ERP/SCM INTEGRATION

N. R. Srinivasa Raghavan
Assistant Professor
Department of Management Studies
IISc
raghavan@mgmt.iisc.ernet.in

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 The E-Quations

E-SRM = E-SCM + E-ERP + E-CRM +

E-SEM + E-LOGISTICS + E-PDM

E-SCM = E-PROCUREMENT +
E-MANUFACTURING + E-PLANNING
E-DISTRIBUTION

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Information Systems in SCM
*Stgc
Strategic Alliance
Planing formulation
*Devp of
Core Competence
Decision OPT *VRP& Schg
Analysis Tools *Invy.Control *NPD
*SCN Design *FMS
*Virtual/Vertical Integration
Mgmt *Fin. Mgmt. *Cust.Serv. Mmt.
Control *Cost/Asset Mgmt. * Productivity Mmt.
*Vendor Mgmt. *Quality Mmt.
ERP *ODP * Shipping * CRM
*Inventory Assignment * Pricing + Inventory *Payrolls etc.

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Integration @ what levels?

Transaction level
Management control level
Decision analysis level
Strategic planning level

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Need for Integration: Strategic
motivation
Excess Demand plan &
Unnecessary
Inventory
I PDN plan not
Prod./Purchase
Late synchronizer.
Revenue Deliveries
Infeasible Prod.plan &
Poor usage Plan Purchase plan not
R
- of capacities synchronizer.
O
Expenses Premium
A PDN.plan &
transportation
costs Capacity plan not
Late Resynch- synchronizer.
Assets Premium
purchase ronisation
costs
Qualityissues
Quality costs

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Need for Integration: Operational
motivation
Customers
Sudden 20% raise in
B/D of logistics
retail demand
operations

Distribution Centers

M/C 2010 is down. Factory

Will be up again in 3 days Lockout forces
prodn. to be shut

Supplier

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Solutions due to ERP are myopic

An ERP System would react by:-

*Adapting the schedule of machine 2010 and
reschedule other manufacturing orders.
* Send orders through EDI to the distribution centre
*Arrange for alternate fleet to route finished goods.

Impact on total supply chain is ignored

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 S/W Modules covering the SCP

SOURCE MAKE DISTRIBUTE SALES

Long
STRATEGIC NETWORK PLANNING
term

Medium MASTER PLANNING Demand

term Planning

Prodn.Planning Dristbn.Planning
Short Demand
MRP
term Scheduling Transport Planning &ATP

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Global SCN Formulation

 Maximize Sum of the global after tax discounted

yearly profits ($,Rs,etc)
 S.t., for every planning period:
 Supplier's capacity

 Production capacity at plants and DC's

 Transportation capacity of channels

 Customer demand constraints, BOM

 Minimum profit for SBU's on a country basis

 Solution: MILP: Use ILOG/CPLEX/NEOS etc.

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Global SCN Formulation: Data
requirements
 Average capacities available at various entities (at
any granularity desired: eg. Machine-Shopfloor-
Factory)
 Availability and utilization of logistics fleet
 Estimates/Forecasts of customer demand by region,
product etc
 Average per unit costs incurred for various resources
 BOM
All obtainable from OLTP systems

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 ATP Computations
* Provide promised dates for customers
- influences leadtime + on time delivery
* Generate fast & reliable order promises (esp. in E-
business environment)
* Helps in retaining customers & increasing market share
* Complexity increases as :
# of parts increase; PLC decr.; #of customers
increase;flexible pricing policies;demand gets uncertain.
Should be based on status of ALL SCN facilities

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Scheduling
* Generate detailed prodn./procurement/tptn schedules for all
facilities over a rlatively short interval of time.
* Specify start & end time of various activities
* Identify bottlenecks & provide efficient means of prompt
delivery of customer desired products & right place & time
objectives
* makespan. *sum of lateness/tardiness
* sum of flow times * sum of set up times
* max.lateness/tardiness

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Phases in Scheduling
1. Model building-ILP, queueing model, NLP

2. Extracting required data from ERP system- (set up time,cycle time

m/c breakdown data, resource requirements)

3. Generating scenarios (input cases)

4. Iterative creation/adjustment of schedules

5. Approve a scenario

6. Executing the schedule via ERP system.

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 SCM Solutions: i2 RHYTHM
Source Make Deliver Sales

Long term
SC Strategist

Mid term SC Planner Demand

planner
Factory Tptn.
planer -Modeler
Short Demand
term -Optimizer fulfillment
Optimal -Manager
scheduler

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 SCM Solutions: J. D. Edward's
Source Make Deliver Sales

Long term
Enterprise Planning

Mid term Production and Distribution Planning Demand

planner
P&DP

Short Production
term Scheduling Vehicle P&DP
Routing

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 SCM Solutions: SAP's APO
Source Make Deliver Sales

Long term

Mid term Supply Network Planning Demand

planning
Production
Short Planning and
Deployment Global
term Detailed
Scheduling ATP

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Integration Issues

SCM solutions need to be integrated in existing IT Systems

SCM

OLTP/ERP D/W

SCM cannot replace ERP.On the contrary, they extend

planning tasks

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Integration with ERP
* ERP has transactional data
* SCM solution regularly has to talk to several ERP/OLTP
systems of various SC entities.
Two models required
A. Integration model-(what)
Defines - Which objects are exchanged (eg.BOM’s, routings,
inventory levels, Customer Order, PO, etc)
- Their origin
- Which planning tasks performed on which system.

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Integration with ERP (contd)
B. Data exhange model (how)
Specifies how the flow of data & info between systems is
organized.

Most solutions provide a macro language to define these models

An SCM solution should:
* Match data items from ERP system & structure it
* Provide Import/Export formats (eg.ASCII format with fixed
field size or csv files)

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Data exchange model
Two types - Initial transfer
Incremental transfer

Master data Transactional data

(Long term changes, (for implementation of
new facility, new plans)
shifts, new suppliers,
etc.)

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Data exchange model (contd.)
ERP SCM

BOM, Initial Model

Inv.levels, tranfer building
routing,..
Incremental Model
Master adjustment
data tranfer

Transactional Incremental Planning

data tranfer data

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Integration with D/W
ERP D/W
Real time data Historical snap shots
Transactional purposes Decision support purposes
KDD/Data mining/OLAP

D/W are mainly used in demand planning:

Finding patterns in demand using stats

OLAP tools help in fast and powerful reporting on data

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

 Data warehouses and SCM
 Collect data from various companies;
 Ensure consistency of data from disparate
transactional
SCM
systems
D/W Model
OLAP tools building
Historical
data KDD
data mining Time series
tools analysis

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in

Classification of SCM integration techniches

Standard
Technology
Standard

middleware
pdt
eg.CORBA

Internal Vendor specific

technology

interfaces middleware
specific
Vendor

eg.SAP eg.i2
R/3, APO RhythmLink
Open only for pdts of vendor Open for other systems
10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in
SCM Solution Providers: A Glance

Dy nas is i2 logility M anugis tic s JD E dwards W eb P lanner

E lec tronic s
A utom otive
M ec h. E ngg.
M etals
P harm a
Chem ic als
P aper/P rint
O il and G as
F M CG
Tex tiles
F ood
Trans portation

INDUS TRY FO CUS A /C TO V E NDO R

INS TA LLA TIO NS E XIS TING A /C TO V E NDO R

10th August 2001 N. R. S. Raghavan, raghavan@mgmt.iisc.ernet.in