| By Steve Heistand
The Supply Chain Software Business Cases
Supply chain processes cross most department boundaries and exchange information with trading partners. This makes SCM systems one of the more challenging business applications for Information Technology (IT) to integrate with other systems.
Key Supply Chain Software Integration Points
Although different from one company to the next, business systems that generally make sense to integrate with the SCM software include financial & accounting software, Enterprise Resource Planning (ERP) software, Customer Relationship Management (CRM) software and a host of other auxiliary systems. Many companies approach their supply chain management system with a best of breed software strategy which results in additional business systems to integrate. Retail Chains interface their SCM systems with Merchandising and Store Operation Systems.
The traditional interfaces with financial systems include inventory activities, revenue data and logistical costs. A typical interface would be a warehouse distribution updating inventory management (inventory quantities and costing) and accounts receivable (customer invoicing and sales). Finance departments also need access to operational data in order to trouble shoot exceptions. For example, Finance needs access to transportation documents for processing freight claims or calculating landed costs. Other areas include capturing SCM activities to manage costs, develop budgets and improve forecasts.
Integrating data from ERP, CRM and SCM software systems is critical for end to end business process support and for reliable demand trends used in forecasting sales. Evolving best practices are improving sales forecast accuracy by incorporating methods to collaborate across department and trading partner boundaries – in other words, anyone that can provide relevant input to a sales forecast should have their judgments considered. Many of the integration requirements get built into the Sales and Operational Planning (S&OP) process, and other requirements are driven by demand management system needs.
Fulfilling inventory and customer orders is an integrated effort between several systems, including: ERP, CRM, Warehouse Management Systems (WMS) and Vendor Managed Inventory (VMI) systems. Only when these systems are integrated do sales people have visibility into what products they can actually sell and companies have the automated processes to efficiently pick, ship and invoice customers timely and accurately.
The supply and delivery sides of Supply Chain Management requires integrated operational systems such as manufacturing, distribution, and SCM partner (customer, suppliers and third party logistic providers) systems. A SCM integration requirement is to gather details on the supply channel's capacity to meet demand. Logistics needs include integrating schedules and planning resources.
Voluntary Industry Commerce Solutions and other organizations have been effective in establishing standards for exchanging information between trading partners. Still, each company needs to define their requirements for the information they need from their trading partners, as well as how to accommodate their trading partner's needs.
Challenging System Integration Points
Even with advances in IT solutions to simplify systems integration—using technologies such as APIs, SOA, XML web services, RESTful services and new forms of middleware—system integration remains one of the more time consuming, complex and costly IT challenges. The plethora of variations in types of data, sources of information, business rules, processing requirements, exception conditions and information security mandates require well thought out specifications with multiple layers of validation and plenty of testing.
Another IT challenge in managing disparate systems is keeping multiple versions of the same information in different systems consistent. An example is inventory receipts that are maintained in inventory management, warehouse management, accounts payable and other auxiliary systems. Management issues arise when different teams are working together on an assignment and each team is working with a different representation of events. The user community should own and define their needs along with having a clear understanding of the timing differences between the systems. Because SCM crosses so many boundaries, this becomes an even bigger problem than what is normal with other types of business systems.
Gathering quality data for tracking demand trends requires the collection of actual sales and lost sales, which may include data from channel partners, syndicated data, CRM software and other external systems. Not only is sales data from other systems a must have requirement, but sales opportunities lost (because of out-stock and other issues) is also a must have requirement. Including all sales plus lost sales will more accurately reflect real trends in demand.
Collecting qualitative information that affects future demand not reflected in historical trends, is another demand management integration challenge. There can be many sources of qualitative data including economic conditions, weather forecasts, fluid customer preferences, channel partners, sales team and others. Qualitative data becomes very relevant to making judgments on forecast for unpredictable or random demand. Identifying the sources and variables along with the tools to capture and integrate qualitative data into the forecasting process provides much greater clarity on future demand.
The S&OP process pulls data in from many other systems and trading partners. Here, challenges include keeping the S&OP plans in synch with the many different and more detailed departmental plans used to plan and schedule resources. For example, Marketing should not execute a promotion if inventory management is delayed in receiving the products being promoted.
Overseas shipments can be challenging. One of the challenges is the limited visibility to what was actually shipped, the current status and accuracy of schedules. If you are working with an overseas agent to facilitate transportation, they should provide timely and accurate information on what was shipped along with the scheduled and actual transportation dates. However, the information is only going to be as good as the information they collect and there can be challenges meeting information requirements through a third party.
Scheduling and planning inbound warehouse deliveries depends on timely information from suppliers and 3PLs; otherwise, shipments will show up at the warehouse and the right resources may not be available to process the deliveries timely and efficiently. Advanced Ship Notices sent by the suppliers and appointments made by the carriers need to be validated and processed with internal systems to facilitate the most effective use of time and resources. In many cases when the supplier is located close to the distribution center, shipments arrive before the information. The challenge is in receiving complete, accurate and timely information so that it can be processed before the shipments arrive.
SCM System Integration Bottom Line
To facilitate the requirements for integrating SCM software with other business systems, the top three to six key processes can be defined and an owner assigned to each. The owner takes responsibility for collection and for validating the detailed requirements for all departments and organizations that are impacted by the process. Their efforts are approved by the Project Sponsor, who then directs the Project Manager to include the integration requirements as a project deliverable.
Categories: Supply Chain Management Software
Tags: SCM integration
Author: Steve Heistand