McGraw-Hill/Irwin Copyright © 2008 by The McGraw-Hill Companies, Inc. All rights reserved. Information Technology ERP Systems, SCA Systems, & E-Commerce Chapter 2

2-2 Key questions 1.What do ERP systems do, are these systems easy to implement, why? 2.What do SCA systems do, are these systems easy to implement, why? 3.What are the three categories of SCA systems, & what do they involve? 4.What is e-commerce, & what is the difference e- commerce in its simplest form & e-commerce at a deep level (a.k.a. e-business) 5.What is the role of ERP/SCA systems in e-commerce, & why? 6.What are the emerging information technologies that affect SCM?

2-3 Road map Enterprise Resource Planning Systems Supply Chain Analytics Systems E-Commerce Future

2-4 ERP software market Big guns  SAP  Oracle  PeopleSoft (owned by Oracle)  J.D. Edwards Slingshots  Microsoft  MK Group  CMS  Syspro Impact Software  Qube ERP ERP Enterprise Resource Planning Systems

2-5 Essence of ERP systems Record day-to-day transactions associated with running a business  E.g., customer order, raw material purchase, vendor payment, customer shipment, customer payment, new hires, new equipment Provide near real-time access to information in a consistent manner throughout the organization ERP

2-6 Big picture Enterprise Resource Planning Systems Time MoneyMaterial Transactions Planning ERP system ERP

2-7 ERP in more detail ERP The ERP database surrounded by example activities supported by ERP software modules.

2-8 Illustration Business Week 1. Sales rep from Intl Sneaker Co. takes an order for 1,000 shoes from a Brazilian retailer. From her portable PC, she taps into the R/3 sales module back at headquarters, which checks the price, including any discounts the retailer is eligible for, & looks up the retailer’s credit history. 2. Simultaneously, R/3’s inventory software checks the stock situation & notifies the sales rep that half the order can be filled immediately from a Brazilian warehouse. The other sneakers will delivered in 5 days direct from ISC’s factory in Taiwan. 3. R/3’s manufacturing software schedules the production of the sneakers at the Taiwan factory, meanwhile alerting ISC’s warehouse manager in Brazil to ship the 500 purple tennis shoes to the retailer. An invoice gets printed up—in Portuguese. ERP

2-9 Illustration continued 4. That’s when R/3’s HR module identifies a shortage of workers to handle the order & alerts the personnel manager of the need for temporary workers. 5. R/3’s materials planning module notifies the purchasing manager that it’s time to reorder purple dye, rubber, & shoelaces. 6. The customer logs on to ISC’s R/3 system through the internet & sees that 250 of the 500 shoes coming from Taiwan have been made & dyed. He also sees there are 500 orange tennis shoes in stock & places a follow-up order on the net. 7. Based on data from R/3’s forecasting & financial modules, the CEO sees that colored sneakers are not only in hot demand but are also highly profitable. He decides to add a line of fluorescent footwear. ERP

2-10 ERP implementation is risky Ballpark figures for large multinational:  4 years & $500 + million to implement As many as 70% of implementations fail to meet objectives $5 billion pharmaceutical company filed for bankruptcy  Primary cause - failed ERP implementation crippled the business (APICS: The Performance Advantage) Why the challenge?  Affects almost entire organization – processes & people ERP

2-11 Road map

2-12 SCA software market Big guns  i2 Technologies  Siebel  Manugistics  SAP  Logility Slingshots  Advanced Process Combinatorics  Comergent  Saltare.com SCA Supply Chain Analytics Systems

2-13 Essence of SCA systems Support supply chain analysis & decision-making  Demand and/or commodity price forecasting  Where production should take place, what vendors to use  Due date & price quotation  When & how much to order of raw materials  Optimize transportation costs considering service requirements  New market/promotion opportunities  Insight into optimal customer mix, e.g., profitably maximize customer service where profits are highest  Problem identification & recovery SCA

2-14 Big picture Supply Chain Analytics Systems Categories of supply chain analytics software SCA

2-15 Supplier relationship management For example  Organize & track supplier performance  Analysis of products to outsource  Determine best suppliers for strategic partnerships SCA

2-16 Supply-demand management For example  Demand forecasting, potentially in collaborative framework  Real-time delivery date & pricing quotes Visibility within own enterprise & potentially up the supply chain  Dynamic pricing (yield management)  Optimizing flow inbound, production, outbound  Early warning & resolution of supply chain problems SCA

2-17 Customer relationship management For example  Web store fronts  Organize & track interaction with customers Conversations Web activity (e.g., “click stream” analysis)  Slice & dice capabilities  Targeted promotions E.g., Amazon.com sending coupon for soon-to- be-released CDs to those customers who have previously purchased a CD by the artist SCA

2-18 SCA system implementation Challenging, as with any large IT project, but less challenging than ERP  Affects fewer people & processes SCA

2-19 Road map

2-20 What is e-commerce? For example… configure product/service dynamic price & lead-time quotes supply chain visibility  inventory, capacity, transportation, pricing order tracking past order history customer-specific pricing suggested products/services based on past/current orders notification  when shipped  delays  future price changes  promotions E-Com The buying & selling of goods & services over the Internet In simplest form  a web storefront - display product, accept orders At a deeper level  dynamic coordination across a supply chain through information & collaboration a.k.a. “e-business”

2-21 Relationship to ERP/SCA systems ERP/SCA systems = digital representation of an organization ERP systems  Past, present, future SCA systems  Future “Windows” into supplier/buyer systems E-Com

2-22 ERP/SCA systems -“backbone of e-commerce” Cisco Systems  Integrates its online ordering system into the manufacturing queue, cutting leadtimes  Customers manage their account, follow progress of their orders, & improve delivery to their own customers Sun Microsystems  Private trade exchange linking Sun with 35 suppliers E-Com

2-23 Road map

2-24 The information dam is breaking up SCA systems still not practical for many organizations  Not only difficult to implement but highly dependent on data quality …but in the midst of change  Expansion of ERP systems  Data collection & storage technology advancing & cost is reducing E.g, global positioning systems, bar code readers, RFID, programmable logic controllers Future

2-25 Technology trends 1.Expanding availability of broadband (wired & wireless)  Fiber optics, DSL, cable Internet access  Communication technology advances Wireless cell phone approaching broadband speeds Wi-Fi & Bluetooth wireless technology RFID 2.Advancing machine-to-machine communication protocols  A foundation for an e-vocabulary – XML (industry-specific tags)  Business -.Net (Microsoft), e-Speak (HP), Java System (Sun)  Networked appliances - Jini (Sun) Increasing power-to-cost ratio of computing hardware/software & lowering communication costs Future

2-26 Emerging e-commerce infrastructure E-Commerce Infrastructure BRAINS VOCAL CHORDS LANGUAGES ERP/SCA Systems Transmission Technologies E-Commerce Protocols Digital representationInternet, fiber optic lines,.Net (MS), e-Speak of past, present, futurewireless at broadband (HP), Java & Jini with analysis &speeds by 2004, Wi-Fi, (Sun), XML decision capabilitiesBluetooth, RFID Biological analogy of e-commerce infrastructure E-commerce infrastructure is approaching critical mass… Future

2-27 Back to key questions 1.What do ERP systems do, are these systems easy to implement, why? 2.What do SCA systems do, are these systems easy to implement, why? 3.What are the three categories of SCA systems, & what do they involve? 4.What is e-commerce, & what is the difference e- commerce in its simplest form & e-commerce at a deep level (a.k.a. e-business) 5.What is the role of ERP/SCA systems in e-commerce, & why? 6.What are the emerging information technologies that affect SCM?