Beruflich Dokumente
Kultur Dokumente
ERP and SCM systems integration: The case of a valve manufacturer in China
Indranil Bose a,1, Raktim Pal b,*, Alex Ye c,2
a
Room 730, Meng Wah Complex, School of Business, The University of Hong Kong, Pokfulam Road, Hong Kong
College of Business, Showker Hall, MSC 0202, James Madison University, Harrisonburg, VA 22807, USA
c
376 Wukang Road, Unit 201, Xujiahui District, Shanghai 200031, China
b
A R T I C L E I N F O
A B S T R A C T
Article history:
Received 22 March 2006
Received in revised form 25 February 2008
Accepted 27 February 2008
Available online 15 April 2008
Many modern organizations integrate enterprise resource planning (ERP) and supply chain management
(SCM) systems, as they work in a complementary fashion. This often results in technical and
organizational challenges. Neway, a Chinese organization, recently went through this complex process.
This required efcient procurement and management of hardware, software, and human resources for
successful completion. The integrated system was found to improve operations, foster a paperless
environment, and provide efcient inventory tracking and picking. It also had several tangible benets,
including reduced lead time and improved inventory accuracy. ERP and SCM systems integration is still a
novel concept for a Chinese manufacturing organization. Our case study details the organizations
experience, identies challenges that were faced, and describes solutions adopted to overcome them.
2008 Elsevier B.V. All rights reserved.
Keywords:
Case study
Chinese manufacturing
Enterprise resource planning systems
Supply chain management systems
Systems integration
1. Introduction
Enterprise resource planning (ERP) and supply chain management (SCM) systems have been implemented and used successfully in many organizations. But managing the operation of such
systems is not easy. It is important for operations managers to
understand how ERP and SCM systems complement each other.
Due to a paucity of case studies on ERPSCM systems, especially in
Chinese manufacturing organizations, we developed a case study
of the integration of these systems at Neway, a Chinese valve
manufacturer.
2. ERP and SCM systems and their integration
Efcient management of supply chains require continuous
adjustments of the decision-making process including dynamic
pricing and risk assessment, and evaluation of sourcing and
logistics alternatives. While SCM systems are suitable for these
functionalities, ERP systems are not designed for it. In ERP systems,
material, capacity and demand constraints are considered
separately. However, SCM systems consider all constraints simultaneously and develop a higher quality plan relatively quickly. The
study by Akkermans et al. [1] identied the limitations of ERP
* Corresponding author. Tel.: +1 540 568 7094; fax: +1 540 568 3273.
E-mail addresses: bose@business.hku.hk (I. Bose), palrx@jmu.edu (R. Pal),
yecongxuan@hotmail.com (A. Ye).
1
Tel.: +852 2241 5845; fax: +852 2858 5614.
2
Tel.: +86 21 6126 7601; fax: +86 21 6126 7603.
0378-7206/$ see front matter 2008 Elsevier B.V. All rights reserved.
doi:10.1016/j.im.2008.02.006
234
Table 1
Key considerations in enterprise systems implementations
Items
References
Top management support, project management team competence, interdepartmental cooperation and communication, clear goals and
objectives, vendor support, careful package selection, data analysis and conversion, dedicated resources, user training, education on new
business processes, business process re-engineering, minimal customization, architecture choices, change management
Internal and external integration through consolidation of system instances, use of integration technologies, standardization of data and
process denitions, process ow improvement to t with the system and business needs, addition of analytical capabilities transform
robust data access to useful business knowledge
Consideration of social, cultural, and organizational aspects
Strategies and sequences for realigning business processes, use of quality management programs
Emergence of right strategic plans overcoming power struggle and politics
Software suitability, appropriate system integration strategy and technology, information quality
[2,19,23,24]
[7,23]
[15,20,30]
[22]
[13,16]
[25,28]
Fig. 1. MECI framework for Neway case study. (See Ref. [11]).
235
4.1.2. Manufacturing
This supported planning and scheduling, inventory management, and manufacturing control. It helped users in all phases of
the product lifecycle and enabled them to communicate product
information quickly and easily among production, maintenance,
and other units of the organization. It included quality management, asset/equipment maintenance management, inventory
management, and production planning management.
4.1.3. Human resource
This supported staff, payroll, time, and organizational management, performance evaluation of staff members, and career
planning management. It followed the Chinese legal welfare and
tax system and was exible enough to support international
practices and salary regulations.
4.1.4. Accounting and nancial analysis
This supported accounting, nancial control, and nancial
analysis. It integrated all business performance data and provided
comprehensive and systematic nancial reports.
As shown in Fig. 2, all four subsystems were integrated. The ERP
system beneted Neway in many ways, as have most ERP systems
that did not fail. It eliminated disorder in production planning,
improved production capacity, standardized and streamlined the
order fulllment process from purchasing to delivery and
established an open environment allowing corporation wide data
sharing. It dealt with resource planning within the whole
enterprise through fulllment of orders. But the ERP system did
not track or instruct the execution of planning that involved much
paper work between handoff points, and depended on human
collection and input of data. Also, coordination with vendors and
customers could not be accomplished well. Thus there was need
for a system to overcome the limitations of the ERP system and
provide a well-coordinated execution of activities at Neway.
4.2. Process ow at Neway
Fig. 3 shows the process ow after Neway implemented the
ERP system. The operational processes improved with use of the
ERP system. However, there were still problems: most handoff
processes used manual paper work and this caused delays in
236
237
and used for printing shipping lists. The Cisco D-link wireless access
box having a signal range of 100 m indoors and 300 m outdoors was
located in the rst oor of the raw materials warehouse and was
linked using 802.11b standard with handheld radio frequency
terminals.
7.1.2. Software
The three main software components were the ERP system from
Summiteam, the e-SCM system from Wmsvision, and the Oracle 8i
database management system. The PCs used by Neway had e-SCM
and Oracle clients. The main software requirement was to interface
between the three systems and this used XML, requiring
Summiteam to create a new interface for the ERP system. The
radio frequency handheld terminals had telnet emulation software
installed so that they could remotely update data to the Dell server.
There was an agreement between Neway and the software vendors
so that Neway could upgrade to newer versions of the software as
they became available.
7.1.3. Data communication
The local area network used an Ethernet connection. The PCs,
printers, and wireless access point connected to a second-tier
switch having a capacity of 100 Mbps and the connections from
these switches to the core switch as well as the connections
between the servers to the core switch had a capacity of
1000 Mbps. The network switches were procured from Cisco.
Internally Neway used copper wire-based Ethernet connections
but the connection between the two facilities of Neway was
through ber optic cables. Neway had leased a 2 Mbps connection
from China Netcom when they only used the ERP system. After
implementation of the e-SCM system, the need for bandwidth
increased and the leased line was upgraded to 100 Mbps.
7.2. Human and nancial resources management
Successful implementation of the e-SCM system required
efcient use of human resources and budget. The project needed
to be completed quickly with limited resources and this called for
active cooperation between the teams from the three different
companies.
7.2.1. Human resource management
Neway used a six member project team led by the project
manager who reported to the vice general manager. This manager
provided boundary coordination between the three teams and the
project, being responsible for coordination and providing estimates of resources for the project while communicating with
project managers from Summiteam and Wmsvision.
238
Fig. 5. Organizational structure of the project teams from the three companies.
Summiteam had a three member team responsible for developing the new XML interface for the ERP system and for making any
adjustments to the ERP system.
The leader of the seven member Wmsvision team was the
project manager who made sure the project progressed in the right
direction and within the right time and budget. He leaded the team
and allocated responsibilities. The SCM consultant played an
important role during the reengineering of the operational
processes. The software engineers worked off site, and depended
on the project manager for specications of software retooling. The
document maintainer was responsible for record keeping.
Fig. 5 shows the organizational structure of the three teams
from the three companies.
7.2.2. Financial resources management
Neway procured the e-SCM system software from Wmsvision
by paying a one-time license fee of US $15,000 and annual
maintenance fee of US $3000. The total cost of new hardware was
US $35,725. Neway had to pay US $6000 to Summiteam for
modication and customization of the ERP system and US $30,000
to Wmsvision for their implementation of the project. The annual
maintenance expenses of the e-SCM system involved additional
hours of work by in-house personnel (one extra hour per day)
resulting in US $1500. So the total initial budget for the e-SCM
implementation and integration project amounted to nearly
US $92,000.
7.3. Project management
The project management tasks were quite important for success
at Neway.
239
Table 2
Challenges and solutions of the e-SCM system implementation
Challenges
Solutions
Management of data
Preimplementation
Postimplementation
80
98
45
80
30
95
Inventory
Average safety stock period (days)
Inventory accuracy (%)
Average monthly purchase frequency
40
85
50
25
99
10
240
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