Virtual manufacturers contract with suppliers for outsourcing almost all manufacturing activities. A virtual manufacturer takes responsibility for the complete product design for documentation and costing purposes. They define the items and bills within an ERP system. Depending on the virtual manufacturing scenario, the bill defines reference information for a "buy complete" item, the supplied material for a "subcontract" item, or the internal production activities for a "make" item.
Variations in virtual manufacturing scenarios, summarized in Figure 2-4, mean that an ERP system must handle bills for buy and subcontract items. A subcontract item's bill defines the subset of components that will be supplied to the subcontractor. These bills can be used for cost roll-up and material planning calculations. An ERP system must handle subcontract purchase orders, and track kits of components as well as direct-ship components to the subcontractor. It may need to track overseas shipments and capture the landed costs. It may need to recognize different costs for an item stocked in two locations, handle sales orders that designate the ship-from location, and communicate shipping requirements to the different locations.
Figure 2-4 Virtual Manufacturing Scenarios
Final Assembly + Subcontract Manufacturing. The subcontractor makes an intermediate item, where some or all of the component parts are supplied to the subcontractor. The virtual manufacturer purchases these component parts, and either kits them for shipment to the subcontractor or has them drop-shipped directly. Multiple levels of subcontractors may even be used. The subcontractor sends the completed intermediate to the virtual manufacturer, who performs final assembly with other components and tests the completed end item.
Final Assembly. The virtual manufacturer purchases all components "complete," with internal final assembly and test of the end item.
Buy Complete. The virtual manufacturer purchases the end-item "complete." No components are supplied to the vendor. Inventory of the end item may be kept at the supplier, or sent back to the virtual manufacturer's location, for subsequent shipment to a customer. Costs of the item may differ between the two locations because of high transportation costs, such as high shipping costs from an overseas vendor.
Subcontract Final Assembly. The subcontractor makes the end item, where some or all of the component parts are supplied to the subcontractor (either as a kit or direct drop-shipment). The end item may be stocked at the subcontractor or sent to the virtual manufacturer, with the possibility of different item costs between the locations.
This is Part Two of a three-part article reprinted from Maximizing Your ERP System by Dr. Scott Hamilton.
Bridging the theory and realities of current ERP systems, Maximizing Your ERP System provides practical guidance for managing manufacturing in various environments. Drawing on case studies from Dr. Scott Hamilton's first-hand experience in consulting with more than a thousand firms, it covers common problems and working solutions for how to effectively implement and use ERP systems. This excerpt on "Trends Affecting Manufacturing and ERP" is drawn from one of the book's twenty-five chapters. The book can be ordered on amazon.com. The trends discussed in this part are:
Many firms with multisite operations are adopting a management bias towards small autonomous business units, rather than a large centrally managed organization. These thrusts to "demassify" the organization have been coupled with efforts to push decision making down in the organization, empower the local management team, reduce corporate staff, and eliminate layers of management. Associated with this general trend is decentralization of the ERP systems and the MIS function.
The Advantages of Decentralizing the Organization
The movement to smaller plants has an objective of fostering an entrepreneurial spirit and "ownership" within the plant management and employees. The smaller size reduces bureaucracy. Decisions are delegated to personnel who best understand the local operation and can create the best solutions to problems in the shortest time. It helps middle managers become profit-oriented.
The availability of low-cost easy-to-implement micro-based ERP systems has enabled and accelerated the movement to downsize. Compared to mainframe centralized applications, they can be implemented faster and at less cost. Less MIS expertise is required for system administration, and end-user decision support tools (such as spreadsheets and report-writers) make users less dependent on MIS staff for customizations. In particular, an autonomous ERP system fosters the sense of "ownership" within plant management. It facilitates the ability to tailor the application to local operational requirements and management style, while enforcing consistent corporate procedures via a standardized ERP package.
Operations management typically drives the decision to decentralize and downsize the ERP systems. It gives them greater control of the tools to plan and control their business. In many cases, they have experienced difficulties in implementing a centralized ERP application, and inadequate support from a corporate MIS function. They also question the costs (or allocations) of corporate MIS services and consulting assistance.
Stand-alone ERP applications work best in autonomous manufacturing sites, which typically require minimum coordination between sites. The minimum coordination typically reflects periodic updates of the corporate general ledger using the plant's consolidated general ledger data. Stand-alone ERP applications can be easily deployed at remote sites of larger firms, such as an off-shore manufacturing plant. A stand-alone ERP application facilitates the acquisition and divestiture of an autonomous site, since the system and site stay together. With a centralized ERP system, a newly acquired unit must convert from an existing information system to a system that meets central specifications. Divesting a business unit may change the overhead allocations and pricing for services from the central ERP system.
The degree of coordination between business units affects the ability to decentralize and downsize the ERP applications. For example, a centralized ERP application is typically required for a firm that takes sales orders for shipment from multiple distribution sites, with replenishment from multiple plants.
A Swedish consumer products company involved in appliances has over 100 plants around the world. Each plant operates as an autonomous business unit with its own ERP system. It was especially critical that the ERP software vendor had language translations and local support for the 15 languages (and 25 countries) encompassed by the multi-site operations.
A large US-based transportation equipment manufacturer established several overseas plants in China. The US corporate plant supplied components to the overseas plants, which operated as autonomous business units to manufacture and sell products to Chinese markets. As each site was established, a fully-configured ERP system (hardware and software) was shipped from the corporate office. The database and associated procedures had already been prepared by the local management team during training sessions at the corporate offices. The management and ERP system were ready to run each remote plant on the first day of operation.
An ERP system provides the foundation for many electronic business applications, termed e-business or e-commerce applications. E-business applications differ slightly between business-to-business and business-to-consumer relationships.
- Business-to-consumer (termed B2C) relationships do not generally involve negotiation and collaboration. One example involves an on-line catalog of standard products, or custom products with predefined options, with fixed prices. Orders are often placed by one-time customers, with payment by credit card.
- Business-to-business (termed B2B) relationships generally involve negotiation and collaboration, covering issues such as product specifications, delivery and price. One example involves an electronic marketplace or trading exchange, where a web site enables companies to buy and sell from each other using a common technology platform.
Collaboration in a business-to-business relationship (sometimes termed c-commerce) can be carried out within a framework that integrates the firms' business processes and manages knowledge across organizational boundaries. Collaborative product development, for example, may involve multiple trading partners providing components. Work-flow capabilities—with access to technical documents/drawings and electronic signoff procedures—can facilitate this collaboration. E-business applications represent 24/7 availability for customers and suppliers, and reduced personnel requirements for handling inquiries and coordination. On the customer side, for example, customers can place orders and check status at any time of day without waiting for normal business hours or availability of customer services personnel.
EDI standards have been developed for US markets in various industries, such as automotive and retail industries. Other standards apply in European and Asian markets. The core concept is that basic transactions in supply chain activities can be replaced by electronic communication. Some of the basis transactions, shown in Figure 2-5, include releases for shipment and shipping schedules (from the customer) that represent demands, and advanced ship notices upon shipment to customers. Each transaction has been identified by an ANSI identifier, such as the 856 transaction for an advanced ship notice transaction.
Figure 2-5 Supply Chain EDI: Basic Transactions for Scheduling & Delivery
An EDI transaction requires a mapping between the standard transaction format and the transaction format in an ERP system. The vendor schedule in one ERP system, for example, can be generated as standard EDI transactions and subsequently translated into a customer shipping schedule in a second ERP system. The standard EDI transaction format provides a bridge between two different ERP systems.
E-business can facilitate collaboration between the customer and sales (or the sales channel). This step in sales order processing—termed "configure order"—often precedes the actual sales order. It can be structured around the key constructs in an ERP system, such as quotations and sales orders. It can support attachments to the quote/order, such as text or other objects, which flow through to an ERP system for specifying customer requirements. The customer can obtain quotes and enter sales orders directly, typically via the "shopping cart" analogy. To load their shopping cart, a user can directly identify items, select from catalogs, select from user-defined templates or previous orders, or use "expert assistance" to guide them to the correct product. The system provides availability and pricing information, and access to product pictures, specifications and other descriptive information. The system may identify previous purchases, and suggest related purchases (for up-selling and cross-selling purposes). The user can save the cart (with a user-specified description) for subsequent use.
A custom product can also be configured without personal assistance. A rules-based configurator can prompt the user through a decision-tree of questions, and provides pricing information based on responses. The configuration can be saved as an item in the shopping cart, and revised as needed.
Each item in a shopping cart represents a line item on a quote, and the "check out" process converts the cart contents to sales order line items. The "check out" process enforces credit management policies and payment methods, such as credit card processing. The system prompts established customers for ship-to and bill-to information, and gathers additional information to process orders from "guest" or new customers. Confirmations can be sent via e-mail about the quotations, sales orders and shipments.
A customer can verify his or her order and account status without requiring assistance from customer service personnel. Order status typically identifies the quotes and unshipped orders and enables the user to change information. Linkages to carrier web sites can augment shipment information for the specified tracking number.
Request for Quotes and Electronic Marketplaces
E-business enables a manufacturer to electronically communicate requests for quotes to suppliers, and to obtain and store the responses. An electronic marketplace or trading exchange provides a one solution approach. A "buyer" firm can publish product requirements and demand schedules, request quotes from "supplier" firms, and then review the bids and select the supplier.
An electronic marketplace can facilitate more than just requests for quotes. It may offer additional services—such as logistic/transportation services and payment services—to help complete a transaction. It may support community activities, like distributing industry news, sponsoring on-line discussions, and providing research information about the industry.
No comments:
Post a Comment