Supply Chain Management w.r.t.

Oracle Applications
Posted by vaishali_iware in Blog Jan,15 No comments Supply Chain Management w.r.t. Oracle Applications. Oracle Supply Chain Management (SCM) basically integrates and automates all key supply chain activities starting from design, planning, and procurement to manufacturing and fulfillment. It depends upon how the company or Line managers planning to use these application module in there business line Lets understand first what supply chain management is all about.

Supply chain management (SCM) is a systematic approach to manage the seamless flow of information, materials, and services from raw material suppliers through factories and warehouses to the end customer.

Moreover, SCM involves seamless flow of material, information & finance in a network consisting of customers, suppliers, manufacturers, retailers and distributors.

Note: 1. supply chain is product specific, not company specific 2. This does not cover the financial flow with SCM.

You should be clear with Flow that SCM can manage :

The flow of actual materials, the top middle bars

From suppliers : flows of raw materials, intermediate products, finished goods Reverse material flows : returns, repairs, servicing, recycling, disposal From suppliers : manufacturing capacity, delivery schedules, promotions they have going to launch for specific timeframe. Reverse flows : sales, orders, inventory, quality, promotions From suppliers: Credits, consignment, payment terms, invoice Reverse Flows : payments, consignment

and the information flows

And finally, there are financial flows:

Supply Chain Management is the management of the entire value-added chain, from the supplier to manufacturer right through to the retailer and the final customer. SCM has three primary goals: Reduce inventory, increase the transaction speed by exchanging data in real-time, and increase sales by implementing customer requirements more efficiently The need for SCM is because effective Supply Chain Mgt. is the next logical step towards increased profits and market share. Supply Chain Management (SCM) in line manager prospective is lets-keep-things-moving-

efficiently. What is Oracles SCM Solution for Customer Oracle Supply Chain Management (SCM) basically integrates and automates all key supply chain activities starting from design, planning, and procurement to manufacturing and fulfillment. It depends upon how the company or Line managers planning to use these application module in there business line. For better understanding from Product point, lets understood on eight key areas as given in below figure

Here are the details with underline Product which is potentially used. 1. Design: SCM start with designing & developing new products where Product specifications are created. Few Important applications play major role in this phase.

Engineering & Bills of Materials 2. Market: Marketing and Sales generates demand for the Product by publicizing its features and how it would address customer priorities. In the process, Marketing also gets customer feedback and communicates to Product development group. These are application potentially can be used.

Oracle Product Life cycle Management Oracle Advanced product Catalog

Oracle sales 3. Plan: Planning is the strategic portion of SCM. You need a strategy for managing all the resources that go toward meeting customer demand for your product or service. Global Order Promising 4. Sell & Manage Order: Maintain and manage the customer orders, order holds, notes and release the orders to warehouse for fulfillment based on requested date, product availability and customer credit limit.

Telesales Trade Management Incentive Compensation Order Capture

Advanced Supply Chain Planning

Order management Advanced Pricing Configurator iStore

5. Procure: Here you normally choose the suppliers that will deliver the goods and services you need to create your product. Develop a set of pricing, delivery and payment processes with suppliers and create metrics for monitoring and improving the relationships. iProcurement 6. Manufacture: Schedule the manufacturing activities necessary for production, testing, packaging and preparation for delivery.

Purchasing

Work in Process 7. Fulfill & Release Management : Coordinate the receipt of orders from customers, develop a network of warehouses, pick carriers to get products to customers and set up an invoicing system to receive payments.

Cost Management Process Manufacturing Project Manufacturing Quality

Transportation Execution 8. Service & Maintain: Create a network for receiving defective and excess products back from customers and supporting customers who have problems with delivered products.

Shipping Execution Inventory Management Warehouse Management System

Service Contracts Oracle SCM Solutions Oracle E-Business Suite does covers each area of SCM as discussed above. Here is how best we can describe involvement of all five key participants. Oracle provides two streams to capture entire supply chain planning. 1. Manufacturing: Consists of Inventory, Bills of Material & Work in process to capture details of every type of manufacturing like discrete, batch, mass production. 2. Distribution: Consists of Inventory, Purchasing, and Order Management to capture entire procure to pay & order to cash business processes.

Depot Repair Field Service Install Base

Within SCM above shown Processes can be fit in Oracle applications called as business process lifecycles 1) Procure to Pay (P2P) Here is flow that can be best understood with Oracle Modules Involvement. Procure to pay lifecycle captures demands from different applications like Inventory, Order Management, Purchasing & consolidate all demands in the form of requisitions. Requisitions can be optionally converted in to RFQ & Quotations, or else directly converted in Purchase Orders. Approved PO then can be send to suppliers & receipts are generated in different Inventory organizations. Further more Financials applications can be used to capture invoices & process payments for suppliers.

Under this Business Process below Oracle module can be potentially used.

Payables 2) Order to Cash (O2C) O2C lifecycle starts with entering different types of orders on to customers name. Book orders once all relevant scheduling & pricing information of item is reviewed. Booked orders are treated as firm demand to process orders either for manufacturing or fulfilling the demand through supplier networks. Then you pick release & ship confirms these orders to interface data with accounts receivables for further financial transactions.

Oracle Purchasing iProcurement iSupplier Portal Inventory

Under this Business Process Oracle below module can be potentially used.

Receivables 3) Lead to Service A lead is an expressed customer interest that a sales agent uses to determine whether there is potential for a after sales service opportunity Leads are intended to capture the initial contact with potential or existing customers, gathering just enough information to tell a sales organization whether there is sufficient interest on behalf of the buyer to make a lead worth following up. Under this Business Process Oracle module can be potentially used.

Oracle Order Management Oracle Inventory Shipping Execution Advanced Pricing Oracle Configurator Warehouse Management

Field Service 4) Forecast to Plan This business flow outlines how a company uses sales order history to produce a forecast, design a production, manufacturing, or distribution plan from that forecast, and how to analyze, revise, and simulate changes to that plan. Under this Business Process Oracle module can be potentially used as

CRM Foundation Sales Online Marketing Online Install Base Depot Repair Service Contracts iStore

Collaborative Planning 5) Demand to Build This business flow outlines how a company analyzes or anticipates demand and translates that demand to a production plan. Under this Business Process Oracle module can be potentially used as

Material Planning Advanced Supply Chain Planning

Demand Planning Bills of Material Work in Process Cost Management Flow Manufacturing

This is one of the basic areas from management books. In fact lot of people have requested some more information on SCM, OPM and other manufacturing area. therefore,I take this opportunity, as this is one of my favorite topic, as I started my first job in PPC (Production Planning &Control) department of a big steel company a decades ago, so I hope I will surly help in giving a clear picture of SCM. Let's start with basic and gradually will move into ERP arena: SCM is defined as combination of art and science that goes into improving the way your company find the raw components that needs to make a product or services and deliver it to customer. In Business word this art and science become functions that an organization undertake. If you are IT guys you can understood SCM as: Systems that support manufacturing managers in making decisions that optimize the trade off between capital tied up in stocks and inventories, versus the ability to deliver goods at prices and delivery dates agreed with customers. In principle and reality, both inwards logistics operations to acquire materials to make products and outwards logistics operations shipping finished goods to final customers are monitored. WHAT EXACTLY IS SUPPLY CHAIN MANAGEMENT OR WHAT IS BASIC COMPONENT OF SCM? As per Supply-Chain Operations Reference-model (SCOR) which has been developed by Supply-Chain Council . This model organized and focused on the five primary management

1. 2. 3. 4. 5.

PLAN SOURCE MAKE DELIVER RETURN

1. Plan: This is vital part of SCM philosophy, where the companies normally need to make strategy for managing all the resource that go towards fulfilling the customer demand for the product and services that they offers. A big piece of planning is developing a set of matrices to monitor the Supply chain so that it would be efficient, cost effective and deliver high quality and value to the customer. 2. Source: It means processes that procure goods and services to meet planned or actual demand. This part of SCM consists of selecting right suppliers that will deliver the good and services that need to create your product. Developing a set of pricing, delivery and payment process with supplier is important. Also this will also take care of managing the inventory of goods, and services you receive from your suppliers, including receiving shipping, verifying them, transferring them into various facilities and authorizing supplier payment. 3. Make: This is basically a step where your company starts fulfilling the request or BUILT for products into finished state to meet planned or actual demand. Schedule activity necessary for production, testing, packaging and preparation for delivery.

4. Deliver: This is also called Logistic Process. This is the processes that provide finished goods and services to meet planned or actual demand, typically including order management, transportation management, and distribution management. 5. Return - This is real pain of SCM model, which defined as processes associated with returning or receiving returned products for any reason. Typical model can be best described as:

WHO IS THE STAKEHOLDER OF SUPPLY CHAIN These are considered as stake holder of SCM:

Customers Your Company Design Partners Material Suppliers Contract Manufacturers Logistic Providers

WHAT ARE DRIVERS OF THE SUPPLY CHAIN? These are the main drivers :

Production Inventory Location Transportation Information

1. Production This driver addressing these questions: what products does the market want? How much of

which products should be produced and by when? This activity includes the creation of master production schedules that take into account plant capacities, workload balancing, quality control, and equipment maintenance. 2. Inventory This driver addressing these questions: What inventory should be stocked at each stage in a supply chain? How much inventory should be held as raw materials, semi finished, or finished goods? The primary purpose of inventory is to act as a buffer against uncertainty in the supply chain. 3. Location This driver addressing these questions: Where should facilities for production and inventory storage be located? Where are the most cost efficient locations for production and for storage of inventory? Should existing facilities be used or new ones built? Once these decisions are made they determine the possible paths available for product to flow through for delivery to the final consumer. 4. Transportation This driver addressing these questions: How should inventory be moved from one supply chain location to another? Air freight and truck delivery are generally fast and reliable but they are expensive. Shipping by sea or rail is much less expensive but usually involves longer transit times and more uncertainty. 5. Information This driver addressing these questions: How much data should be collected and how much information should be shared? Timely and accurate information holds the promise of better coordination and better decision making. With good information, people can make effective decisions about what to produce and how much, about where to locate inventory and how best to transport it. GET FAMILIAR WITH TOP 10 TERMS, DEFINITIONS AND TERMINOLOGY IN SCM Master Demand Schedule - MDS The MDS is a consolidation of demand by product and time bucket Master Production Schedule- MPS The MPS is a statement of supply required to meet the demand for the items contained in the MDS. The master production schedule defines the anticipated build schedule for all products. The master production schedule also provides the basis for order promising (ATP) function Material Requirements Plan-MRP The Material requirements planning (MRP) calculates net requirements from gross requirements by evaluating:

The master schedule

Bills of material Scheduled receipts On-hand inventory balances Lead times Order modifiers

Advanced Supply Chain Plan- ASCP Constrained Based and optimized version of MRP Planned Order Automatically suggested action from planning engine Consumption The process of "relieving" the forecast to prevent double counting of demand Drop Ship Having an order ship directly from the vendor to the customer without physically being in your inventory. Vendor Managed Inventory- VMI The process of giving the vendor the authority and visibility to determine what your inventory should be Customer Owned Inventory- COI Where you are managing the customers inventory on your premises and supply as required Work Order/Sales Order The request that you received from the customer for fulfilling there demand. SIMPLE PLANNING CYCLE WITHIN AN ORGANIZATION A typical planning cycle would start by loading the sales orders, forecast and other demand such internal orders into the master demand schedule (MDS). That demand statement would then be used as the schedule that drives the Master Production Schedule (MPS) . Take a note in regular MRP implementations the MPS is used as the schedule for ATP. Once the MPS is reviewed and updated is used as the schedule to drive the MRP process. The result of the MRP process is planned orders and exception messages. When released from MRP the planned orders for "buy" items become requisitions or purchase orders in the purchasing module and the "make" items become discrete jobs in the Work In Process Module. Once the finished goods are received into inventory it is shipped to satisfy customer orders.

Scenario I :Sales Order - Forecast Planning Cycle This is the scenario where normally we are building to stock and satisfying sales order demand from stock. Here you will see the difference as planned orders are released to become purchase requisitions for components and work orders for sub assemblies and finished goods. The finished goods are then shipped to satisfy the sales orders.

Scenario II : Planning Procurement Cycle In the Planning-Procurement cycle we normally start where the first part of the planning cycle is complete and we have a planned order for a buy item from MRP. The planned order is released and becomes a requisition or purchase order in the purchasing module. A purchase order is then created from the requisition and sent to the vendor. The vendor would supply the materials. The materials would be received into inventory and the purchase order would be closed.

Scenario III :Planning - Drop Ship Cycle In the Drop Ship cycle the process is as follows:

A sales order is received from the customer. After the sales order is entered a process is run that creates a purchase order that matches the sales orders The item, quantity and required date information on purchase order matches that information on the sales order. The ship to address on the purchase order is the ship to address of the customer. The vendor ships the product directly to your customer. Once the vendor ships the product you receive" the purchase order and that creates the shipping transaction to satisfy the sales order. Matching accounting transactions complete the process

You can also see technical details for drop ship cycle in my earlier post. Scenario IV :Planning - WIP Cycle In the Work In Process cycle after the planning cycle is complete a planned order is released to create a discrete job. Material/components is issued the job or back flushed from inventory. The job is completed from Work In Process to Inventory.

Scenario V : Planning - Outside Processing Cycle With Outside Processing you could be buying a service, an item or capacity from an outside vendor. The setup for each of these scenarios will be described in the training sessions to follow, however they all follow a similar process. A routing with an outside processing operation is setup. After the planning cycle is complete a planned order is released to create a discrete job. Once the Discrete job is moved to a outside processing operation, a purchase requisition is triggered. The requisition is imported to Purchasing and a purchase order is created. The details of the discrete job such as job number, assembly number and quantity is tied to the purchase order. The purchase order is sent to the vendor. When the purchase order is received its destination will be shop floor and the assembly will be returned to the next operation on the work order.

This make an end of this discussion. In Next post we will see what are the different subsystem SCM will have and what are the modules which comes under SCM Implementation. Any comment is welcome