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Integrating ERP Systems
Part 2 of 4

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SCM, standing for Supply Chain Management, is an acronym of a different color and represents a newly developed suite of tools that have become significant as the result of the computing power avail­able in personal computers. This is not to say that the concepts in­volved are entirely new, but just as the first mainframes made MRP feasible, PCs have enabled the growth of these tools. SCM systems were developed as a way to supercharge existing systems. Most com­panies have systems that do a wonderful job of capturing transactions, but the handling of material requirements has become outmoded in this day of integrated supply chains and demands for instantaneous regeneration (or net change) of data. In fact, it is reasonable to think of SCM software as the ultimate aftermarket accessory because, properly represented, it is not marketed as a replacement for your existing ERP system, but a way of extending its life by adding efficient front-end planning logic.

It is at this point that we must define exactly what we mean by a Supply Chain Management system. The reason for this is that SCM embodies a number of functions that meet different needs and require specific implementation efforts. At last count, there were at least four functional areas under the heading of SCM. They include forecasting, Supply Chain Management (SCM), Advanced Planning and Schedul­ing (APS), and logistics. It is possible that more have been added since this writing, as these tools are on the leading edge of software develop­ment, but for now we will address these four.

Forecasting packages are not new, but recently they have been inte­grated with SCM packages to provide a full complement of applica­tions for dealing with demand and its fulfillment. It is noteworthy that forecasting solutions are available in both statistical and causal mod­els, and prospective users should understand the "what and how" of each before opting for a specific methodology. Supply chain manage­ment (SCM) tools, which serve as the foundation of the software pack­ages, can be best described as on-demand requirements planning. The concept is to have a memory resident tool (i.e., very, very fast) avail­able for balancing multiple demand sources and multiple supply op­portunities across a supply chain. As such, it becomes a combination of real-time DRP, MRP, and Purchasing, done with an objective of always balancing activities to the critical path. These functions have become especially important to companies that are global in nature, regardless of whether they own their supply chain or serve as an oasis on the way to the end consumer.

Advanced Planning and Scheduling (APS) systems have been merged into the SCM suite because computing tools enabled them and data integrity requirements of SCM demand them. We will explore APS further below. The final major component of an SCM system is logistics. Logistic tools allow us to identify, stage, ship, and track goods and components sourced from around the world. This function is des­tined to see explosive growth as NAFTA takes hold and more compa­nies use offshore sourcing as defensive strategy. As should be readily apparent from this discussion, to say one is implementing SCM is not enough to understand the scope and objectives of the project.

For the balance of this writing, we will focus on APS systems. These systems began life as "black-box" finite scheduling programs (e.g., OPT), a stigma that has been somewhat hard to overcome. Most re­cently, they have moved away from iteration-based finite scheduling systems and moved to optimization systems that use advanced pro­gramming to help planners and schedulers recognize constraints plan around them. Rather than search for the one optimum schedule, today's APS systems offer users good, achievable alternatives that consider multiple issues and factors. APS systems request the user to prioritize demand so that in a situation where a bottleneck cannot be circum­vented, the system will suggest changes that will minimize impact on certain orders/customers based on their significance to the organiza­tion. Lastly, most APS packages incorporate an order-promising tool that will allow you to simulate a proposed delivery or calculate the best delivery on a proposed order.

In the case study to be presented, the focus will be the integration of an APS tool with an ERP system being used in a repetitive manu­facturing environment. The focus on advanced planning and sched­uling resulted from the fact that it met the most pressing needs of the firm and provided the greatest opportunity for payback. One of the lessons implicit in this example is don't try to swallow the elephant in one bite. Just because tools exist doesn't mean they are needed or should be applied. If your supply chain is no more that a few links, and your logistics are simple, it does not make sense for you to spend a lot of time for little results. Correspondingly, if your manufacturing is rate-based and hard-automated, it does not behoove you to waste time implementing a system designed to conjure up alternative pro­duction pathways.

To Be Continued


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