Page 144 - DMGT523_LOGISTICS_AND_SUPPLY_CHAIN_MANAGEMENT

Unit 6: Information Technology Framework

Procurement Notes

Procurement manages PO preparation, modification, and release as well as tracks vendor
performance and compliance. Although procurement systems have not traditionally been
considered part of logistics systems, the importance of integrating procurement with logistics
schedules is critical to facilitate the coordination of material receipt, facility capacity, and
transportation backhaul.

Self Assessment

State whether the following statements are true or false:
15. The supply chain information system is not the backbone of modem logistics operations.
16. Customer orders reflect demands placed by enterprise customers.

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Case Study Achieving Integration through Decentralisation

ince its founding in 1984, Cisco has always seemed to be able to look a bit further
over the horizon than its competitors. It concentrated on networking when the rest
Sof the world was point-to-point. It specialized in the enhanced functionality of
routing when most people thought switches were all they’d ever need. And it moved
rapidly to put a large portion of its sales operations online before most people thought
this was practical. As a result, Cisco now manages 75 percent of its revenues through its
website: $25 million per day, $8 billion per year. This is believed by many industry
observers to be the largest electronic commerce site in the world. Despite Cisco’s
indisputable record of success, the journey hasn’t always been an easy one. Growth, was
one reason. By 1994, Cisco had rapidly outgrown its application systems. “We were
experiencing growth rates of more than 70 percent per year,” says Andy Starr, IS Manager.
Revenues had reached nearly $1 billion, but Cisco was still operating on applications
meant to support a company half that size. To remedy the situation, Cisco embarked on an
aggressive ERP implementation using an Oracle database and applications. In 1995, after
only 9 months the company went live with a big bang implementation – a complete
switch of all worldwide transactions systems. Five thousand orders in backlog were
converted in just one weekend. Peter Solvik, Cisco’s CIO, says, “The applications provided
the architecture on which we could very, very rapidly grow, adapt, and scale the company.”
Acquisitions were another reason. In 5 years Cisco has acquired 27 companies. When
acquiring a company, systems integration is critical to support the 60- to 90-day closing
period applied by Cisco. The goal is to take orders for that company’s products on Cisco’s
information system the day the deal is closed. The acquired firm’s legacy systems are then
replaced quickly, creating a common worldwide ordering environment. “We wouldn’t
have acquired these companies if we didn’t have the ability to integrate them fluidly.
They wouldn’t provide value to our customers or our shareholders,” says Solvik. Cisco’s
ERP framework has grown from a single server into three U.S.-based servers and one in
the Netherlands. This network of servers coordinates Cisco’s manufacturing and order
fulfilment processes, providing immediate response to requests and better availability of
products to its customers. For example, an order loaded into the Amsterdam server is
scheduled for delivery using the U.S. Available-to-Promise (ATP) server. The ATP server
schedules according to the supply is said to be available by the U.S. manufacturing server.
Contd...

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