MODUL PERKULIAHAN
ENTERPRISE RESOURCE PLANNING
POKOK BAHASAN :
SUPPLY CHAIN MANAGEMENT INFORMATION SYSTEM
Fakultas
Program Studi
E-Learning
Pasca Sarjana
Magister
Teknik Industri
10
Abstract
2
Disusun Oleh
53001
Dr.Eng Bonivasius P.I
Kompetensi
Modul ten explain about concept of
Supply Chain which consist of
supplier, manufacturer and customer.
The relation of SC Management and
ERP is also described in this modul.
2016
Kode MK
-
Understand the links in the
supply chain from raw materials
to the retail customer.
-
Recognize the interrelationship
among business processes
supporting sales and marketing,
production and material
manajemen, accounting and
finance and human resources.
ERP
Pusat Bahan Ajar dan eLearning
Dr.Eng Bonivasius P.I
http://www.mercubuana.ac.id
INTRODUCTION
In previous modul, you learned that Enterprise Resource Planning (ERP) has its roots in
materials requirements planning (MRP) processes and software. Materials requirements
planning, and the extension of that process to partners in the supply chain, are important parts
of today’s ERP systems. In fact, effective supply chain management is critical to the success of
companies such as Fitter Snacker. We will explore some supply chain management functions
in an ERP system. We will also we will look at the broader concept of supply chain
management.
We looked at Fitter’s sales order process, and we assumed that Fitter had enough snack
bars in its warehouse to fill a typical order. Like most un-integrated manufacturing operations,
however, Fitter often has problems scheduling production. Consequently, sometimes its
warehouse is not adequately stocked, and customer orders cannot be filled in a timely fashion—
leading to customer dissatisfaction and lost sales. In this chapter, you will explore Fitter’s supply
chain management problems and learn how ERP can help solve them.
ERP AND SUPPLIER
Fitter is part of a supply chain that starts with farmers growing oats and wheat and ends
with a customer buying an NRG bar from a retail store. Previously, companies used competitive
bidding to achieve low prices from suppliers, which frequently led to an adversarial relationship
between suppliers and their customers. In recent years, more companies have begun to realize
that they are part of a supply chain, and if the supply chain is more efficient, all participants in
the chain can benefit. Collaboration can frequently achieve more than competition, and ERP
systems can play a key role in collaborative planning.
Working with suppliers in a collaborative fashion requires trust among all parties. A
company opens its records to its suppliers, and suppliers can read certain company data
because of common data formats. Working with suppliers in this way cuts down on paperwork
and response times. Reductions in paperwork, savings in time, and other efficiency
improvements translate into cost savings for the company and the suppliers. ERP lets
companies and suppliers share information (sales, inventory, production plans, and so on) in
real time throughout the supply chain. This allows all parties to eliminate from the supply chain
costs that do not add value to the product (such as inventory, overtime, changeovers, and
spoilage), while simultaneously improving customer service.
2016
2
ERP
Pusat Bahan Ajar dan eLearning
Dr.Eng Bonivasius P.I
http://www.mercubuana.ac.id
THE TRADITIONAL SUPPLY CHAIN
The term supply chain describes all the activities that occur between the growing or
mining of raw materials and the appearance of finished products on the store shelf. The supply
chain for Fitter’s NRG bars starts with farmers growing oats and wheat, and it ends with a
customer buying a bar from a retail store. In a traditional supply chain, information is passed
through the supply chain reactively, as participants change their product orders— as illustrated
in Figure 10-1.
Figure 10.1 SCM: From Supplier to Customer
For example, a retailer sees an increase in the sales of Fitter’s bars and orders a larger
quantity of bars from the wholesaler. If a number of retailers increase their orders, the
wholesaler will increase its orders from Fitter. When Fitter gets larger orders from wholesalers, it
must increase production to meet the increased demand. To increase production, Fitter will
order more raw materials from suppliers. Because of the time lags inherent in a traditional
supply chain, it might take weeks— or even months—for information about Fitter’s increased
need for raw materials to reach Fitter’s suppliers. Raw material suppliers might require time to
increase their production to meet Fitter’s larger orders, resulting in temporary shortages for the
supplier. And unusual events such as the “Oprah effect” (where a product is endorsed by a
famous name and causes a huge upsurge in demand) can also result in shortages. For
example, the Amazon Kindle quickly sold out after the famous talk-show host Oprah Winfrey
claimed it was one of her favorite items. By contrast, if the participants in the supply chain are
2016
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part of an integrated process, information about the increased customer demand can be passed
quickly through the supply chain, so each link in the chain can react quickly to the change.
The development of supply chain strategies does not necessarily require an ERP
system. Before ERP systems were available, companies could be linked with customers and
suppliers through electronic data interchange (EDI) systems. Recall from previous modul that
EDI is the computer-to-computer exchange of standard business documents (such as purchase
orders) between two companies. A well-developed ERP system, however, can facilitate supply
chain management because the needed production planning and purchasing systems are
already in place. In addition, the integration of accounting data in the ERP system (described in
the next chapter) allows management to evaluate changes in the market and make decisions
about how those changes should affect the production plan. With an ERP system, sharing
production plans along the supply chain can occur in real time. Using the Internet can make this
communication even faster and cheaper than using private EDI networks.
THE SUPPLY CHAIN SYSTEM FRAMEWORK
Given the wide realm of information we have discussed, it is important to develop a
framework that helps a manager understand how this information is utilized by the various
segments of IT within the supply chain. Our vision of this framework is presented in the next
several sections of this chapter. It is important to note that the use of information in the supply
chain has increasingly been enabled by enterprise software. Enterprise software collects
transaction data, analyzes these data to make decisions, and executes on these decisions both
within an enterprise and across a supply chain. Certainly other parts of IT beyond enterprise
software, such as hardware, implementation services, and support, are all crucial to making IT
effective. Within a supply chain, however, the different capabilities provided by IT have as their
most basic building block the capabilities of the supply chain's enterprise software. In many
ways, software shapes the entire industry of enterprise IT as the other components follow the
software lead. It is for this reason that we use enterprise software and its evolution as the
primary guide in analyzing IT and its impact on the supply chain. The evolution of enterprise
software provides insights not only into the future of IT, but also into what the key supply chain
processes are. We now discuss this evolution and its impact on companies' supply chain
processes.
The enterprise software landscape became increasingly overpopulated during the late
1990s. The unprecedented flow of venture capital into new software companies led not just to
an increase in the number of software companies, but also to the proliferation of entire
2016
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http://www.mercubuana.ac.id
categories of software. The growth of the number of software companies, the emergence of new
categories, and the expansion of software product lines combined to create an enterprise
software landscape that was not only much more crowded than in the past, but also much more
dynamic. It was an environment ripe for significant evolutionary change.
The downturn in technology spending in the early 2000s brought about this evolutionary
pressure, causing many software companies to cease operations or merge with existing
software firms. Some entire software categories are now extinct or close to it, with many
recently created categories landing on this endangered species list. What drives this evolution
of the enterprise software landscape? Why are some categories of software companies headed
for a profitable long-term future, whereas others have failed? Certainly there are a wide variety
of factors that affect the natural selection of software companies. We propose, however, that
three of the main drivers of the evolution taking place in enterprise software are the three major
groups of supply chain processes, which we call supply chain macro processes. The successful
categories of software will be those that focus on the macro processes. The failures, on the
other hand, will not have such a focus.
The emergence of supply chain management has broadened the scope across which
companies make decisions. This scope has expanded from trying to optimize performance
across the division, to the enterprise, and now to the entire supply chain. This broadening of
scope emphasizes the importance of including processes all along the supply chain when
making decisions. From an enterprise's perspective, all processes within its supply chain can be
categorized into three main areas: processes focused downstream, processes focused
internally, and processes focused upstream.

Customer relationship management (CRM). Processes that focus on downstream
interactions between the enterprise and its customers.

Internal supply chain management (ISCM). Processes that focus on internal operations
within the enterprise. Note that the software industry commonly calls this "supply chain
management" (without the word "internal"), even though the focus is entirely within the
enterprise. In our definition, supply chain management includes all three macro
processes, CRM, ISCM, and SRM.

•Supplier relationship management (SRM). Processes that focus on upstream
interactions between the enterprise and its suppliers.
We must also note that there is a fourth important building block that provides the
foundation on which the macro processes rest. We call this category the transaction
management foundation (TMF), which includes basic ERP systems (and its components, such
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as financials and human resources), infrastructure software, and integration software. TMF
software is necessary for the three macro processes to function and to communicate with each
other. The relationship between the three macro processes and the transaction management
foundation can be seen in Figure 10-2.
Supplier Relationship Internal Supply Chain Customer Relationship
Management (SRM) Management (ISCM) Management (CRM)
Transaction Management Fundation (TMF)
Figure 10.2 The Macro Processes in SCM
ERP VS SCM
The most distinguishing characteristic of ERP systems is their comprehensiveness. R/3
broadly covers Sales and Distribution, Business Planning, Production Planning, Shop Floor
Control, and Logistics. On the surface, this would seem to cover anything that SCM claims to
provide. However, “the devil is in the details”. Therefore, it helps to review the relevant functions
of R/3 in detail, to be able to contrast to SCM software later. First, Sales and Distribution covers
order entry and delivery scheduling. This module also naturally checks on product availability to
ensure timely delivery, and checks the customer’s credit line. Business Planning consists of
demand forecasting, planning of product production and capacity, and the detailed routing
information that describes where (in which work cells) and in what sequence the product is
actually made.
The capacity and production planning gets very complex, and simulation tools are
provided as part of R/3 that can help managers to decide how to overcome shortages in
materials, labor, or time. Once the Master Production Schedule is complete, that data is fed into
the MRP (Materials Requirements Planning) module. The MRP has three principle pieces of
output: An exception report, an MRP list, and order proposals. The exception report brings to
attention situations that need attention, such as late delivery of materials, and rescheduling
2016
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http://www.mercubuana.ac.id
proposals. The MRP list shows the details of shipments and receipts for each product and
component. Order proposals are used to order materials and issue production orders.
This naturally leads to Shop Floor Control. The planned orders from the MRP are
converted to production orders. This leads to production scheduling, dispatching, and job
costing. Finally, the Logistics system takes care of the rest, assuring timely delivery to the
customer. Logistics in this case consists of inventory and warehouse management, and
delivery. The purchasing function is also usually grouped under logistics. The overall process
summary looks like:
1) Sales & Forecasting Data
2) Production & Capacity Planning
3) Production Execution
4) Logistics
This functionality is representative of all the major ERP vendors, including SAP, Oracle, Baan,
and PeopleSoft. However, it also seems to be very close in functionality to SCM products such
as those from I2 and Manugistics. So what’s the difference?
The Manugistics web site (http://www.manugistics.com) has the following description of
supply chain management: “Effective supply chain management enables you to make informed
decisions along the entire supply chain, from acquiring raw materials to manufacturing products
to distributing finished goods to the consumer.” This sounds a lot like what R/3 does also. R/3
has detailed functionality to order needed materials, schedule and track the manufacture of
products, and to schedule and track distribution. So really, what’s the difference? The
description of I2’s Rhythm product line (found at http://www.i2.com) is slightly different:
“RHYTHM’s Supply Chain Planner provides advanced planning capabilities to leading
companies in many industries. RHYTHM plans and optimizes the supply chain as a continuous
and seamless activity that integrates all planning functions across the supply chain. RHYTHM
goes beyond traditional planning solutions like MRP (Manufacturing Resource Planning) and
DRP (Distribution Resource Planning) by simultaneously considering demand, capacity and
material constraints.” This provides a better idea of the chief differences between ERP and SCM
systems.
According to a July 1997 study by Gartner Group, “Through 1999, enterprises with multiechelon distribution networks that have aggregation, disaggregation, balancing or echelonskipping requirements within the distribution network will need to augment their existing ERP
applications with advanced SCP functionality or risk incurring distributions costs that are at least
10 percent higher due to expediting, low order fill rates and inventory imbalances.” The study
2016
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Pusat Bahan Ajar dan eLearning
Dr.Eng Bonivasius P.I
http://www.mercubuana.ac.id
goes on to say that this is caused by the static sourcing tables used in ERP systems. While
ERP systems provide a great deal of planning capabilities, the various material, capacity, and
demand constraints are all considered separately, in relative isolation of each other. The more
leading edge SCM products are able to consider all the relevant constraints simultaneously, and
to perform real-time simulations of adjustments in the constraints. ERP systems have a harder
time adding this more dynamic functionality because they are chiefly concerned with transaction
processing, and also have many more jobs to do than just SCM. Getting answers from an
overloaded ERP systems may take hours, whereas getting them from a separate SCM system
may take minutes or seconds.
The leading SCM products generally have many other enhancements as compared to
the ERP packages. Many employ visible maps of the entire supply chain, showing where
problems are. Here is a description of Manugistics version: “Navigating your way through
mountains of supply chain information is made easier with Supply Chain Navigator's state-ofthe-art graphical user interface. This intuitive GUI gives you complete visibility into the innerworkings of the supply chain - through demand, supply, manufacturing scheduling, and
transportation - all at your fingertips.” Just recently, SAP has added similar functionality. But that
functionality is actually an SAP version of the SCM product made by I2, which SAP is selling as
a separate module. This is a relatively simplistic explanation of the key differences between the
ERP vendors’ SCM modules and the leading SCM-only products, but it hits the main points.
Now, since these products have many naturally overlapping features, how is data kept
consistent between them? I2 uses SAP’s ALE (Application Link Enabling) to exchange data
between R/3 and Rhythm (I2’s SCM product suite). Oracle and the other ERP vendors also
have APIs that I2 and other vendors can use common denominator middleware to interface to.
However, this means that each vendor has to change their middleware interface software quite
often, which is often a trial and error process, doesn’t usually perform well, and often turns into a
nightmare (see http://www.dbmsmag.com/9802d07.html). A newer, and possibly better solution
to this problem is SIS (Specialized Integration Software). This is software that is designed
specifically to allow ERP and other systems to share processes and data. This removes the
chore of developing an interface to every other vendor’s software. The major company in this
area is Cross Worlds Software Inc., although more are appearing. This software, which runs on
Windows NT, claims to work by simply pointing and clicking on a sending application (such as
SAP) and a receiving application (such as Manugistics) and then selecting the processes to link
together. No programming required. Sounds almost too good to be true, but it certainly should
make things easier for implementers.
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One other key development that should be noted is the rapid convergence that is
happening between ERP and SCM software. The ERP vendors have awakened, and are
rushing to add more sophisticated SCM functionality to their ERP products. And the SCM
vendors are also expanding their functionality, further encroaching on the area inhabited by the
ERP vendors. Although it seems that all the leading SCM vendors are partnered with the all the
leading ERP vendors, this is only a temporary relationship if SAP, Oracle, etc. have their way.
Following SAP’s example, Oracle also recently added a SCM module, and Baan and
PeopleSoft both have recently acquired smaller SCM vendors to integrate into future releases of
their ERP products. As the ERP vendors move heavily into the mid-size market with their new
supply-chain bolstered products, they should push a lot of the smaller SCM and ERP vendors
out of business. With the industry shakeout, implementations should become somewhat simpler
and thus shorter and less expensive, since there will be fewer products to integrate, and more
experienced implementers in job market.
REFERENCES

Monk, E.F and Wagner, B.J (2013). Concepts in Enterprise Resource Planning, 4th Ed,
Boston, MA: Thomson Learning

2016
Sumner, M (2014). Enterprise Resource Planning. Pearson Education, Inc.
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ERP
Pusat Bahan Ajar dan eLearning
Dr.Eng Bonivasius P.I
http://www.mercubuana.ac.id