Integration of E-Supply Chain Management in a Web-Based Environment Abstract
Organizations today are plagued by multitude of issues and problems based on the changing business environment. The emergence of globalization, for example, has motivated organizations to become current with existing technologies, improved processes and business models in order to compete effectively in the global marketplace. In the manufacturing industry, eSCM and ERP are two of the most sought after phenomenon, which are driving organizations to transition onto new operational systems. However, integration is not an easy process. It involves consideration for change at the business, technical and application level. It involves costs of implementation. And it involves taking risks in the new systems. These aspects provide a very dubious picture for the supplier. This is why the researcher has carried out the following research to establish that eSCM and ERP integration is possible for organizations, if they carefully simulate the process. The long-term benefits outweigh the risks taken for implementation. Through case studies and theoretical framework, the researcher proposes that ERP and eSCM integration is not only an option but an imperative for today’s organization to effectively migrate online and compete in the global marketplace.
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Traditionally, buyer-supplier relations are based on market mechanisms, competition for customers and profit margin. Over the years, this relationship has given way to partnership through direct cooperation agreement and profitability (Swamidass 2002). In the last decades of the 20th century, organizations have evolved further to improve on supplier performance and profitability through series of process change, integration, and improvement in technologies. Improvement in this manner has often been controversial as it means changing business structure and developing Information Technology (IT) infrastructure (Themistocleous and Corbitt 2006). According to Hammer and Champ (1993), process integration is difficult as it involves changing control, ownership, structure, culture and responsibility. Although, the resulting integrative system offers strategic and operational control, it leaves management with the difficult task of managing material and information in a dynamic business environment.
To resolve, the concepts of Materials Requirements Planning (MRP) and Manufacturing Resources Planning (MRP II) have emerged with focuses on the key drivers of manufacturing processes. According to Kakouris and Polychronopoulos (2005), MRP and MRP II are concepts that support production integration including planning, scheduling, shop floor control, inventory and the production department’s connection with other functions of the organization. This has been the beginning of Supply Chain Management.
Supply Chain Management (SCM) is the management of production function and its distribution through a chain of processes. SCM complements the trend of integration and elimination of barriers of communication and cooperation among partners in the supply chain (Fawcett 2002). Today, Kilner (2006) points out that SCM is becoming large-scale and more complex. Companies are burdened with the task of responding to customers, unplanned demand, supply and production. They are also constrained by low productivity, inventory liability, high material costs and logistics issues. In the United Kingdom, for example, changes in the production sector have made supply chains complex and vulnerable to risks including maintenance of quality, supply, scheduling capacity, control, management of integrated processes and dealing with short product life cycle. These activities require a central system that coordinates and integrates various organizational and production functions.
Moreover, as organizations migrate to the Internet for commercial purposes, issues relating to Supply Chain Management have magnified; ranging from transitioning supply chain activities like material sourcing, production scheduling and logistics, to information flow and the integrative information system. The challenge for organizations that are considering to adopt SCM is how the integrative IS contributes to their organization’s strategies. Since Electronic Supply Chain Management (eSCM) today is considered to be the benchmark for entering the business arena, question arises as to the cost and feasibility of adopting eSCM. Enterprise Resource Planning (ERP), considered to be eSCM’s backbone, has become a necessity for production organizations, to operate on the same platform as other organizations. Not only this, multinational players are restricting their trade with companies which operate on the same software (Shehab et al 2004), which leads to the dilemma of choosing the right ERP vendor that would integrate all partners onto the same platform. These issues lead organizations to question the viability of adopting ERP systems and integrate with eSCM.
The following report shall endeavour to enumerate on the benefits and setbacks in adopting an integrated Supply Chain system based on Internet technology. It shall attempt to achieve the following objectives:
a. To illustrate the concept of Supply Chain Management, tracing its evolution from traditional buyer-supplier partnership to current strategic SCM.
b. To outline the technological framework required for implementing ERP systems, with emphasis on SAP.
c. Moreover, to detail the advantages and problems that organizations face if they seek to adopt a fully Web-based Supply Chain system.
The report is organized as follows:
Chapter 1: The chapter illustrates a cursory survey of the current scenario, and why there is a need for this report.
Chapter 2: This chapter briefly outlines the method used for researching the topic.
Chapter 3: This is a core chapter, which shall explore issues, problems, and benefits surrounding eSCM. It shall trace the historical development and current practices in SCM, with emphasis on ERP.
Chapter 4: The chapter shall evaluate the factors explored in Chapter 3, and study some cases that have adopted ERP/SAP.
Chapter 5: Based on evidences in Chapter 3 and Chapter 4, recommend strategies and steps for adopting eSCM in modern organizations.
The purpose of this research is to produce a report that shall outline the practicality of implementing integrative SCM systems in organizations. Since the nature of the study is to speculate, analyze and explore ways to implement ERP systems, the chosen a qualitative research paradigm to reflect upon the phenomenon under study (Stenbacka 2001). Through secondary resources such as books, journal articles, magazines, newspapers and the Internet the researcher shall develop a theoretical framework. Moreover, to ensure that the this report has practical implications, case studies shall be used to explore these concepts in practice, based on the ideology that action research is critical for problem-solving studies. It offers a participative and collaborative approach to research (Gummesson 1993 qt. Neergaard and Ulhøi 2007). In the process, I hope to gain an understanding of the challenges, setbacks and application of integrative SCM in an online environment, and formulate recommendations for modern organizations endeavouring to adopt eSCM systems.
3. Literature Review
3.1 Supply Chain Management – Activities and Processes
In the past, demand-supply management is characterized by buyer-supplier relationship in which the supplier vies for its customers while the buyer shops for the best deal. The relationship is distinguished by profit margins (Porter 1980). Evolving SCM gave way to supplier-buyer partnership in which both the parties see the exchange process as a win-win situation. Indeed, in a partnership approach, the supplier and buyer engage in a vertical integration of supplies, control, cost and quality. Obviously, this requires close coordination of scheduling, cooperation of production and process improvement to reduce cost to benefit both, the supplier and the buyer (Womack et al 1990). The partnership approach to SCM is vulnerable to industry and economic evolution such has been the case of transitioning economies from labour intensive to computing, during the 1970s and 1980s.
As a result, manufacturing organizations sought for a formula that would effectively reduce production cycle, offer room for innovation and add value to the process of distribution at a low cost and on time. This they were sure would ensure sustained competitive advantage and help them gain customer loyalty. From this conceptual framework emerged SCM. SCM is characterized by tiers of processes involving materials suppliers, service providers and customers (Fawcett 2002) and can be defined as processes that “begin with the customer and shape the organization of the supply chain." Traditionally, SCM strategies involved developing a competitive environment and power channel in which the supplier and buyer has the bargaining power. However, with emergence of globalization, this strategy has elevated the power of the final consumer, resulting in highly customized delivery systems, communication channels and logistics systems to oversee the supply chain. The emphasis is on bringing the product closer to the customers, in the least possible time. This has motivated companies to create alliances in the global marketplace to minimize inventory, and achieve just-in-time delivery, regardless of the geographic or channel of distribution the customer chooses (Fawcett 2002).
The inclusion of such complex processes means Supply Chain Integration. Kotzab, Skjoldager and Vinum (2003) note that integration takes place on three levels:
1. Technical integration
2. Application integration
3. Business integration
Integration is critical to operate in the global competition, as it would help organizations increase efficiency while streamlining its processes and enhance customer service through collaborative relationships. In this context, SCM can be defined as:
"The systematic, strategic coordination of the traditional business functions within a particular company and across businesses within the supply chain, for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole." (Mentzer 2001 qt. Williams, Esper, and Ozment 2002)
During the latest time a lot of organization make use of pull strategy (JIT)accompany with to perform the customer demand .These approaches can make a big variation in supply chain management .JIT is working like same in supply chain management by take away the inventories and recuperating the systematic linkages between the organizations.These process work in the whole operation regard how work will be proceed and those process interacting with the customer as well (; Johnson and Brö ms, 2000 ).In the manufacturing sector that kind of work produced in a time-honed example of complete loom to supervise the organization, that kind of association all the way through the organization function with metrical accuracy .Similarly the acceptance of technology can merely dish up to the huge hustle to the disparity. Beginning of technology and procedure at organizational edge can merely endorse the formation of the price if they hold up firm associations stand upon the premeditated commonalities.(Forrester 1999) provide in 1950 of demand up and down as information go through a supply chain now we call bullwhip effect, stay a rich study topic.
3.2 E-Supply Chain
To resolve the integration of the three levels in SCM means transforming the supply chain to automation to match real-time coordination. Thus, SCM systems transitioned to EDI (Electronic Data Interchange), using electronic communication systems as platforms for coordination; and this type of supply chain is known as eSCM. eSCM involves processes of Human Resource Management, change management, information networks, performance measurement mechanism, alliance management, and technological development. Moreover, Hewitt (1994 qt.) describes that SCM includes processes such as:
i. customer service
ii. order fulfilment
iii. demand management
iv. production flow management
v. procurement for product development
vi. marketing and commercialization of new products
vii. customer relationship management
(Kotzab, Skjoldager and Vinum 2003) (See Figure 1)
Since eSCM relies on technologies for communication interchange and coordination, the cost of operation is low; at the same time, allows the organization to be adaptable to change management, consumer preferences and competition (See Figure 2)
Source: Williams, Esper and Ozment 2002
The structural benefits of eSCM supersede the traditional supply chain and allow organizations to expand their logistics, customer base and production centres. eSC is boundary-less, spherical and reconfigurable, according to (Kotzab, Skjoldager and Vinum 2003). It is highly adaptable to organizational and market needs. Hence, eSCM can be defined as "a management discipline which concerns Electronic Supply Chain Integration on a technical, application and business-management level. ESCM includes optimization of business processes and resources across supply chains, from customers to suppliers of products, services or information." (Kotzab, Skjoldager and Vinum 2003).
In this context, eSCM is considered a management approach involving information flow, technology to manage processes, and optimization of enterprise resources.
3.3 Technologies in eSCM
The development of eSCM had been gradual, and evolved from automation. Traditionally, SCM had been supported by tools which relied on EDI. Electronic Data Interchange, then, had been typically a data bus and storage hub with retrieval capability. Large databases managed information of processes and products. These databases handled information relating to Material Resource Planning (MRP) and Master Production Scheduling (MPS), which have been critical for SCM (Gupta 2000). During the 1990s, MRP II (Manufacturing Resources Planning) and later Enterprise Resource Planning (ERP) emerged to support eSCM. These tools relied on EDI for information interchange (See Figure 3).
EDI systems are independent Information Systems and are defined by inter-organizational processes and business partnerships. The same framework has been taken up by modern enterprises to adapt to "faster and easier communication" technologies, such as the Internet and the Web, that would integrate all levels of organizational information, and factors that create value to the supply chain (Williams, Esper, and Ozment 2003) (See Figure 4).
3.4 Enterprise Resources Planning
Among these technologies, ERP is a popular supply chain tool, which resolves problems of integration that businesses had been facing earlier. Shehab et al (2004) define ERP as "a business management system that comprises integrated sets of comprehensive software, which can be used, when successfully implemented, to manage and integrate all the business functions within an organization. These sets usually include a set of mature business applications and tools for financial and cost accounting, sales and distribution, materials management, human resource, production planning and computer integrated manufacturing, supply chain and customer information." (p.359). ERP is critical for today’s organization to sustain businesses, especially when ERP systems are being integrated with the Internet for electronic commerce. Whether organizations are big or small, ERP has become the standard for system integration (Boykin 2001 qt. Shehab et al 2004).
Today, ERP is considered to be the backbone of SCM in strategic and managerial consideration (Tarn et al 2002; Koh, Saad and Arunachalam 2006; Chen 2001). ERP technologies focus on sales-force automation, data warehousing, document management, and after sales service and support. Furthermore, ERP today addresses the majority of the issues faced by organizations earlier including e-supply chain integration, risk and uncertainty (Koh, Saad and Arunachalam 2006). Fundamentally, ERP treats application systems, organizational systems and technological systems as one. Unlike traditional SCM, stand-alone activities are interlinked in ERP systems to reflect the cohesiveness of the enterprise. Suppliers and customers share information, as well as use the information system to access delivery status, stock information or delays in real time. Organizations with ERP systems enjoy the benefit of ease of use, integrative function, communication flow, customization, improved decision-making, improved processing time, operations and interface integration that reduces planning inaccuracies (Gupta 2000) (See Figure 5 for ERP Characteristics).
Despite these facts, critics are sceptical of ERP’s efficiency. According to Wagle (1998), ERP systems have many pitfalls too. Although, ERP helps management to make informed decisions through integrated Information Systems, setting up of ERP systems, process redesigning and training for change management incur costs. Others (Themistocleus and Corbitt 2006; Koh, Saad and Arunachalam 2006) are of the view that ERP systems are only part of the production and automation solution as they are limited to "co-existing" with other software used by today’s technological organizations. Depending on the ERP systems chosen (Baan, SAP, and PeopleSoft etc.), ERP systems may or may not be compatible with the organization’s own IT infrastructure, resulting in inefficiency rather than efficiency.
To resolve, Themistocleous and Corbitt (2006) suggest organizations to choose ERP software before integration. The vendor should be able to customize the software that supports business process integration with many variations and scenarios. The multiple business process scenarios will help management to configure an SCM system fit to their individual business. This process is called Enterprise Application Integration (EAI). Basically, EAI is a subset of Business Process Integration (BPI) which companies today choose to organize change processes. This usually involves integration of organizational functions, processes, applications and inter and intra-organizational systems. Thus, EAI enables organizations to ease into technical and behavioural transition (Themistocleous and Corbitt 2006).
Other ERP technologies are various, depending on the type of business and organizational structure. Some of the major names in this industry include SAP, Oracle, JD Edwards, PeopleSoft and Baan. Apart from these major players, the rest of the market of ERP technology is made of smaller and specialized vendors such as SSA, BPCS, Inertia Movers, QAD, MFG, PRD etc. Popular ERP software includes MFO/PRO by Qad, IFS/AVALON, SAP, JD Edwards, BAAN IV, and PeopleSoft (Siriginidi 2000 qt. Shehab et al 2004). Among these, SAP (Systems, Applications and Products) is perhaps one of the most favoured by organizations.
3.5 Internet technology in ERP and eSCM
Technology is critical in supply-buyer relationship. The advent of the Internet has once again forced eSCM to evolve. As buyers and suppliers engage in integration technologies, the Web has brought new dimensions to supply chain activities and processes. Early adopters of ERP enjoyed benefits including flexibility, adaptability, on-time delivery and cost reduction. They also faced issues in implementation such as lead time and inventory cycle. These inevitably lead to customer dissatisfaction. Problems include compatibility with ERP systems, networking issues, software package, user training, change resistance, non-committal attitude of management, and employees’ reluctance to learn new technologies (Gupta 2000; Boone and Ganeshan 2002). Furthermore, every time the organization changed its technology, it had to change its systems application programming interface as well. As a result, cost and time overruns have been common in organizations (Gupta 2000). Therefore, the Internet provides a new dimension to ERP and eSCM.
Web-based procurement applications, which incorporate the Internet for their applications, allow users to browse the Internet for products, check delivery status, and stock, in real time. Consequently, organizations are able to outsource ERP applications to small and medium-sized organizations, and let them control the flow of eSCM through remote data centre and server (Gupta 2000).
The Internet has also opened doors for exchange of real time information to create effective value chain. Indeed, long-term competitive advantage can be achieved through scaled human resources, inventory control, physical assets and operational costs. The challenge for eSCM is then to focus on customer service efficiency, investment control, strategy development and maintaining partner relationships (Burca, Fynes and Marshall 2005). Organizations can now focus on eliminating irregularities and unpredictability in quantities orderd along the value chain. This can be achieved through electronic procurement. E-procurement is "an online intermediary that connects fragmented buyers and sellers which can eliminate inefficiencies by aggregating offerings from many sellers or by matching buyers and sellers in an exchange or auction; they form around specific industries and are thus referred to as vertical markets" (Burt et al 2003 qt. Burca, Fynes and Marshall 2005). Upgrades have become necessary, as eSCM are highly dependent responses to the market environment. Upgrades like software efficiency are necessary for EAI integration.
3.6 Web-based ERP
Trends in online trade have also hastened transitioning ERP systems online. Gupta et al (2004), for example, note that the Internet has linked ERP to e-commerce, which has resulted in new ERP applications.
Boone and Ganeshan (2002) are of the view that ERP has transitioned to Web-based integration due to several reasons. Firstly, online ERP systems have become hubs for eliminating information gaps in the supply chain, as well as inconsistent systems layers such as financial performance, supplier partnership, and organizational functions. To save time, cost and resources, it needed to transfer eSCM to online-based platforms to make specific strategic integration such as developing suppliers’ relationship, enhancing buyer relationships and capitalizing on volume trade online, through a new consumer base. For example, Dell and Amazons are live examples of eSCM, which specialize in third-party logistics partnerships to organize upstream supply chain. Their strategies are to concentrate on smaller warehousing investment, increased customization and spot delivery (Boyer, Frohlich and Hult 2005).
Secondly, by transitioning online organizations with ERP, systems can compete against small profit margins and participate in price-sensitive markets by making product information available to the consumers. Web-based technologies enable buyers to survey, evaluate and select suppliers of their products, according to Lancaster, Yen and Ku (2006). Buyers – whether individual consumers or business buyers – are knowledgeable, demanding and hard to please. The Internet facilitates them with the ability to make decisions based on quality, cost, and customer service. eSCM using ERP backbones can only capitalize on these factors if it uses technologies that offer competitive edge in these arenas.
Thirdly, the Web offers opportunities for firms to set up industry-specific "shop windows" with product information for customers and trading partners. The Web is a platform for linking supply chain partners, thereby acting as a community for suppliers, buyers and manufacturers. This virtual market place is highly integrated in ideas, information and services (Anderson and Lee 2001 qt. Lancaster, Yen and Ku 2006) (See Figure 6).
As a result, retailers and manufacturers can advance in business strategic positioning in terms of global reach, improved processes, operating supply chains, information networks and shared resources. Unlike independent Intranets, the Internet offers a broad range of supply chain functions such as collaborative enterprise networks, supply chain transactions, shared platforms, and performance forecasts (Wagner, Fillis and Johansson 2003; Cross 2000). Organizations can communicate effectively and in real time, thereby are able to improve their service levels significantly. For example, Wal-Mart and Procter&Gamble have adopted an eSCM model with ERP system. This means that Wal-Mart can effectively communicate and coordinate with P&G so that they can never have an inventory problem at the Wal-Mart distribution centres. This type of bullwhip effect of distortion in demand forecasts had often been the problem inherent in automated Supply Chain Management, which is the result of inaccurate or inadequate information (Koch 2002).
While issues of supply chain integration, cost, technology, and business process continue to plague ERP and eSCM experts, the fact remains that organizations are migrating to these platforms more and more each day. Implementation of ERP and eSCM is difficult when one considers the complexities of their systems processes (See Figure 7).
Source: Tarn et al 2002
Tarn et al (2002) are of the view that ERP and eSCM integration is difficult, but not impossible. The benefit perhaps outweighs the problems inherent therein. For example, they are of the view that SCM provides a framework for collaborative efforts, integrated processes, and streamline the supply chain through improved and efficient technologies. There are broad scopes for eSCM as its progress is still at the development stage. eSCM systems functions include support for demand and supply, business to business communication, planning, and curbing uncertainties. Since eSCM is based on a wider framework of value chain partners, it has to be flexible to adapt to change. eSCM applications are still dominantly in the sphere of manufacturing (Tarn et al 2002).
On the other hand, ERP systems can be organizational-specific or industry-specific, depending on the type of products the enterprise is selling. ERP systems are at a mature stage today, with specialized technologies provided by specialist vendors. Despite these facts, ERP system implementation faces a multitude of problems such as data quality (Nord et al 2002), cost, technical compatibility, business process integration, training and information structure change. The difficulty lies in choosing a compatible platform that would match with other partners in the supply chain (Gupta et al 2004).
Critical success factors in implementing ERP depend on the training, top management support, communication among business and IT departments, change management initiatives, employee relations, and control (Nord et al 2002). Moreover, implementation and integration of ERP and SCM depend largely on the flexibility, inter-changeability and compatibility between the software packages of the two. To integrate information systems means to allow communication flow, data interchange and organizational integration. Since ERP and SCM operate on the similar framework of Intranet, extranet and EDI, it is feasible to integrate the two. There are three methods for integrating SCM and ERP:
a. through system conformity
b. through middleware
c. through specialized integration software (SIS) (See Figure 8)(Tarn et 2002)
Source: Tarn et al 2002
This is the reason why Web-based ERP is thought to be the best option for organizations endeavouring/transitioning to eSCM. The future of ERP systems is inherent in improving the supply chain in fostering collaborative multiple enterprise systems, operations, financial, logistics and financial systems (Tarn et al 2002; Alsene 2007).
SAP (Systems, Applications and Products in data processing) is an integrated business system package that has evolved by five former IBM systems engineers in the 1970s. They designed a software package that provides businesses with an effective and efficient framework for organizations’ deployment of ERP. SAP R/3, at the core, is a software that enables organizations to adopt ERP and integrate with eSCM easily. According to Wolff and Gieger (2000), SAP is the new vehicle for Internet based ERP. It is customer-oriented as it allows suppliers to sell and communicate with buyers in real time. It also provides a close logistical link to join the supplier with the customers through business process integration. As a result, eSCM integration becomes easier and vendors can concentrate on improving decision-making processes, production processes and real time transactions. SAP is also based on IT systems that are compatible with other vendors’.
As far as process integration and change are concerned, SAP is flexible in letting the organizations’ management choose from comprehensive scenario to compact scenario implementation. Through flow-charting business processes, SAP uses event-driven processes to identify users, events, tasks, functions and organizational structures before it is customized for implementation (Gupta et al 2004). Indeed, ERP in SAP can broadly follow the following steps for integration:
d. Implementation and Testing
By going through these stages, though time-consuming, the organization minimizes the risk of barriers, unfitness, costs of reruns, and technological incompatibility. Furthermore, scenario testing and practical testing allow the organization to improve on the system before it is fully integrated within the supply chain. While there are other vendors which provide ERP systems (See Figure 9), SAP is perhaps the most preferred by organizations, and perhaps the easiest to integrate into.
Sap solutions for small business and midsize companies
According to SAP press, small business and midsize companies (SME) are facing greater competition then ever across various industries. With pricing pressure and the increasing power of large rivals in some segments they have a critical need to optimize business process, cut operational costs and improve customer acquisition and retention rates.Sucess depends on having the ability to keep pace with rapidly changing customer and industry demands and execute quickly, the agility to quickly seize new opportunities and flexibility to achieve sustainable business growth
In choosing their software solutions, these businesses must balance their long term needs for innovative solutions to drive the next level of growth with their existing resources and short-term needs for quick return on investmet.low cost of ownership and minimum disruption to current operations. Many small business and midsize companies must also ensure integration in their corporate and partner/supplier ecosystem, often requiring the complete replacement of legacy systems
With the complexity and global reach of today’s business environment small business and midsize companies are also under increased pressure to monitor business process and financial operations more closely.
According to sap press release 75 percent of its software installations worldwide in small business and midsize enterprises. SAP has a 30 year industry
Experience and distribute through a global channel of qualified SAP partners. SAP solution for SME is
Are inexpensive, easy to deploy and proven business solutions to better needs of customers across diverse industries.
SAP Business one
SAP business one is an integrated business management application designed to address the specific needs of small business, typically with 10 to 100 employees. Its covers all the operations which are necessary to run and grow a successful business, including CRM, purchasing ,warehouse and partner management .SAP business one helping companies improve business -process efficiency ,take advantage of growth opportunities and seamlessly link with parent companies, customer and suppliers using SAP Business suite application.
Key Characteristics of SAP Business One
Sap Business one is sold exclusively through a channel of certified sales and service partners
SAP Business One can be customized according country specific location that can be deployed. Is an important part of SAP offering for channel partners is the SAP Business One software development kit. Its allow advance development environments available for small business. SAP software has significant benefits such as powerful customizations, formatted search and user fields, efficient system, administration and smooth upgrade process.
SAP application supports Microsoft SQL Server database, Microsoft Windows Server (2003, R2, 2003SP1), Microsoft Windows Business Server (2003R2, 2003SP1and Microsoft Windows SP2 (stand alone installations only), application also support Microsoft Office.
SAP Business one is designed for small business with up to 100 employees and this software is available for industry specific and other application through SAP Business One partners.
Implementation and use
SAP Business One is easy to use and easy to deploy, normally this application up and running with in days. This application is easy to use because of Microsoft Windows look and feel
SAP Business One include core business management functionality such as general ledger,analytics,reporting, sales, purchasing,inventory,costing and customer relationship management (CRM).This application has very powerful tool for small Business. This application also offers new CRM and e-commerce functionality enabling companies to set up online stores easily and to deploy CRM software quickly and simply via the internet.
SAP Business One makes easy for business process. Microsoft windows environment with in SAP Business One enable users to use this application with out difficulties and exchange data with other windows desktop applications including office software.
This package also provide customers with faster and more frequent access to new functionality, best practice tools and maintenance updates. Customer can download packages and these packages are available once a year between major applications updates. It includes new enhancement in financials, including control accounts, general ledger reporting and document printing, enhancement package is plug and play and it reduce the cost and interference associated with typical software.
SAP Business Design
According to SAP press “SAP Business By Design is a new solution for companies with 100 to 500 employees. The on- on demand business software solution complements and does not replace any of the other solutions in the SAP portfolio of solutions for small businesses and midsize companies. SAP Business By Design specifically have not invested in the types of customers growing midsize companies that typically have not invested in the types of integrated business solution SAP provides
SAP business By Design is available to days for selected early customers in United Sates, Germany, France, United Kingdom, and China. In 2008 the product will be introduced in India, the next wave of country launches is planned for 2009
TCO Reduction. The solution is designed to lower total cost of ownership (TCO) by bundling software, e-learning, services and support for easy configuration and ongoing operation without requiring extensive IT infrastructure”
4.1 E-Supply Chain Management and ERP Implementation
In the course of the above review, one understands that SCM is not a new concept. Indeed, the management approach evolved from supply-buyer relationships to partnership; and today, to integration. The evolution of SCM has led to the discovery, designing and implementation of a management approach that is characterized by the following:
a. Vertical integration of organizational processes
b. Process efficiency
c. Cost efficiency
d. Technological development
e. Improved communication
f. Customer relationship building (Fawcett 2002).
Over the years, SCM has evolved from mere relationships between buyer and supplier to complex value chain in which partners in the supply chain work towards its consolidation. Their efforts have resulted in the complex supply chain that characterizes SCM today, including sustaining competitive advantage, improved processes, production lead time, innovation and value added to the process of supply and distribution. As a result, the distance between the customer and the supplier has decreased significantly. Moreover, the process of SCM development has continued even today (Williams, Esper, and Ozment 2002). The evolution of eSCM, as discussed earlier, has resolved several issues of integration such as:
a. Technical Integration
b. Application Integration
c. Business Integration
Initially through EDI, and later on through the Internet, eSCM has transitioned online to a platform that enables businesses to coordinate their organizational functions and processes harmoniously, including processes of Human Resource Management, change management, information networks, performance measurement, and communication flow (Kotzab, Skjoldager and Vinum 2003). This has been made possible through structural and technological change in eSCM.
Clearly, eSCM is a platform that organizations in the manufacturing business cannot go without. Not only eSCM is a valuable approach to production and supply management, but also an efficient framework for organizations to adopt in order to effectively compete in the global market. eSCM provides the following benefits to the adopter:
i. Organizational information integration
ii. Process improvement to optimize resources and reduce cost of operation
iii. Improved communication network to critical partners in the value chain such as manufacturers, suppliers, buyers etc. (not necessarily individual consumers)
iv. Faster information access and exchange to improve customer response time
v. Planning and strategic development
Despite these benefits, organizations also face a host of eSCM pitfalls,
including the following:
i. Technological platform compatibility
ii. Cost of implementation
iv. Employee reluctance in learning
v. Level of management commitment to the programme
vi. Technological development and upgrades
Organizations that adopt eSCM also need to adopt ERP systems. ERP is a supply chain tool that helps business integration into the new supply chain environment. It complements SCM in implementation, management and integration of business function. Essentially, it is a software application which integrates functions like financial, sales and distribution, materials management, human resource management, production planning and manufacturing, and customer profile. ERP has become a critical tool for today’s organizations that aspire to compete with rivals in the global marketplace (Tarn et al 2002; Shehab et al 2004).
ERP systems are efficient, yet they are also vulnerable to risks and issues such as compatibility, infrastructure integration and implementation cost. One of the most critical factors for ERP system implementation is change management in organizations that are endeavouring in ERP adoption. Information Systems, communication framework and organizational structure need to be congruent with ERP systems before it can be effectively integrated. Not only this; as other organizations are transitioning online, the Internet has become the platform for communication, procurement, distribution and logistics. For this reason, it is necessary for organizations implementing ERP to choose a package that enables it to operate online and integrate within the eSCM framework (Gupta et al 2004; Burca, Fynes and Marshall 2005; Gupta 2000).
One such package that I am interested in is SAP.
SAP is a software package for ERP which is highly flexible. SAP R/3 enables organizations to integrate ERP and eSCM easily through scenario flowchart. This allows the vendor to study the user, event, information, function, and infrastructure requirements before it can be implemented. Even so, once implemented SAP module allows the implementer to test and screen before it is holistically integrated within the organization. Therefore, SAP eases ERP implementation process by minimizing risks of unfitness, costs of reruns, and technology incompatibility. To fully understand the implication of implementing SAP, ERP and eSCM in organizations, I shall study some cases in the following section.
4.2 Case Studies
4.2.1 UPS Worldwide Logistics
UPS is a logistics service provider which initially specialized in end-consumer parcel delivery services. UPS diversified its business to logistics and recently adopted a 4PL (fourth party logistics) business model with the view to increase its competitiveness. By adopting the 4PL business model, it has restructured its supply chain from supply-base to client-based. 4PL involves the provision of logistics of physical supply for clients, while coordinating with transport and warehousing partners. This type of business model requires extensive use of information and coordination, as well as expertise in customer-client knowledge. Therefore, supply chain process efficiency is critical for client satisfaction and meeting management goals (Van Hoek and Chong 2001).
Since 4PL is information-based, it needed a central contract point that would allow employees, clients and supply chain partners to communicate with each other. Furthermore, it needed to develop an information framework that would optimize supply chain effectiveness without compromising on its operations. At the client end, UPS had to deliver on its promise to perform responsibly for its clients. For this purpose, it started to contract its supply chain interfaces, and used I2 (an eSCM software) to transition suppliers, clients and manager onto the new platform. Once the first and second-level customer interaction processes were in place, such as orders of shipments and order fulfilment, UPS 4PL started to focus on manufacturing interfaces. This meant coordination from manufacturing to delivering to the client, dealing with partners from manufacturers to the customer (Van Hoek and Chong 2001).
Change progress is monitored by reflecting on disintegration and reintegration processes, phase by phase, to distinguish tier integration (See Figure 10). Traditional processes are displaced by specialized and knowledge-based activities such as consultancy, relationship building and Supply Chain Management. As a result of transitioning to SCM, UPS Worldwide Logistics can now dissociate its services from physical coordination and distribution of parcels to adding value to SCM for its clients (Van Hoek and Chong 2001).
Source: Van Hoek and Chong 2001
4.2.2 Comp Group
Comp Group is a network of complementary companies in the manufacturing industry in the Middle East. In 1993, Comp Group faced global challenges in terms of intense competition, business environment threats and opportunities, diversification of Comp Group business activities to become customer-driven, and the need to improve quality to achieve cost-effective production. These issues surrounded the organization and forced it to re-evaluate its business activities to tailor it to business strategy. The goal is to empower its organization and make participants more accountable by decentralizing its power to activity level. At the time, Comp Group relied on its outdated IT infrastructure to coordinate production, management, and communication within the organization (Al-Mashari and Al-Mudimigh 2003).
Clearly, Comp Group needed an organizational makeover with emphasis on coordinated IT infrastructure and process management. To begin its transition, it migrated some of its applications systems to the Oracle database environment. This database was supposed to handle business functions, but the integration offered little flexibility in terms of consolidating with the internal IT infrastructure. As a result, the organization decided to change its IT infrastructure to migrate to a more flexible applications system (Al-Mashari and Al-Mudimigh 2003).
In evaluating its infrastructure through a consulting group, ConsCo, it had been able to develop two alternatives: to upgrade the current systems, or to select a world-class package. Consequences of implementation had been weighed and, in the end, Comp Group decided to adopt an enterprise-wide Information System which could fit into its current organizational structure and help it reengineer business processes. Thus, implementation of change management at Comp Group involved parallel change management of technology integration, as well as business integration. These have been critical for improving processes and information flow from various departments.
On the IT spectrum, Comp Group evaluated its current systems, applications and database structure before comparing it with the viability of adopting application software. This had been evaluated based on strategic objectives and benefits it would provide, as well as the role the software would play in providing technological strategy, data capture and storage, integration of group systems and enterprise systems. Various software packages were compared including Oracle Financials, SAP R/3, Triton, and EMIS, of which SAP R/3 was considered to be strategically compatible, with potentially least risks in implementation (Al-Mashari and Al-Mudimigh 2003).
SAP R/3 features supported the diversified nature of its business structure, as well as its medium and long-term requirements. SAP R/3 was also widely used by Comp Group’s business partners. More importantly, SAP has a leading market share in business integration which meant that current and future supply chain partners would be transitioning to SAP R/3 platform – making it viable for investment (Al-Mashari and Al-Mudimigh 2003).
The process of integrating SAP R/3 took place in phases, with initial focus on logistics processes, which gradually transitioned and re-engineered to integrate SAP systems. The new system supported sales and distribution, material management, finance and production, and planning (See Figure 11). Each of these sub-systems were transitioned, phase by phase, and tested accordingly. However, before Comp Group could fully customize and transition its business onto SAP R/3, ConsCo its consulting company’s contract expired, resulting in a halt in its integration (Al-Mashari and Al-Mudimigh 2003).
Covisint is a leading partner in the auto making industry. It creates value by providing car components to the final product in the auto-making process. It participates in Web activities to reduce time-to-market processes and costs, and provides benefits to supply chain partners by decreasing switching costs by being always available to its partners – GM, Ford and Daimler Chrysler. Covisint strategic positioning is inherent in value and specific knowledge delivered to its partners. For this purpose, it needs to be present at all time of orders, production and distribution. A complex data processing system or i-Supply service was central to its information interchange with carmakers, warehousers and material and component suppliers. Convisint relied on this network which was the essence of its value chain. Since the Web is its core platform for communication activities, including partner selection, decision-making, human resources integration and knowledge capture, it is only logical that Covisint uses Internet applications for its value integration and hierarchical control (Caputo et al 2004).
Web-based eSCM is not only ideal for providing competences in procurement, but also in integrating and coordinating activities with partners along the supply chain. By using the i-Supply Service platform, Covisint is able to provide consistent service delivery in a highly fragmented market of carmakers. Since Web applications allow Covisint to act as an independent vendor, it has been able to extend its services to carmakers and competitors alike. This opens new windows of opportunities, decision-making and business strategy (Caputo et al 2004).
Source: Caputo et al 2004
4.2.4 Evaluation of Case Studies
The case studies demonstrate that the need for transitioning to Web-based environment, whether by adopting eSCM or ERP SAP integration, is a necessity today for organization to compete effectively. The most common feature of transitioning process includes the evaluation of the existing IT infrastructure, business processes and information requirements. Organizations also need to know what they expect in the new business model, to predict the type of supply chain they want to adopt and the technology to integrate it. For example, features they expect to see in the new supply chain model may include improved communication, optimization of resources, operational cost reduction, building partnership, customer relationship development and management, and/or exchange of information. For example, in the case of UPS, the company wanted to specialize in building customer relationships and reduce cost of operations by reducing its role in the supply chain; Covisint wanted to emphasize on its information dissemination role to its partners, based on its online business model; while Comp Group wanted to consolidate its business functions and activities.
Once needs and expectations have been established, organizations can start "shopping" for a package by simulating scenarios, using factors like users, events, activities, functions and information. This is a realistic approach to implementing SCM because it allows the organization to gauge technological compatibility, cost of implementation, training requirements, and risk of implementation. Consequently, scenario-based simulation is critical for implementation.
Moreover, once the package selection has been established, implementation must take place in a continuous flow and phase by phase. Each phase involves the transitioning of the organizational function from traditional supply chain framework onto the online environment so that barriers or risks do not pose as bottlenecks to the process of integration. The organization also has to ensure that the choice and implementation of eSCM or ERP SAP reflects business strategy, to achieve its desired effectiveness and efficiency.
Having said that, the liability of failure is still possible. In the case of Comp Group, for example, implementation failure had resulted due to disruption in integration, while UPS faced transitioning barriers like best-fit package. Other pitfalls such as inadequate information, hidden costs, employees’ resistance to change, and lack of training – all contribute towards failure.
5.1 Critical Success Factor
Theoretically, SCM appeals to the business community because it enhances communication and coordination among the different members of the distribution channel. As technological development took place, SCM has become more efficient in materials management, inventory control, supply chain responsiveness, and flexibility to its buyers. This has played an important role in letting organizations to concentrate on strategic development, product innovation, and improved service delivery. Indeed, as seen in the case of UPS, success in eSCM integration has led the firm to shift its core operational objectives from core logistics and distribution to consultancy and client service. Thus, eSCM integration is no longer an option but a necessity, especially when organizations of the world are migrating online to compete in the global marketplace.
Implementation of eSCM and ERP systems involves evaluation of complex information structures, reengineering organizational processes and, at times, even changing organizational objectives to effectively integrate these systems. Evidence from the above report suggests that organizations need to be clear in their eSCM and ERP implementation approach at the technical, business and application integration levels. They must be prepared to change, and be flexible in their approach to EAI in order to harmoniously transition to a new operating platform.
Success is contingent to the organization’s ability to commit itself to the process of integration; in supporting vertical integration, process alteration, cost of implementation and restructuring IS. Moreover, experts are of the view that the choice of software package also determines success. As a result, transitioning to ERP and eSCM must be done with an open mind, flexible attitude and willingness to change.
For organizations which are endeavouring to migrate to these online-based supply chain systems, I r recommends the following steps and approaches:
Step 1: Evaluation
The organization needs to survey, evaluate and identify the need for change. Identification of processes which need improvement, information which is not being catered to by existing IS, and communication infrastructure limitations would be valuable for developing a future framework for operation. This could be used as a blue print for "shopping" for application software that is compatible with the organization’s needs.
Step 2: Cost Implications
One of the most critical factors in deciding to migrate paper base environment to a Web-based ERP system and eSCM, is the cost of implementation. While experts are of the view that the cost of application is an investment, there are other factors such as are hidden costs of reruns, failure, and efficiency due to improper integration, which need to be considered beforehand.
Step 3: Deciding on the platform to be implemented
Although there are various vendors in the market offering ERP and eSCM packages, SAP R/3 is considered to be one of the most used by suppliers. SAP is highly flexible and customizable. Vendors can simulate integration through scenario flowchart to determine users, events, information flows, functions and structural requirements – before the actual implementation takes place. This pragmatic approach also minimizes the risk of barriers, hindrances and incompatibility, and most of all reduce costs of inefficiency and failure. SAP R/3 is also considered to be widely used by supply chain partners who would allow easy transition from one platform to another.
Step 4: Developing a strategy for implementation
Before any integration activity takes place, the management must develop an implementation strategy that outlines the various levels of integration. It also needs to segregate its various departments so that they can be integrated phase by phase, as has been done by organizations in the case studies. This approach minimizes bottlenecks and limits problems in integration to certain departments at a time only.
Step 5: Implementation
While the organization can implement the new platform on its own (if it has a capable IT department of its own) external consultants with expertise in SCM and ERP integration to direct the process of implementation are recommended. This would facilitate the organization in having a third-party, unbiased perspective in change management; and second, the consultants would also help in identifying processes and information that the management take for granted. They would also be able to provide post-implementation advice if the organization faces any setbacks.
Step 6 Testing and Review
Once the system is in place, and transitioning online to a Web-based ERP system has been successful, review of its operations, cost implications and efficiency can be gauged. This should be measured in tangible and intangible terms, such as cost of operation, software cost, employee performance, partner performance, profitability and value in the supply chain. If for some reason the cost of application outweighs value, then the model needs to be reviewed for improvement.
5.3 Challenges and Future Development
While ERP and ERP strategies have evolved significantly over the years, its development is far from complete. The challenges that ERP faces is transitioning into the next-generation enterprise systems. The current ERP packages will become outdated in a few years’ time, and new IS frameworks will replace the current models. Upgrades to existing frameworks need to be carried out for organizations to successfully compete in the future business environment. Some technologies that need consideration include Web 2.0 and ERP II, which are emerging with the new online business environment. Similarly, issues pertaining to online policies and laws need to be considered for effective online trade activities. Since ERP and eSCM largely depend on information interchange, copyright issues may have deeper implications in the future. Given these challenges, its highly recommends organizations to keep a look out for future developments to keep their systems updated.
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