Computer Associates International, Inc. (CA), Baan Japan, and EXE Inc. announced a strategic alliance designed to enable Japanese companies to create total solutions for the rapidly growing supply chain management (SCM) field. The companies will jointly market the new solutions, which will be built on Unicenter TNG, CA's industry-leading enterprise management software.

The new SCM solutions will incorporate Baan Japan's Supply Chain Solution and EXE's Nexus II to create a Japanese-focused supply chain management solution. Nexus II is an integrated distribution package utilizing object-oriented design technology. "This announcement really demonstrates Baan's global best-of-breed marketing strategy, which is to integrate its enterprise platform products with the premier solution providers," said Thomas N. Erickson, managing director, Baan Japan. "Along with CA, the leading supplier of end-to-end enterprise management solutions, and EXE, whose logistics system solution has the capability to excel in Japan, we can help define what we expect to be the de facto standard in SCM solutions in Japan." "After deploying supply chain management, the flow of manufacturing, sales and logistics becomes mission-critical, where a small problem can affect the total enterprise system," said Sumio Tanaka, president of EXE. "By this measure, integrated enterprise management is the lifeline of supply chain management. By leveraging the functionality of Unicenter TNG and Nexus II, we can quickly build low-cost and high-quality SCM solutions. This partnership will bring our clients the efficiency and reliability they require." The alliance will enable CA to extend Unicenter TNG to the rapidly growing SCM market segment. CA will focus on the manufacturing, logistics and service areas of the industry.

CA and Baan are not strangers to each other. When CA acquired ASK's Manman several years ago, Baan was subcontracted to develop the source code, after ASK's own development failure. This relationship expansion between CA and Baan, with the addition of EXE, will have the following effects:

CA supplements its ability to deliver supply chain management solutions to their customers in the reviving Japanese market. CA also obtains better coverage of the supply chain management market by strengthening an arrangement with vendors strong in SCM planning and execution products, and who have previous experience in integrating disparate enterprise applications components.

Baan and EXE gain a much needed boost to their indirect channel, and the opportunity to increase both their revenues, customer base, and visibility in the enterprise software markets outside their strongholds in Europe and North America, respectively.

Current and prospective Japanese customers of CA, Baan, and EXE should exercise caution when evaluating these vendors as providers of complementary solutions. Improved technological integration is seldom guaranteed by joint marketing arrangements, and only comes after the arrangement yields considerable implementation experience. Furthermore, users are advised to identify and negotiate in advance the main contractor that will assume overall accountability for the project. Failing to do so may result with customers being caught in a middle of contractors' recriminations and finger pointing when things start to go awry.

SOURCE:http://www.technologyevaluation.com/research/articles/computer-associates-baan-japan-and-exe-announce-strategic-alliance-to-provide-total-supply-chain-management-solutions-15566/

Computer Associates International, Inc. (CA), Baan Japan, and EXE Inc. announced a strategic alliance designed to enable Japanese companies to create total solutions for the rapidly growing supply chain management (SCM) field. The companies will jointly market the new solutions, which will be built on Unicenter TNG, CA's industry-leading enterprise management software.

The new SCM solutions will incorporate Baan Japan's Supply Chain Solution and EXE's Nexus II to create a Japanese-focused supply chain management solution. Nexus II is an integrated distribution package utilizing object-oriented design technology. "This announcement really demonstrates Baan's global best-of-breed marketing strategy, which is to integrate its enterprise platform products with the premier solution providers," said Thomas N. Erickson, managing director, Baan Japan. "Along with CA, the leading supplier of end-to-end enterprise management solutions, and EXE, whose logistics system solution has the capability to excel in Japan, we can help define what we expect to be the de facto standard in SCM solutions in Japan." "After deploying supply chain management, the flow of manufacturing, sales and logistics becomes mission-critical, where a small problem can affect the total enterprise system," said Sumio Tanaka, president of EXE. "By this measure, integrated enterprise management is the lifeline of supply chain management. By leveraging the functionality of Unicenter TNG and Nexus II, we can quickly build low-cost and high-quality SCM solutions. This partnership will bring our clients the efficiency and reliability they require." The alliance will enable CA to extend Unicenter TNG to the rapidly growing SCM market segment. CA will focus on the manufacturing, logistics and service areas of the industry.

CA and Baan are not strangers to each other. When CA acquired ASK's Manman several years ago, Baan was subcontracted to develop the source code, after ASK's own development failure. This relationship expansion between CA and Baan, with the addition of EXE, will have the following effects:

CA supplements its ability to deliver supply chain management solutions to their customers in the reviving Japanese market. CA also obtains better coverage of the supply chain management market by strengthening an arrangement with vendors strong in SCM planning and execution products, and who have previous experience in integrating disparate enterprise applications components.

Baan and EXE gain a much needed boost to their indirect channel, and the opportunity to increase both their revenues, customer base, and visibility in the enterprise software markets outside their strongholds in Europe and North America, respectively.

Current and prospective Japanese customers of CA, Baan, and EXE should exercise caution when evaluating these vendors as providers of complementary solutions. Improved technological integration is seldom guaranteed by joint marketing arrangements, and only comes after the arrangement yields considerable implementation experience. Furthermore, users are advised to identify and negotiate in advance the main contractor that will assume overall accountability for the project. Failing to do so may result with customers being caught in a middle of contractors' recriminations and finger pointing when things start to go awry.

SOURCE:http://www.technologyevaluation.com/research/articles/computer-associates-baan-japan-and-exe-announce-strategic-alliance-to-provide-total-supply-chain-management-solutions-15566/

A black hole is an object whose gravitational pull is so strong that nothing - not even light - can escape from it. Although predicted by Einstein's General Theory of Relativity, the existence of black holes in our galaxy and elsewhere has only recently been confirmed. A black hole forms when a massive star dies and collapses under its own mass.

For all but a few astronomers, black holes are unknown in the realm of ordinary experience. Analogs do exist, however, in the more terrestrial domain of business process reengineering and take the form of supply chain management implementations.

Similar to their gravitational counterparts, supply chain management implementations can grow to vast, unanticipated proportions, enveloping unbudgeted amounts of time, resources, and money. A crucial difference between the two is that supply chain projects can be kept to a manageable size by making careful preparations and setting realistic expectations at the outset. The following real-life examples offer insights that may help prevent your supply chain project from collapsing into oblivion, taking your enterprise with it.

Case 1:

Problem

Five months into the implementation of a factory scheduling system at a mid-sized PC assembly facility and one month before going live, planners were asked to help perform the system test of the application, during which daily workflow would be checked against requirements.

Planning involved making a survey of the next few days of PC orders, the required components indicated by the Bill of Materials, and the current inventory so that new components could be procured in time to meet the demand. Planners relied on a metric known as "days of inventory," calculated for each component SKU (stock keeping unit) by subtracting all components needed for each day of production successively from inventory until the inventory was exhausted. The number of days that would bring inventory to zero was that component's days of inventory.

Unfortunately, the new system had no capability for computing this value and planners found that to generate it, they had to page through hundreds of scheduled orders, sorted by finished SKU, use the software's capability for reverse BOM explosion to get the components, total the needed components by SKU in a spreadsheet and then manually subtract the totals one day at a time from the inventory, also provided by the system. The software selected for the new system had no capability to produce the required metric. Needless to state, the manual steps completely derailed the workflow and the planners revolted.

SOURCE:http://www.technologyevaluation.com/research/articles/how-supply-chain-projects-morph-into-black-holes-16781/

A black hole is an object whose gravitational pull is so strong that nothing - not even light - can escape from it. Although predicted by Einstein's General Theory of Relativity, the existence of black holes in our galaxy and elsewhere has only recently been confirmed. A black hole forms when a massive star dies and collapses under its own mass.

For all but a few astronomers, black holes are unknown in the realm of ordinary experience. Analogs do exist, however, in the more terrestrial domain of business process reengineering and take the form of supply chain management implementations.

Similar to their gravitational counterparts, supply chain management implementations can grow to vast, unanticipated proportions, enveloping unbudgeted amounts of time, resources, and money. A crucial difference between the two is that supply chain projects can be kept to a manageable size by making careful preparations and setting realistic expectations at the outset. The following real-life examples offer insights that may help prevent your supply chain project from collapsing into oblivion, taking your enterprise with it.

Case 1:

Problem

Five months into the implementation of a factory scheduling system at a mid-sized PC assembly facility and one month before going live, planners were asked to help perform the system test of the application, during which daily workflow would be checked against requirements.

Planning involved making a survey of the next few days of PC orders, the required components indicated by the Bill of Materials, and the current inventory so that new components could be procured in time to meet the demand. Planners relied on a metric known as "days of inventory," calculated for each component SKU (stock keeping unit) by subtracting all components needed for each day of production successively from inventory until the inventory was exhausted. The number of days that would bring inventory to zero was that component's days of inventory.

Unfortunately, the new system had no capability for computing this value and planners found that to generate it, they had to page through hundreds of scheduled orders, sorted by finished SKU, use the software's capability for reverse BOM explosion to get the components, total the needed components by SKU in a spreadsheet and then manually subtract the totals one day at a time from the inventory, also provided by the system. The software selected for the new system had no capability to produce the required metric. Needless to state, the manual steps completely derailed the workflow and the planners revolted.

SOURCE:http://www.technologyevaluation.com/research/articles/how-supply-chain-projects-morph-into-black-holes-16781/

At its annual user conference in late October, PeopleSoft trumpeted the availability of its revamped supply chain management solution ambitiously titled, PeopleSoft Supply Chain in a Box. The new solution combines applications for customer management, e-commerce, order fulfillment, planning, and supply chain analytics and delivers them via multiple channels including an Internet portal and handheld devices. PeopleSoft claims the "Box" automates a large variety of business functions from managing sales leads to planning, filling orders, and collecting cash. Customers will be able to check the status of orders, account balances and payment histories, and place orders on-line.

According to Mike Frandsen, Vice President and General Manager of PeopleSoft's Supply Chain Division, "PeopleSoft Supply Chain in a Box is a completely new way of implementing an end-to-end supply chain solution. This pre-assembled solution can begin paying back a customer's investment immediately." Though the software may enable the stated functions, the proposition that it can deliver them in a pre-assembled, pre-packaged and pre-configured manner stretches the limits of imagination.

PeopleSoft Supply Chain in a Box is hardly the first supply chain software product promising pre-packaged functionality and rapid deployment. Pure play supply chain management vendors like i2 Technologies and Logility have offered configurable pieces of the overall supply chain puzzle for many years, but have never offered a complete solution "in a box". One reason is that these solutions, like the supply chains they support, are enormously complex.

The possibility of shrink-wrapping software to represent and support a supply chain, really a network linking a company's internal operations with external suppliers and customers, is not easy to believe. To us, a package that comes "in a box" is ready to install and run, with at most an hour or so spent choosing parameters from a predefined list or using a simple configuration wizard. Can a product that claims to automate business processes across enterprises really arrive in a box? Such a packaged suite of applications would have to seamlessly touch critical points within the systems of all of a company's trading partners and produce immediate benefits. Would that this was so, but we fear that the claim is incredible even in the era of XML and wireless communication.

Brash announcements by ERP vendors aimed at cutting a way into the supply chain management market are common, of course, and PeopleSoft's claims are no less extravagant than others are. The announcement may serve to attract attention in the short term, but only proven application of its supply chain solutions will enable the vendor to contend on an equal footing with SAP, J.D. Edwards, and Oracle.

We are sure that there are small organizations with simple supply chains for which the product might well run "out of the box." But in general, users would do well to take PeopleSoft's claims with a vein of salt and maintain realistic expectations regarding the challenges they will face in integrating their supply chains. Don't buy this or any other system on the basis of such over worn vendor hype as "immediate return on investment," "rapid deployment," and "seamless integration out of the box." Do a careful selection process and ask each bidder to provide a realistic estimate of the time and cost of installation; give preference to those vendors who will back up their estimates with rebates or free services

SOURCE:http://www.technologyevaluation.com/research/articles/peoplesoft-delivers-oxymoron-in-supply-chain-in-a-box-16211/

At its annual user conference in late October, PeopleSoft trumpeted the availability of its revamped supply chain management solution ambitiously titled, PeopleSoft Supply Chain in a Box. The new solution combines applications for customer management, e-commerce, order fulfillment, planning, and supply chain analytics and delivers them via multiple channels including an Internet portal and handheld devices. PeopleSoft claims the "Box" automates a large variety of business functions from managing sales leads to planning, filling orders, and collecting cash. Customers will be able to check the status of orders, account balances and payment histories, and place orders on-line.

According to Mike Frandsen, Vice President and General Manager of PeopleSoft's Supply Chain Division, "PeopleSoft Supply Chain in a Box is a completely new way of implementing an end-to-end supply chain solution. This pre-assembled solution can begin paying back a customer's investment immediately." Though the software may enable the stated functions, the proposition that it can deliver them in a pre-assembled, pre-packaged and pre-configured manner stretches the limits of imagination.

PeopleSoft Supply Chain in a Box is hardly the first supply chain software product promising pre-packaged functionality and rapid deployment. Pure play supply chain management vendors like i2 Technologies and Logility have offered configurable pieces of the overall supply chain puzzle for many years, but have never offered a complete solution "in a box". One reason is that these solutions, like the supply chains they support, are enormously complex.

The possibility of shrink-wrapping software to represent and support a supply chain, really a network linking a company's internal operations with external suppliers and customers, is not easy to believe. To us, a package that comes "in a box" is ready to install and run, with at most an hour or so spent choosing parameters from a predefined list or using a simple configuration wizard. Can a product that claims to automate business processes across enterprises really arrive in a box? Such a packaged suite of applications would have to seamlessly touch critical points within the systems of all of a company's trading partners and produce immediate benefits. Would that this was so, but we fear that the claim is incredible even in the era of XML and wireless communication.

Brash announcements by ERP vendors aimed at cutting a way into the supply chain management market are common, of course, and PeopleSoft's claims are no less extravagant than others are. The announcement may serve to attract attention in the short term, but only proven application of its supply chain solutions will enable the vendor to contend on an equal footing with SAP, J.D. Edwards, and Oracle.

We are sure that there are small organizations with simple supply chains for which the product might well run "out of the box." But in general, users would do well to take PeopleSoft's claims with a vein of salt and maintain realistic expectations regarding the challenges they will face in integrating their supply chains. Don't buy this or any other system on the basis of such over worn vendor hype as "immediate return on investment," "rapid deployment," and "seamless integration out of the box." Do a careful selection process and ask each bidder to provide a realistic estimate of the time and cost of installation; give preference to those vendors who will back up their estimates with rebates or free services

SOURCE:http://www.technologyevaluation.com/research/articles/peoplesoft-delivers-oxymoron-in-supply-chain-in-a-box-16211/

On the heels of its win at Equilon, SCT Corporation recently secured another high-profile contract in the petroleum products sector with Valvoline, the $1.1 billion lube oil division of Ashland Inc. Valvoline will use Fygir Supply Chain Planning suite as part of a larger initiative to support its e-business efforts. The contract has a total value of more than $4 million in license fees and services.

Acquired by SCT in 1998, Fygir supply chain suite provides the critical ingredient for SCT's integrated enterprise planning and execution suite, iProcess.sct. iProcess.sct binds together SCT's Adage Supply Chain Execution software, advanced planning features from Fygir, and ecFoods' Internet Trading Exchange. The combination neatly unites ERP, Supply Chain Management (SCM), and e-procurement.

The Fygir suite itself consists of modules for advanced planning, advanced scheduling, and demand planning. The Fygir products enable users to improve their supply chain management performance and make their manufacturing process more efficient by applying mathematical techniques to optimize the supply chain.


Lube oil represents just one component of Valvoline's growing business that now includes antifreeze, automotive chemicals, refrigerants, appearance products, and lube services franchising. As companies like Valvoline/Ashland expand their product mix, it becomes increasingly important to maintain visibility across multiple business units to avoid overlap and ensure best use of common resources.

In Valvoline's case, Fygir can help address inefficiencies that erode margins and pull down profits. For example, though Valvoline's operating income increased 40% to $74 million in 1999, compared to $53 million in 1998, increased expenses in Latin America and lower international revenues robbed the company of an even stronger bottom line. In 1998, large inventories of its R-12 automotive refrigerant product at the distributor and retail levels reduced demand and resulted in lower gross profit.

These problems are by no means unique to Valvoline but are common in the industry and represent a golden opportunity for supply chain management tools like Fygir. The petroleum sector is not among SCT's core industries but shares similar processes and problems with chemicals manufacturing and food & beverage, both of which are well-represented in SCT's client base. The king of petroleum supply chain management is indisputably Aspen Technology, which counts among its clients 17 of the top 20 refining and exploration companies. We expect Fygir to continue to do well within petroleum as it offers more "out-of-the-box" functionality than Aspen Technology.


Fygir has found wide success in the process manufacturing industries and these users would do well to include this component of iProcess.sct in selections with other best-of-breed supply chain management software from Logility, and Aspen Technology.

For users considering a migration to Oracle based servers, SCT could help ease the transition. The company currently has an agreement with Oracle Corporation allowing it to sublicense a limited-use Oracle system, which enables a client to use Oracle with its software products at a significantly lower cost than a full-use Oracle license. The agreement expires in July 2003.

SOURCE:http://www.technologyevaluation.com/research/articles/sct-fygir-to-lubricate-valvoline-s-supply-chain-15976/

On the heels of its win at Equilon, SCT Corporation recently secured another high-profile contract in the petroleum products sector with Valvoline, the $1.1 billion lube oil division of Ashland Inc. Valvoline will use Fygir Supply Chain Planning suite as part of a larger initiative to support its e-business efforts. The contract has a total value of more than $4 million in license fees and services.

Acquired by SCT in 1998, Fygir supply chain suite provides the critical ingredient for SCT's integrated enterprise planning and execution suite, iProcess.sct. iProcess.sct binds together SCT's Adage Supply Chain Execution software, advanced planning features from Fygir, and ecFoods' Internet Trading Exchange. The combination neatly unites ERP, Supply Chain Management (SCM), and e-procurement.

The Fygir suite itself consists of modules for advanced planning, advanced scheduling, and demand planning. The Fygir products enable users to improve their supply chain management performance and make their manufacturing process more efficient by applying mathematical techniques to optimize the supply chain.


Lube oil represents just one component of Valvoline's growing business that now includes antifreeze, automotive chemicals, refrigerants, appearance products, and lube services franchising. As companies like Valvoline/Ashland expand their product mix, it becomes increasingly important to maintain visibility across multiple business units to avoid overlap and ensure best use of common resources.

In Valvoline's case, Fygir can help address inefficiencies that erode margins and pull down profits. For example, though Valvoline's operating income increased 40% to $74 million in 1999, compared to $53 million in 1998, increased expenses in Latin America and lower international revenues robbed the company of an even stronger bottom line. In 1998, large inventories of its R-12 automotive refrigerant product at the distributor and retail levels reduced demand and resulted in lower gross profit.

These problems are by no means unique to Valvoline but are common in the industry and represent a golden opportunity for supply chain management tools like Fygir. The petroleum sector is not among SCT's core industries but shares similar processes and problems with chemicals manufacturing and food & beverage, both of which are well-represented in SCT's client base. The king of petroleum supply chain management is indisputably Aspen Technology, which counts among its clients 17 of the top 20 refining and exploration companies. We expect Fygir to continue to do well within petroleum as it offers more "out-of-the-box" functionality than Aspen Technology.


Fygir has found wide success in the process manufacturing industries and these users would do well to include this component of iProcess.sct in selections with other best-of-breed supply chain management software from Logility, and Aspen Technology.

For users considering a migration to Oracle based servers, SCT could help ease the transition. The company currently has an agreement with Oracle Corporation allowing it to sublicense a limited-use Oracle system, which enables a client to use Oracle with its software products at a significantly lower cost than a full-use Oracle license. The agreement expires in July 2003.

SOURCE:http://www.technologyevaluation.com/research/articles/sct-fygir-to-lubricate-valvoline-s-supply-chain-15976/

The competitive environment for every industry grows increasingly intense. Fast, reasonably accurate information about the impact of a software investment decision grows more critical. Many decision-makers look for an exact forecast of return on investment (ROI) from the purchase of a supply chain management application. At least four very real challenges make such perfect information elusive. Commonly, executives meet these challenges with responses that are not carefully considered. The challenges and the corresponding reactionary refrains are as follows:

Limited time exists to perform analysis - "We need to know now!"

Business analysis skills are lacking - "We are looking for the vendor to tell us!"

The data to perform the analysis are almost always not available in the corporate databases - "We have tons of data, but we don't have it broken down like that."

It is always difficult to predict the future … like forecasting, certain laws about a prediction of ROI will forever hold true…

the prediction will always be wrong

the prediction will always change for as long as the analysis continues

someone is going to be held accountable for the prediction

- "Just give us the bottom line!"

After a quick look at these issues, one might question the effort to undertake the analysis to predict an ROI, as well as the validity of the outcome. Perfect, or even complete, information may not be feasible, but if a few basic principles are followed, some analytical work can provide an understanding of the potential for bottom line impact. It can also yield insight into the root causes of undesirable symptoms from which your business may be suffering.

The reactions of some decision-makers to each of the four challenges that are listed above provide a convenient outline for exploring a more thoughtful and strategic approach to evaluating a potential investment in supply chain management software.

About This Note: This is a four part note, each part addressing one of the four challenges.

Part One covered "We need to know now!"

Part Two covered "We are looking for the vendor to tell us!"

Part Three discusses the challenge of performing the data analysis.

Part 4. "Just give us the bottom line!"

This reaction to the need to understand the future impact of an investment decision is reminiscent of an individual who wants to know what stock they should buy. This person does not want to learn about industry performance. He or she is not interested in the relative competitive strengths of one company versus those of the other companies in the same industry. Nor is this person motivated to research financial statements in order to understand what might be driving a company's performance or whether that performance is getting better or worse. Such an individual simply wants to know if it will be a good investment and how much can be made at the end of 12 months if it is sold. So he or she scans a list of stock picks in one of the many financial publications, chooses the company ranked at the top, and then "places a bet" because at that point, the decision is little more than a bet based on an uninformed hunch. It is likely that this person will be sadly disappointed in the return. The investor will probably try to recover the loss with an equally unconsidered investment decision, leading to a cycle of poorly informed decisions. Obviously, this individual is putting the amount of money about to be invested at great risk because he or she has latched on to an answer without context.

In the same way, decision-makers in a company may rush to a "bottom-line" conclusion, only to have their efforts frustrated because they did not take the time, or do the work, necessary to gain some understanding of what is driving their pain and how their investment decision may affect those drivers. This will often lead to additional decisions that are made without adequate research and consideration in an effort to recover from the first one.

SOURCE:http://www.technologyevaluation.com/research/articles/identifying-the-roi-of-a-software-application-for-supply-chain-management-part-4-just-give-us-the-bottom-line-16423/

The competitive environment for every industry grows increasingly intense. Fast, reasonably accurate information about the impact of a software investment decision grows more critical. Many decision-makers look for an exact forecast of return on investment (ROI) from the purchase of a supply chain management application. At least four very real challenges make such perfect information elusive. Commonly, executives meet these challenges with responses that are not carefully considered. The challenges and the corresponding reactionary refrains are as follows:

Limited time exists to perform analysis - "We need to know now!"

Business analysis skills are lacking - "We are looking for the vendor to tell us!"

The data to perform the analysis are almost always not available in the corporate databases - "We have tons of data, but we don't have it broken down like that."

It is always difficult to predict the future … like forecasting, certain laws about a prediction of ROI will forever hold true…

the prediction will always be wrong

the prediction will always change for as long as the analysis continues

someone is going to be held accountable for the prediction

- "Just give us the bottom line!"

After a quick look at these issues, one might question the effort to undertake the analysis to predict an ROI, as well as the validity of the outcome. Perfect, or even complete, information may not be feasible, but if a few basic principles are followed, some analytical work can provide an understanding of the potential for bottom line impact. It can also yield insight into the root causes of undesirable symptoms from which your business may be suffering.

The reactions of some decision-makers to each of the four challenges that are listed above provide a convenient outline for exploring a more thoughtful and strategic approach to evaluating a potential investment in supply chain management software.

About This Note: This is a four part note, each part addressing one of the four challenges.

Part One covered "We need to know now!"

Part Two covered "We are looking for the vendor to tell us!"

Part Three discusses the challenge of performing the data analysis.

Part 4. "Just give us the bottom line!"

This reaction to the need to understand the future impact of an investment decision is reminiscent of an individual who wants to know what stock they should buy. This person does not want to learn about industry performance. He or she is not interested in the relative competitive strengths of one company versus those of the other companies in the same industry. Nor is this person motivated to research financial statements in order to understand what might be driving a company's performance or whether that performance is getting better or worse. Such an individual simply wants to know if it will be a good investment and how much can be made at the end of 12 months if it is sold. So he or she scans a list of stock picks in one of the many financial publications, chooses the company ranked at the top, and then "places a bet" because at that point, the decision is little more than a bet based on an uninformed hunch. It is likely that this person will be sadly disappointed in the return. The investor will probably try to recover the loss with an equally unconsidered investment decision, leading to a cycle of poorly informed decisions. Obviously, this individual is putting the amount of money about to be invested at great risk because he or she has latched on to an answer without context.

In the same way, decision-makers in a company may rush to a "bottom-line" conclusion, only to have their efforts frustrated because they did not take the time, or do the work, necessary to gain some understanding of what is driving their pain and how their investment decision may affect those drivers. This will often lead to additional decisions that are made without adequate research and consideration in an effort to recover from the first one.

SOURCE:http://www.technologyevaluation.com/research/articles/identifying-the-roi-of-a-software-application-for-supply-chain-management-part-4-just-give-us-the-bottom-line-16423/

I'm going to begin with an overview of problems and solutions relating to technology selection, starting first with the problem:

According to our research, over 80% of enterprise technology evaluations run over time and budget, and once completed, over 50% of the implementations fail to meet functional and total cost expectations. There are three main reasons that project teams run into trouble.

They have no effective way to identify the critical vendor and product questions necessary to successfully initiate the evaluation process.

They have no ability to prioritize the different criteria, once identified, relative to one another. As a result, final priorities are often more the result of internal political agendas than true needs and requirements.

And finally, project teams have no ability to gather objective, validated, updated data on the vendor alternatives. As you may well know, vendors have a tendency to exaggerate product, service, and corporate capabilities if it enables them to move to the next phase of the deal.
So, what's the solution?

The solution is to create a structured, repeatable process for evaluating technology solutions and the vendors that provide them. Best practices drawn from our clients that have completed internal technology selections suggest that project teams should examine five key categories of criteria. The first two categories examine product specific capabilities, while the remaining three investigate the software vendor's overall corporate capabilities.

So let's review these criteria categories.

Number 1: Product Functionality - Product functionality is the most obvious evaluation criterion and plays a dominant role in supply chain management software selections. Simply put, this evaluates the features and functions delivered by the product as it currently exists. Together with technology and architecture, product functionality often makes up over 90 percent of the overall importance within IT selections, but this is probably too high. Other criteria such as service/support, corporate viability, and strategy should make a stronger contribution.

Number 2: Product Technology - Product technology defines the technical architecture of the product, and the technological environment in which the product can run successfully. Sub criteria include things like application architecture, software usability and administration, and platform and database support. Relative to the other evaluation criteria, best practice selections place a lower relative importance on the product technology criterion. However, this apparently lower importance is deceptive, because the product technology criterion usually houses the majority of an organization's mandatory criteria, which usually include server, client, protocol and database support, application scalability and other architectural capabilities. The definition of mandatory criteria within this set often allows the client to quickly narrow the long list of potential vendors to a short list of applicable solutions that pass muster relative to the most basic mandatory selection criteria.

Number 3: Corporate Service and Support - This criterion defines the capability of the vendor to provide implementation services and ongoing support. Repeated industry surveys have identified this category as the single largest differentiating factor among potential selection options, as well as the greatest indicator of ultimate user implementation success and long term vendor viability. A proper professional services and support evaluation should include both subjective, qualitative measures validated by current product users, and objective, quantitative criteria within both the professional services and product support categories. Service and support includes categories such as consulting, systems integration, project management skills, geographic coverage, language and time coverage of the vendor help desk, and delivery mediums.

Number 4: Corporate Viability - Corporate viability is a critical, yet often overlooked category that examines the financial and management strength of the vendor. Given the huge number of dollars spent on IT procurements, not to mention their strategic importance, the financial stability of the vendor simply can't be stressed too much. The vendor viability category in WebTESS combines quantitative Wall Street ratio and metric analysis with qualitative management and corporate evaluations. Only by combining the two components can IT executives accurately assess the risk and benefit of corporate investment in a specific product and vendor option.

Number 5: Corporate Strategy - Corporate strategy evaluates the corporate road map and strategy of the software vendor with regard to specific timelines of how the product will be developed, sold, and supported within the supply chain management market. This is the most strategic and long term set of evaluation criteria, and rates how effectively the stated vendor's three to five year product, support and sales strategy maps to the overall market direction. Any dissonance between the stated vendor direction and market direction is a cause for concern, and should be rectified by the vendor through either a shift in corporate policy or a detailed and market validated explanation for the discord.

Now that we have given an overview of the requirements of a technology selection, I would like to move on to an overview of the Supply Chain Management Software Marketplace and as it exists today.

SOURCE:http://www.technologyevaluation.com/research/articles/supply-chain-management-audio-conference-transcript-15893/

I'm going to begin with an overview of problems and solutions relating to technology selection, starting first with the problem:

According to our research, over 80% of enterprise technology evaluations run over time and budget, and once completed, over 50% of the implementations fail to meet functional and total cost expectations. There are three main reasons that project teams run into trouble.

They have no effective way to identify the critical vendor and product questions necessary to successfully initiate the evaluation process.

They have no ability to prioritize the different criteria, once identified, relative to one another. As a result, final priorities are often more the result of internal political agendas than true needs and requirements.

And finally, project teams have no ability to gather objective, validated, updated data on the vendor alternatives. As you may well know, vendors have a tendency to exaggerate product, service, and corporate capabilities if it enables them to move to the next phase of the deal.
So, what's the solution?

The solution is to create a structured, repeatable process for evaluating technology solutions and the vendors that provide them. Best practices drawn from our clients that have completed internal technology selections suggest that project teams should examine five key categories of criteria. The first two categories examine product specific capabilities, while the remaining three investigate the software vendor's overall corporate capabilities.

So let's review these criteria categories.

Number 1: Product Functionality - Product functionality is the most obvious evaluation criterion and plays a dominant role in supply chain management software selections. Simply put, this evaluates the features and functions delivered by the product as it currently exists. Together with technology and architecture, product functionality often makes up over 90 percent of the overall importance within IT selections, but this is probably too high. Other criteria such as service/support, corporate viability, and strategy should make a stronger contribution.

Number 2: Product Technology - Product technology defines the technical architecture of the product, and the technological environment in which the product can run successfully. Sub criteria include things like application architecture, software usability and administration, and platform and database support. Relative to the other evaluation criteria, best practice selections place a lower relative importance on the product technology criterion. However, this apparently lower importance is deceptive, because the product technology criterion usually houses the majority of an organization's mandatory criteria, which usually include server, client, protocol and database support, application scalability and other architectural capabilities. The definition of mandatory criteria within this set often allows the client to quickly narrow the long list of potential vendors to a short list of applicable solutions that pass muster relative to the most basic mandatory selection criteria.

Number 3: Corporate Service and Support - This criterion defines the capability of the vendor to provide implementation services and ongoing support. Repeated industry surveys have identified this category as the single largest differentiating factor among potential selection options, as well as the greatest indicator of ultimate user implementation success and long term vendor viability. A proper professional services and support evaluation should include both subjective, qualitative measures validated by current product users, and objective, quantitative criteria within both the professional services and product support categories. Service and support includes categories such as consulting, systems integration, project management skills, geographic coverage, language and time coverage of the vendor help desk, and delivery mediums.

Number 4: Corporate Viability - Corporate viability is a critical, yet often overlooked category that examines the financial and management strength of the vendor. Given the huge number of dollars spent on IT procurements, not to mention their strategic importance, the financial stability of the vendor simply can't be stressed too much. The vendor viability category in WebTESS combines quantitative Wall Street ratio and metric analysis with qualitative management and corporate evaluations. Only by combining the two components can IT executives accurately assess the risk and benefit of corporate investment in a specific product and vendor option.

Number 5: Corporate Strategy - Corporate strategy evaluates the corporate road map and strategy of the software vendor with regard to specific timelines of how the product will be developed, sold, and supported within the supply chain management market. This is the most strategic and long term set of evaluation criteria, and rates how effectively the stated vendor's three to five year product, support and sales strategy maps to the overall market direction. Any dissonance between the stated vendor direction and market direction is a cause for concern, and should be rectified by the vendor through either a shift in corporate policy or a detailed and market validated explanation for the discord.

Now that we have given an overview of the requirements of a technology selection, I would like to move on to an overview of the Supply Chain Management Software Marketplace and as it exists today.

SOURCE:http://www.technologyevaluation.com/research/articles/supply-chain-management-audio-conference-transcript-15893/

Who Are The Players?

The differences between new parts production supply chain and service and replacement parts supply chain are significant. Companies using conventional supply chain management (SCM) methods to track their service and replacement parts supply are failing to grasp the special needs of the aftermarket. Further , one can even differentiate between the inventory optimization approaches of new production parts. Pure distribution parts include finished consumer goods (not including fashion/apparel items due to their seasonality idiosyncrasies, see Intentia: Stepping Out With Fashion and Style; Part One: Characteristics and Trends of the Fashion Industry), with a large number of items, large number of locations (whereby store levels can get out of hand), and with a desire for very high customer service levels (98 percent or more). The vendors that cater to these customers would be the likes of ToolsGroup. Mixed manufacturing and distribution for new parts require the exact positioning of parts. Exact positioning is highly important for manufacturing and configuring (postponement) purposes, because bill of materials (BOM) logic is heavily leveraged for inventory planning and optimization. Leading vendors in this market include Optiant, LogicTools, SmartOps, or i2 Technologies.

Part Four of the Lucrative but "Risky" Aftermarket Business—Service and Replacement Parts for SCM series.

These solutions typically leverage stochastic optimization using nonlinear modeling techniques to analyze input data for randomness. This knowledge is applied to determine an optimal inventory policy at a particular node in a multi-tier supply network. Namely, as supply chain variability has increased, the data has become more random. Consequently, user companies need to not only look at the nominal values per se, but also at the probability of the value. For example, they need to know what the probability is of the forecast value, the purchase/transportation lead time, the manufacturing run time, the supplier quality, etc.

Contrary to these new parts production segments, aftermarket service and replacement parts are typically "slow movers," but may be critical for the operation of expensive equipment, often containing associated service level agreement (SLA) penalties for inadequate service. Thus, for the reasons of repair and indenture level and SLA considerations, one has to optimize inventories for required service levels and end-equipment availability. Varied service and customer entitlements complicate things, since aftermarket service must support warranty commitments; contract extensions, which might include same-day or next-day service; and direct or through distributor part sales. These entitlements may have different service objectives, which may include fill rates, response times, or system uptime maintenance.

How is risk factored into decision-making for service parts? In this case, forecasting might use demand history, but perhaps more importantly, mean time between failure (MTBF) data and an analysis of causal factors can provide item- and location-specific estimates of usage. This data can also be used to calculate the probability of demand occurring during the planning period in question. For example, a forecast might state that there is a 12 percent chance that the user will need a specific part in the next thirty days at a specific location. However, this forecast is risk-based, rather than consumption-based, as it is in new parts production supply chain planning (SCP).

Moreover, the design of the distribution network including which parts and how many of each are positioned at which depot(s) is another risk based evaluation. Typically, this dictates a multi-tier or multi-echelon depot strategy, where tactical planning involves risk-based decision-making that considers the probability of demand and therefore, the probability of a stockout. To refresh our memory, stockout costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs (not to mention lost face before the customer and hurting SLA penalties). Thus, the strategy include issues like, if we have a 20 percent chance of needing a single unit of a specific part in the next thirty days, what are the odds that we will need two? Moreover, given the part delivery lead time, what are the odds that the demand for two will create a stockout?

Given the random, sporadic nature of service events, forecasting approaches cannot eliminate the uncertainty of demand. Hence, inventory decisions must be evaluated on the basis of risk, whereby the considerations should include MTBF; the number of a particular asset type to be maintained; the product life cycle stage; the locations of assets and available spare parts; SLA commitments; the cost of downtime and of the service or replacement part, etc. To deal with these variables effectively companies must address the complexity and the need to manage risk directly. Some vendors, as will be described later, have developed approaches incorporating these factors into the proprietary models and algorithms.

Service and replacement parts inventory optimization is a big issue for a wide gamut of manufacturers. Aeronautical and defense (A&D) companies that design products for high reliability figure most prominently, but they still have to maintain stocks of complex and expensive spare and replacement parts, since the impact of any type of failure is large and requires the widespread and global stocks of parts for rapid replacement. The situation becomes even more complicated with rotable parts, such as the interchangeable elements of an aircraft that are removed, rebuilt, or reinstalled, which, almost as a rule, are always on a different aircraft. In an industry where every nut and bolt is important for safe operation, immense amounts of attention and effort are used to track interchangeable components and subassemblies for costing, replacement scheduling, and mean time-for-failure (MTFF) prediction.

A&D companies design low-volume, high-cost products for high reliability, but still maintain stocks of complex and expensive spares, since the impact of any failure in this industry, is large and requires adequate stocks of parts at several locations for rapid replacement in case of repair. On one hand, minimizing the number of new parts introduced into the market (and subsequently into inventory) should be a major aim, particularly because parts face obsolescence as new finished product are introduced. Yet, on the other hand, rotable parts and reusing ("harvesting") repaired components only adds to the complexity and likely impaired the efficiency of this process. Further, lot and serial tracking capabilities, the so-called tail effectivity, permits users to tie every part (within part lists and diagrams) on a plane back to that one entity. For more information, see MRO and Spare Parts Management Considerations.

Similar low-volume, high-cost, high-impact concerns are applicable to a range of other manufacturers, such as automotive and high-tech/electronics makers of complex medical equipment, large industrial systems, and mining equipment. All have immense, installed bases and complex, multi-echelon supply chains with high occurrences of slow-moving parts. Manufacturers of durable goods, like household appliances, have an additional issue with the need for highly mobile service van stocks. In addition to original equipment manufacturers (OEM), asset-intensive manufacturers, and service organizations, like refineries, chemical plants, primary metals producers, telecommunications, utilities, and municipalities, have to maintain large stores of spare parts to minimize the impact of failures on their revenue generating activities.

SOURCE:http://www.technologyevaluation.com/research/articles/supply-chain-management-systems-for-service-and-replacement-parts-players-benefits-and-user-recommendations-18090/

Who Are The Players?

The differences between new parts production supply chain and service and replacement parts supply chain are significant. Companies using conventional supply chain management (SCM) methods to track their service and replacement parts supply are failing to grasp the special needs of the aftermarket. Further , one can even differentiate between the inventory optimization approaches of new production parts. Pure distribution parts include finished consumer goods (not including fashion/apparel items due to their seasonality idiosyncrasies, see Intentia: Stepping Out With Fashion and Style; Part One: Characteristics and Trends of the Fashion Industry), with a large number of items, large number of locations (whereby store levels can get out of hand), and with a desire for very high customer service levels (98 percent or more). The vendors that cater to these customers would be the likes of ToolsGroup. Mixed manufacturing and distribution for new parts require the exact positioning of parts. Exact positioning is highly important for manufacturing and configuring (postponement) purposes, because bill of materials (BOM) logic is heavily leveraged for inventory planning and optimization. Leading vendors in this market include Optiant, LogicTools, SmartOps, or i2 Technologies.

Part Four of the Lucrative but "Risky" Aftermarket Business—Service and Replacement Parts for SCM series.

These solutions typically leverage stochastic optimization using nonlinear modeling techniques to analyze input data for randomness. This knowledge is applied to determine an optimal inventory policy at a particular node in a multi-tier supply network. Namely, as supply chain variability has increased, the data has become more random. Consequently, user companies need to not only look at the nominal values per se, but also at the probability of the value. For example, they need to know what the probability is of the forecast value, the purchase/transportation lead time, the manufacturing run time, the supplier quality, etc.

Contrary to these new parts production segments, aftermarket service and replacement parts are typically "slow movers," but may be critical for the operation of expensive equipment, often containing associated service level agreement (SLA) penalties for inadequate service. Thus, for the reasons of repair and indenture level and SLA considerations, one has to optimize inventories for required service levels and end-equipment availability. Varied service and customer entitlements complicate things, since aftermarket service must support warranty commitments; contract extensions, which might include same-day or next-day service; and direct or through distributor part sales. These entitlements may have different service objectives, which may include fill rates, response times, or system uptime maintenance.

How is risk factored into decision-making for service parts? In this case, forecasting might use demand history, but perhaps more importantly, mean time between failure (MTBF) data and an analysis of causal factors can provide item- and location-specific estimates of usage. This data can also be used to calculate the probability of demand occurring during the planning period in question. For example, a forecast might state that there is a 12 percent chance that the user will need a specific part in the next thirty days at a specific location. However, this forecast is risk-based, rather than consumption-based, as it is in new parts production supply chain planning (SCP).

Moreover, the design of the distribution network including which parts and how many of each are positioned at which depot(s) is another risk based evaluation. Typically, this dictates a multi-tier or multi-echelon depot strategy, where tactical planning involves risk-based decision-making that considers the probability of demand and therefore, the probability of a stockout. To refresh our memory, stockout costs may include lost sales, backorder costs, expediting, and additional manufacturing and purchasing costs (not to mention lost face before the customer and hurting SLA penalties). Thus, the strategy include issues like, if we have a 20 percent chance of needing a single unit of a specific part in the next thirty days, what are the odds that we will need two? Moreover, given the part delivery lead time, what are the odds that the demand for two will create a stockout?

Given the random, sporadic nature of service events, forecasting approaches cannot eliminate the uncertainty of demand. Hence, inventory decisions must be evaluated on the basis of risk, whereby the considerations should include MTBF; the number of a particular asset type to be maintained; the product life cycle stage; the locations of assets and available spare parts; SLA commitments; the cost of downtime and of the service or replacement part, etc. To deal with these variables effectively companies must address the complexity and the need to manage risk directly. Some vendors, as will be described later, have developed approaches incorporating these factors into the proprietary models and algorithms.

Service and replacement parts inventory optimization is a big issue for a wide gamut of manufacturers. Aeronautical and defense (A&D) companies that design products for high reliability figure most prominently, but they still have to maintain stocks of complex and expensive spare and replacement parts, since the impact of any type of failure is large and requires the widespread and global stocks of parts for rapid replacement. The situation becomes even more complicated with rotable parts, such as the interchangeable elements of an aircraft that are removed, rebuilt, or reinstalled, which, almost as a rule, are always on a different aircraft. In an industry where every nut and bolt is important for safe operation, immense amounts of attention and effort are used to track interchangeable components and subassemblies for costing, replacement scheduling, and mean time-for-failure (MTFF) prediction.

A&D companies design low-volume, high-cost products for high reliability, but still maintain stocks of complex and expensive spares, since the impact of any failure in this industry, is large and requires adequate stocks of parts at several locations for rapid replacement in case of repair. On one hand, minimizing the number of new parts introduced into the market (and subsequently into inventory) should be a major aim, particularly because parts face obsolescence as new finished product are introduced. Yet, on the other hand, rotable parts and reusing ("harvesting") repaired components only adds to the complexity and likely impaired the efficiency of this process. Further, lot and serial tracking capabilities, the so-called tail effectivity, permits users to tie every part (within part lists and diagrams) on a plane back to that one entity. For more information, see MRO and Spare Parts Management Considerations.

Similar low-volume, high-cost, high-impact concerns are applicable to a range of other manufacturers, such as automotive and high-tech/electronics makers of complex medical equipment, large industrial systems, and mining equipment. All have immense, installed bases and complex, multi-echelon supply chains with high occurrences of slow-moving parts. Manufacturers of durable goods, like household appliances, have an additional issue with the need for highly mobile service van stocks. In addition to original equipment manufacturers (OEM), asset-intensive manufacturers, and service organizations, like refineries, chemical plants, primary metals producers, telecommunications, utilities, and municipalities, have to maintain large stores of spare parts to minimize the impact of failures on their revenue generating activities.

SOURCE:http://www.technologyevaluation.com/research/articles/supply-chain-management-systems-for-service-and-replacement-parts-players-benefits-and-user-recommendations-18090/

Most Misunderstood Link in Supply Chain Management
Critical to sales, customer service, quality, cash flow, and to a company's very survival, credit and collections is often caught up in a 1950's risk management time warp.

Lots of things have changed since the '50s, besides the color of my hair. One thing that has remained fairly constant though is how most business executives view the credit and collection function.

They Don't Know What They Don't Know

An 18-year-old kid knows everything worth knowing, or so he believes. Most business executives know everything worth knowing about credit and collections, or so they believe.

There are two questions I ask potential clients about their credit and collection operation:

How do you measure performance?
Do you have usable written policies and procedures?
If clients have any kind of trackable numbers with which to measure credit and collection performance, those numbers are usually tied to average turn-time on the accounts receivable (A/R)—the days sales outstanding (DSO) or collection days index (CDI)—and percent of A/R written off as a bad debt loss (money the customer didn't pay). The same as in the '50s. As for usable written policies and procedures, many of these companies have none; only a few have actually documented the why, what, how, and when. The problem with many of these companies is that they have had the same policies and procedures since the 1950s.

"The new guy learns from the old guy, who learned from the dead guy." (Scott Stratman)

The problem with verbal understandings is that everyone gets to be the policy maker and there are as many policies as there are people. Many companies have a loose collection of forms, memos, and letters that they mistakenly call policies and procedures. They can't hand these so-called policies and procedures to someone new and reasonably expect the person to know how things work.

If you think you have usable policies and procedures, pull them out and see if they answer the following questions:

What is the purpose of the credit function?

What is the goal of credit approval, and does that goal complement the purpose?

What is the goal of collections (delinquent A/R management), and does it complement the purpose?

How is credit approval performance measured, and does it complement the goal?

How is collections measured, and does it complement the goal?

People Forget

Eli Goldratt, in his book The Goal, says people in business forget why they're in business, that they get caught up in the process (details) and lose sight of the purpose (vision). I think Goldratt is too kind. I think many people in business never knew the purpose of what they do to begin with. Recently I was visiting with a chief executive officer (CEO) and his vice president (VP) of purchasing, and I asked the VP what the purpose of his function was. He stumbled around and came up with something about customers' needs and balancing that against various other factors.

If the head of a department can't clearly state why that department exists, what are the chances his people know? Or care?

Considering the costs of extending credit to customers—namely, the additional administrative expenses, the cost of time and money that goes with carrying A/R, and the potential for loss (bad debt)—why should any business extend credit? What is the purpose of the credit function?

Why Credit?

Businesses incur the costs of extending credit terms for the following reasons:

It is a customer requirement. These companies are doing business with customers that require that they be given time to ensure they receive what they ordered; they require time to process the bill for payment. If credit terms aren't extended to such customers, the company loses profitable sales.

The customer sells downline. Customers add value to the goods or services they buy and then sell downline to their own customers. Such customers require time (credit terms) to add value, make sales, and perhaps to collect their own A/R before they can pay vendors and suppliers. And if credit terms are not extended, profitable sales are lost.

It is customary. In some industries, credit terms are customary, which means that other vendors and suppliers (competitors) extend credit terms. If credit terms aren't extended, profitable sales are lost.

The only reason to incur the costs that come with extending credit terms is to get profitable sales that would otherwise be lost.

Measurements over Purpose

How performance is monitored and measured means more than any stated purpose. Remember the first question I ask prospective clients: how are you measuring performance? If they are using DSO and bad debt, they are not measuring for how well the function performs in getting profitable sales; they're measuring for risk. The old comeback to credit being a lubricant of commerce, and allowing for the expanded movement of products and services is, "a sale's not a sale until you're paid." Consider this: If the purpose (vision) of credit is "to get profitable sales that would otherwise be lost," then should not the goal of credit approval be "to find ways of accommodating profitable sales while remaining confident of payment"? Who says we can't have our cake and eat it too? Stop painting credit as "the sales avoidance department" by measuring for what you want—profitable sales.

Factors in Credit Approval

There are three main factors companies consider when deciding to extend credit to a customer:

Customer profile and how the customer does business (i.e., process, paperwork, accounts payable [A/P] cycle, etc.).

Customer past performance. If they've never paid anyone in the past, chances are real good you won't be the first they will pay.

Seller's product value (i.e., the margin on the sale, the current demand for the product or service, and lending company's current capacity).

Based on these factors, the goal is to find ways to maximize sales and minimize risks.

SOURCE:http://www.technologyevaluation.com/research/articles/most-misunderstood-link-in-supply-chain-management-19354/

Most Misunderstood Link in Supply Chain Management
Critical to sales, customer service, quality, cash flow, and to a company's very survival, credit and collections is often caught up in a 1950's risk management time warp.

Lots of things have changed since the '50s, besides the color of my hair. One thing that has remained fairly constant though is how most business executives view the credit and collection function.

They Don't Know What They Don't Know

An 18-year-old kid knows everything worth knowing, or so he believes. Most business executives know everything worth knowing about credit and collections, or so they believe.

There are two questions I ask potential clients about their credit and collection operation:

How do you measure performance?
Do you have usable written policies and procedures?
If clients have any kind of trackable numbers with which to measure credit and collection performance, those numbers are usually tied to average turn-time on the accounts receivable (A/R)—the days sales outstanding (DSO) or collection days index (CDI)—and percent of A/R written off as a bad debt loss (money the customer didn't pay). The same as in the '50s. As for usable written policies and procedures, many of these companies have none; only a few have actually documented the why, what, how, and when. The problem with many of these companies is that they have had the same policies and procedures since the 1950s.

"The new guy learns from the old guy, who learned from the dead guy." (Scott Stratman)

The problem with verbal understandings is that everyone gets to be the policy maker and there are as many policies as there are people. Many companies have a loose collection of forms, memos, and letters that they mistakenly call policies and procedures. They can't hand these so-called policies and procedures to someone new and reasonably expect the person to know how things work.

If you think you have usable policies and procedures, pull them out and see if they answer the following questions:

What is the purpose of the credit function?

What is the goal of credit approval, and does that goal complement the purpose?

What is the goal of collections (delinquent A/R management), and does it complement the purpose?

How is credit approval performance measured, and does it complement the goal?

How is collections measured, and does it complement the goal?

People Forget

Eli Goldratt, in his book The Goal, says people in business forget why they're in business, that they get caught up in the process (details) and lose sight of the purpose (vision). I think Goldratt is too kind. I think many people in business never knew the purpose of what they do to begin with. Recently I was visiting with a chief executive officer (CEO) and his vice president (VP) of purchasing, and I asked the VP what the purpose of his function was. He stumbled around and came up with something about customers' needs and balancing that against various other factors.

If the head of a department can't clearly state why that department exists, what are the chances his people know? Or care?

Considering the costs of extending credit to customers—namely, the additional administrative expenses, the cost of time and money that goes with carrying A/R, and the potential for loss (bad debt)—why should any business extend credit? What is the purpose of the credit function?

Why Credit?

Businesses incur the costs of extending credit terms for the following reasons:

It is a customer requirement. These companies are doing business with customers that require that they be given time to ensure they receive what they ordered; they require time to process the bill for payment. If credit terms aren't extended to such customers, the company loses profitable sales.

The customer sells downline. Customers add value to the goods or services they buy and then sell downline to their own customers. Such customers require time (credit terms) to add value, make sales, and perhaps to collect their own A/R before they can pay vendors and suppliers. And if credit terms are not extended, profitable sales are lost.

It is customary. In some industries, credit terms are customary, which means that other vendors and suppliers (competitors) extend credit terms. If credit terms aren't extended, profitable sales are lost.

The only reason to incur the costs that come with extending credit terms is to get profitable sales that would otherwise be lost.

Measurements over Purpose

How performance is monitored and measured means more than any stated purpose. Remember the first question I ask prospective clients: how are you measuring performance? If they are using DSO and bad debt, they are not measuring for how well the function performs in getting profitable sales; they're measuring for risk. The old comeback to credit being a lubricant of commerce, and allowing for the expanded movement of products and services is, "a sale's not a sale until you're paid." Consider this: If the purpose (vision) of credit is "to get profitable sales that would otherwise be lost," then should not the goal of credit approval be "to find ways of accommodating profitable sales while remaining confident of payment"? Who says we can't have our cake and eat it too? Stop painting credit as "the sales avoidance department" by measuring for what you want—profitable sales.

Factors in Credit Approval

There are three main factors companies consider when deciding to extend credit to a customer:

Customer profile and how the customer does business (i.e., process, paperwork, accounts payable [A/P] cycle, etc.).

Customer past performance. If they've never paid anyone in the past, chances are real good you won't be the first they will pay.

Seller's product value (i.e., the margin on the sale, the current demand for the product or service, and lending company's current capacity).

Based on these factors, the goal is to find ways to maximize sales and minimize risks.

SOURCE:http://www.technologyevaluation.com/research/articles/most-misunderstood-link-in-supply-chain-management-19354/

What Is SCM Software?

SCM software manages product flows from supplier, to manufacturer, to customer. In brief, it manages supply and demand for an organization. According to APICS, SCM software refers to

the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.

SCM systems integrate all features of procurement processes, warehouse management system (WMS) features and functions, transportation, and logistics, as well as other product planning modules.

To learn more about the distinction between advance planning and scheduling (APS), SCM, and enterprise resource planning (ERP), read TEC’s article Comparative Analysis: Are You Still Confused About APS, SCM, and ERP?



About This SCM Guide

Our SCM request for information (SCM RFI) template is composed of almost 2,600 criteria; consequently, we’ll focus here on the “big picture” features only.

We’ve brought SCM features together by broad category:

Warehouse management system (WMS)
Transportation management system (TMS)
International trade logistics (ITL)
Supplier relationship management (SRM)
Demand management
Supply chain analytics
Order management
Service parts planning
Product technology
These categories correspond to a high-level functional breakdown of software features. In this reference guide, we give a short explanation of how each category impacts your supply chain management processes.

If you would like more information about full listings of enterprise software functions and features (SCM, ERP, and other enterprise software categories), please see TEC’s RFP Templates.



Supply Chain Management (SCM) Software Functions and Features



SCM functions and features, submodule #1: warehouse management system (WMS)

Functionality
This category includes the general warehouse management functionalities such as warehouse configuration, bin location and product setup, inventory control, license plate tracking, quality control, picking, packing and shipping, etc.

Adaptability
The adaptability module in SCM software covers business processes, decision support, and reporting.

Warehouse management system (WMS) technology configuration
The technology configuration addresses WMS-specific functionality such as radio-frequency identification (RFID), security, and internationalization supported by each vendor. It also touches on programming and other technologies used in the development of the WMS application.

SCM functions and features, submodule #2: transportation management system (TMS)

System definition and implementation
The TMS should include tools and applications to enable to create profiles for all your contracts, associated carriers, and trade lanes for inter-modal and multi-leg moves. This should support regional as well as international transportation movements. The key to the successful operation of the TMS is a robust foundation created during the system implementation.

Transportation management operation functionality
Transportation management operation functionality allows distributors to align their transportation operations with their supply chain strategies and overall business objectives. This includes areas that take into consideration the entire shipment life cycle, from planning, network optimization, and execution, to shipment tracking and analysis.

SCM functions and features, submodule #3: international trade logistics (ITL)

Collaboration
True collaboration across a global and disparate set of entities and information systems requires a neutral and secure environment. This type of environment enables all players to engage in an electronic dialogue to collaborate in acquiring, transferring, transporting, and settling with regional and international trading partners. In addition, the data model should take into account the different roles of all participants and manage these through a set of rule-based processes. As such, the system implementation should include clear definitions in terms of buy-sell relationships, financial terms, and service level agreements, as well as related contact details and user profiles for suppliers, customers, and related service providers.

Content
The system should support all the data and information required in order to establish a true total cost of goods sold at the time of the initial buy-sell transaction. The SCM software should also enable users to track incremental costs as the shipment is processed from point of origin to final point of receipt. All costs and activities should be available at the transaction initiation point and can be classified by the primary components, which are product costs, compliance costs, and logistics costs.

Commerce
Starting with the initial request for goods—whether this is an RFI, a request for quotation (RFQ), or a formal purchase order, all information that is exchanged during the shipment life cycle should be facilitated by the international trade logistics (ITL) system. This requires a synchronized system and process, where the product and shipment requirements are integrated into an automated order fulfillment environment. The product item master and associated tables will determine the cost of the product as well as the relationship between the product and any duties or tariffs that are applicable. Tables related to customs duties and tariffs as well as associated rates of exchange and transportation costs should be available as part of the system functions. This will enable the user to obtain an estimated total cost of goods sold as well as a final cost of goods sold, to highlight any variances or discrepancies. This implies a data model that includes an understanding of all the data exchanged and processed at the product and item level, between order management systems, as well as the data exchanged with warehouse management and transportation systems.

SCM functions and features, submodule #4: supplier relationship management (SRM)

Design
Best practice dictates that strategic suppliers be involved in the new product process from the very beginning—i.e., the concept, requirements, and design definition phase. Supplier relationship management (SRM) suites support this with functionality for requirements collaboration tools, component selection tools, and bills of materials (BOMs) grading.

Sourcing
Many consider sourcing to be the heart of SRM and commodity management to be the heart of sourcing. Advanced sourcing suites are rich in analysis and decision support technology to absorb huge amounts of data quickly and make intelligent sourcing decisions. They also lay the foundation of execution through RFI, RFQ, and RFP processes, and manage performance against contracts. Risk management is an area which spans the full life cycle, in particular association with the sourcing function.

Procurement
Procurement is generally divided into material requirements planning (MRP)-driven procurement (sometimes referred to as direct materials procurement) and requisition-driven procurement (sometimes referred to as indirect or maintenance, repair, and operations [MRO] procurement), although some long-lead-time, first-run direct materials are ordered via requisitions. This division reflects substantial differences in the two methods of procurement. Management of catalogs supports requisition-driven procurement and the sourcing processes that precede MRP-driven procurement.

Fulfillment
The bulk of fulfillment functionality is traditionally performed by ERP and related systems such as order management, warehouse management, and distribution management systems. As companies virtualize and suppliers become increasingly involved in the fulfillment process, some functionality is appropriate within SRM. SRM systems should support a range of modern inbound inventory management practices, such as kanban and vendor-managed inventory (VMI) and provide visibility into the inbound pipeline. Returns management becomes important in SRM for situations where components are being returned to and repaired or replaced by suppliers.

Manufacturing
As with fulfillment, the bulk of manufacturing functionality is traditionally performed by ERP systems. However, the important supplier-facing processes of quality and engineer change order (ECO) management may be done outside the ERP system as part of an SRM suite.

Settlement
The primary SRM-related function for settlements is in reconciliation between the original order, actual received goods, and the invoice. Advanced settlement processes may also be supported, such as evaluated receipts or electronic invoice presentation and payment.

Utilities
There are several areas that span across the lifecycle categories. Specifically, you need project management utilities during design, sourcing, and manufacturing. The same is true for managing BOMs and managing cost.

Infrastructure
SRM is by nature an integrative function and requires the infrastructure to support that integration, as well as to manage the massive volume of related content, alerts, and data.

SCM functions and features, submodule #5: demand management

Promotion planning
Promotion management systems allow your organization to plan promotions with your trading partners, including simulating, executing, and evaluating the promotion performance. Some performance planning issues to be aware include the following:

Promotion plans are frequently not integrated into the demand stream.
Promotions are launched without the requisite tracking of real-time events to monitor and modify the promotions in action, during the promotion cycle.
Pricing and profit optimization
The pricing and profit module manages profitable and sellable prices for products by dimensions such as markets, demographics, and channel partners. The module also enables future evaluation by maintaining pricing logic and results. The challenge in pricing is that the source and adjustments to price come from various organizations within the enterprise and the channel partners, which impacts actual pricing and profitability. Thus, the ability to track and report history is equally important for managing pricing activities.

Forecasting
Reliable forecasts are based not only on algorithms that are appropriate to the business setting, but also on an inclusive, highly integrative process that gathers all data that can impact the ultimate demand placed upon the supply chain. Data granularity is critical to ensuring that the right product at the item level is produced or distributed. Superior forecast processes require the evaluation of historical data as well as the current demand activity, and the ability to adjust forecasts on the most current data and assumptions.

Merchandise planning
Merchandise planning analyzes demand at the item level. It allows organizations like merchants (retailers) to understand demand based on issues ranging from demographics, store locations, shelves, and support, to purchasing as well as the positioning of merchandise in the retail channel.

Life cycle planning
Life cycle planning is becoming a more popular capability. Demand characteristics change over the life of a product and require close attention to demand patterns to ensure that markets are not starved during ramp-up, or supplied with excess in later stages. In addition, firms are frequently left with excess inventory thanks to ECOs or other product changes, as well as at end-of-life, due to poor planning and visibility into demand cycles and communication of product phase-outs. Life cycle planning provides the ability to view sell-in and sell-through point of sale (POS) data and will recommend alternate curves based on early actual sales information.

Consensus planning
Consensus planning is a method to create a "one number" forecast for the enterprise. Within complex organizational structures, many professionals are responsible for planning in different areas, such as product marketing for product and product families; sales for territory sales plans; channel and alliance management for channel forecasts; finance for revenue and corporate strategic plans; and manufacturing for shipment or off-the-dock plans. The wide range of professionals involved often creates confusion, poor coordination, and missed business opportunities when sales are missed or excess inventories mount. Ultimately, a process must produce a forecast—one number—upon which the supply chain will act.

Collaborative planning
Collaboration among trading partners has become standard practice in many industries as more supply chain activities are being outsourced. Within the demand management module, collaborative forecasting must comply with process and data standards that have been validated by the Voluntary Interindustry Commerce Solutions (VICS) Council, RosettaNet, and other industry bodies that have modeled these processes for their industries. In addition, a collaborative software system must allow the ability for joint sharing and modeling of demand supply gaps between trading partners. It must allow trading partners to view, drive alternative solutions and simulations, and resolve issues around price and unit availability, which include flexibility and target replenishment levels (re-order points).

Sales and operation planning (S&OP)
S&OP is a process that employs enabling technology to balance demand and supply to create a feasible forecast that meets an enterprise's global organizational needs. Cross-functional organizations from marketing to manufacturing require visibility, simulation, and consensus building for meeting revenue, cost, and delivery needs. The ability to reallocate and reprioritize based on customer, profit, and other factors are important elements of S&OP today. It is important to determine whether the vendor supports the S&OP process with information from multiple systems. S&OP processes also ask questions around investment to improve responsiveness, customer service, reduce risk, and increase market share. Integration is important because the data to answer these questions may reside in other modules such as APS or inventory planning.

Vendor-managed inventory (VMI) replenishment
VMI replenishment allows the co-management of inventory by both customers and suppliers. Best practices allow for joint creation and analysis of the current level of inventory to support demand and keep cost down. In addition, VMI dynamically detects when inventory levels fall bellow required (agreed-to) levels and place a refill (replenishment) order.

Event planning
Event planning for various marketing events has become more complex as more firms use a rich set of trading partners, which include media, channel partners, and retailers. Product launches, special media and advertising, promotional events, or new store openings need finely tuned planning to be successful. Today, systems must move from PowerPoint-level tools to strong profit analytics for ensuring market success and return on investment (ROI).

Metrics and reporting
Metrics and reporting capabilities today must be forward-looking to report (but more importantly, prevent) negative business performance. Beyond excellent modeling and simulation capabilities, metrics systems must be real-time and predictive. They must not only record real-time events and their impacts, but also use techniques such as pattern recognition to determine processes out of tolerance and provide early detection. Preventing late orders is better than reporting late orders, naturally.

Demand management systems architecture
Demand management tools have unique and high levels of integration requirements. These requirements should be factored into your evaluation of SCM functions and features if your organization places a high priority on demand management functionality.

SCM functions and features, submodule #6: supply chain analytics

Supply chain optimization
Supply chain optimization modules allow you to design the best-fit (optimal) supply chain by time, cost, and other factors, in order to create responsive and lean supply chains. Each module has a unique specialty such as logistics or inventory. In addition, the optimized network blends and trades off all these factors.

Supply chain event management
Supply chain event management (SCEM) or supply chain network systems are a new class of solutions designed to monitor, notify, analyze, measure, and control business process and execution types of activities. These systems take advantage of new architectural principles brought about by several forces: high-availability, publish-and-subscribe architectures; tools like Java; the maturity of artificial intelligence (AI) rule-based programming capabilities; emerging agent technologies; and Web architectures and standards such as simple object access protocol (SOAP) and extensible markup language (XML). These solutions allow open, real-time views into global information, as well as the ability to pinpoint and drill into key information, sensing deviations in business plans versus execution expectations (unplanned events).

Production and supply planning
Today's supply chain planning systems have significant advantages over the manufacturing resource planning (MRP II) systems of the past. These systems incorporate up-to-date algorithms and philosophies on how supply chains work. In addition, they have a technology advantage over MRP II, in that they are memory-resident, which allows the solutions to solve simulation issues extremely quickly, with very large arrays (models). These large models solve simultaneous, multi-level, and multi-node problems that MRP II systems cannot.

SCM functions and features, submodule #7: order management

Order promising
The order promising submodule includes criteria for available-to-promise (ATP) and configuration management across multiple databases, integration of configuration management with multiple unique BOMs, and integration with demand and replenishment orders.

Inventory management and visibility
Many organizations want to provide real-time promising, so inventory visibility from multiple sources is critical.

Sourcing
A primary attribute of a distributed order fulfillment system is the ability to perform multi-stage sourcing and assembly. This requires a very open architecture to integrate seamlessly with various systems and supply chain nodes, in a real-time fashion.

Execution visibility
Once an order has been promised, keeping track while the order is built and shipped has become a critical function in the supply chain.

Inbound and assembly coordination or multi-site staging
Many orders are sourced and built by a network of partners. Frequently, notification of cancellations does not occur. Keeping these orders synchronized is critical toward meeting schedules as well as avoiding over-building or building ahead of demand.

Shipping and outbound management
Once an order has been created and built, it must be shipped. Notification of advance shipments to customers is key to seamless transportation, as well as tracing, tracking, and receiving the orders.

Order management-specific technology
A distributed architecture is key to a successful order management system, whether supply chain nodes are internal or external to the enterprise.

SCM functions and features, submodule #8: service parts planning

Planning
Service parts planning deals with the creation and replenishment of a supply network for service operations. This can include original equipment manufacturers (OEMs) and service partners, as well as service logistics providers.

Service delivery and execution
The service delivery and execution submodule includes functionality for integration with call center systems (for dispatching requirements), service response prioritization and optimization, allocation of scarce parts, and dispatch.

Workforce optimization
Workforce optimization is used for determining the right skill mix and location of personnel to support service demands. This can include on-site, co-managed personnel at the customer site.

Logistics transportation and reverse logistics
Transportation planning and execution has a significant role to play in the service supply chain. As in traditional models, there is always a trade-off in time and cost between fixed assets and delivery responsiveness in serving customers. Dynamic repair needs such as emergency breakdowns in remote settings can exacerbate delivery problems. In addition, reverse logistics issues, such as pickup of parts for delivery to third-party locations for repair, are addressed in this submodule.

Analytics and reporting
The service planning system is a wealth of information for many organizations which are accountable for product planning and design, asset and capital management, and general customer relationship management. Therefore analytics and reporting features are not just designed to enable functional excellence, but also to feed these other key areas of the value chain.

SCM functions and features, submodule #9: product technology

Architecture
Architecture refers to the framework for organizing the planning and implementation of data resources. It also refers to the way the system is designed and the manner in which all components are connected to one another.

User interface
User interface refers to the manner in which people access and interact with the software. The user interface should facilitate the user's easy operation of the software.

Platforms
The platform refers to the framework, both the hardware (e.g., type of processor) and the operating system that allows a computer or set of computers to function.

Application tools
Application tools are the components that provide the ability for an application or program to work.

Reporting
Functionality for reporting refers to technical options for generating and delivering reports.

SaaS and hosting options
This category refers to features for software-as-a-service (SaaS) or hosted solutions

SOURCE:http://www.technologyevaluation.com/research/articles/reference-guide-to-supply-chain-management-scm-features-and-functions-20849/

What Is SCM Software?

SCM software manages product flows from supplier, to manufacturer, to customer. In brief, it manages supply and demand for an organization. According to APICS, SCM software refers to

the design, planning, execution, control, and monitoring of supply chain activities with the objective of creating net value, building a competitive infrastructure, leveraging worldwide logistics, synchronizing supply with demand, and measuring performance globally.

SCM systems integrate all features of procurement processes, warehouse management system (WMS) features and functions, transportation, and logistics, as well as other product planning modules.

To learn more about the distinction between advance planning and scheduling (APS), SCM, and enterprise resource planning (ERP), read TEC’s article Comparative Analysis: Are You Still Confused About APS, SCM, and ERP?



About This SCM Guide

Our SCM request for information (SCM RFI) template is composed of almost 2,600 criteria; consequently, we’ll focus here on the “big picture” features only.

We’ve brought SCM features together by broad category:

Warehouse management system (WMS)
Transportation management system (TMS)
International trade logistics (ITL)
Supplier relationship management (SRM)
Demand management
Supply chain analytics
Order management
Service parts planning
Product technology
These categories correspond to a high-level functional breakdown of software features. In this reference guide, we give a short explanation of how each category impacts your supply chain management processes.

If you would like more information about full listings of enterprise software functions and features (SCM, ERP, and other enterprise software categories), please see TEC’s RFP Templates.



Supply Chain Management (SCM) Software Functions and Features



SCM functions and features, submodule #1: warehouse management system (WMS)

Functionality
This category includes the general warehouse management functionalities such as warehouse configuration, bin location and product setup, inventory control, license plate tracking, quality control, picking, packing and shipping, etc.

Adaptability
The adaptability module in SCM software covers business processes, decision support, and reporting.

Warehouse management system (WMS) technology configuration
The technology configuration addresses WMS-specific functionality such as radio-frequency identification (RFID), security, and internationalization supported by each vendor. It also touches on programming and other technologies used in the development of the WMS application.

SCM functions and features, submodule #2: transportation management system (TMS)

System definition and implementation
The TMS should include tools and applications to enable to create profiles for all your contracts, associated carriers, and trade lanes for inter-modal and multi-leg moves. This should support regional as well as international transportation movements. The key to the successful operation of the TMS is a robust foundation created during the system implementation.

Transportation management operation functionality
Transportation management operation functionality allows distributors to align their transportation operations with their supply chain strategies and overall business objectives. This includes areas that take into consideration the entire shipment life cycle, from planning, network optimization, and execution, to shipment tracking and analysis.

SCM functions and features, submodule #3: international trade logistics (ITL)

Collaboration
True collaboration across a global and disparate set of entities and information systems requires a neutral and secure environment. This type of environment enables all players to engage in an electronic dialogue to collaborate in acquiring, transferring, transporting, and settling with regional and international trading partners. In addition, the data model should take into account the different roles of all participants and manage these through a set of rule-based processes. As such, the system implementation should include clear definitions in terms of buy-sell relationships, financial terms, and service level agreements, as well as related contact details and user profiles for suppliers, customers, and related service providers.

Content
The system should support all the data and information required in order to establish a true total cost of goods sold at the time of the initial buy-sell transaction. The SCM software should also enable users to track incremental costs as the shipment is processed from point of origin to final point of receipt. All costs and activities should be available at the transaction initiation point and can be classified by the primary components, which are product costs, compliance costs, and logistics costs.

Commerce
Starting with the initial request for goods—whether this is an RFI, a request for quotation (RFQ), or a formal purchase order, all information that is exchanged during the shipment life cycle should be facilitated by the international trade logistics (ITL) system. This requires a synchronized system and process, where the product and shipment requirements are integrated into an automated order fulfillment environment. The product item master and associated tables will determine the cost of the product as well as the relationship between the product and any duties or tariffs that are applicable. Tables related to customs duties and tariffs as well as associated rates of exchange and transportation costs should be available as part of the system functions. This will enable the user to obtain an estimated total cost of goods sold as well as a final cost of goods sold, to highlight any variances or discrepancies. This implies a data model that includes an understanding of all the data exchanged and processed at the product and item level, between order management systems, as well as the data exchanged with warehouse management and transportation systems.

SCM functions and features, submodule #4: supplier relationship management (SRM)

Design
Best practice dictates that strategic suppliers be involved in the new product process from the very beginning—i.e., the concept, requirements, and design definition phase. Supplier relationship management (SRM) suites support this with functionality for requirements collaboration tools, component selection tools, and bills of materials (BOMs) grading.

Sourcing
Many consider sourcing to be the heart of SRM and commodity management to be the heart of sourcing. Advanced sourcing suites are rich in analysis and decision support technology to absorb huge amounts of data quickly and make intelligent sourcing decisions. They also lay the foundation of execution through RFI, RFQ, and RFP processes, and manage performance against contracts. Risk management is an area which spans the full life cycle, in particular association with the sourcing function.

Procurement
Procurement is generally divided into material requirements planning (MRP)-driven procurement (sometimes referred to as direct materials procurement) and requisition-driven procurement (sometimes referred to as indirect or maintenance, repair, and operations [MRO] procurement), although some long-lead-time, first-run direct materials are ordered via requisitions. This division reflects substantial differences in the two methods of procurement. Management of catalogs supports requisition-driven procurement and the sourcing processes that precede MRP-driven procurement.

Fulfillment
The bulk of fulfillment functionality is traditionally performed by ERP and related systems such as order management, warehouse management, and distribution management systems. As companies virtualize and suppliers become increasingly involved in the fulfillment process, some functionality is appropriate within SRM. SRM systems should support a range of modern inbound inventory management practices, such as kanban and vendor-managed inventory (VMI) and provide visibility into the inbound pipeline. Returns management becomes important in SRM for situations where components are being returned to and repaired or replaced by suppliers.

Manufacturing
As with fulfillment, the bulk of manufacturing functionality is traditionally performed by ERP systems. However, the important supplier-facing processes of quality and engineer change order (ECO) management may be done outside the ERP system as part of an SRM suite.

Settlement
The primary SRM-related function for settlements is in reconciliation between the original order, actual received goods, and the invoice. Advanced settlement processes may also be supported, such as evaluated receipts or electronic invoice presentation and payment.

Utilities
There are several areas that span across the lifecycle categories. Specifically, you need project management utilities during design, sourcing, and manufacturing. The same is true for managing BOMs and managing cost.

Infrastructure
SRM is by nature an integrative function and requires the infrastructure to support that integration, as well as to manage the massive volume of related content, alerts, and data.

SCM functions and features, submodule #5: demand management

Promotion planning
Promotion management systems allow your organization to plan promotions with your trading partners, including simulating, executing, and evaluating the promotion performance. Some performance planning issues to be aware include the following:

Promotion plans are frequently not integrated into the demand stream.
Promotions are launched without the requisite tracking of real-time events to monitor and modify the promotions in action, during the promotion cycle.
Pricing and profit optimization
The pricing and profit module manages profitable and sellable prices for products by dimensions such as markets, demographics, and channel partners. The module also enables future evaluation by maintaining pricing logic and results. The challenge in pricing is that the source and adjustments to price come from various organizations within the enterprise and the channel partners, which impacts actual pricing and profitability. Thus, the ability to track and report history is equally important for managing pricing activities.

Forecasting
Reliable forecasts are based not only on algorithms that are appropriate to the business setting, but also on an inclusive, highly integrative process that gathers all data that can impact the ultimate demand placed upon the supply chain. Data granularity is critical to ensuring that the right product at the item level is produced or distributed. Superior forecast processes require the evaluation of historical data as well as the current demand activity, and the ability to adjust forecasts on the most current data and assumptions.

Merchandise planning
Merchandise planning analyzes demand at the item level. It allows organizations like merchants (retailers) to understand demand based on issues ranging from demographics, store locations, shelves, and support, to purchasing as well as the positioning of merchandise in the retail channel.

Life cycle planning
Life cycle planning is becoming a more popular capability. Demand characteristics change over the life of a product and require close attention to demand patterns to ensure that markets are not starved during ramp-up, or supplied with excess in later stages. In addition, firms are frequently left with excess inventory thanks to ECOs or other product changes, as well as at end-of-life, due to poor planning and visibility into demand cycles and communication of product phase-outs. Life cycle planning provides the ability to view sell-in and sell-through point of sale (POS) data and will recommend alternate curves based on early actual sales information.

Consensus planning
Consensus planning is a method to create a "one number" forecast for the enterprise. Within complex organizational structures, many professionals are responsible for planning in different areas, such as product marketing for product and product families; sales for territory sales plans; channel and alliance management for channel forecasts; finance for revenue and corporate strategic plans; and manufacturing for shipment or off-the-dock plans. The wide range of professionals involved often creates confusion, poor coordination, and missed business opportunities when sales are missed or excess inventories mount. Ultimately, a process must produce a forecast—one number—upon which the supply chain will act.

Collaborative planning
Collaboration among trading partners has become standard practice in many industries as more supply chain activities are being outsourced. Within the demand management module, collaborative forecasting must comply with process and data standards that have been validated by the Voluntary Interindustry Commerce Solutions (VICS) Council, RosettaNet, and other industry bodies that have modeled these processes for their industries. In addition, a collaborative software system must allow the ability for joint sharing and modeling of demand supply gaps between trading partners. It must allow trading partners to view, drive alternative solutions and simulations, and resolve issues around price and unit availability, which include flexibility and target replenishment levels (re-order points).

Sales and operation planning (S&OP)
S&OP is a process that employs enabling technology to balance demand and supply to create a feasible forecast that meets an enterprise's global organizational needs. Cross-functional organizations from marketing to manufacturing require visibility, simulation, and consensus building for meeting revenue, cost, and delivery needs. The ability to reallocate and reprioritize based on customer, profit, and other factors are important elements of S&OP today. It is important to determine whether the vendor supports the S&OP process with information from multiple systems. S&OP processes also ask questions around investment to improve responsiveness, customer service, reduce risk, and increase market share. Integration is important because the data to answer these questions may reside in other modules such as APS or inventory planning.

Vendor-managed inventory (VMI) replenishment
VMI replenishment allows the co-management of inventory by both customers and suppliers. Best practices allow for joint creation and analysis of the current level of inventory to support demand and keep cost down. In addition, VMI dynamically detects when inventory levels fall bellow required (agreed-to) levels and place a refill (replenishment) order.

Event planning
Event planning for various marketing events has become more complex as more firms use a rich set of trading partners, which include media, channel partners, and retailers. Product launches, special media and advertising, promotional events, or new store openings need finely tuned planning to be successful. Today, systems must move from PowerPoint-level tools to strong profit analytics for ensuring market success and return on investment (ROI).

Metrics and reporting
Metrics and reporting capabilities today must be forward-looking to report (but more importantly, prevent) negative business performance. Beyond excellent modeling and simulation capabilities, metrics systems must be real-time and predictive. They must not only record real-time events and their impacts, but also use techniques such as pattern recognition to determine processes out of tolerance and provide early detection. Preventing late orders is better than reporting late orders, naturally.

Demand management systems architecture
Demand management tools have unique and high levels of integration requirements. These requirements should be factored into your evaluation of SCM functions and features if your organization places a high priority on demand management functionality.

SCM functions and features, submodule #6: supply chain analytics

Supply chain optimization
Supply chain optimization modules allow you to design the best-fit (optimal) supply chain by time, cost, and other factors, in order to create responsive and lean supply chains. Each module has a unique specialty such as logistics or inventory. In addition, the optimized network blends and trades off all these factors.

Supply chain event management
Supply chain event management (SCEM) or supply chain network systems are a new class of solutions designed to monitor, notify, analyze, measure, and control business process and execution types of activities. These systems take advantage of new architectural principles brought about by several forces: high-availability, publish-and-subscribe architectures; tools like Java; the maturity of artificial intelligence (AI) rule-based programming capabilities; emerging agent technologies; and Web architectures and standards such as simple object access protocol (SOAP) and extensible markup language (XML). These solutions allow open, real-time views into global information, as well as the ability to pinpoint and drill into key information, sensing deviations in business plans versus execution expectations (unplanned events).

Production and supply planning
Today's supply chain planning systems have significant advantages over the manufacturing resource planning (MRP II) systems of the past. These systems incorporate up-to-date algorithms and philosophies on how supply chains work. In addition, they have a technology advantage over MRP II, in that they are memory-resident, which allows the solutions to solve simulation issues extremely quickly, with very large arrays (models). These large models solve simultaneous, multi-level, and multi-node problems that MRP II systems cannot.

SCM functions and features, submodule #7: order management

Order promising
The order promising submodule includes criteria for available-to-promise (ATP) and configuration management across multiple databases, integration of configuration management with multiple unique BOMs, and integration with demand and replenishment orders.

Inventory management and visibility
Many organizations want to provide real-time promising, so inventory visibility from multiple sources is critical.

Sourcing
A primary attribute of a distributed order fulfillment system is the ability to perform multi-stage sourcing and assembly. This requires a very open architecture to integrate seamlessly with various systems and supply chain nodes, in a real-time fashion.

Execution visibility
Once an order has been promised, keeping track while the order is built and shipped has become a critical function in the supply chain.

Inbound and assembly coordination or multi-site staging
Many orders are sourced and built by a network of partners. Frequently, notification of cancellations does not occur. Keeping these orders synchronized is critical toward meeting schedules as well as avoiding over-building or building ahead of demand.

Shipping and outbound management
Once an order has been created and built, it must be shipped. Notification of advance shipments to customers is key to seamless transportation, as well as tracing, tracking, and receiving the orders.

Order management-specific technology
A distributed architecture is key to a successful order management system, whether supply chain nodes are internal or external to the enterprise.

SCM functions and features, submodule #8: service parts planning

Planning
Service parts planning deals with the creation and replenishment of a supply network for service operations. This can include original equipment manufacturers (OEMs) and service partners, as well as service logistics providers.

Service delivery and execution
The service delivery and execution submodule includes functionality for integration with call center systems (for dispatching requirements), service response prioritization and optimization, allocation of scarce parts, and dispatch.

Workforce optimization
Workforce optimization is used for determining the right skill mix and location of personnel to support service demands. This can include on-site, co-managed personnel at the customer site.

Logistics transportation and reverse logistics
Transportation planning and execution has a significant role to play in the service supply chain. As in traditional models, there is always a trade-off in time and cost between fixed assets and delivery responsiveness in serving customers. Dynamic repair needs such as emergency breakdowns in remote settings can exacerbate delivery problems. In addition, reverse logistics issues, such as pickup of parts for delivery to third-party locations for repair, are addressed in this submodule.

Analytics and reporting
The service planning system is a wealth of information for many organizations which are accountable for product planning and design, asset and capital management, and general customer relationship management. Therefore analytics and reporting features are not just designed to enable functional excellence, but also to feed these other key areas of the value chain.

SCM functions and features, submodule #9: product technology

Architecture
Architecture refers to the framework for organizing the planning and implementation of data resources. It also refers to the way the system is designed and the manner in which all components are connected to one another.

User interface
User interface refers to the manner in which people access and interact with the software. The user interface should facilitate the user's easy operation of the software.

Platforms
The platform refers to the framework, both the hardware (e.g., type of processor) and the operating system that allows a computer or set of computers to function.

Application tools
Application tools are the components that provide the ability for an application or program to work.

Reporting
Functionality for reporting refers to technical options for generating and delivering reports.

SaaS and hosting options
This category refers to features for software-as-a-service (SaaS) or hosted solutions

SOURCE:http://www.technologyevaluation.com/research/articles/reference-guide-to-supply-chain-management-scm-features-and-functions-20849/

The Morphing Functional Scope of Service Parts SCM

There are many requirements involved in the supply chain management (SCM) of service and replacement parts that make the process different from traditional, "new parts" SCM (see Part One). As a result, some specialist SCM solutions have been developed to address these challenges. Some might resemble conventional SCM solutions, but feature different approaches. The requirements of service and replacement parts SCM solutions also vary given the wide range of members that exist across multi-node supply chains. Each of these members can be grouped into a few major solution functional categories.

Part Two of the Lucrative but Risky "Aftermarket" Business: Service and Replacement Parts SCM series.

Service and replacement parts resource management, which is the main focus of this article, consists of a variety of solutions that are comparable to supply chain planning (SCP) components in conventional SCM suites. Service and replacement parts management has inventory optimization at its core that determines the best way to stock inventory across the supply chain to maximize service levels while minimizing investment. In other words, the basic goal is to maintain the optimal placement of resources, including parts, tools, and service technicians, across service regions to meet service level agreement (SLA) commitments at the lowest possible cost.

These spare parts planning systems provide the means to define and implement a spare parts inventory strategy that meets enterprise objectives. In other words, they tend to help enterprises understand the relationship between a customer service target level and the value of the inventory required to support it. To that end, they combine forecasting with replenishment logic to determine the optimal level and mix of parts to carry at each stocking tier, given certain capital investment targets and customer service level goals. Unlike finished goods, where nearly 100 percent customer service levels are desirable, here only certain classes of spare parts need to be available all the time, at all supply chain nodes.

Spare parts planning systems might also improve user productivity, since by automating the basic forecasting and replenishment process, planners and inventory managers can focus on exceptions and more-strategic planning activities, such as how to handle expensive, slow-moving items or how to use substitute parts to reduce costs or obsolescence.

Achieving this goal requires a mix of tools. These range from strategic tools identifying demand profiles, service objectives, and the best way to position resources to meet demand, to tactical tools determining what orders need to be placed to meet strategic objectives. Such goals include managing the risk inherent in allocations and transships; repair or new purchase orders; new product introductions (NPI) or discontinuations; and the replenishment and redeployment decisions.

Tactical refinements of inventory optimization entail setting minimum and maximum inventory levels, which recognizing stochastic, changing demand and lead-time. The algorithms required to provide this support are significantly different from those found in conventional, new parts production SCM, and justify the use of focused, point solutions, including dynamic programming, simulation, mixed integer optimization, etc. In the case of inventory optimization, two parts may be present:

Multi-echelon optimization determines optimal stocking levels of an item at a particular location, based on the item's possible investment levels. In this case, an echelon is the level of supply chain nodes, or disintermediation. For example, a supply chain with two independent factory warehouses and nine wholesale warehouses delivering product to 350 retail stores is a supply chain with three echelons between the factory and the end customer. One echelon consists of the two independent factory warehouses, the other echelon consists of the nine wholesale warehouses, and the third echelon consists of the 350 retail stores. Each echelon adds operating expenses, holds inventory, adds to the cycle time, and expects to make a profit.
Multi-item optimization determines the optimal allocation of inventory investment across items in a product group.
Even fundamental concepts like customer service level are different in the service and replacement parts milieu. Namely, in new parts production, the customer service level (synonymous with customer service ratio, fill rate, order-fill ratio, and percent of fill) is a measure of the delivery performance of finished goods, usually expressed as a percentage. In a make-to-stock (MTS) company, this percentage usually represents the number of items or dollars (on one or more customer orders) that were shipped on schedule for a specific time period, compared with the total that were supposed to be shipped in that time period. Likewise, in a make-to-order (MTO) company, the customer service level is usually a comparison between the number of jobs or dollars shipped in a given time period and the number of jobs or dollars that were supposed to be shipped in the same period. Yet, in the service and replacement parts world, with a high level of unpredictability, how can one forecast the dollar amount of service or repair parts that were supposed to be shipped during a particular period?

Thus, given the random nature of service and breakdown events, it is clear that demand uncertainty (which can be measured by the standard deviation, mean absolute deviation [MAD], or variance of forecast errors) cannot be eliminated through traditional forecasting methods. Hence, trade-offs must be evaluated on the basis of captured future risk assessments; estimates of demand probability distribution, relevant to specific customer products; and locations at future points in time. The decisions made across the planning horizon thus constitutes an exercise in risk management

SOURCE:http://www.technologyevaluation.com/research/articles/supply-chain-management-morphing-the-functional-scope-of-service-parts-18086/

The Morphing Functional Scope of Service Parts SCM

There are many requirements involved in the supply chain management (SCM) of service and replacement parts that make the process different from traditional, "new parts" SCM (see Part One). As a result, some specialist SCM solutions have been developed to address these challenges. Some might resemble conventional SCM solutions, but feature different approaches. The requirements of service and replacement parts SCM solutions also vary given the wide range of members that exist across multi-node supply chains. Each of these members can be grouped into a few major solution functional categories.

Part Two of the Lucrative but Risky "Aftermarket" Business: Service and Replacement Parts SCM series.

Service and replacement parts resource management, which is the main focus of this article, consists of a variety of solutions that are comparable to supply chain planning (SCP) components in conventional SCM suites. Service and replacement parts management has inventory optimization at its core that determines the best way to stock inventory across the supply chain to maximize service levels while minimizing investment. In other words, the basic goal is to maintain the optimal placement of resources, including parts, tools, and service technicians, across service regions to meet service level agreement (SLA) commitments at the lowest possible cost.

These spare parts planning systems provide the means to define and implement a spare parts inventory strategy that meets enterprise objectives. In other words, they tend to help enterprises understand the relationship between a customer service target level and the value of the inventory required to support it. To that end, they combine forecasting with replenishment logic to determine the optimal level and mix of parts to carry at each stocking tier, given certain capital investment targets and customer service level goals. Unlike finished goods, where nearly 100 percent customer service levels are desirable, here only certain classes of spare parts need to be available all the time, at all supply chain nodes.

Spare parts planning systems might also improve user productivity, since by automating the basic forecasting and replenishment process, planners and inventory managers can focus on exceptions and more-strategic planning activities, such as how to handle expensive, slow-moving items or how to use substitute parts to reduce costs or obsolescence.

Achieving this goal requires a mix of tools. These range from strategic tools identifying demand profiles, service objectives, and the best way to position resources to meet demand, to tactical tools determining what orders need to be placed to meet strategic objectives. Such goals include managing the risk inherent in allocations and transships; repair or new purchase orders; new product introductions (NPI) or discontinuations; and the replenishment and redeployment decisions.

Tactical refinements of inventory optimization entail setting minimum and maximum inventory levels, which recognizing stochastic, changing demand and lead-time. The algorithms required to provide this support are significantly different from those found in conventional, new parts production SCM, and justify the use of focused, point solutions, including dynamic programming, simulation, mixed integer optimization, etc. In the case of inventory optimization, two parts may be present:

Multi-echelon optimization determines optimal stocking levels of an item at a particular location, based on the item's possible investment levels. In this case, an echelon is the level of supply chain nodes, or disintermediation. For example, a supply chain with two independent factory warehouses and nine wholesale warehouses delivering product to 350 retail stores is a supply chain with three echelons between the factory and the end customer. One echelon consists of the two independent factory warehouses, the other echelon consists of the nine wholesale warehouses, and the third echelon consists of the 350 retail stores. Each echelon adds operating expenses, holds inventory, adds to the cycle time, and expects to make a profit.
Multi-item optimization determines the optimal allocation of inventory investment across items in a product group.
Even fundamental concepts like customer service level are different in the service and replacement parts milieu. Namely, in new parts production, the customer service level (synonymous with customer service ratio, fill rate, order-fill ratio, and percent of fill) is a measure of the delivery performance of finished goods, usually expressed as a percentage. In a make-to-stock (MTS) company, this percentage usually represents the number of items or dollars (on one or more customer orders) that were shipped on schedule for a specific time period, compared with the total that were supposed to be shipped in that time period. Likewise, in a make-to-order (MTO) company, the customer service level is usually a comparison between the number of jobs or dollars shipped in a given time period and the number of jobs or dollars that were supposed to be shipped in the same period. Yet, in the service and replacement parts world, with a high level of unpredictability, how can one forecast the dollar amount of service or repair parts that were supposed to be shipped during a particular period?

Thus, given the random nature of service and breakdown events, it is clear that demand uncertainty (which can be measured by the standard deviation, mean absolute deviation [MAD], or variance of forecast errors) cannot be eliminated through traditional forecasting methods. Hence, trade-offs must be evaluated on the basis of captured future risk assessments; estimates of demand probability distribution, relevant to specific customer products; and locations at future points in time. The decisions made across the planning horizon thus constitutes an exercise in risk management

SOURCE:http://www.technologyevaluation.com/research/articles/supply-chain-management-morphing-the-functional-scope-of-service-parts-18086/

Manufacturers are under increasing pressure to document their impact on the environment. This pressure is coming—for North American manufacturers—primarily from the private sector. Major manufacturers are asking their upstream supply chain partners to document its environmental impact as part of green supply chain initiatives. Green supply chain programs may be initiated in order to help manufacturers position themselves to its own customers or investors, or to facilitate environmental compliance.

This focus on green extends well beyond the simple carbon footprint, which in and of itself can be a challenge to track given that almost any business activity, from turning on the lights to running a metal press, results in consumption of at least some fossil fuels. In coming to grips with an environmental footprint, a number of other impacts including discharges to waterways, landfills, and other gas emissions must be monitored. The life cycle impact of a product—ranging from shipability, energy consumption, offgassing, service requirements, and end-of-life disposal or recycling, must be taken into consideration.

In this article, I will address the various drivers for this green supply chain trend, share important considerations for satisfying a customer’s green supply chain initiative or initiating your own green supply chain initiative, and discuss the role of enterprise software like enterprise resource planning (ERP) in keeping pace with this industry trend.

Why Green Your Supply Chain?
From a practical standpoint, green supply chains are smart moves for manufacturers because they can present a marketing advantage. Here are more pressing and immediate reasons for green supply chain management (SCM):

Investor demand for sustainability data is increasing. This should be a serious consideration for public companies and their suppliers. In February of 2010, the Securities and Exchange Commission (SEC) issued guidance requiring publicly-held companies to disclose their environmental liabilities that could become problematic if cap and trade regulation came into effect.

The concern for sustainability of public companies from an investor perspective is not driven by altruism, but rather by a need to increase the degree of transparency and visibility of potential risks and liabilities that could harm long-term returns. While manufacturers can expect more rather than less in the way of environmental reporting requirements, substantial rules are already in force, including several statements of position (SOP) from the Accounting Standards Executive Committee (AcSEC) of The American Institute of Certified Public Accountants (ACPAs):

• Guidance on "Accounting for Contingencies" requires that liabilities be recognized in the financial statements if a loss is probable and the amount is estimable. At the very least, even if the loss is not estimable, the likely loss must be accounted for in footnotes to financial reporting.
• These position statements also require that environmental contamination costs be expensed as incurred unless they extend the life or increase capacity of the property, mitigate or prevent future environmental contamination, or are realized while preparing the asset for sale.
• The standard operating procedure (SOP) for Environmental Remediation Liabilities details the responsibilities of corporations involved in mandated environmental cleanup, and responsibilities of corporations to avoid environmental destruction.

SOURCE:http://www.technologyevaluation.com/research/articles/erp-for-green-supply-chain-management-in-manufacturing-20770/

Manufacturers are under increasing pressure to document their impact on the environment. This pressure is coming—for North American manufacturers—primarily from the private sector. Major manufacturers are asking their upstream supply chain partners to document its environmental impact as part of green supply chain initiatives. Green supply chain programs may be initiated in order to help manufacturers position themselves to its own customers or investors, or to facilitate environmental compliance.

This focus on green extends well beyond the simple carbon footprint, which in and of itself can be a challenge to track given that almost any business activity, from turning on the lights to running a metal press, results in consumption of at least some fossil fuels. In coming to grips with an environmental footprint, a number of other impacts including discharges to waterways, landfills, and other gas emissions must be monitored. The life cycle impact of a product—ranging from shipability, energy consumption, offgassing, service requirements, and end-of-life disposal or recycling, must be taken into consideration.

In this article, I will address the various drivers for this green supply chain trend, share important considerations for satisfying a customer’s green supply chain initiative or initiating your own green supply chain initiative, and discuss the role of enterprise software like enterprise resource planning (ERP) in keeping pace with this industry trend.

Why Green Your Supply Chain?
From a practical standpoint, green supply chains are smart moves for manufacturers because they can present a marketing advantage. Here are more pressing and immediate reasons for green supply chain management (SCM):

Investor demand for sustainability data is increasing. This should be a serious consideration for public companies and their suppliers. In February of 2010, the Securities and Exchange Commission (SEC) issued guidance requiring publicly-held companies to disclose their environmental liabilities that could become problematic if cap and trade regulation came into effect.

The concern for sustainability of public companies from an investor perspective is not driven by altruism, but rather by a need to increase the degree of transparency and visibility of potential risks and liabilities that could harm long-term returns. While manufacturers can expect more rather than less in the way of environmental reporting requirements, substantial rules are already in force, including several statements of position (SOP) from the Accounting Standards Executive Committee (AcSEC) of The American Institute of Certified Public Accountants (ACPAs):

• Guidance on "Accounting for Contingencies" requires that liabilities be recognized in the financial statements if a loss is probable and the amount is estimable. At the very least, even if the loss is not estimable, the likely loss must be accounted for in footnotes to financial reporting.
• These position statements also require that environmental contamination costs be expensed as incurred unless they extend the life or increase capacity of the property, mitigate or prevent future environmental contamination, or are realized while preparing the asset for sale.
• The standard operating procedure (SOP) for Environmental Remediation Liabilities details the responsibilities of corporations involved in mandated environmental cleanup, and responsibilities of corporations to avoid environmental destruction.

SOURCE:http://www.technologyevaluation.com/research/articles/erp-for-green-supply-chain-management-in-manufacturing-20770/

To increase market share, vendors are expanding and offering more services to customers. On one hand, enterprise resource planning (ERP) vendors are adding such functionality as warehouse management systems (WMS) andtransportation management systems (TMS) into their suites; on the other hand, supply chain management (SCM) vendors are including business intelligence(BI) or supplier relationship management (SRM) functionalities in their applications. Consequently, the IT market is seeing a convergence of functionality for ERP and SCM systems.

In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management(PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuablesupply chain execution (SCE) market share. This is in accordance with market demand, as organizations are now expected to have one system to address all needs collaboratively.

This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.

The Downward Push of ERP Vendors

ERP vendors are expanding their market share at the expense of SCM vendors. ERP solutions encompass a wide range of functionality that includes most of the business processes of an organization. Traditional modules like accounting, BI, customer relationship management (CRM), advanced planning and scheduling, manufacturing, warehousing, and shipping are all standard ERP offerings today.

Most ERP functionality is usually stronger within a particular function of the enterprise (such as financials), while accommodating the other functions within its infrastructure. Other business functions within the ERP infrastructure are incorporated within the same platform, and there is no need for additional interfacing between each operation. Although ERP software covers many modules, its functionality within a module may vary widely, and may not incorporate an adequate level of detail for a particular function like an engineered-to-order product.

Many organizations have elected to implement best-of-breed SCE software on top of their current ERP system to address the shortcomings of functionality within the supply chain. An example where additional functionality was needed in the warehouse is Indigo Books & Music. Indigo implemented SAPcorporate-wide, and then had to install an additional WMS (HighJump) to cater to its warehousing requirements. This is common for other companies, such as Nike, Daydots, and 99 Cents Only Stores, where ERP systems have been installed along with WMS solutions to manage the warehouse.

Companies like Catalyst, HighJump, Manhattan Associates, and RedPrairie have all interfaced to SAP successfully, and Catalyst is even approved by SAP for its interface between the WMS and the ERP. Generally speaking, new SCM functionality now incorporated into the ERP products is more detailed and stable from a platform and functionality aspect.

This new level of functionality incorporated within ERP may be the element that is currently missing to handle today’s increasing need for real-time information and accuracy. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.

Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.

TRADITIONAL ERP FUNCTIONALITY	TRADITIONAL SCM FUNCTIONALITY
Electronic data interchange
Supplier relationship management
Customer relationship management	Warehouse management
Business intelligence	Slotting optimization
Financials	Labor management
Advanced demand planning	Yard management
Financial and item planning	Transportation management
Catalog planning	Carrier management
Web planning	Radio frequency identification
Promotion planning	Automated search and retrieval systems
Demand forecasting	Manufacturing execution systems
Promotion forecasting	Product lifecycle management
Replenishment	Event management
E-commerce
Manufacturing
Enterprise performance management
Point of sale
Human resources
Procurement

Figure 1. Traditional functionality of most ERP and SCM systems software.

The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are submodules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.

SOURCE:http://www.technologyevaluation.com/research/articles/squeeze-play-in-the-supply-chain-management-market-19481/

To increase market share, vendors are expanding and offering more services to customers. On one hand, enterprise resource planning (ERP) vendors are adding such functionality as warehouse management systems (WMS) andtransportation management systems (TMS) into their suites; on the other hand, supply chain management (SCM) vendors are including business intelligence(BI) or supplier relationship management (SRM) functionalities in their applications. Consequently, the IT market is seeing a convergence of functionality for ERP and SCM systems.

In pushing downward into the supply chain space, ERP vendors are incorporating such additional functionality as product lifecycle management(PLM), SRM, advanced planning, WMS, TMS, event and performance management, labor, slotting, yard management, and radio frequency identification (RFID) to their ERP product suites. This business model of ERP vendors pushing downward has expanded, and it is consuming valuablesupply chain execution (SCE) market share. This is in accordance with market demand, as organizations are now expected to have one system to address all needs collaboratively.

This article examines the upward push of supply chain vendors into the ERP space and the downward penetration of ERP into the supply chain market, as well as the overall impact on the market.

The Downward Push of ERP Vendors

ERP vendors are expanding their market share at the expense of SCM vendors. ERP solutions encompass a wide range of functionality that includes most of the business processes of an organization. Traditional modules like accounting, BI, customer relationship management (CRM), advanced planning and scheduling, manufacturing, warehousing, and shipping are all standard ERP offerings today.

Most ERP functionality is usually stronger within a particular function of the enterprise (such as financials), while accommodating the other functions within its infrastructure. Other business functions within the ERP infrastructure are incorporated within the same platform, and there is no need for additional interfacing between each operation. Although ERP software covers many modules, its functionality within a module may vary widely, and may not incorporate an adequate level of detail for a particular function like an engineered-to-order product.

Many organizations have elected to implement best-of-breed SCE software on top of their current ERP system to address the shortcomings of functionality within the supply chain. An example where additional functionality was needed in the warehouse is Indigo Books & Music. Indigo implemented SAPcorporate-wide, and then had to install an additional WMS (HighJump) to cater to its warehousing requirements. This is common for other companies, such as Nike, Daydots, and 99 Cents Only Stores, where ERP systems have been installed along with WMS solutions to manage the warehouse.

Companies like Catalyst, HighJump, Manhattan Associates, and RedPrairie have all interfaced to SAP successfully, and Catalyst is even approved by SAP for its interface between the WMS and the ERP. Generally speaking, new SCM functionality now incorporated into the ERP products is more detailed and stable from a platform and functionality aspect.

This new level of functionality incorporated within ERP may be the element that is currently missing to handle today’s increasing need for real-time information and accuracy. Tier one vendors, aware that their solutions were lacking in detailed supply chain functionality, have spent extensive research and development resources to improve these shortcomings. SAP, for instance, has dramatically increased functionality within its WMS offering.

Figure 1 outlines most of the traditional functionality included with most ERP and SCM systems software.

TRADITIONAL ERP FUNCTIONALITY	TRADITIONAL SCM FUNCTIONALITY
Electronic data interchange
Supplier relationship management
Customer relationship management	Warehouse management
Business intelligence	Slotting optimization
Financials	Labor management
Advanced demand planning	Yard management
Financial and item planning	Transportation management
Catalog planning	Carrier management
Web planning	Radio frequency identification
Promotion planning	Automated search and retrieval systems
Demand forecasting	Manufacturing execution systems
Promotion forecasting	Product lifecycle management
Replenishment	Event management
E-commerce
Manufacturing
Enterprise performance management
Point of sale
Human resources
Procurement

Figure 1. Traditional functionality of most ERP and SCM systems software.

The left-hand side of the chart shows traditional ERP modules, and the right-hand side displays typical SCM functionality. Within each of these modules, there are submodules, as in advanced demand planning (outlined in gray). In demand management alone, several components that were not previously included in earlier versions of ERP have now been incorporated. Likewise, within SCM software, modules such as BI, manufacturing, and SRM are now included as part of SCE software.

SOURCE:http://www.technologyevaluation.com/research/articles/squeeze-play-in-the-supply-chain-management-market-19481/

How Supply Chain Management Helps Today's Engineer-to-order Companies

In the project-based nature of the engineer-to-order (ETO) world's manufacturing processes, specific parts are needed at precise times. As well, because ETO manufacturing must meet stringent milestones and deadlines, it is critical that firms obtain parts on time. Otherwise, project costs go up, timelines are extended, and budgets are blown.

How can these manufacturers mitigate the pressures of this competitive landscape? Supply chain management (SCM) can play a vital role in an ETO manufacturing environment, enabling milestones to be met and parts to arrive on time so that production can continue on schedule.

This article details how SCM helps firms that manufacture ETO goods, as well as how SCM integrates with ETO to improve business processes.

The Role of SCM in ETO Firms

The ETO environment is a very detailed type of manufacturing because it involves many changes in the engineering and design of a product throughout its production. In this manufacturing environment, orders are based on contracts as opposed to work orders, which means it is crucial that the manufacturer meets its project deadlines.

ETO enterprise resource planning (ERP) software manages project deadlines and milestones within the manufacturing environment. However, with today's increasing amount of global sourcing, additional functionality is required, and this is where SCM software comes into the picture.

Because precise components need to be routed from different sources during the process of designing and manufacturing of the product, suppliers need to be made aware of the product requirements in enough time to be able to deliver these requirements to the client.

How can suppliers be linked into the operations of the manufacturing firm, which can make demands on a whim?

How SCM Software Components Relate to the ETO Manufacturing Environment

The main modules of SCM software include the following:

• Warehouse management system (WMS)—enables firms to optimize methods of storing and moving inventory through the warehouse.

• Transportation management system (TMS)—enables transportation firms to manage and optimize any mode of transportation.

• International trade logistics (ITL)—helps organizations with the logistics of importing and exporting, the finances related to these activities, and collaboration between firms across multiple locations.

• Supplier relationship management (SRM)—manages the relationships between suppliers, distributors, and manufacturing firms. SRM is one of the key features that enables manufacturing firms to source products quickly.

• Demand management (DM)—forecasts how much product to move through the supply chain, how much product to produce, and how much product will need to be produced in the future, based on historical data.

• Supply chain analytics—enables supply chain managers to create work-arounds if problems within the supply chain occur. Supply chain analytics is comprised of supply chain optimization, supply chain event management (SCEM), and production and supply planning.

• Order management—enables suppliers (or manufacturers) to take an order, search within their inventory to see if the item is available, and ship the item to its final destination.

SCM software integrates into the ETO software infrastructure, enabling manufacturers to source goods from multiple suppliers. Because of the project-based nature of ETO manufacturing, the need for different and multiple components, as the engineering of a product changes, is essential for the manufacturing project to succeed.

Here's a look at how the seven main SCM modules can be applied to the ETO manufacturing environment:

• Using warehouse optimization techniques built into the software, the WMS will facilitate the quick movement of goods coming into the manufacturing environment in order to get the goods to the workstations as soon as possible.

• The TMS will enable ETO manufacturers to obtain the components as quickly as possible by choosing the most appropriate means of transportation. Also, if a transportation route is blocked, the TMS will help drivers find an alternate route, which ensures and improves delivery times, and enables the project costs of the ETO product to fall within a tolerable range.

• The SRM software will choose the appropriate supplier. (A detailed example is shown below.)

• Finally, because multiple orders are being delivered to the manufacturer at the same time as engineering changes are happening throughout the design of the good, the order management system will integrate with the ETO software to send out the appropriate orders to each supplier. This helps to ensure that suppliers send the correct components needed for ETO production.

Let's look at an example that illustrates the SCM process involved in ETO environments.

Figure 1: SCM at work in an ETO manufacturing environment.

Figure 1 represents a typical manufacturing situation. However, because of the nature of an ETO environment, precise components are needed quickly, thus putting pressure on suppliers to deliver components on time so that the manufacturer can meet its project deadlines.

In the above diagram, we will consider Supplier 1 a dedicated supplier, meaning that it usually provides the components to the manufacturer, and Supplier 2 up to Supplier N will be considered new suppliers.

In this example, let's say that Supplier 1 falls short on the order, creating a long lead time for the manufacturer—an unacceptable situation due to project deadlines. Whether the manufacturer obtains only part of the order or none of the order, it will have to choose another supplier, since deadlines need to be strictly adhered to in an ETO manufacturing environment. And let's say Supplier 2 has the component the manufacturer needs and can deliver it in a shorter time frame.

In this situation, let's examine how SCM software can allow the manufacturing firm to come out on top:

• Having an SRM system in place, the manufacturer can see which supplier has what supplies, when they have them, and the lead times required to get the supplies to the manufacturer. The manufacturer can also see what suppliers have penalties for not delivering on time, and which suppliers can deliver the products to it right now.

• The SRM software enables the manufacturer to choose the next appropriate vendor when the one it originally ordered components from cannot deliver for whatever reason. As shown in figure 1, if the first chosen supplier defaults on delivering the order, the SRM system will loop back to choose the supplier next in line. Once a supplier delivers the components in time to meet the project deadline, the manufacturer can finally produce the good and deliver it to the final destination.

• The order management system can leverage the integrated functionality of the SRM system so that even before the order is sent out, the system can search for suppliers that can deliver the goods.

• The TMS can integrate with the SRM system to ensure delivery of the products falls within acceptable tolerance levels of the project's budget, factoring in the continuing rise in fuel prices. This is done through transportation network optimization. (For a more information, please see the article Transportation Management Systems: The Glue of the Supply Chain.)

• Supply chain analytics enables manufacturers to avoid potential problems in the supply chain, using SCEM. SCEM gives the manufacturer the ability to take into account unforeseen events, and to plan accordingly. Using figure 1 as an example, the manufacturer is able to see that Supplier 1 has had problems delivering products in the past. Entering the loop, the manufacturer will attempt to find another suitable supplier, taking into account each supplier's pros and cons.

• Finally, once the product is produced, the manufacturer can use the above functionality to deliver the product to the consumer.

SOURCE:http://www.technologyevaluation.com/research/articles/how-supply-chain-management-helps-today-s-engineer-to-order-companies-19343/

How Supply Chain Management Helps Today's Engineer-to-order Companies

In the project-based nature of the engineer-to-order (ETO) world's manufacturing processes, specific parts are needed at precise times. As well, because ETO manufacturing must meet stringent milestones and deadlines, it is critical that firms obtain parts on time. Otherwise, project costs go up, timelines are extended, and budgets are blown.

How can these manufacturers mitigate the pressures of this competitive landscape? Supply chain management (SCM) can play a vital role in an ETO manufacturing environment, enabling milestones to be met and parts to arrive on time so that production can continue on schedule.

This article details how SCM helps firms that manufacture ETO goods, as well as how SCM integrates with ETO to improve business processes.

The Role of SCM in ETO Firms

The ETO environment is a very detailed type of manufacturing because it involves many changes in the engineering and design of a product throughout its production. In this manufacturing environment, orders are based on contracts as opposed to work orders, which means it is crucial that the manufacturer meets its project deadlines.

ETO enterprise resource planning (ERP) software manages project deadlines and milestones within the manufacturing environment. However, with today's increasing amount of global sourcing, additional functionality is required, and this is where SCM software comes into the picture.

Because precise components need to be routed from different sources during the process of designing and manufacturing of the product, suppliers need to be made aware of the product requirements in enough time to be able to deliver these requirements to the client.

How can suppliers be linked into the operations of the manufacturing firm, which can make demands on a whim?

How SCM Software Components Relate to the ETO Manufacturing Environment

The main modules of SCM software include the following:

• Warehouse management system (WMS)—enables firms to optimize methods of storing and moving inventory through the warehouse.

• Transportation management system (TMS)—enables transportation firms to manage and optimize any mode of transportation.

• International trade logistics (ITL)—helps organizations with the logistics of importing and exporting, the finances related to these activities, and collaboration between firms across multiple locations.

• Supplier relationship management (SRM)—manages the relationships between suppliers, distributors, and manufacturing firms. SRM is one of the key features that enables manufacturing firms to source products quickly.

• Demand management (DM)—forecasts how much product to move through the supply chain, how much product to produce, and how much product will need to be produced in the future, based on historical data.

• Supply chain analytics—enables supply chain managers to create work-arounds if problems within the supply chain occur. Supply chain analytics is comprised of supply chain optimization, supply chain event management (SCEM), and production and supply planning.

• Order management—enables suppliers (or manufacturers) to take an order, search within their inventory to see if the item is available, and ship the item to its final destination.

SCM software integrates into the ETO software infrastructure, enabling manufacturers to source goods from multiple suppliers. Because of the project-based nature of ETO manufacturing, the need for different and multiple components, as the engineering of a product changes, is essential for the manufacturing project to succeed.

Here's a look at how the seven main SCM modules can be applied to the ETO manufacturing environment:

• Using warehouse optimization techniques built into the software, the WMS will facilitate the quick movement of goods coming into the manufacturing environment in order to get the goods to the workstations as soon as possible.

• The TMS will enable ETO manufacturers to obtain the components as quickly as possible by choosing the most appropriate means of transportation. Also, if a transportation route is blocked, the TMS will help drivers find an alternate route, which ensures and improves delivery times, and enables the project costs of the ETO product to fall within a tolerable range.

• The SRM software will choose the appropriate supplier. (A detailed example is shown below.)

• Finally, because multiple orders are being delivered to the manufacturer at the same time as engineering changes are happening throughout the design of the good, the order management system will integrate with the ETO software to send out the appropriate orders to each supplier. This helps to ensure that suppliers send the correct components needed for ETO production.

Let's look at an example that illustrates the SCM process involved in ETO environments.

Figure 1: SCM at work in an ETO manufacturing environment.

Figure 1 represents a typical manufacturing situation. However, because of the nature of an ETO environment, precise components are needed quickly, thus putting pressure on suppliers to deliver components on time so that the manufacturer can meet its project deadlines.

In the above diagram, we will consider Supplier 1 a dedicated supplier, meaning that it usually provides the components to the manufacturer, and Supplier 2 up to Supplier N will be considered new suppliers.

In this example, let's say that Supplier 1 falls short on the order, creating a long lead time for the manufacturer—an unacceptable situation due to project deadlines. Whether the manufacturer obtains only part of the order or none of the order, it will have to choose another supplier, since deadlines need to be strictly adhered to in an ETO manufacturing environment. And let's say Supplier 2 has the component the manufacturer needs and can deliver it in a shorter time frame.

In this situation, let's examine how SCM software can allow the manufacturing firm to come out on top:

• Having an SRM system in place, the manufacturer can see which supplier has what supplies, when they have them, and the lead times required to get the supplies to the manufacturer. The manufacturer can also see what suppliers have penalties for not delivering on time, and which suppliers can deliver the products to it right now.

• The SRM software enables the manufacturer to choose the next appropriate vendor when the one it originally ordered components from cannot deliver for whatever reason. As shown in figure 1, if the first chosen supplier defaults on delivering the order, the SRM system will loop back to choose the supplier next in line. Once a supplier delivers the components in time to meet the project deadline, the manufacturer can finally produce the good and deliver it to the final destination.

• The order management system can leverage the integrated functionality of the SRM system so that even before the order is sent out, the system can search for suppliers that can deliver the goods.

• The TMS can integrate with the SRM system to ensure delivery of the products falls within acceptable tolerance levels of the project's budget, factoring in the continuing rise in fuel prices. This is done through transportation network optimization. (For a more information, please see the article Transportation Management Systems: The Glue of the Supply Chain.)

• Supply chain analytics enables manufacturers to avoid potential problems in the supply chain, using SCEM. SCEM gives the manufacturer the ability to take into account unforeseen events, and to plan accordingly. Using figure 1 as an example, the manufacturer is able to see that Supplier 1 has had problems delivering products in the past. Entering the loop, the manufacturer will attempt to find another suitable supplier, taking into account each supplier's pros and cons.

• Finally, once the product is produced, the manufacturer can use the above functionality to deliver the product to the consumer.

SOURCE:http://www.technologyevaluation.com/research/articles/how-supply-chain-management-helps-today-s-engineer-to-order-companies-19343/