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Lean Manufacturing Articles

SUPPLY CHAIN MANAGEMENT

Supply chain management is not a new concept. One of the first uses of supply chain techniques was in the au­tomotive industry. This technique, supplier scheduling, has also been adopted by the commercial electronics industry, among others. What has changed is the wide­spread adoption of ERP, the emergence of sophisticated planning capabilities (APS), and the acceptance of the Internet as a vehicle to collaborate.

Supply chain management is all about synchroniza­tion among trading partners. A chain is only as strong as its weakest link. Each link in the supply chain is an enterprise managing itself with ERP or extended ERP. The secret to an effective supply chain is the effective use by each partner or link of their internal resource management system, their extended ERP system. (See Figure 5.)

A multiple choice quiz—strictly to test the effective­ness of the discussion facilitator.

•    Extended ERP is considered an obsolete approach
with the emergence of supply chain management
concepts.

or

•    Effective use of extended ERP is a prerequisite to ef­
fective supply chain management.

WHAT EXTENDED ERP REALLY DOES

Extended ERP allows us to look at our company and ob­jectively assess its competitive capability. Extended ERP is based on time-tested good business practice and represents a model of such. Since extended ERP touches virtually ev­ery department within a company, the implementation of it provides an opportunity to examine current and new methods, approaches, habits, and perspectives. When someone discovers a better way of managing or doing something and that discovery of a "new way" is known among associates, it is difficult to maintain the nonpro­ductive status quo. Put another way, extended ERP is a catalyst for change. A few examples of new approaches are the use of modular bills of material and master produc­tion scheduling (MPS). If you look at Figure 6 and do the following exercise, you'll see some real opportunities for data reduction, improved communications, and quality of decision-making.

An Update

Many companies today create and maintain a bill of material for each end item shippable unit. This method of configuration management fosters the creation of large, expensive-to-maintain databases. Figure 6 is a lun­cheon menu with choices needed on five variables: the main protein component, bread, condiment, salad, and drink. A customer order is secured and the choice is chicken salad, fiber bread, butter, baked potato, and beer. A new BOM to maintain! Another customer order is booked—this time the BOM consists of club, bread (again), butter (again), baked potato (again), and coffee (new). Another BOM to maintain! Now it's your turn. How many end-item possibilities exist in this lunch menu? If you came up with 26,880, you're correct. Please now count the number of menu choices. This should be 41. Which of these two possibilities is easier to main­tain a database on, forecast, plan, and dedicate time to problem-solving on? Need I say more?

Another example of new (but time-tested) approaches is supplier scheduling, an innovation from the automo­tive industry. If we simulated the activity of a new pur­chase part requirement being identified with one change during the planning cycle and the securing of it, we have a lot of non-value-added time (hence added lead time and cost). The wasteful cycle: planner communicates requirement to buyer, buyer selects vendor and commu­nicates to their sales/order entry function, and this group communicates with their planning department who confirms schedule. Sales communicates to client buyer, who then confirms this with their planner. I rec­ommend you use Figure 7 to work through the scenario.

Let's now introduce a change on the client/buying side, and you get a sense of how convoluted and waste­ful the "traditional" method is. What if the planner on the customer side could communicate directly with theplanner on the supplier side? Would that not cut out this inefficient cycle? Yes, it would, and that's what supplier schedul­ing is all about. Supplier scheduling has some prerequisites. You must reduce the number of suppliers to a small group of trusted ones with whom you feel a win-win relationship can exist or already ex­ists. Both parties must understand the obligation this relationship brings with it to be absolutely reliable and honest. You must have the systems and legal framework in place to accommodate this new way of doing business. The two ex­amples given are just the tip of the ice­berg relative to the new approaches embedded in the extended ERP model.

 

Once in place, this new model is also better suited to monitoring performance to management's policies and strategies than the previous one. Additionally, in an era of intense marketplace competition, anything that is known to improve corporate survivabil-ity has the potential to act as a morale booster for the associates/employees of that organization.

In summary, extended ERP is a descendent of MRP, closed-loop MRP, MRP II, and ERP. In addition, it re­flects the influences of JIT as well as taking advantage of the latest IT technologies. Since it is based on proven good business practices, its implementation is an op­portunity to reexamine and compare an enterprise in terms of competitiveness and world-class performance. A multiple choice quiz—strictly to test the effective­ness of the discussion facilitator.

 

•   Extended ERP provides a model for contemporary
good business practice.

 

or

 

      Extended ERP Is a catalyst for change,


or

 

      Extended ERP provides an opportunity to examine
new concepts and techniques

 

or

 

•           All of the above

To Be Continued

For balance of this article, click on the below link:

Lean Manufacturing Articles and click on Series 13


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