Page 45 - DCAP302_ENTERPRISE_RESOURCE_PLANNING

Unit 2: ERP and Related Technology

2. Production: An organization must decide what products to create at which plants, which notes
suppliers will service those plants, which plants will supply specific distribution centers,
and, sometimes, how goods will get to the final customer. These decisions have a big impact
on revenue, costs and customer service.
3. Inventory: Each link in the supply chain has to keep a certain inventory of raw materials,
parts, subassemblies and other goods on hand as a buffer against uncertainties and
unpredictabilities. Shutting down an assembly plant because an expected parts shipment
didn’t arrive is expensive. But inventory costs money too, so it’s important to manage
deployment strategies, determine efficient order quantities and reorder points, and set
safety stock levels.
4. Transportation: How do materials, parts and products get from one link in the supply
chain to the next? Choosing the best way to transport goods often involves trading off
the shipping cost against the indirect cost of inventory. For example, shipping by air is
generally fast and reliable. Shipping by sea or rail will likely be cheaper, especially for
bulky goods and large quantities, but slower and less reliable. So if you ship by sea or rail,
you have to plan further in advance and keep larger inventories than you do if you ship by
air.

2.14.1 managing the chain

Once you’ve determined all of the elements in the supply chain, how do you manage the chain?
There are three main paths in the process:
1. Product flow includes the movement of goods from a supplier to a customer, as well as
customer returns.

2. Information flow involves transmitting orders and updating the status of delivery.
3. Financial flow consists of credit terms, payments and payment schedules, plus consignment
and title ownership.
Juggling these elements involves record-keeping, tracking and analysis by many departments.
Supply chain software, especially large, integrated packages, combines many different
technologies to give a single view of supply chain data that can be shared with others.
SCM applications fall into two main categories: planning applications and execution applications.
Planning applications determine the best way to route materials and the quantities of goods
needed at specific points. When such applications work well, they make possible the “just-in-
time” delivery of goods. Execution applications track financial data, the physical status and flow
of goods, and ordering and delivery of materials.

A relatively new SCM option involves Web-based software with a browser interface. Several
major Web sites now offer auctions and other electronic marketplaces for buying and selling
goods and materials. Also, Web-based application service providers are now promising to
provide part or all of the SCM services for companies that rent their services.

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