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Enterprise Profitability
Part 4 of 8

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Lean Manufacturing, Basics, Principles, Techniques

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Order Generation
Integrated order generation is the cornerstone of customer-driven supply chain management. Even when order volumes become very large, a TEI/ ERP system must be designed to handle each individual order quickly, smoothly, efficiently, and accurately. Order generation encompasses all the methods of bringing customer demand to the manufacturer's atten­tion, including
• vendor-managed inventory (VMI)/continuous replenishment— VMI moves day-to-day responsibility for management of invento­ries from the customer to the supplier, subject to controls that they mutually define in advance. This removes one redundant layer of planning (at the customer) in the supply chain by tightly integrating the customer and supplier, resulting in lower costs and reduced re­sponse times.
• electronic commerce, such as EDI and Internet commerce— E-commerce involves moving data between companies electroni­cally rather than by paper or phone. E-commerce provides the es­sentially the same capabilities as EDI (electronic transfer of data from computer to computer, rapidly and error-free) very inexpen­sively by using the Internet. Thus, e-commerce is rapidly becoming the technology that enables supply chain partnerships. Some ERP systems are already adapted for e-commerce; the rest will probably follow suit in the near future.
• supplier-entered orders, from customer phone calls, faxes, and mail—When a customer calls to place an order, the TEI/ERP sys­tem must be sufficiently responsive to allow the customer service representative to quickly and accurately enter the order while the customer is on the phone, providing a firm ship date and a total price for the order (and assuring creditworthiness in the background).
• kanbans and other manual signals—Kanbans and other manual signals relay an authorization to ship products to a customer with­out any paperwork or intervention on the part of customer service.
• distribution resources planning (DRP)—DRP is a logical precur­sor of VMI. It monitors the current and projected future on-hand of finished goods at warehouses, in the same way that MRP monitors the current on-hand and projected usage of inventory inside the plant.
Order Entry
Order entry addresses the various options and challenges involved in accepting the demand from the customer, no matter in which form it has arrived. Some of the order entry capabilities included in TEI/ERP systems are
• multiple order types
• handling large volumes of order line items
• pricing and promotions
• multiple units of measure
• product substitution rules
• product allocation and reservation rules
• multiple sourcing options for each order line
• fully integrated credit checking
• forecast coordination.
Quoting and Promising Deliveries
Quoting and promising deliveries can be done by the salesperson in the customer's office, or the supplier's offices, or anywhere else. In more advanced TEI/ERP systems, it can be done by
• linking the customers' computer directly (probably with e-com­merce, using the Internet) to the supplier's computer
• providing the logic in the supplier's system so that it can quote prices and delivery dates for stocked items and even legal combi­nations of configurable items, with no human intervention required unless capacity or material constraints will be violated. In advanced TEI systems, these delivery quotes fully integrate with logistics and transportation systems, routing the items from the most appropriate warehouse or factory to the customer's desired location using the lowest total cost shipping method (combining with other or­ders going to the same customer, and/or with other orders which can be dropped off a truck before or after the customer's order) while still fulfilling the customer's requested delivery date.
Demand Management
Traditionally, companies have treated customer demand very simply: "All customer demand will be fulfilled!" In reality, however, not all customer demand benefits a company equally1. Demand management, therefore, is a formal approach to stratifying customer demand, so that
• Salespeople are motivated to increase the "best" type of demand.
• When there are resource shortages, the demand that contributes the least to the manufacturer will absorb the bulk of the shortage. Demand can be prioritized by a new process known as rough-cut
value analysis, which ranks demand by how it fits the manufacturer's
business objectives.

To Be Continued


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