Supply Chain Management (SCM) and its enabling information systems seem to be the "catch-all" for just about every process in a manufacturing and distribution business. In an attempt to better define SCM applications, we can segregate this space into two categories representing the planning and execution components. The planning component is dominated by Enterprise Resource Planning (ERP) and Advanced Planning systems that do not adequately address the complex requirements of order fulfillment execution. Consequently, a unique grouping of integrated software applications have emerged that address the needs of the SCM execution component. These systems are referred to as Supply Chain Execution (SCE) systems.
This article is part I in a three part series on SCE systems. Part I explains SCE system functions and benefits. Part II steps through one company. s SCE system decision process and Part III details the system implementation results of that company.
SCE systems focus on automating the processes and associated transactions within the order fulfillment cycle. These processes include:
- order/distribution management (OM/DM)
- warehouse management (WM)
- production execution (PE)
- transportation management (TM)
Standalone software applications have been used to automate these processes for several years. SCE software provides the robust functionality of these best-of-breed, standalone applications with the added benefit of seamless integration.
Warehouse management has long been a powerful execution application for both manufacturers and distributors. Subsequently, several of the SCE system providers are emerging from the ranks of the Warehouse Management System (WMS) industry. Many of the WMS suppliers have taken the lead by positioning themselves to respond to SCM needs upstream and downstream of their traditional warehouse management roles.
The SCE system marketplace is in the early stages of growth. The WMS vendors targeting this opportunity are, in turn, in various stages of product development. Their development is being completed through a combination of in-house software development and software product acquisition.
The SCE system suppliers do not all share the same market strategy. Strategies generally vary based on the supplier. s perception of what their target industries "want" and "need". As a result, the suppliers. existing and planned SCE system offerings differ.
The suppliers are positioning their software applications to fill the needs of manufacturers and/or distributors. Most manufacturing companies use ERP or supply chain planning tools to run their business. These systems provide order management software that may eliminate the need to look to a SCE system for this functionality. In such cases, a manufacturer would benefit from the PE, WM, and TM applications. Conversely, a pure distribution company has little need for manufacturing software and would be looking to a SCE system for order management. In these cases, a distribution company would benefit from the OM, WM, and TM applications.
Distribution and third party logistics companies performing value added services could benefit from the PE application as well.
Integrated systems simplify the timely sharing of information between applications. They provide companies the luxury of phased and non-phased software implementation without the burden of interface development, multiple hardware platforms, and multiple software/database systems. The benefits and features of SCE systems that are least understood yet most beneficial, are those associated with integrated WM and PE systems.
Traditional WM focuses on storage of finished goods and distribution of customer orders. Some WMS. s can handle picking and staging of raw materials and work-in-process (WIP) while others can be adapted to receive new inventory from production operations. In both cases, the WMS is being extended beyond its intended design. Subsequently, gaps in the order fulfillment process are exposed and inventory accuracy, customer service, order cycle time, and labor benefits promised by WMS can only be partially realized. SCE systems employing integrated WM and PE fill this gap, amplifying system benefits exponentially.
Integrated WM/PE extends the benefits of traditional WM by tracking, managing and automating the order fulfillment process for both customer orders and production orders. As with traditional WM, these systems need to receive, produce, and ship orders independent of host system availability. Integrated WM/PE systems accomplish this by providing mission critical manufacturing-type functionality required to "keep the orders moving". This functionality, in addition to the robust functionality of traditional WM, includes:
- production order execution planning
- soft and hard allocate raw materials and WIP
- pick and stage materials for production processes
- activate and close production orders
- generate, assign, and track lot numbers
- complete production "issue" transaction for inventory against a production order
- direct allocate inventory from active production order to active customer order
- complete production "receipt" transaction for inventory against a production order
- crossdock new production to another production order or customer order
- theoretical consumption of ingredients and packaging materials
- theoretical production of empty containers
- paperless, real time operations enabled by bar coding and radio frequency (RF) technology
Try doing that with a traditional WMS package!
Integrated WM/PE benefits are not limited to application functionality. Manufacturers typically develop custom software or purchase standalone applications to address their PE needs. If the manufacturer has implemented or intends to implement a WMS, they will be required to develop custom interfaces between the two systems and install separate bar code equipment and RF networks for each system. The cost and complexity associated with these efforts often results in standalone WM and PE systems that increase system-operating costs and minimize system benefits.
Integrated WM/PE Infrastructure Benefits
Integrated WM/PE is not limited to manufacturing companies. Pure distribution companies performing value added processes can benefit from the production (value added process) order, automated data collection, and real time information flow of WM/PE systems. Next month we will explore the process that ConAgra/Gilroy Foods went through in designing, justifying, and selecting their integrated WM/PE system.
Ty Hansen is a Principal with Centek Associates; a Seattle based consultant and integrator of supply chain execution systems. He has been designing and implementing warehouse management and production execution systems for the past 10 years. Ty can be reached at 425-413-1090 or tyhansen@gte.net.