New business practices include supply chain management, customer-oriented strategies and customer relationship management (CRM), just-in-time (JIT) and lean manufacturing, virtual manufacturing, and "de-massified" multi-site operations. These new business practices sometimes represent a reformulation and synthesis of previous ideas, or current themes in the literature. New information technologies include e-commerce, computer integrated manufacturing (CIM), and advanced planning and scheduling (APS).
The commercially available software packages reflect variations in origins and orientation, as well as software maturity. Although progress has been made to standardize vocabulary and conceptual frameworks for generally-accepted manufacturing practices, the underlying design of each ERP software package reflects wide variations in interpretation of these practices.
Supply chain management (SCM) emphasizes the need to model the manufacturing enterprise from the perspective of the supply chain in order to synchronize supplies with demands and respond to change. An ERP system provides the tools to model various supply chain scenarios, from simple to complex. In many ways, the perspective of supply chain management has helped push the evolving scope of ERP applications.
The supply chain model for a particular manufacturing enterprise reflects the company's product, industry, and its position within the supply chain. Supply chain models range from the simple to complex. The two supply chain models shown in Figure 2-1 help illustrate the impact on an ERP system.
Figure 2-1 Supply Chain Models
Simple Model. The "simple" manufacturing enterprise buys items from external suppliers, and internally produces items for direct sale and shipment to customers. The ERP system must handle buy and make items, and a single-site operation.
More Complex Model. The "complex" manufacturing enterprise buys items from external suppliers, authorized distributors (for approved manufacturer part numbers), and from sister plants. In addition to internally produced items, it supplies components for external production at subcontractors and sister plants. The ERP system must handle buy and subcontract items, make items, and transfer items for both "buy complete" and "subcontracted" products at sister plants.
The "complex" manufacturing enterprise sells and ships products direct to customers and through multiple sales channels, such as resellers, distributors, and original equipment manufacturers (OEMs). It involves multiple sites, with inventory at distribution centers replenished from manufacturing plants. Sales orders can be shipped from designated sites, requiring visibility of available inventory across the distribution network. Items may also be drop-shipped from supplier and subcontractor sites.
Initiatives in supply chain management have created other requirements for ERP applications. For example, an ERP system must handle inventory stocked at customer sites and supplier's material stocked at the manufacturing enterprise.
The supply chain perspective has helped expand the scope of ERP beyond coordination of internal production activities to align supplies with demands. On the demand side, supply chain management concepts intersect with the philosophy of customer-oriented strategies and e-business. Supply chain concepts also intersect with JIT and virtual manufacturing strategies.
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