HF - Supply Chain Strategic Application PDF

Course structure Supply chain and Logistics background ERP system – SAP ERP – Manufacturing use case SCM - Top 10...

Course structure Supply chain and Logistics background ERP system – SAP ERP – Manufacturing use case SCM - Top 10 Technology  Topics  Background of : Logistics Inbound Outbound Supply chain Management SCM Vs Logistics Information system ERP page 6 Logistics Types Logistics Elements page 8 page 10 What is the different between Supply chain and Logistics?  SCM vs Logistics SCM: The integration of key business processes from end user through original suppliers, that provides products, services, and information that add value for customers and other stakeholders. Logistics: is a part of supply chain process that plans, implements and controls the efficient, cost-effective flow and storage of goods, services, and related information from point of origin to point of consumption in order to meet customers’ requirements.  What is the SCM ? The integration of all activities through improved supply chain relationships to achieve a sustainable competitive advantage. Life cycle processes include physical , information , financial , and knowledge flows whose purpose is to satisfy end-user requirements with products and service from multiple linked suppliers. Design, maintenance , and operation of supply chain processes for satisfaction of end user needs. page 15 A Digital Supply chain is a supply chain whose foundation is built on Web-enabled capabilities. Many supply chains use a mix of paper-based and IT-enabled processes. A true digital supply chain goes far beyond this hybrid model to fully capitalize on connectivity, system integration and the information-producing capabilities of "smart" components. Digital Supply chain  What is the E-SCM ? Is the effective utilization of internet and business processes that help in delivering goods, services and information from the supplier to the consumer in an organized and efficient way. Is a collaborative use of technology to improve the operations of supply chain activities as well as the management of supply chains.(Turban et al., 2012). The merger of SCM and the Internet  CHARACTERISTICS OF e-SCM 1) 2) 3) Information Speed 1- Information in the supply chain.  Example: Cisco E-SCM Cisco Systems using the Internet to continuously reengineer processes to achieve a truly global networked organization. Each node in Cisco’s supply chain, from Web- enabled order entry (50% of orders received) and customer service to software distribution download, is executed through Internet based processes. Web-enabled Collaborative Planning, Forecasting, and Replenishment (CPFR) applications allow Cisco to communicate demand changes with suppliers and distributors. Cisco’s e-procurement programs provide online access to purchasing / market places exchanges. Cost reduction by $560 million with a growth rate of 400% for the past 5 years.  1- Information in the supply chain. 1.2 Supply Chain Event Management: Agile and flexible supply chains occur when companies can effectively respond to both planned and unexpected events. The ability of e-information to extend visibility and a degree of control throughout the supply chain has been facilitated. Supply chain process management (SCPM). Supply chain event management (SCEM). Providing managers with a window into key events and metrics in time to make corrective action.  1- Information in the supply chain. 1.3 “Real Options” Management: E-information metrics provides “Real Options” for companies in the supply chain to use time-based information to mitigate risks. Strategically plan and deploy safety stocks, determine the optimal point for product postponement and allocate capital. E-information provides the bridge between company-level optimization planning and the global demand pull of the entire business network.  1- Information in the supply chain. 1.4 Supply Chain Systems Integration The impact of e-SCM is measured by the depth of connectivity existing among channel members. E-Information provides companies with the real-time information and networks that ignore channel inventory buffers and improve customer service. Integrative IT tools XML, Java, Operating platforms, E-business applications, Wireless communications, …etc.  1- Information in the supply chain. 1.5 Collaborative Relationships: E-information provides for new way for the development of collaborative strategies and networked business planning. Facilitate channel collaboration on all levels, from product design to customer service. Take advantage of real-time data through enter-enterprise Internet-enabled networks. What is Management  Management - An Art..! To make the things done with proper resource at correct cost, place and schedule To direct resources (human or material) in order to achieve certain goals Elements of Management Planning Organizing Directing Coordinating Controlling page 30  Levels of Management & Information flow Top Strategic Middle Tactics Operational Operations  What is information? Data are facts, events, and transactions which have been recorded. They are basically the raw inputs which further get processed to become information. When facts are filtered through one or more processes (human or system), and are ready to give certain kind of details… they are the information. Processed data when presented in some useful and meaningful form, it is actually the information we are looking at. Appropriate Accurate Relevant Data Information Decision  Difference between data & information? Data Information Raw facts Processed facts Dead stored facts Live presented facts Inactive (only exists in the Active (being processed data for backend) knowledge base) Technology oriented Business oriented Why do we require information? To ensure effective & efficient decision making leading to prosperity of the organization. Classification of Information By By By Level By Time Source Nature By By By Use By Form Occurrence Frequency / Frequency page 36  Characteristics of Perfect Information ✓ Relevant Information Vertical ✓ Accurate ✓ Complete ✓ Understandable Horizontal Information What is System? System is a functional unit, which involves set of procedures/functions to produce certain outputs by processing data/information given as input. Input Process Output  What is MIS? MIS is basically a software tool which gives a holistic report of processed information based on which management can take certain crucial decision on which strategy and tactics could be figured out. MIS provides information that is needed to manage organizations efficiently and effectively Effectiveness And Efficiency  The difference between effectiveness and efficiency Effective – Adequate to accomplish a purpose; producing the intended or expected result. Efficient – Performing or functioning in the best possible manner with the least waste of time and effort.  The Importance of Management Information (MIS) ✓ Provide Useful information for management decisions. ✓ Comprises processed data (information), necessary for making management decisions and generally gives output in the form of tables, matrix, reports, dashboards, graphs, trends, etc for logical and analytical comparisons. ✓ Many Reports are available: (Market trend reports, sales report, IT application usage reports, Management dashboards, business information reports, research reports, …etc.)  Role of MIS? Effective decision making based upon: 1. Quality analysis 2. Cost & budget analysis 3. Risk analysis 4. Market analysis 5. Inventory analysis 6. SWOT analysis 7. Stakeholder analysis 8. Feedback analysis 9. Behavior analysis Report & Dashboard preparation. Classification of Information Systems  Types of MIS Management information systems (MIS): produce fixed, regularly scheduled reports based on data extracted and summarized from the firm’s underlying transaction processing systems to middle and operational level managers to identify and inform structured and semi-structured decision problems. Decision support systems (DSS) : are computer program applications used by middle management to compile information from a wide range of sources to support problem solving and decision making. Executive information systems (EIS): is a reporting tool that provides quick access to summarized reports coming from all company levels and departments such as accounting, human resources and operations. Marketing information systems: are MIS designed specifically for managing the marketing aspects of the business. Office automation systems (OAS): support communication and productivity in the enterprise by automating work flow and eliminating bottlenecks. OAS may be implemented at any and all levels of management.  Advantages of MIS 1. Companies are able to highlight their strengths and weaknesses due to the presence of revenue reports, employees' performance record etc. The identification of these aspects can help the company improve their business processes and operations. 2. Giving an overall picture of the company and acting as a communication and planning tool. 3. The availability of the customer data and feedback can help the company to align their business processes according to the needs of the customers. The effective management of customer data can help the company to perform direct marketing and promotion activities. 4. Information is considered to be an important asset for any company in the modern competitive world. The consumer buying trends and behaviors can be predicted by the analysis of sales and revenue reports from each operating region of the company.  Outputs of MIS Scheduled reports Produced periodically, or on a schedule (daily, weekly, monthly) Key-indicator report Summarizes the previous day’s critical activities Typically, available at the beginning of each day Demand report Gives certain information at a manager’s request Exception report Automatically produced when a situation is unusual or requires management action Types of reports Planning reports Operating reports Control reports  Role of Information System in Current Business Scenarios 1- Information systems are transforming business: ▪ Increase in wireless technology use, Web sites. ▪ Shifts in media and advertising. ▪ New federal security and accounting laws. 2- Globalization opportunities: ▪ Internet has drastically reduced costs of operating on global scale ▪ Presents both challenges and opportunities  Role of Information System in Current Business Scenarios 3- In the emerging, fully digital firm: Significant business relationships are digitally enabled and mediated Core business processes are accomplished through digital networks Key corporate assets are managed digitally 4- Digital firms offer greater flexibility in organization and management: Time shifting, space shifting  Role of Information System in Current Business Scenarios 5- Growing interdependence between ability to use information technology and ability to implement corporate strategies and achieve corporate goals 6- Business firms invest heavily in information systems to achieve six strategic business objectives: Operational excellence New products, services, and business models Customer and supplier intimacy Improved decision making Competitive advantage Survival Role of Information System in Current Business Scenarios 7- Operational excellence: Improvement of efficiency to attain higher profitability Information systems, technology an important tool in achieving greater efficiency and productivity Wal-Mart’s Retail Link system links suppliers to stores for superior replenishment system 8- New products, services, and business models: Business model: describes how company produces, delivers, and sells product or service to create wealth Information systems and technology a major enabling tool for new products, services, business models Examples: Apple’s iPod, iTunes, and iPhone, Netflix’s Internet- based DVD rentals Role of Information System in Current Business Scenarios 9- Customer and supplier intimacy: Serving customers well leads to customers returning, which raises revenues and profits Example: High-end hotels that use computers to track customer preferences and use to monitor and customize environment Intimacy with suppliers allows them to provide vital inputs, which lowers costs Example: J.C.Penney’s information system which links sales records to contract manufacturer 10- Improved decision making: Without accurate information, Managers must use forecasts, best guesses, luck Leads to: o Overproduction, underproduction of goods and services o Misallocation of resources o Poor response times o Poor outcomes raise costs, lose customers Example: Verizon’s Web-based digital dashboard to provide managers with real-time data on customer complaints, network performance, line outages, etc Role of Information System in Current Business Scenarios 11- Competitive advantage: Delivering better performance Charging less for superior products Responding to customers and suppliers in real time Example: Toyota and TPS (Toyota Production System) enjoy a considerable advantage over competitors – information systems are critical to the implementation of TPS 12- Survival: Information technologies as necessity of business May be: Industry-level changes, e.g. Citibank’s introduction of ATMs Governmental regulations requiring record-keeping Examples: Toxic Substances Control Act, Sarbanes-Oxley Act  Overview of Information System Scope in supply chain Internal External Finance/Accounting Customers Marketing IS Vendors Logistics Carriers Manufacturing Supply chain partners Purchasing Order Management System Warehouse Management Transportation Contact with customer System Management System Stock availability Stock level management Shipment consolidation Crediting checking Order picking Routing and scheduling Invoicing Picker routing Claims Product allocation to Picker assignments and Tracking customer work loading Bill payment Fulfillment location Product availability Freight bill auditing estimating 53 Order processing system Industry/external data Customer location Market share Order history Operating data Product offering Salesperson Freight payment Demographic trends Revenues Transportation history Economic trends Order status Inventory Credit files Product movement Management Company records Competitive reactions Cost of capital Sales forecasts Cost of logistics Future trends activities New markets Standart costs Application Database Report generation Product traking and Order performance forecasting Shipment performance Performace and cost Damages and returns 54 reports Functional areas of logistics page 55  What is ERP Enterprise resource planning (ERP)  ERP Evolution  First came into prominence in the 1970s. It is a business software designed to improve accuracy and efficiency in basic processes like production scheduling and inventory management. Its primary objective was to precisely calculate for manufacturing companies the materials needed, the times they were MRP I needed and the ideal quantities of the materials. In today’s world of manufacturing, MRP I is considered limiting as it only offers basic material requirements planning. For the most part, MRP II is considered the official replacement of MRP I given that it provides added functionality.  By the time, the 1980s rolled around, MRP II was being utilized. It helped manufacturers with other important facets of their companies. These included scheduling, payroll, shop floor control, invoicing and detailed MRP II capacity planning. As explained by VIENNA Advantage, MRP II gave companies the ability to compare forecasts with actual data and analyze performance and improve processes to achieve better efficiency.  Enter the 1990s and ERP is conceived. Coined by research and advisory company, Gartner, ERP is a software that combines all the benefits of MRP II with added applications for a variety of other operations. They include Financial Management, HR & Payroll management and Customer Relationship Management, among others. Today, MRP II and ERP are generally used in conjunction as opposed to having ERP serve as a replacement for MRP II. ERP ERP solutions are typically used by organizations to collect, store, manage and interpret data from various departments of the organization. “ERP solution integrates the key areas of the business like purchases, sales, manufacturing, human resources, services, inventory, etc., and improves the business processes and flow of information across the organization,” informs VIENNA Advantage.  Enterprise Resource Planning Systems (ERP) ERP systems is a set of integrated software modules and a central database that enables data to be shared by many different business processes and functional areas throughout the enterprise. page 63 ERP Types Why ERP is Required  Reasons for Implementing ERP Systems ❑Improve business performance. ❑Position the company for growth. ❑Make employee jobs easier. ❑Better serve customers. ❑Ensure reporting/regulatory ❑Standardize global business operations. compliance. ❑Appease the parent ❑Better integrate systems across company/stakeholders. locations. ❑Reduce working capital. ❑Replace an old ERP or legacy system. Top ERP Vendors What is SAP ERP? page 70 Sample : Business Suite page 71  Solutions for all Whether you have two or 200,000 employees, SAP has a comprehensive portfolio of leading ERP cloud systems and tools to fit your needs. We also provide dedicated support teams that are at your disposal 24/7. Industry-leading technology SAP has over 40 years of enterprise resource planning experience across industries and business sizes. We use the latest technologies to build future-proof cloud ERP tools, delivered via automatic updates. Why SAP Flexibility ERP? SAP is dedicated to creating easy-to-use, adaptable cloud ERP applications. Whether you want to customize processes, use the public or private cloud, or pay only for what you need, flexibility is at the core of our offerings. Cloud security management SAP Business Technology Platform is built on an advanced technology infrastructure. We have teams of experts working on the management of data protection and security threats. SAP ERP History  S = simple 4 = four (4th generation) HANA = underlying database technology S/4HANA is the successor of SAP ERP. S/4HANA is to extend the existing ERP product. It will cover all daily WHAT IS S/4HANA? processes of a company. Parts of the following industry solutions are also included: SAP SRM, SAP CRM and SAP SCM. Other functions are available as LoB Solutions (Line of Business Solutions). These solutions offer an additional range of functions. However, they must be licensed and installed separately.  Fast Facts about SAP S/4HANA Enterprise Resource Planning (SAP ERP) Enables a company to support and optimize its business Buy (MM) Track (CO) processes Sell People (SD) (HCM) Helps the organization run smoothly Make Maintain (PP) (EAM) Real-time environment, Scalable and flexible Store Track (WM) (FI) Collections of logically related transactions within Projekt (PS) Services (CS) identifiable business functions  Organizational Master Transaction Data Data Data Fast Facts about SAP Company Code Person Purchase Order S/4HANA Plant Material Invoice Storage Location Customer Quotation Data Types in ERP Distribution Channel Vendor Sales Order Systems Purchasing Organization Work Centre Transportation Order  Fast Facts - SAP S/4HANA On-Premise vs. Cloud Traditional licensing Subscription Licensing → Traditional licensing with customer → Deployment in the private cloud, control of deployment and maintained by SAP maintenance SAP provides system and controls Private control of deployment and maintenance maintenance Automatic participation in Hardware at companies’ location quarterly innovation upgrades Privately controlled data In-App extensibility with limited ABAP Fewer release cycles Current release cycles Individual requirements possible SAP ERP embedded Traditional ABAP extensibility up to core modification  Fast Facts about SAP S/4HANA Digital Transformation - Why? Changing the way of life Empowered & s Informed Customer Simulation Forecasting Contact to the Customer Research New possibilities companies by social media etc. Drivers of Change IoT Companies Technology Cloud New Changing organization customer Mobility Big units expections Data  SAP MM (SAP Materials Management) SAP MM (Materials Management) is a module in SAP ERP Central Component (ECC) that provides companies with materials, inventory and warehouse management capabilities. The primary goal of SAP MM is to make sure that materials are always kept in proper quantities and without shortages or gaps in the organization's supply chain. It also helps supply chain professionals and other SAP users complete the purchasing of goods in a timely and cost- effective way and to be able to deal with day-to-day changes in these processes. One of the critical modules in SAP ECC, SAP MM is part of SAP ECC's logistics function and plays a vital role in a manufacturer's supply chain. It integrates with other ECC components like Production Planning (PP), Sales and Distribution (SD), Plant Maintenance (PM), Quality Management (QM), Finance and Controlling (FICO) and Human Capital Management (HCM).  Inventory Management Purchasing MRP Physical Inventory SAP – MM Valuation Functionality Service Master Invoice Verification Product Catalogs  Internal Document instructing the purchasing department to request a specific good or service for a specified time Requisitions can be created two ways: Directly - Manually person creating determines what, how Purchase much, and when Requisition Indirectly - Automatically MRP Production Orders Maintenance Orders Sales Orders  Once the requisition has been assigned a source of supply it can be released for processing Internal Sourcing Requirements There are a variety of ways that a purchasing Requisition department can Source List Sourcing process a requisition to determine the Outlined Agreement appropriate Source of Supply: RFQ Internal Sourcing The requisition for materials could be satisfied by sources within our company. It is possible that a plant within your firm could represent a potential source of supply for the material needed (centralized warehouse) If an internal source is identified the requirement is covered by an internal procurement transaction (stock transport order)  A source list is a record that specifies the allowed means for procuring a material for a certain plant within a given time period. If the list contains a sole source the system will assign the vendor to the requisition. Source List If several options exist, the system will display a list of vendors for you to choose from. If no source has been established the system will revert to search information records and outline agreements.  Outline Agreement  SAP Sales and Distribution (SAP SD) is a core functional module in SAP ERP Central Component (ECC) that allows organizations to store and manage customer- and product- related data. Organizations use this data to manage all of the sales ordering, shipping, billing, and invoicing of their goods and services. SAP – SD Working in conjunction with the other modules, SAP SD enables an order-to-cash cycle business process. SD handles all the details in the sales and distribution part of the cycle, Sales and Distribution according to SAP. In a typical cycle, SD generates a sales quote, and the customer then places a sales order, the goods are picked from a warehouse or production facility and shipped to the customer, an invoice is sent with the order and accounts receivable settles the payment with the customer. Each step in the process generates transactions in the SD module, which then generate further transactions in the other ECC modules. The backwards scheduling calculates a scheduled start that is in the past despite maximum reduction. Forward scheduling then calculates the scheduled finish, starting at today's date and using maximum reduction.  is the component of ERP Central Component (ECC) that helps businesses plan the manufacturing, sale and distribution of goods. A part of SAP ECC's logistics function, SAP PP plays a vital role in a manufacturer's supply chain and integrates with other ECC components, including Materials Management (MM), Sales and Distribution (SD), Plant Maintenance (PM), Quality Management (QM), Finance (FI), Controlling (CO) and Human Resources (HR). SAP PP activities include material requirements planning, bill of material, routings and capacity planning. Everything in SAP PP revolves around master data that is SAP – PP stored and manipulated in centralized master data tables. Master data types include materials master, work center, BOM and routing. The master data is used to create transactional data in SAP ECC, such as creating a production order in PP, a sales Production Planning order in SD, or a purchase order in MM. For example, when a production order is created in SAP PP, it uses master data from SAP MM about the raw materials needed to produce the finished product, which will subsequently be used to create a sales order in SAP SD. SAP PP sub-modules include sales and operations planning (S&OP), long-term planning (LTP), data management (DM), master production schedule/material requirements planning (MPS/MRP), capacity requirements planning (CRP), shop floor control and information systems.  Supply chain management focuses on the management of the flow of goods and how the raw materials are transformed into finished products. Below are the key steps that are handled through Production the production planning process in SAP: Planning Sales and Operations Planning (SOP) Process in Demand Management SAP Long-Term Planning Master Production Scheduling Material Requirement Planning Shop Floor Control Settlement 1 - Sales and Operations Planning The Sales and Operation Planning (SOP) component in SAP manages sales, production, and other supply chain targets of the organization. This is done through a planning tool that uses historical and current data to set up the future supply chain targets in the system. Information passed through sales and operations planning is passed into Master Production Scheduling (MPS) and Material Requirement Planning (MRP). SOP is also connected with profitability analysis, cost center accounting, and activity-based costing. There are two main planning methods available in SOP and we can customize further methods based on the requirement. 1.Consistent planning 2.Level-by-level planning 2 - Demand Management Demand management in production planning is handled through the planning strategy. Planning strategy determines the method in which a product is manufactured. The main demand management method is planned independent requirements (PIR). The PIR creates demand in the system, and it can be used in a make-to-stock (MTS) planning strategy. A make-to-order (MTO) planning strategy is based on sales orders. Production does not start until the customer sales orders are placed in the system. Production and inventory are managed with the sales order link and the production process can be tracked using the sales order. 3 - Long-Term Planning Long-term planning is used to check the future demands of materials based on the bill of material (BOM). Long-term planning can be carried out in simulation mode. It will check the capacity availabilities, material forecast, and delivery timelines, and if the requirements can be fulfilled, simulation can be transferred into an operational mode. Long-term planning can be executed based on an existing production BOM. It is also possible to define BOM and routing specifically for long-term planning. 4 - Master Production Scheduling Master production scheduling (MPS) enables the planning of critical materials of an organization with special tools. MPS increases material availability, reduces storage costs, and increases planning stability. MPS materials are planned independently and will not be considered in the regular MRP runs. 4 - Master Production Scheduling Master production scheduling (MPS) enables the planning of critical materials of an organization with special tools. MPS increases material availability, reduces storage costs, and increases planning stability. MPS materials are planned independently and will not be considered in the regular MRP runs. 5 - Material Requirement Planning Material requirement planning (MRP) is the heart of the production planning process. MRP matches the demand and the supply and proposes the best methods for executing the production process. The output of the MRP run is the procurement proposals. There are two main procurement proposals in SAP. These are the plan order and purchase requisitions. Plan order is generated through MRP for materials that are produced in-house. Plan orders are converted into production orders when the manufacturing starts. The second procurement proposal which MRP generates is the purchase requisitions. Purchase requisitions are generated for materials that are procured from external parties. These include mainly the raw materials. Purchase requisitions are converted into purchase orders. 6 - Shop Floor Control Shop floor control in production planning is mainly about executing the production functions within the shop floor. Shop floor control determines which materials need to be produced, the quantities to be produced, and the locations in which the materials are to be produced. Shop floor control uses production planning master data such as BOM, routing, work center, and production versions when executing the shop floor activities. Shop floor activities are based on a production order or a process order. Production/process order has the quantities to be produced, scheduled dates, routing sequence, work centers, and materials that are consumed during the production. Monitoring and controlling the shop floor activities are essential for the supply chain management. 7 - Capacity Planning Capacity planning is essential for the supply chain management process. Demand vs supply capability is based on the available manufacturing capacity. The manufacturing capacity is dependent on the capacity of the work centers. A work center can be a person, a group of people, or a machine. For each work center, individual capacities can be defined. Capacities are generally defined in minutes or hours. Based on the work center capacity and the standard values of the product, schedule dates will be determined for production. Scheduling determines when the production can start and when it can end based on the work center capacity and other defined constraints. 8 - Inventory Management Inventory management deals with the management of material stocks on a quantity and value basis. Documenting goods movements and carrying out physical inventory are also important functions of inventory management. Inventory management also provides the capability to handle special stocks like sales order stocks and consignment stocks. When it comes to production planning, managing the material stocks and executing goods movements are essential activities on the shop floor. Therefore, inventory management is used throughout the production process. 9 - Settlement Once the production is complete, settlement runs are carried out to identify and evaluate the variances. Production orders will be technically completed, and this marks the completion of the production planning process  ERP – Manufacturing use case Pain areas in Inventory and planning operations 1.1 Reorder Point 1.2 Min Max - ordered QTY calculation methodology 1.3 Dual Unit Items - conversation ERP in Internal Purchasing Cycle ERP – Manufacturing use case Technological part Digital as Enabler EDI- Electronic data interchange  What is EDI Electronic Data Interchange (EDI) is the computer-to-computer exchange of business documents in a standard electronic format between business partners.  RPA - Robotic process automation Robotic process automation is the use of specialized computer programs, known as software robots, to automate and standardize repeatable business processes 3D Printing  The 3D printing process builds a three-dimensional object from a computer- aided design (CAD) model, usually by successively adding material layer by layer, which is why it is also called additive manufacturing RFID  Radio Frequency Identification: a technology that uses electronic tags placed on objects, people, or animals to relay identifying information to an electronic reader by means of radio waves. IoT In simple words, Internet of Things (IoT) is an ecosystem of connected physical objects that are accessible through the internet.