Concepts in Enterprise Resource Planning, Fourth Edition 4-1

Chapter 4:
Production and Supply Chain Management Information Systems

Another Look

Sales and Operations Planning for Blood Banks

Students should look to the instructor for guidelines as to how long this memo needs to
be. Benefits may include:
 Higher customer satisfaction (donors and health care providers)
 Balanced inventory across product lines and customers
 More stable production rates and higher productivity
 More cooperation across the entire operation
 Timely updates to the business plan resulting in better forecasting and fewer
surprises that negatively impact the bottom line

Source: http://www.ncbi.nlm.nih.gov/pubmed/21128950

Complexities of Supply Chain Management

Responses will vary. Possible causes of supply chain disruption include:

 Worker unrest
 Flooding
 Tropical cyclones
 War
 Conflicts
 Terrorist attacks
 Data breaches

ERP lets companies and suppliers share information (sales, inventory, production plans,
and so on) in real time throughout the supply chain. This allows all parties to respond
quickly to disruptions by shifting production to new locations and mapping out supply
networks.

Supply Chain Going Green

Responses will vary. Environmentalists, for one, would be thrilled and would happily pay
the increased prices to ensure their products are sustainably produced and packaged.
Concepts in Enterprise Resource Planning, Fourth Edition 4-1

Exercises

1. In which industries is supply chain management important? In which industries

is it not? Why, or why not?

Industries that manufacture goods and/or supplies goods to customers place a high
value on supply chain management. For example, the textile industry needs to
procure raw materials and manufacture textiles to sell to the garment and furnishing
industry. Students may be able to think of other industries easily. Encourage them to
think of their daily lives: shopping at the grocery store, visiting a fast food restaurant,
or going to the mall.

Those industries not valuing supply chain management would be service-oriented

industries like financial services, banks, law firms, and health care industries. Keep
in mind that some of these industries still have some supply chain issues but they are
not as critical as the other industries.

2. Recall from Chapter 1 that a business process cuts across functional lines. When
a customer orders a product, such as a custom-built car, the Supply Chain
Management function must interact with other functional areas in a company to
complete this order. List the functional areas involved in this process. What
information must pass between those areas and Supply Chain Management to
fill the customer’s needs?

Most companies have four main functional areas of operation: Marketing and Sales
(M/S), Supply Chain Management (SCM), Accounting and Finance (A/F), and
Human Resources (HR).

Information that could be shared include: sales orders, payments, product marketing,
advertising, and production runs.

3. Create a two-column list, and in the first column, list Fitter’s flawed supply
chain management process. In the second column, list the ways in which an ERP
system could alleviate some of these problems.

Fitter Snacker Problems

Problems that might be included in the list:

 Marketing does not share information with production
 Production not involved in marketing meetings
 Production not advised of sales promotions
 Production not warned when large orders are accepted
 Production scheduled by monitoring finished goods inventory
 Marketing not sure what inventory is actually available
 Production schedule changes reduce capacity because of changeovers
 Inventory records are inaccurate
Concepts in Enterprise Resource Planning, Fourth Edition 4-1

 Difficulty in keeping standard costs up-to-date

 Raw materials inventories higher than necessary
 Unable to determine profitability quickly and easily

The sharing of information and plans between marketing and production can be aided
with an integrated information system, but this is primarily an organizational issue.
Coordination between these two functions could occur without an integrated IS, and
the installation of an integrated IS will not guarantee their cooperation.

Production scheduling could be greatly improved with an integrated IS. Real-time

information on sales orders and accurate finished goods inventory information would
make production scheduling possible. Changing the organizational structure and
incentives to encourage cooperation between marketing and production would serve
to improve this process.

Managing inventory and determining costs and profitability are directly improved
with an integrated information system.

4. Metrics are used to measure improvements in supply chain management. What

are the benefits of tracking metrics? How often should they be calculated and
recorded? Does it depend on the industry? Does it depend on the competitive
environment? Why? Justify your answer.

Responses will vary. Metrics help to:

 Identify problem areas
 Ensure that decisions are based on facts
 Identify whether or not suppliers are meeting requirements
 Validate expectations
 Focus on results
 Provide specific numbers for comparison, analysis, and planning

Some metrics are calculated monthly while others are done quarterly. It depends on
the metric and the industry.

5. What are potential sources of risk in Fitter’s supply chain? How should Fitter
prepare to minimize these risks? Research this topic on the Internet, and use
examples to support your reasoning.

Responses will vary. Risks include:

 Supplier failure
 Strategic risk
 Natural disaster
 Logistics failure
 Infringement on intellectual property
 Cost increases
Concepts in Enterprise Resource Planning, Fourth Edition 4-1

To minimize these risks, supply chain risk management technology should be

considered.

6. Compare customer relationship management and supply chain management.

How are they similar? How are they different? In which functional areas do they
have the most impact? In answering, consider the kinds of technologies used in
each.

SCM is involved with coordination between customers and suppliers, and CRM is
used to manage customer relationships, so there is a lot of similarity. SCM is used
when critical, long-term relationships are developed between the customer and
supplier. For example, an automotive supplier is linked integrally to the auto
manufacturer because the product being supplied is critical to the customer’s product
and is a result of long-term purchasing and engineering development.

CRM can be used with industrial customers as well as individuals. Products managed
with CRM are not likely to be integral parts of the customer’s products. For example,
a PC manufacturer would more likely use CRM with an individual or industrial
customer, while a steel manufacturer would use SCM with an appliance
manufacturer. With CRM, the company is trying to present “one face” to the
customer. With SCM, the company is trying to create a virtual organization to meet
the end-customer’s needs. In CRM, companies use knowledge warehouses to gather
and summarize voluminous data on the customer (contacts, quotes, orders, etc.) to
gain understanding. In SCM, technology is used to share demand and production data
among all participants in the supply chain.