price data

supply chain managemet in


the network economy

We view a supply chain as a network consisting of

suppliers, manufacturers, disrributors, retailers, and


customers.
The network, in turn, is supported by three pillars:
Financial flow
Information flow
Material flow
Suppliers=>Manufactures=>Distributors=>Customers

Processes
Fig.1

Organizational
Structures

Enabling
Technologies

An integrated model of the supply chain

Supply chain design is concerned not only with the specification of


customer zones, selection of manufacturing and distribution
facilities, and allocation of product families to these sites, but also
with the prioritization of the capabilities to be developed and
retained internally, and the forging of new partnerships with other
entities along a supply network.

This dynamic view is particulary important in a fast-evolving world


where new products and emerging distribution channels
necessitate a contiunuous review of supply chain design
decisions.

This dynamic view may neseccitate different perspectives for

supply chain design. These perspectives include: organizational


supply chain, capability supply chain, and technology supply
chain.

The validity of a particular supply chain solutions is therefore


determined by the clockspeed

Market mediation

Market Mediation
Supply Chain Design
Capability Building

Information deployment
-POS data
-Joint forecasting
-Schedule sharing

Supply Chain Coordination


Channel Alignment
-Contracts
-VMI
-CPFR

Operational Flexibililty
-Postponement
-ATO, MTO

ERP System

There are different ways of definnig ERP: a business


perspective, a technical perspective or a funtional
perspective.
One way of looking at ERP is as a combination of business
processes and information technology.
Worldwide sales of ERP packages together with
implemetantion support, on the other hand, have esceeded 50
billion dollars at the turn of the century with annual growth
rates of over 30%.
In spite of the significandt slowdown in IT spending, ERP is
expected to become a 10 billion dollar industry by 2004.
A recent survey by fortune magazine revealed that seven out
of the top tehn global pharmaceutical and petroleum
companies, and all of the top ten global chemical companies
are SAPs R/3.
the number of local IT system to be replaced by an intefrated
ERP system usually runs into the dozens up to a hundred or
more in multinational companies.

How Companies Benefit from


Improving ERP System

As the world economy reaccelerates, Ventana Research sees

companies investing selectively in information technology.


Ventana Research advises our clients to assess their major IT
system to determine if there are cost savings that can be
achieved, and determine how well their software/hardware
infrastructure supports existings strategy and business
processes.
We find that companies that evolve their ERP solutions
usually do so for any combination of the fallowing reasons:
-Increase productivity
-address performance management needs
-Implement business process imprvements
-Leverage technology
-Address organizational changes
-Enhance adaptability
-Avoid absolescence
-consolidate instances

Delphi study findings


This section describes the main empirical results from the
Delphi workshop.

Key trends in supply chain management for the coming

years.
-Just about every panel expert sees futther integration of
activites between suppliers and customer across the entire
chain os one of the three biggest trends in SCM

Expected impacts of ERP on SCM trends.


SCM limitations of current ERP systems
-EE funtionality
-Flexibility in adapting to changing supply chain needs
-beyond transactions- more advanced supporting funtionality

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