Strategic Information Systems and Enterprise Resource Planning

Assignment File 1

Assignment 3

Due date: 7 November 2011

Weighting: 12.5% of the total marks for this course

Before attempting any of the questions, read the following case.

AG Company has a long history as a leader in the manufacturing sector. Headquartered in Hong Kong, the company has 40,000 employees and buyers from more than 30 countries around the world. Its product lines and services are extremely diversified, and the company is now in the middle of transitioning into a ‘hub of a supply chain.'

In the last decade, AGC has been trying to restructure and standardize all its business processes, particularly the key ICT systems that support operational efficiency. There are internal systems as well as external. The company relies on ICT systems to improve its interoperability with its suppliers and its e-commerce readiness. In fact, 10% of its total sales and purchases have been moved online, and the percentage is climbing fast. AGC is now looking forward to a tighter relationship with its business partners.

Construction phases

To get an overall view of its international operations, AGC has adopted the supply-chain operations reference (SCOR) model to build its own supply chain. Using its own SAP R/3 system, the management chose i2 Technology and IBM software to construct its SCM system. i2 consultants gave the company a brief introduction to the phased SCOR methodology:

Phase 1 Review corporate strategy

Phase 2 Define the supply chain process

Phase 3 Determine the performance of the existing supply chain

Phase 4 Establish the supply chain strategy

Phase 5 Redesign the supply chain needed

Phase 6 Enable the redesign and implement

As AGC has just completed a BPR three years ago, the management decided to skip the first two phases and apply the results of this recent BPR directly to phase 3.

SCOR

Scott Shaw was the chief technical officer (CTO) of the company and led the SCM team. He understood that SCOR worked only if he could get consensus or compromise from all parties involved. As there were so many working parties, Scott made a large list of the vocabulary and terminology relevant to the existing system, and proceeded to make

2 BIS B425 Strategic Information Systems and Enterprise Resource Planning (ERP)

everyone agree on a boundary for the as-is supply chain management. The team first determined the performance of the existing supply chain as the level 1 metrics shown in Figure 1. A diagram was also drawn to define the level 2 processes (Figure 2).

Level 1 metrics

Customer-facing

Internal-facing

Reliability

Responsiveness

Flexibility

Cost

Assets

Delivery performance

×

Fill rate

×

Perfect order fulfillment

×

Order fulfillment lead time

×

Supply chain response time

×

Production flexibility

×

Total SCM cost

×

Cost of goods sold

×

Value-added productivity

×

Warranty cost or returns processing cost

×

Cash-to-cash cycle time

×

Inventory days of supply

×

Asset utilization

×

×

Figure 1 Level 1 metrics of the supply chain

Assignment File 3

Figure 2 SCOR Level 1 (process types) and Level 2 (alternative sub-processes)

Though not shown in Figure 2, the company's SCM partners are connected by one of the source processes or deliver processes. Note that the diagram is drawn in the way described by the Supply Chain Council, the creator of the SCOR methodology. It comprises five main processes, with an additional process, ‘Enable,' which includes the supportive sub-processes for the other processes.

The multi-location manufacturing company required a geographical map to illustrate the location of each process. Figure 3 illustrates several source à make à delivery routes. Coincidentally, the most profitable route in AGC's business is depicted by the diagram from China (warehouse in Asia) à Seattle (manufacturing in North America) à Amsterdam (warehouse in Europe). The operations in the Chinese warehouse are summarized as an S1 (Source Stocked Products) in Figure 2.

4 BIS B425 Strategic Information Systems and Enterprise Resource Planning (ERP)

Figure 3 An as-is geography map of AGC's supply chain

On further analysis (the ‘configuration level') of the operations in the Chinese warehouse, the S1 process was decomposed into five sub-processes (Figure 4). Note that each sub-process has its own inputs and outputs indicated by arrows. From the diagram, one can also discover how one sub-process is related with other sub-processes, which may belong to the plan, source, make, deliver or return process as labelled. (A quick reference is available at: http://www.isye.gatech.edu/faculty/ Leon_McGinnis/8851/Sources/SCOR/SCORv6quickref.pdf).

Assignment File 5

Figure 4 Level 3 sub-processes of S1

Details of the first sub-process S1.1 (Schedule Product Deliveries) were studied at the ‘process element level' and tabulated, as shown in Figure 5. Notice that the five strategic performance attributes (reliability, responsiveness, flexibility, SCM costs, and asset utilization) are examined in each sub-process. They may or may not have the same metrics stated in Figure 1, depending on whether those metrics can provide a suitable measurement of the performance attributes.

6 BIS B425 Strategic Information Systems and Enterprise Resource Planning (ERP)

Process element: Schedule product deliveries Process element number: S1.1

Process element definition

Scheduling and managing the execution of the individual deliveries of products against an existing contract or purchase order. The requirements for product release are determined based on the detailed sourcing plan or other types of product pull signals.

Performance attributes

Metric

Reliability

% Defective,

Defective parts per million (dppm),

% Completion to budget and scope of service description

Responsiveness

Total source lead time (in % of transactions)

Flexibility

% Schedule generated within supplier's lead time

% Schedule changed within supplier's lead time

Cost

Schedule deliveries costs (in % of product acquisition costs)

Asset

Raw material or product (in no. of days of supply)

Best practices

Features

Utilized EDI transaction to reduce cycle time and costs

EDI interface for critical transactions

VMI agreements allow suppliers to manage (replenish) inventory

Supplier managed inventories with scheduling interfaces to external suppliers systems

Advanced ship notices allow for right synchronization between source and make processes

Blanket order support with scheduling interfaces to external supplier systems

Inputs

Plan

Source

Make

Deliver

Sourcing plans

P2.4

Source