ISA Ch. 8

Enterprise application integration middleware

Takes a new approach to middleware by packaging commonly used applications together, reducing the time needed to integrate applications from multiple vendors

•Collaborative engineering

allows an organization to reduce the costs required during the design process of a product

•Selling chain management

applies technology to the activities in the order life cycle from inquiry to sale

Integration alone creates huge advantages for organizations because it...

reduces information redundancy and ensures accuracy and completeness (CIA)

What are the three components of supply chain management

•Procurement •Logistics •Materials management

What is the primary purpose of an ERP system?

(as a whole) is integration *You should understand that ERP can be costly and often risky, especially when the ERP is customized

What Are the Problems Created by Information Silos? (Silos are also called Islands of Automation)

-Duplicated and inconsistent data. -Separated supporting applications; difficult for two activities to reconcile their data, getting approvals will be slow and possibly erroneous -Lack of integrated enterprise data as a consequence of disjointed systems -Inefficiency results from making decisions in isolation -Information silos increase costs — duplicated data, disjointed systems, limited information, and inefficiencies all mean higher costs

Integration Tools:

-Enterprise system -Enterprise application integration -Middleware -Enterprise application integration middleware

What are the five basic supply chain activities

-Plan -Source -Make -Deliver -Return

What are the three primary enterprise systems

-Supply chain management (SCM is more than just a "tool") -Customer relationship management (CRM) -Enterprise resource planning (ERP)

Procurement can help a company answer the following questions:

-What quantity of raw materials should we purchase to minimize spoilage? How can we guarantee that our raw materials meet production needs? -At what price can we purchase materials to guarantee profitability? Can purchasing all products from a single vendor provide additional discounts

The supply chain has three main links:

1. Materials flow from suppliers and their "upstream" suppliers at all levels 2. Transformation of materials into semifinished and finished products through the organization's own production process 3. Distribution of products to customers and their "downstream" customers at all levels

•What problems do silos (e.g., lack of integration) cause in the procurement process?

? possibility for wrong orders to be made?

Integration

Allows separate systems to communicate directly with each other, eliminating the need for manual entry into multiple systems

The functional structure

Although most companies maintain vertical (or functional) silos to compartmentalize their operational units, the integrated business processes that companies use to perform their work cut across these silos horizontally.

Supply chain execution system

Automates the different activities of the supply chain

A procurement process:

BUY (and pay). Five steps across three different functional areas of the organization (Warehouse twice). The procurement process includes all of the tasks involved in acquiring needed materials externally from a vendor.

What are the three main processes that are directly related to creating and delivering products and services

Buy, Make and Sell are the main processes here *Note the arrows (not all possible arrows shown), which represent possible integration opportunities. Can YOU see how procurement might integrate with Material Planning (Plan) and Fulfillment (Sell)?

Efficient and effective process execution requires:

Communication and coordination among/across functions How is this achieved? -e.g., Think "sideways"

•Source

Companies must carefully choose reliable suppliers that will deliver goods and services required for making products. Companies must also develop a set of pricing, delivery, and payment processes with suppliers and create metrics for monitoring and improving the relationships.

Enterprise application integration (EAI)

Connects the plans, methods, and tools aimed at integrating separate enterprise systems

Supporting processes include...

Design, Plan, Store (and move), and Service plus People, Projects, and track/report (Accounting).

Supply Chain Example

Dozens of steps are required to achieve and carry out each of the supply chain components. The above figure diagrams the typical manufacturing supply chain SCM software can enable an organization to generate efficiencies within these steps by automating and improving the information flows throughout and among the different supply chain components.

Silo Effect

Focusing on functional objectives without regard to process objectives --> people in the different functional areas lose sight of the "big picture"; Optimizing functional goals vs. process goals A key point here is that the silo nature of the functional organizational structure and the cross‐functional nature of processes are at odds with each other

Bullwhip effect

Occurs when distorted product demand information ripples from one partner to the next throughout the supply chain

Enterprise system

Provide enterprisewide support and data access for a firm's operations and business processes •Enterprise systems can manage information across the entire enterprise allowing users to view every detail of business operations •Enterprise systems are often available as a generic, but highly customizable, group of programs for business functions such as accounting, manufacturing, and marketing

Middleware

Several different types of software that sit between and provide connectivity for two or more software applications -Middleware translates information between disparate systems

Supply chain visibility

The ability to view all areas up and down the supply chain in real time

Supply Chain Management (SCM)

The management of information flows between and among activities in a supply chain to maximize total supply chain effectiveness and profitability

•Make

This is the step where companies manufacture their products or services. This can include scheduling the activities necessary for production, testing, packaging, and preparing for delivery. This is by far the most metric-intensive portion of the supply chain, measuring quality levels, production output, and worker productivity.

•Plan

This is the strategic portion of supply chain management. A company must have a plan for managing all the resources that go toward meeting customer demand for products or services. A big piece of planning is developing a set of metrics to monitor the supply chain so that it is efficient, costs less, and delivers high quality and value to customers.

•Return

This is typically the most problematic step in the supply chain. Companies must create a network for receiving defective and excess products and support customers who have problems with delivered products.

Deliver

This step is commonly referred to as logistics. Logistics is the set of processes that plans for and controls the efficient and effective transportation and storage of supplies from suppliers to customers. During this step, companies must be able to receive orders from customers, fulfill the orders via a network of warehouses, pick transportation companies to deliver the products, and implement a billing and invoicing system to facilitate payments.

Supply chain planning system

Uses advanced mathematical algorithms to improve the flow and efficiency of the supply chain while reducing inventory (e.g., something a BA minor/co-major might do)

SCM example:

Wal-Mart and P&G implemented a tremendously successful SCM. System links Wal-Mart's distribution centers directly to P&G's manufacturing centers. Each time a Wal-Mart customers purchases a P&G product, the system sends a message directly to P&G's factory for a reorder •Explain how Wal-Mart's and P&G's relationship would be affected if a catastrophic incident destroyed the SCM system? §How would Wal-Mart reorder products? §How would Wal-Mart send payments? §How would P&G know which products to send to Wal-Mart?

Supply chain visibility allows organizations to

eliminate the bullwhip effect §To understand the bullwhip effect, note a product that demand does not change, such as diapers. The need for diapers is constant, it does not increase at Christmas or in the summer, diapers are in demand all year long. The number of newborn babies determines diaper demand, and that number is constant. Retailers order diapers from distributors when their inventory level falls below a certain level, they might order a few extra just to be safe. §Distributors order diapers from manufacturers when their inventory level falls below a certain level, they might order a few extra just to be safe. §Manufacturers order diapers from suppliers when their inventory level falls below a certain level, they might order a few extra just to be safe. §Eventually the one or two extra boxes ordered from a few retailers becomes several thousand boxes for the manufacturer. This is the bullwhip effect, a small ripple at one end makes a large wave at the other end of the whip.

Supply chain event management (SCEM)

enables an organization to react quickly to resolve supply chain issues

What does EAI enable? And how?

enables organizations to use existing silo applications while eliminating many serious problems of isolated systems. EAI Automatically Makes Data Conversions Among Different Systems. No centralized EAI database, but uses metadata to create a "virtual" repository that appears to be a database.

EAI

enterprise application integration

Collaborative demand planning

helps organizations reduce their investment in inventory, while improving customer satisfaction through product availability

Supply Chain Managment (SCM)

improves ways for companies to find the raw components they need to make a product or service, manufacture that product or service, and deliver it to customers

Materials management with what types of questions can be answered by each?

includes activities that govern the flow of tangible, physical materials through the supply chain such as shipping, transport, distribution, and warehousing. •Materials management can help a company answer the following concerns: •What are our current inventory levels? •What items are running low in the warehouse? •What items are at risk of spoiling in the warehouse? •How do we dispose of spoiled items? •What laws need to be followed for storing hazardous materials? •Which items must be refrigerated when being stored and transported? •What are the requirements to store or transport fragile items?

Logistics with what types of questions can be answered by each?

includes the processes that control the distribution, maintenance, and replacement of materials and personnel to support the supply chain. •Inbound logistics acquires raw materials and resources and distributes them to manufacturing as required. •Outbound logistics distributes goods and services to customers •Logistics can help a company answer the following questions: §What is the quickest way to deliver products to our customers? §What is the optimal way to place items in the warehouse for picking and packing? §What is the optimal path to an item in the warehouse? §What path should the vehicles follow when delivering the goods? §What areas or regions are the trucks covering?

•Application integration

integration of a company's existing management information systems.

•Data integration

integration of data from multiple sources, which provides a unified view of all data

Procurement

is the purchasing of goods and services to meet the needs of the supply chain.

Procurement and with what types of questions can be answered by each?

is the purchasing of goods and services to meet the needs of the supply chain. Procurement can help a company answer the following questions: §What quantity of raw materials should we purchase to minimize spoilage? §How can we guarantee that our raw materials meet production needs? §At what price can we purchase materials to guarantee profitability? §Can purchasing all products from a single vendor provide additional discounts

Visibility

more visible models of different ways to do things in the supply chain have emerged to view metrics and transaction data in real time.

Entering the same customer information into multiple systems is

redundant, and chances of making a mistake in one of the systems is high -->Integrations offer many advantages, but for the most part, the automated flow of information among separate systems is the biggest benefit

What do enterprise systems replace

replace multiple siloed systems with a single application, thus integrating the systems. *You should recognize EAI as an alternative that uses middleware to connect legacy applications.

•Forward integration

sends information entered into a given system automatically to all downstream systems and processes.

•Backward integration

sends information entered into a given system automatically to all upstream systems and processes

What is one of the biggest benefits of integration?

that organizations only have to enter information into the systems once and it is automatically sent to all of the other systems throughout the organization

•Eintegration

use of the Internet to provide customers with the ability to gain personalized information by querying corporate databases and their information sources.

cross-functional

when businesses naturally cut across functions --> no single group or function is responsible for their execution. Rather, it is a shared responsibility among many functional areas.

§Supply chain management disruptive technologies:

•3D printing (supports procurement) -->Maker movement -->Makerspace •Radio frequency identification (supports logistics) •Drones (supports logistics) •Robotics (supports materials management)

Effective and/or efficient SCM systems can enable an organization to:

•Decrease the power of its buyers •Increase its own supplier power •Increase switching costs to reduce the threat of substitute products or services •Create entry barriers thereby reducing the threat of new entrants •Increase efficiencies while seeking a competitive advantage through cost leadership *This is a good time to review Porter's Five Forces Model - can you diagram Porter's Five Forces and then walk-thru each of the above bullets and explain how SCM is causing this effect? •Considerable evidence shows that this type of supply chain integration results in superior supply chain capabilities and profits.

The fastest growing extensions for supply chain management include:

•Supply chain event management (SCEM) •Selling chain management •Collaborative engineering •Collaborative demand planning

example of customer information integrated using this method:

•Users can create, read, update, and delete in the main customer repository, and it is automatically sent to all of the other databases •This method does not follow the business process when building the integrations •Business-critical integrity constraints still need to be built to ensure (quality) information is only ever entered into the customer repository, otherwise the information will become out-of-sync