EDI connecting partners in Supply chain

Electronic Data Interchange (EDI) is the method of communicating vital information required for supply chain function.   With increasing competition companies are doing what they do best and outsourcing tasks which can done better by others. Also, customers are increasingly going global with their market in far of countries.  Companies are having multi site operations to leverage on  low-cost labor, tax holidays and other advantages offered by certain regions. 

To make all this work,  key partnerships  between various suppliers, customer and your own sister companies need  to be established.  EDI is a  critical piece to make such partnerships work. Each of your partner will likely have their own systems and hence a common language  to link these disparate systems becomes critical.

EDI provides seamless integration between different systems by adopting an industry standard.  Various industry standards have emerged to meet this need. However,  X12 used mainly in the Americas and EDIFACT in the Europe are the most widely used standards. In addition, Rosettanet, a  xml standard has gained popularity in the last  few year.

EDI helps to have information exchange between various partners in near real-time and hence  is a crucial piece for an effective supply chain.

Transportation planning in Supply Chain

Product manufacturing requires movement of materials from near and far of places.  This requires lot of planning and co-ordination and falls under the category of transportation planning. Transportation Planning is handled by the shipping and receiving department. They need  the following information :

• Mean of Transport
• Rates
• Transit time
• Material availability
• Holiday calendar for both selling and buying parties and Carriers.

All the above information is entered into a  database to arrive at the best possible options for each shipment.  In addition, to the above criteria transportation leaves a carbon footprint on the environment hence a sustainable way to move the product becomes necessary.  Morever, the threat of terrorism is complicating the process.

Project management of ERP deployment

Recent studies show that over 50% percent of the ERP implementations are  unsuccessful. Effective project management can prevent companies from many of the pitfalls.  Any ERP implementation will directly affect all three parts of the company.

• System  :  Kinds of systems used for eg: Windows vs Unix,  Changes  to the current infrastructure.
• Personnel:  Competence level of your IT department in terms of their ability to support the new infrastructure. 
• Processes:  Some business processes will be eliminated or re- engineered.

Clear description of changes in people, systems and organizational goals need to be documented and agreed upon.

With several internal and external parties involved, communication becomes the key. Objectives are  defined and split into goals. To reach the objective, a series of milestones are defined and agreed upon.  All milestones need to defined in terms of time costs and quality. 

Doing the above can greatly enhance your chances of success and prevent cost over runs. 

Your suggestion and comments are welcome.

Implementing Enterprise Resource planning.

Creating a RFP is the first step in introducing your organization to Enterprise resource planning. Strict adherence to this document will pose problems. Heraclitus famously said change is the center of universe. tThis adage cannot be more true in today’s environment. Organizations have to deals with increasing global competition, strengthening quality requirements, complex technical requirements, shortened product life cycle and sustainability issues. Success and failure is contingent on how quickly organization can adapt to changing market conditions.

Process of implementing an ERP requires a multi phased approach due to the size of effort and dollar amount  involved.  In genera,l any ERP implementation involves 3 Phases

• Selection Phase :  In this phase, the organization determines the functional, technical and cultural fit of various ERP softwares. Budgetary and project implementation timelines are also crucial to the success of the project and is given due consideration in this phase.
• Implementation Phase: This is the actual implementation process where the desired ”tobe” state business processes  will  be mapped to the new ERP system. Several simulation runs will be conducted to reach an acceptable configuration of the new ERP. Also, it is important to start small with bare minimum functionality and handle desired nice to have features to the next phase
• Optimization phase: During this phase additional functionality is added to the system. 

ERP Selection for effective suppy chain

Business functions

 

In my earlier blog, I had mentioned the role of Enterprise Resource planning software in the Supply chain process. Today, I will discuss some of the common pitfalls and things to watch out for in selecting an ERP. Selection of ERP is by far the most important activity any organization will do in its existence.   

Selection process should be driven by the steering committee involving top executives with decision-making powers.  A team of Key Users with good understanding of their  business processes should document the current business process.  The process of documenting the “as is” processes provides vital information to the team. Based on this information future direction on how the company can run their business processes is determined. The Key user team at this point needs to get educated on the best practices in similar industries. Equipped with this knowledge the team should look at each process critically as value added or non value added activities.  This would give a sleek engineered ”tobe”process that forms the basis for Request for proposal RFP.  It is important the team knows what they are trying to accomplish with the new ERP system. Gain an insight into all the ERP available for your industry and check them out on their websites and also on various user community blogs.  You also needs to look at the technical and financial viability of the ERP vendors.  You don’t want to get stuck with a vendor who has no resources to invest in the new development of the product. 

Just like the saying a good project is 80% planning and 20 % execution, this also  holds true in the ERP selection process.  Good Luck in your search !

Supply Chain and Enterprise Resource Planning

ERPContinuing from my last blog Information Technology plays a Vital role in todays organization with increasing global interests.  Enterprise Resource Planning software often called ERP is an important part of Information architecture.  It is a giant application suite designed to meet the needs of today’s Organizations. Common areas included in this software are finance, product development, material requirements planning and Order management.

ERP

Check out the above link for a pictorial representation.

As the first computers became available in the early 1970′s, many organizations started designing their own application using 3rd generation language of that time. The program’s assumed a gigantic portions with millions of lines of code making it a support nightmare .  Companies began to realise some industry standard solutions from external vendors would greatly reduce the problem. Software vendors harness this need and hence the birth of ERP.  However, the cost of implementing ERP was so prohibitive that only few companies could afford it.

 When Y2K, problem came to surface companies had replace their software with Y2K compliant ERP software. This gave birth to a huge market for ERP vendors who provided .

Supply Chain in multi-tier suppliers

Ford motor company in early part of 20^th century made all the components required for their cars including their own steel. Most these component manufacturers were all owned by ford and in close proximity of each other. This made co-ordination simpler between various units. Everybody in the company had one single goal to keep rolling the assembly line with one model of car. The famous saying “you can order ford car in any color as long as it is black” explained the situation during that time.

However, with the passage of time customers started demanding car that suited their taste and status.  Automotive companies started to respond to their customer’s demands with more options and features.  Companies could no longer make everything under one roof, they had to focus on their core competence and let their supplier shoulder some of the responsibilities. Forging partnership started gaining ground.  The birth of multi-tier supply chain started gaining ground.  The attached diagram illustrates the traditional and supply chain manufacturing.

Supply Chain and Information Technology

On the one hand, we talk about the complexities of building and selling products as complex as manufacturing a car. On the other hand we explored the simpler example of cooking your favorite dish. In the former case because of  the complexities of the business, having some form of Informative Technology becomes essential. Even in the case of your household activities, having a simple Microsoft excel spreadsheet to track various ingredients, recipes and costs incurred is very helpful in planning household budget.

When you are part of the supply chain with hundreds of suppliers, customers and millions of dollars, manual systems become ineffective. Over the years companies used several automated means to make things efficient, faster and more accurate using computing technology.  With the enormous power of computing that modern computers have. Number crunching is done in real-time helping the decision maker makeg more effective decisions in their day-to-day activities.

In my next blog I will be discussing  various technology in the market that can make or break your pocket-book. Watch out for the next one. I appreciate your comments and suggestions.

Supply Chain Management -Intro

Is this a buzz word ?  What does it mean anyways ? Do I really care about it ?  This was the thought that crossed my mind, when I heard about it initially 15 year ago.  A college Prof explained  it well when said, we already practice supply chain in our day-to-day life in some form or the other.  For example preparing  a simple  dish that you enjoy requires you make a trip to the grocery store, maybe  visit the local farmers market . We use the ingredients to prepare the meal and put the left overs in the refrigerator.

Now let us analyse what we just did here.   You had an urge to eat, this represents the demand side of the supply chain and then the grocery store  and farmer’s market are your supplier’s, storing the food is the inventory side of it. The process of cooking is the manufacturing.

Now to extrapolate these simple activities to selling   cars which has over 10,000 components supplied by 20,000 suppliers and to that mix, throw in several hundred manufacturing and assembly activities done in your factory. This setup gets very complicated.  To make all of these processes work seamlessly, you need several thousand workers with diverse skill sets.

A Supply chain management professional needs to have a good grasp of activities involved in the design and delivery of the products and services.  Some of the skills I believe that can make a successful Supply chain professional are:

Understanding of Inventory, Warehousing, Shipping and finance. In addition, knowledge of engineering, marketing and human resources will be helpful. 

In my future blogs, I will pursue the details of each aspect, explore recent developments and  the opportunities and challenges posed in this field.  

Thanks for reading my blog.  I welcome your comments and suggestions.  Happy NEW YEAR 2010 !