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1 SCM- integration: organiational, managerial and technological iue M. Caridi 1 and A. Sianei 2 Dipartimento di Economia e Produzione, Politecnico di Milano, Italy [email protected] Itituto di Tecnologie, Univerità Carlo Cattaneo LIUC, Italy [email protected] ABSTRACT: Thi paper focue on the latet evolution of information ytem for Supply Chain Management. In particular, tarting from the obervation that Advanced Planning Sytem and Supply Chain Management Sytem repreent a real breakthrough in IT upport to Production Planning and Control, the paper briefly how how IT upport ha evolved over time both at company level and at upply chain level and deepen the critical feature of IT ytem deign for today upply chain ytem. Keyword: Supply Chain, Enterprie Reource Planning, Production Planning and Scheduling. INTRODUCTION Planning and control ytem have deeply evolved in the recent year in order to cope with the need of the manufacturing firm and new IT tool (named APS, Advanced Planning Sytem, or SCM, Supply Chain Management ytem) are nowaday available. Contemporary the (Enterprie Reource Planning) phenomenon ha been conolidated, but the limitation of ytem, a far a manufacturing or ditribution i concerned, are well known. In order to cope with criticality in upply chain, integration of and SCM ytem ha to be deigned. Depite the great evolution of IT, the effort of the integration between SCM and i till today impreive; o the author explain why the integration i neceary and provide ome guideline for the deign of SCM- integration. 1 IT IN MANUFACTURING: APS-SCM SYSTEMS Planning and control ytem have deeply evolved in the recent year in order to cope with the need of manufacturing firm. It poible to identify a route of evolution that begin with the introduction of MRP ytem (Orlicky, 1975) and, paing through the management of capacity and material contraint, move toward the contemporary APS and SCM olution. New function, uch a ATP (Available to Promie), are nowaday conidered neceary condition for an order planning and quoting. On the other hand, the offer of planning ytem ha reached a high level of performance with APS, where huge et of objective and contraint are tandardied in librarie o that manufacturing ytem can be modelled in detail. Thi i the era of APS-SCM olution. APS-SCM ytem repreent the mot meaningful innovation in the world of manufacturing ince the introduction of ytem MRP in the Seventieth (Turbide, 1998). In fact they marry the potentialitie of modern proceing ytem with the mot ophiticated heuritic / optimiing / AIbaed technique developed from the reearcher in operation reearch and indutrial production management (Caridi, Sianei, 1999). APS-SCM repreent a breakthrough in production planning ince it overcome two baic principle of MRP: - the way the plan i proceed: MRP ytem and, in general, all the cheduling algorithm, baed on heuritic or optimiing technique (Baker, 1974), propoe a plan (what hall be produced, how much, when, where, with which reource) that the uer ha to validate. On the contrary, APS-SCM i a upport to the deciion-maker (it can be claified a DSS, Deciion Support Sytem). In fact, the aim of APS- SCM i not to model accurately complex manufacturing ytem or to implement refined reolution 1 Thi paper ha it origin in the collaboration of the author. In particular, in the final releae M. Caridi ha developed ection 2, 4 and A. Sianei ection 1,

2 technique. Rather, it aim i interactivity in finding olution, efficiency in managing large volume of data, quantification of everal propoed plan, peed of imulation; - the approach: MRP ytem and traditional cheduling ytem are baed on a centralied top-down approach. They aume, in fact, that only a deciion-maker ha the reponibility of determining the manufacturing plan. In other word, a ingle MRP procee all the item of the firm, tarting from end product down to raw material or upplied item. A a conequence, contraint propagate along the level of BOM. On the contrary, in the mot advanced APS-SCM ytem the degree of centraliation can be configured: by etting the parameter of the ytem, one can model highly centralied control or ituation in which each hop (or even each machine) i a deciion-maker that can plan it own activitie. In the latter cae, APS-SCM guarantee the alignment of everal plan. Moreover, in an APS-SCM alo the direction of control i configurable: one can model a traditional top-down control but alo a bottom-up control, where the deciion of what can be produced i made tarting from the availability of material. Then, APS-SCM ytem repreent an evolution of traditional ytem ince they proce plan which repect all the contraint of the problem (tarting from reource capacity and material availability and o on) and allow to carry out a what-if analyi. Other feature of APS-SCM overcome the limitation of traditional approache from a technical point of view: - proceing peed: APS-SCM ytem are RAM reident, o they can exploit the peed of execution of procee in memory. In order to exploit thi potentiality, APS-SCM require computer with huge memory. In thi way, the efficiency of proceing time increae very enibly in comparion with MRP performance (proceing time i reduced to few minute from few hour); - upport to the uer: ince the uer make deciion, APS-SCM ytem are endowed with advanced graphical interface; in fact the uer need to have immediate acce to many information and data. A a conequence, when an APS-SCM i deigned, particular care i given to the way information and data are viualied and to the poibility of chooing the level of aggregation of information on the creen; - optimiation module: the mot ophiticated APS-SCM ytem contain everal librarie of typologie (model) of manufacturing ytem and of reolution algorithm. Moreover, ince each manufacturing ytem ha it own peculiar feature, APS-SCM i endowed with programming language to create routine ad hoc, combining different optimiation rule. Anyway, the aim of the optimiation module i to find not the bet olution but a firt olution, which can be examined and reproceed by the uer in order to reach a feaible olution which repect the availability of productive reource (e.g. manpower and machine) and auxiliary reource (e.g. tranport ytem, equipment, tool); - contraint repreentation: ince APS-SCM aim at finding feaible olution, it i very important to define preciely the data of the problem, epecially thoe related to contrain. Then, it i neceary to monitor them on-line in order to refreh the tatu of the ytem. Thi point i o relevant that the reolution algorithm of the optimiation module are often baed on contraint propagation (Contraint Baed Programming). -APS/SCM INTEGRATION During thee recent year the mot glaring phenomenon of manufacturing IT market ha been the diffuion of olution. Several caue have favoured thi phenomenon: - the well known Y2K problem, that moved everal companie to rebuild their information ytem, adopting, where poible, tandard olution with the aim to reduce project elaped time; - the ucce of ome competitor that have polaried the whole market that today (in Europe) i mainly on few international olution - the need to enure a deeper economical and managerial control a the conequence of globaliation effort - the wide range of functionality encompaed into an olution, allowing to atify epecially the finance and accounting requirement; It i evident that the above mentioned factor have been much more trong that the requirement in term of upply-chain optimiation; the proof of thi entence i the fact that nowaday mot companie have an olution, while, on the contrary, the diffuion of APS-SCM olution i at an embryonic tage. Indeed from a market perpective the evolution of APS-SCM market directly follow one; everal empirical proof of thi can be found analying market trend; for ake of implicity we mention here a entence of (Turbide, 1998) the firt APS-SCM ytem were third-party olution that had to be connected to. Thi made APS implementation both complex and expenive. With the maturation of the technology and increaed market recognition of the value of APS, a conolidation began. Firt, major vendor formed alliance with APS vendor offering ome level of pre-packaged integration. Now, everal upplier have acquired APS developer and are in the proce of integrating the ytem together for a eamle, fully integrated /APS olution. A few vendor have developed their own APS capabilitie 125

3 It eay to identify the + APS-SCM a the more atifying architectural olution for Supply Chain Management and Control. The following figure ummarie the evolution of IT tool: - Figure 1 how the evolution, at a general level, from Make olution to -APS, paing through Bet-Of-Breed and only- olution; - Figure 2 zoom in the Supply Chain level, howing the moving from till to -SCM integrated ytem. Ability to evolve and map new requirement +APS Bet of Breed year Make Specific requirement atifying degree Figure 1: IT evolution at a company level Efficiency (tock reduction, reource utiliation, ecc.) + DSS planning + Supply Chain management Supply Chain evolution Effectivene (ervice level, timeline, ecc.) Figure 2: IT evolution at Supply Chain level Nowaday, the integration between APS and ytem repreent an intereting topic that i getting more and more attention from the point of view of planning ytem deigner. The limitation of ytem a far a manufacturing i concerned are in fact well known. In order to cope with criticality in manufacturing, APS- integration ha to be deigned. The integration problem i indeed extremely complicated by the intrinic difference exiting between APS- SCM and ytem (ee ome difference in Table 1). 126

4 APS-SCM Approach Tranactional ytem Interactive/imulative ytem Analyi What i What wa What i what will be Frequencie Batch run Real time analyi Focu on Data management and integration Shop floor imulation, material availability check, etc. Production capacity Infinite (indirect management by mean of lead time) Finite and detailed; each kind of production reource Program Rough plan Operational Model Company buine model Logitic and productive reource detailed parameteriation model Paradigm Hierarchical top down Ditributed with integrated control; bottom-up approach available Computation logic Eay (e.g. MRP computation) AI, heuritic, optimiation algorithm Table 1: v. APS-SCM key ditinguihing element. Integration problem ha to be faced following three direction: - technological integration, concerning interface development and the et up of communication mechanim between APS-SCM and ytem; IT innovation allow to define thi tak a a non critical one; - organiational integration, very delicate topic ince APS-SCM ytem allow to integrate or ditribute / outource the control and the deciion level, deigning organiational aet that are unmanageable without the pecific IT tool; nowaday thi i probably the mot critical tak even becaue of the lack of table referring template, (if compared with the availability of everal model, thi confirm the embryonic tage of APS-SCM market) - managerial integration, encompaing the allocation of the variou function to the APS-SCM or ytem. A far a managerial integration i concerned, in Figure 3 it ummaried the methodology that, tarting from the deployment of company buine requirement and the analyi of company pecific feature (critical ucce factor, indutrial ector characteritic, organiational culture), allow to deign the critical procee and, on the bai of deciional content and of what-if analyi requirement, put the border between APS-SCM (DSS application) and (or legacy) olution. Buine Objective Buine development Company culture Indutrial ector Buine Requirement Key Procee Functionality Data management DSS Strategical planning Cut. Order Management Production Planning etc... MPS MRP CRP ATP MES etc... - Legacy APS Figure 3: Integration deign methodology 127

5 Once the theoretical managerial integration layout ha been deigned, it neceary to face with the architectural olution allowing integrating APS-SCM and ytem. The architectural olution are: - Off line integration in which entire tep of the production planning and control cycle are in charge of the APS-SCM ytem (e.g.: cutomer order are inerted into ytem, then they are collected and by mean of a batch interface are downloaded to the APS-SCM ytem; APS-SCM, in an aynchronou way, chedule production order, load work-centre and finally feed back the reult to ytem). Thi olution i imple from a technological point of view (the mot critical tak i deigning the interface), but impoe everal contraint, mainly concerning the ynchroniation of the two ytem; - Add-on integration that i a pure real time integration, in which every APS-SCM ub-functionality (e.g. ATP calculation) can be launched (triggered) in environment. In Figure 4 the two architecture are ummaried; it evident how the econd olution i much more complex than the firt, but allow a greater flexibility level. Off-line integration Add-on integration APS Figure 4: Off-line and Add-on integration architecture CONCLUSIONS In thi paper the latet evolution of IT tool for Supply Chain Management ha been depicted. Nowaday, APS- SCM are the mot enhanced upport to production planning deciion making. On the other hand, ytem have a world-wide diffuion becaue they offer the poibility of managing company data in an integrated and tandardied way. One of the mot critical problem to be faced today at IT level i the integration of APS-SCM tool with ytem. The mot frequent quetion emerging while managing uch integration are related to the poition of data (bill of material hould be tored in APS or ytem?), to the location of procedure (hould I ue MRP legacy or enhanced APS MRP?), to ynchroniation of APS and (i APS procedure triggered by or hould it run in aynchrony?), and o on. The anwer to thee quetion have a great impact upon technological feature (databae, ytem architecture) but even upon managerial apect (frequency of planning or recheduling, ). An empirical methodology that focue it attention on managerial integration ha been ummaried in the paper. The propoed methodology i baed on the conideration that functionality integration deign and architecture definition hould be faced in equence tep. Notice in fact, that the firt phae of the methodology (requirement analyi) doe not depend in any way from the knowledge of the pecific APS-SCM olution propoed by Vendor, neither upon the pecific architectural configuration it will aume. The firt effort while integrating APS-SCM ytem with an ha to concentrate upon the real buine requirement, later on the poible information upport will be taken into conideration. From direct experience in many APS-SCM project of integration with ytem, the author have learned the leon that a ucceful guideline i firt undertand what you need and then find out how you can be atified, that i to emphaie managerial integration apect that hall be abolutely faced before invetigating the technological architecture of -APS/SCM integration. 128

6 REFERENCES Baker, K.R. (1974). Introduction to equencing and cheduling. John Wiley & Son. Caridi, M. and Sianei, A. (1999). Production Planning and control: evolution and perpective. Economia & Management (in Italian) 1. Orlicky, J. (1975). Material Requirement Planning. McGraw-Hill. Turbide, D. (1998). APS, Advanced Planning Sytem. APS magazine