Fundamentals of Supply Chain Solutions with SAP
Enterprise Resource Planning (ERP) Enterprise Resource Planning (ERP) is a framework for organizing, defining, and standardizing the business processes necessary to effectively plan and control an organization so the organization can use its internal knowledge to seek external advantage. The ERP system is a set of software applications that organize, define and standardize the business processes necessary to effectively plan and control an organization. Essentially, ERP applications are a computer model of a business, embodying the products and processes, information flow, procedures, and relationships between functions and activities. A set of planning applications can provide recommendations for what must be accomplished in order to meet the forecasted demand and keep the business functioning smoothly. Planning is at the core of ERP and is embodied in a top-down hierarchy of functions: master planning, detailed material and resource planning, and execution, such as production control and purchasing. Master planning is the executive level function that sets the operational business plan, supports the sales and operations planning (S&OP) process. Detailed material planning (Material Requirements Planning or MRP) uses bill of material and inventory information to develop a complete manufacturing and purchasing plan for all products, assemblies, components and materials. At this level capacity requirement planning (CRP) ties the production plan to resource availability, creating work center capacity and loading. Clustered around the planning core functions, additional software modules provide support for executing the plan (production control, purchasing), gathering information for tracking status and feedback to planning (closed loop) and for accounting and control. Additional modules help manage customer orders and fulfillment, forecasting, costing (often integrated within the execution functions), master data (bills of material and routings), finance (accounts payable and receivable, payroll, general ledger, financial reporting and analysis), quality, shop-floor data collection, and more.
ERP must be built on a single, comprehensive database management system. Data analysis and reporting tools are also an essential part of the system, allowing full exploitation of the broad range of information that the system will manage. Another essential technology characteristic is Internet connectivity and e-business links for e-commerce and customer service, supplier relationship management, and collaboration. Modern systems employ thin-client, highly graphical, tailorable role-based user interface with simple connections to and from Microsoft Office applications (Excel, Word) and e-mail. ERP systems are available on a variety of hardware platforms and operating system environments including cloud-based Software-as-a-Service (SaaS) Subscription alternatives (www.aptean.com). The ERP system offers a wide range of advantages for its users, such as complete visibility into all the important processes across various departments of an organization, especially for senior management personnel, this visibility enables better and faster collaboration across all the departments; and an automatic and coherent workflow from one department or function to another department or function to ensure smooth transition and completion of processes. The ERP also provides a unified and single reporting system to analyze the statistics, numbers or status in real time across all the functions or departments. Since the same software is used across all departments, there is no need for individual departments to buy and maintain their own software systems; therefore the operation costs are reduced. The ERP is a modular software system that allows the implementation of a few modules or many modules based on the requirements and goals of an organization. If more modules are implemented, the integration between various departments might be better. The organization might choose from various modules, such as Finance / Controlling, Human Resource Management, Manufacturing, Marketing / Sales, Supply Chain / Warehouse Management, CRM or Project Management. Also, the advanced e-commerce integration is possible with the ERP systems that can handle web-based order tracking processing, or the bar-code reader software could be integrated with the ERP through Application Programming Interface (API). The single Database is implemented on the back-end to store all the information required by the ERP system and that enables centralized storage and back up of all organization’s data. This feature allows all members of the organization to work with the same data that is always updated. The ERP systems are more secure as centralized security policies can be applied to them and all transactions can be traced; and efficient in order tracking, inventory tracking, revenue tracking, sales forecasting and related activities. The ERP systems are simply a benefit for managing globally dispersed enterprise companies. Certain ERP vendors can extend their ERP systems to provide Business Intelligence functionalities as well (www.excitingip.com). Enterprise Resource Planning (ERP) is an enterprise-wide information system designed to coordinate all the resources, information, and activities needed to complete business processes such as order fulfillment or billing. ERP system supports most of the business system that maintains in a single database the data needed for a variety of business functions such as Manufacturing, Supply Chain Management, Financials, Projects, Human Resources and Customer Relationship Management. An ERP system is based on a common database and a modular software design. The common database can allow every department of a business to store and retrieve information in real-time. The information should be reliable, accessible, and easily shared. The modular software design should mean a business can select the modules they need, mix and match modules from different vendors, and add new modules of their own to improve business performance. Supply Chain Management (SCM) and Customer Relationship Management (CRM) are two other categories of enterprise software that are widely implemented in corporations and non-profit organizations. While the primary goal of ERP is to improve and streamline internal business processes, CRM attempts to enhance the relationship with customers and SCM aims to facilitate the collaboration between the organization, its suppliers, the manufacturers, the distributors and the partners. The boundary of an ERP system is usually limited to the boundary of the organization that implements the ERP system. In contrast, the boundary of supply chain systems and ecommerce systems extends to the organization's suppliers, distributors, partners and customers. In practice, however, many ERP implementations involve the integration of ERP with external information systems. There is a positive and significant relationship between ERP system (integration, material management, production planning, and controlling), and SCM performance. The successful implementation and the effective usage of ERP system can contribute toward enhancing supply chain management performance in many ways such as, integration of internal business processes, enhancement of information flow among different departments inside the company, improvement of the company's relationships and collaboration with outsourcing suppliers, customers, and supply chain partners (www.erp.wiziontech.com).
The ERP system architecture comprises of three types: the one tier architecture, two tier architecture and three tier architecture. 1-Tier Architecture: all software packages like MS Access, MS Excel, QuickBooks, and Peachtree have the same in common - they access files directly. This means that the file you want to work with must be accessible from a local or shared drive. This is the simplest of all the architectures, but also the least secure. Since users have direct access to the files, they could accidentally move, modify, or even worse, delete the file by accident or on purpose. There is also usually an issue when multiple users access the same file at the same time; in many cases only one can edit the file while others only have read-only access. So 1-tier architecture is simple and cheap, but usually unsecured and data can easily be lost if the user is not careful. 2-Tier Architecture: this architecture is also called Client-Server architecture because of the two components: the client that runs the application and the server that handles the database back-end. When the client starts the program, it establishes a connection to the server and communicates as needed with the server. The client computer usually cannot see the database directly and can only access the data by starting the client. This means that the data on the server is much more secure. Now users are unable to change or delete data unless they have specific user rights to do so. The client-server solution also allows multiple users to access the database at the same time as long as they are accessing data in different parts of the database. One other benefit is that the server is processing data that allows the client to work on the presentation and business logic only. This means that the client and the server are sharing the workload and by scaling the server to be more powerful than the client; therefore more users are able to work on the system at the same time (http://blog.simcrest.com). 3-Tier Architecture: the ERP application is designed as a web-based and server-side application that is partitioned in terms of application logic into three-tiers or layers. Each layer has a different responsibility in the overall deployment, and within each layer, there can be one or more components. The layer partitioning is as follows: Presentation Tier contains components dealing with user interfaces and user interaction. The presentation layer of the web-based deployment could use HTML pages, Java Server Pages, and/or Java Applets. Middle Tier is composed of the Web Tier – JSP and Business Tier. The Web-Tier is the web server part that includes the web container and other protocols by the J2EE specifications. In the web container, servlets, JSP pages, filters, and web event listeners execute and may respond to HTTP requests from web clients. They may also be used to generate XML or other format data that is consumed by other application components. The Business Tier contains Enterprise Java Beans (EJB) components that encapsulate business logic into server side and work together to solve the business problems. The ERP application is implemented as a set of business-logic-controlling EJB components that have been configured in application-specific ways inside an EJB container such as an application server. Clients are written to communicate with the EJB components and handle the results. Application Layer consists of one or more application servers, each application server contains a set of services used to run the ECC System; however, not all application servers will provide the full range of services. Data Tier is represented by the database system that storages all the business data. It contains the master data and transaction data from all business applications, and all data for the entire ECC System; the control and customizing data that determine how the ECC System runs; and the program code for applications. Further, applications consist of program code, screen definitions, menus, function modules, and various other components. It is accessible from web components, enterprise beans, and application client components through the JDBC API. The advantage to partition the application into these logical layers is to isolate each tier. Thus, it should be possible to change the Presentation Tier while minimizing impacts on the business logic in the Application Tier or Data Tier. As more users access the system a three-tier solution is more scalable than the other solutions because of the possibility to add as many middle tiers (running on each own server) as needed to ensure the best performance (N-tier or multiple-tier). Software components of ECC System can be distributed in almost any configuration across various hosts, it is particularly valuable in the application layer. Security is also the best in the three-tier architecture because the middle layer protects the database tier. However, there is one major drawback to the N-tier architecture, the additional tiers increase the complexity and cost of the installation (Stefan Dumbrava, Doru Panescu and Mihaela Costin, 2005).
The rapidly changing technologies and short lifecycle of corporate strategies present some challenges for the IT systems. The high cost of modification, the design for efficiency, not reuse, and heterogeneous IT systems consequently put constraints on a company’s ability to adapt quickly to new environment and compete successfully in the ever evolving business environment. The solution to this problem is Business Intelligence (BI).
Business intelligence (BI) is a set of theories, methodologies, processes, architectures, and technologies that transform raw data into meaningful and useful information for business purposes. BI can handle large amounts of information to help identify and develop new opportunities. Making use of new opportunities and implementing an effective strategy can provide a competitive market advantage and long-term stability. BI technologies provide historical, current and predictive views of business operations. Common functions of business intelligence technologies are reporting, online analytical processing, analytics, data mining, process mining, complex event processing, business performance management, benchmarking, text mining, predictive analytics and prescriptive analytics.
Though the term business intelligence is sometimes a synonym for competitive intelligence (because they both support decision making), BI uses technologies, processes, and applications to analyze mostly internal, structured data and business processes while competitive intelligence gathers, analyzes and disseminates information with a topical focus on company competitors. If understood broadly, business intelligence can include the subset of competitive intelligence. Other business intelligence trends include the Service Oriented Architecture (SOA), cloud computing and Software-as-a-Service (SaaS) (http://en.wikipedia.org/wiki/Business_intelligence).
The Service Oriented Architecture (SOA) is the underlying structure supporting communications between services. A SOA solution consists of a composite set of business services that realize an end-to-end business process across heterogeneous IT systems in alignment with strategy, separating business functions into subroutines/methods; subroutines can exist in any machine.
Cloud computing, a new paradigm of distributed computing, introduces many new ideas, concepts, principals, technologies and architectural styles into enterprise service-oriented computing. The enterprise service-oriented architecture (ESOA) style is an abstraction of concrete enterprise service-orientated architectures, which includes SOA architectural elements, service design patterns as well as principles, and SOA quality attributes. It can be extended to a new style for realizing enterprise cloud computing. Meanwhile, the principles and style of enterprise service-oriented computing facilitate the enterprise-wide adoption of cloud computing. The style is described by extending enterprise service-oriented formula for ESOA and modeled through specifying each element in the formula with both service-oriented and cloud architectural styles (Longji Tang, Jing Dong, Yajing Zhao, Liang-Jie Zhang, 2010).
One of the SOA solutions is the SAP Enterprise Service Architecture (ESA). SAP enables businesses to adopt SOA as part of their implementation of SAP solutions. At the heart of SAP's open-standards approach to SOA is the concept of enterprise services - highly integrated Web services, architected with business logic and harmonized semantics that can be accessed and used repeatedly to enable end-to-end business processes. Enterprise SOA is enabled by the SAP NetWeaver platform, and builds on the benefits of Web services. SAP has positioned Enterprise SOA to deliver the benefits offered by service-oriented architecture, including enabling both flexibility and business efficiency. Enterprise SOA provides companies with a cost-effective blueprint for composing innovative new applications by extending existing systems, while maintaining a level of flexibility that makes future process changes cost-effective (http://scn.sap.com/community/soa?original_fqdn=esc.sap.com). SAP ERP is the proven foundation for business excellence and innovation. SAP ERP builds on that foundation with superior functionality and greater ease of use. SAP ERP delivers enhanced capabilities for finance, human capital management, sales, procurement, and other key enterprise functions. The application lets the users work more quickly and cost-effectively – connecting them directly to business processes and delivering the information and capabilities they need to make decisions and take action. It also enables the organization to innovate and adapt to the changing requirements of its industry – at lower cost and with greater speed.