Bolt-On/Middleware Examples Kellogg Company Brown et al. [2001] Dow Corning Teresko [1999]

Kellogg Company Bolt-On Kellogg developed their own ERP –Forecast demand –Take customer orders –Coordinate raw material purchasing –Coordinate production of over 100 food products –Coordinate distribution Added linear programming Kellogg Planning System (KPS) –Production, inventory, distribution planning –Budgeting & capacity expansion

History Long user of MRP, DRP (distribution resource planning) 1987 realized product line growth, international expansion led to need for more computer support Developed KPS in 1989, modified over time By 1994 strong cost system in place –Saved $4.5 million in 1995

Kellogg LP Minimized total cost –Purchasing, manufacturing, inventory, distribution Variables: product, package size, case size 30 week planning horizon Constraints: –Line, packaging capacities, flow constraints, inventories, safety stocks 700,000 variables, 100,000 constraints, 4 million non-zero coefficients

Kellogg LP Continuous model took several hours to run –Generated starting solution for managers Probabilistic features dealt with through safety stock Example of bolt-on to ERP –Linear programming generated better plans

Dow Corning System Integration 1995 adopted SAP R/3 to integrate global business practices –Also adopted SAP data warehouse Consolidated information generated internally, externally –Internal: plant-floor data, patent information, benchmarking Allowed deeper data analysis

Dow Corning System Over 4,000 users had access Integration & data compatibility problems dealt with by data warehouse Added automated data collection system –Required middleware Middleware allowed expansion into supply chain management