ERP AND SCM SYSTEMS

INTEGRATION: THE CASE OF

A VALVE MANUFACTURER IN
CHINA
Presented by
Abhinav Sirohi (05)
Ankit Raj (30)
Apoorva Garg (39)
Kanik Maheshwari (80)
Presentation Flow
Introduction and
the need of
integration
Case
Methodology
Background of
the company
Problems
with ERP
systems
and e-SCM
systems
Implementation
and Conclusion
Limitations of ERP
ERP systems are primarily built on transactions-based
systems.
ERP captures and processes necessary data and assists
functions such as sales and services, procurement and
logistics execution, product development and
manufacturing, etc
Crossing organizational boundaries
Lack of exibility in dealing with ever-changing
requirements
dearth of functionalities that focus on managing
transactions
Benefits of SCM systems
SCM provides additional layers of decision support both
within and beyond organizational boundaries
SCM provides visibility, planning, collaboration, and
control across and beyond the enterprise.
SCM systems consider all constraints simultaneously and
develop a higher quality plan relatively quickly
To provide higher business
value ..
ERP
SCM
System
Key considerations in enterprise
systems implementations
Top management
support
project management
team competence
interdepartmental
cooperation and
communication
clear goals and
objectives
vendor support
careful package
selection
data analysis and
conversion
dedicated resources
user training-
education on new
business processes
business process re-
engineering
minimal
customization
change management
Internal and external
integration through
consolidation of
system instances
standardization of
data and process
denitions
process ow
improvement to t
with the system and
business needs
addition of analytical
capabilities transform
robust data access to
useful business
knowledge
Consideration of
social, cultural, and
organizational
aspects
Strategies and
sequences for
realigning business
processes
use of quality
management
programs
Emergence of right
strategic plans
overcoming power
struggle and politics
Software suitability,
appropriate system
integration strategy
and technology
information quality

The Case -
Newaya major manufacturing
organization in China
Basis of Case Study

Motivation
Overcome limitation of ERP and legacy systems
Leverage complementary nature of ERP and SCM Systems.
Meet Strategic Objectives.
Execution
Procurement and use of hardware and software, and human resources
Requirements for efficient project management
Adaptive emphasis during implementation.
Challenges
Organizational and business process oriented.
Technical
China Specific
Impact
Standardization of processes
Holistic Integration
Competitive advantage
The research questions studied
in the case study
Why was the organization prompted to integrate the
ERP and the SCM systems?
How was the integration project managed and what
resources were required to manage it?
What challenges and obstacles were faced by the
organization and how were they solved?
What changes were required to the existing processes
due to integration?
Neways original ERP system
Neways existing ERP system was implemented by Summiteam, a local ERP systems provider.
The system consisted of four major subsystems that paralleled the set of functions in ERP
systems today.
Sales and distribution
This supported customer management, order management, order fulllment, and distributor
management. It gave users access to aggregated operational data from all sources, and helped
them complete their sales cycle from price quotation to invoicing and payment.
Manufacturing
This supported planning and scheduling, inventory management, and manufacturing control.
It included quality management, asset/equipment maintenance management, inventory
management, and production planning management.
Human resource
This supported staff, payroll, time, and organizational management, performance evaluation of
staff members, and career planning management
Accounting and nancial analysis
This supported accounting, financial control, and financial analysis. It integrated all business
performance data and provided comprehensive and systematic financial reports
Process flow at Neway
Problems with the original ERP system and existing business
practices
Data were outdated and inaccurate.
Materials in the warehouse would be damaged and missing and this would
not be recorded on time, resulting in poor customer satisfaction when
manufacturing activity stopped due to lack of materials.
Workers picked materials based on their experience and new workers took
several weeks to learn this.
Pickers could not ensure proper rotation of the inventory and work-in-
process inventory was not always recorded.
Products were put away with incorrect or missing labels.
Paper printing, paper delivery, and paper accumulation consumed resources,
increased the cost of production, and caused delays. Lost or damaged
documents resulted in incorrect recording.
As there was no accurate measurement of labor productivity, supervisors
were not able to provide feedback or rewards to workers as activities were
completed.
Neway did not have standard procedures to evaluate vendors, and to add or
drop them as needed.
Neway implemented the e-SCM system from the vendor Wmsvision.
Neways e-SCM system
Schematic representation of e-SCM
The e-SCM system obtains up-to-date planning
information from the ERP system and generates
operational details that are returned to the ERP system
It allocates tasks to unoccupied workers based on required
completion times. Then it instructs workers to finish
assigned tasks through radio frequency handheld devices
that have wireless connections via a local area network
As soon as a task is finished, relevant feedback
information is sent to the ERP system in XML. The workers
use handheld devices to collect accurate inventory
information in real time, eliminating paper work.
Receiving and storing materials, etc.
When materials are received the system fills
outstanding purchase orders and prints inspection
labels for each receiving activity
The materials are inspected and the system auto-prints
inspection result labels and attach them to packages of
materials
the system determines the best locations for the
materials and selects idle workers to store the packages
Warehouse Management
It involves two key operationscycle count and
inventory adjustment.
If the cycle count results in discrepancies, then the e-
SCM system sends notifications to the ERP system.
Picking and shipping
As soon as picking tickets are released, the system
modifies the inventory data.
It calculates the number and size of containers for
shipping operations and instructs pickers which
containers to select for picking and which order to
send in each container.
Order management
The e-SCM system generates inbound orders
based on purchase orders and outbound orders
based on either production or customer orders.
These orders are automatically released.
Implementation and integration of
the e-SCM system
Infrastructure
Management
Hardware - The e-SCM system and ERP systems were housed on different servers which were
networked with three PCs, three printers, a wireless access point, and two switches.
Software - three main software components were the ERP system from Summiteam, the e-SCM
system from Wmsvision, and the Oracle 8i database management system.
Human
Resource
Management
A six member project team led by the project manager who reported to the vice general
manager who provided boundary coordination between the three teams
Summiteam had a three member team responsible for developing the new XML interface for the
ERP system
Wmsvision team had 7 member including the leader who was the project manager
Financial
Resources
Management
Cost Breakup for entire project -
one-time license fee = US $15,000
Annual maintenance fee = US $3000
Cost of new hardware = US $35,725
Customization of the ERP system = US $6000
Implementation of the project = US $30,000
Additional expenses = US $1500
Total Budget = US $92,000
Project management
Defined the scope of the project, focusing on key issues in inventory
tracking, order management, and resource allocation.
Initial requirements analysis, agreements among project partners,
including timelines and staffing, IT infrastructure, human resources,
budgeting and financing, and transition and maintenance planning
Initial Planning
Issues encountered were prioritized and discussed by representatives
from all groups every other day
The three project managers met every week to evaluate progress and
take corrective actions as needed.
Weekly status update was reported to vice general manager. In case
of conflict, he used to provide necessary support.
Progress
monitoring
and control
Thorough testing was done in 3 phases unit testing , integration
testing and finally beta testing
Training was provided to take over responsibilities of running the
systems.
The system was incrementally backed up every 5 min and a full
backup was performed every night.
Transition and
maintenance
planning
Challenges and solutions of the
e-SCM system implementation
Conclusion
The e-SCM changed many basic processes at Neways manufacturing
facilities and was able to provide benefits such as real time inventory
information update, better picking activities, and establishment of effective
collaboration with vendors and customers.
Benefits in operational measures about 6
weeks after the integration of the systems.
The implementation also provided direct cost
savings for Neway, enabling them to reduce
lost sales by about US $20,000 per year.

Equally, reduction in raw inventory by 15 days
resulted in a cost reduction of approximately
US $1 million per year and by reducing the
monthly purchase frequency from 50 to 10, the
e-SCM system produced a savings of US $4800
per year. Thus the project resulted in a high
return on investment.
Conclusion Contd
As it did not possess enough in-house expertise, therefore it employed Wmsvision, which
had a Chinese speaking implementation team to provide a customized e-SCM system.

Team members agreed to adopt XML as the standard for data exchange between the ERP
and e-SCM systems. This was partially due to available expertise among team members and
the ability of the ERP system to handle XML files.

The focus on a paperless environment reduced individual order entry errors, and the
adoption of handheld devices and technology introduced in a gentle manner among the
factory workers

At the initial stages of the project the team members had to determine their shortcomings
and remedy them quickly. They even had to identify associates with proven expertise in a
particular area (e.g., XML) to lead the implementation for that particular topic.

Senior Management active involvement helped solve various organizational issues, and
enabled the project to remain on time.

Finally, the use of a simulation system for training users allowed them to obtain practice with
the new system before it was deployed.