1. Order Fulfillment
Order
fulfillment is the complete process from point of sales inquiry to delivery of
a product to the customer. Sometimes Order fulfillment is used to describe the narrower
act of distribution or the logistics function. However, in the broader sense it
refers to the way firms respond to customer orders. It is the sequence of steps
involved in processing an order to the satisfaction of the customer and making
the necessary changes in the inventory records. It may also include processing
of returns and re-adjustment of the records. It is also called order processing.
Order fulfillment is one of the most critical areas of supply chain
management because it pits production efficiency as well as inventory
management against customer satisfaction and a market-in approach. Choosing the
right order fulfillment policy will naturally be tricky in an organization
where the barriers between the different departments and corporate strategy are
not entirely clear.
1.1 Basic Strategic
Order
Fulfillment
Options
The first research
towards defining order fulfillment strategies was published by Mather (1988). He
had discussed the P:D ratio, whereby P is defined as the production lead-time (how
long it takes to manufacture a product) and D is the demand lead-time, (how
long customers are willing to wait for the order to be completed). By comparing
P and D, some basic strategic order fulfillment options were resulted.
1.
Engineer-to-Order (ETO)
It
occurs when D is much more than P. The product is designed and built to
customer specifications. This approach is most common for large construction
projects and one-off products, such as Formula 1 cars
2.
Make-to-Order (MTO)
When
D is higher than P, MTO will be suitable. The product is based on a standard
design, but there are some small changes according to the customer
specification in the final product. This strategy is typical for high-end motor
vehicles and aircraft.
3.
Assemble-to-Order (ATO)
When
D is less than P, ATO is suggested. The product is built to customer
specifications from a stock of parts. The small parts are assembled due to
customization. Dell is an example that it customizes its computers according to
customer specification.
4.
Build-to-Forecast (BTF)
This
occurs when the customer’s waiting time is zero. The product is built against a
sales forecast. Customer’s orders are fulfilled from finished goods stock. Usually
grocery and retail sector will take this approach.
5.
Digital Copy (DC)
When
the order lead-time and customer’s waiting are both zero, this approach is
suggested. Products are digital assets and inventory is maintained with a
single digital master. Copies are created on-demand, downloaded and saved on
customers' storage devices.
1.2 Process
1.
Product Inquiry -
Initial inquiry about offerings, visit to the web-site, catalog request
2.
Sales Quote - Budgetary
or availability quote
3.
Order Configuration -
Where ordered items need selection of options or order lines need to be
compatible with each other
4.
Order Booking - The formal
order placement or closing of the deal (issuing by the customer of a Purchase
Order)
5.
Order Confirmation -
the order is booked and/or received
6.
Invoicing/ Billing -
The presentment of the invoice/ bill to the customer
7.
Order Sourcing/ Planning
- Determining the source/ location of item(s) to be shipped
8.
Order Changes - Changes
to orders, if needed
9.
Order Processing -
Process step where the distribution center or warehouse is responsible to fill
order (receive and stock inventory, pick, pack and ship orders).
10. Shipment
- The shipment and transportation of the goods
11. Delivery
- The delivery of the goods to the customer
12. Settlement
- The payment of the charges for goods/ services/ delivery
13. Returns
- In case the goods are unacceptable/ not required
Process of Order Fulfillment
1.3 Advantages
The order
fulfillment strategy also determines the de-coupling point in the supply chain,
which describes the point in the system where the "push" (or
forecast-driven) and "pull" (or demand-driven see Demand chain management)
elements of the supply chain meet. The decoupling point always is an inventory
buffer that is needed to cater for the discrepancy between the sales forecast
and the actual demand (i.e. the forecast error). It has become increasing
necessary to move the de-coupling point in the supply chain to minimize the
dependence on forecast and to maximize the reactionary or demand-driven supply
chain elements.
The order
fulfillment strategy has strong implications on how firms customize their
products and deal with product variety. Strategies that can be used to mitigate
the impact of product variety include modularity, option bundling, late
configuration, and build to order (BTO) strategies.
1.4 Order Fulfillment
Example – Amazon.com
Customers can search for the products wanted in the catalog provided in
Amazon.com and prices are available for them to choose. Availability is quoted.
Amazon.com helps customers to order the product from the manufacturer or
wholesaler. When the order is confirmed, Amazon.com will send the invoice to
the customer.
As the website also receives other orders from different customers, it
will undergo order planning to determine the delivery route of products.
Amazon.com will then pick and pack the product, and make shipping orders. Shipment
is made by 3PL companies.
2. Push and Pull Systems
A push or pull
system in business describes the movement of a product or information between
two the producers and customers. “Pull system” refers to the process when the
consumers “pull” the goods or information they want for their needs, while
“Push system” is the process when the producers or suppliers “push” them toward
the consumers. Push production is based on forecast demand and pull production
is based on actual or consumed demand.
2.1 Advantage of pull system
Since pull
system is more dynamic and can be controlled at any time of the period. It
allows decision-making at appropriate levels, for example, change the delivery
channels.
Pull system also
allows manufacture of only what is needed by the customer. Unlike push system,
we only produce according to the actual need of the consumers, not by
prediction which may vary from the real situation. Moreover, a pull system is
meant to produce higher customer satisfaction, lower inventory, lower costs and
a constantly changing product design to meet changing customers' needs.
2.2 Disadvantage of pull system
Pull system is
about accuracy on production. When the production is of a long lead-time and
can be produced massively in a lower cost, this system will not work
effectively and efficiently. The standard is another problem of pull system. In
order to satisfy each customer with different requirements, the production
process may be adjusted to fit the standard. It could be time consuming and
hard to controlled.
2.3 Advantage of push system
Planning is very
difficult and time consuming, sometime producer cannot wait for the consumers’
opinion to make decision because lead time is needed to produce certain
product. Therefore, in order to make sure there is enough stock to meet demand.
The push system is more effective in dealing with fluctuating demand. Producers
can store finished products in anticipation of demand, even though this incurs
an inventory cost, or they can create a new demand by supplying products in the
finished goods inventory, which means an overstocked sale. Moreover, push
system allows mass productions which can lead to
economies of scale in purchasing and production.
2.4 Disadvantage of push system
The difference between
forecast and actual demand is the main problem of push system, especially when
the product has a high variance in demand. Also, amass production can lead to
large inventories and also the risk of leaving too many ending inventory which
lead to a high inventory cost. The high advertising cost is another problem of
push system; television, radio, phone or internet, anyone of the media should
be used to communicate with the potential customers.
2.5 Push and Pull Example - Taobao
In fact, in
logistic chains or supply chains, the stages are operating normally both in
push- and pull-manner. Take Taobao(淘寶網)
as an example, it pushes its products by advertising through its own website
and other marketplaces. Those products are probably new or hot selling.
Customers will be attracted and giving more sales to the target products. On
the other hand, people will find what they want directly through Taobao’s
official website. By providing a convenient platform and powerful searching
engine, potential consumers can pull any information they need. Taobao can thus
satisfy it customer well. In conclusion, both systems have their advantages and
disadvantages. If we solely use one of them, we may lose the benefit of another
one. The problem is how to strike a balance between them.
3. Reverse Logistics
Logistics is
defined by The Council of Logistics Management as the process of planning, implementing
and controlling the efficient, cost-effective flow of raw materials, in-process
inventory, finished goods and related information from the point of origin to
the point of consumption for the purpose of conforming to customer
requirements.
Reverse
logistics includes all of the activities that are mentioned in the definition
above. The difference is that reverse logistics encompasses all of these activities
because they operate in reverse. Therefore, reverse logistics is the process of
planning, implementing, and controlling the efficient, cost-effective flow of
raw materials, in-process inventory, finished goods and related information
from the point of consumption to the point of origin for the purpose of
recapturing value or for proper disposal.
More precisely,
reverse logistics is the process of moving goods from their typical final destination
for the purpose of capturing value or proper disposal (Rogers &
Tibben-Lembke, 1998). The re-manufacturing and refurbishing activities may also
be included in this definition of reverse logistics. Reverse logistics is more
than re-using containers and recycling packaging materials. Redesigning
packaging to use less material or reducing the energy and pollution from
transportation are important activities, but they might be better placed in the
realm of “green” logistics. If no goods or materials are being sent
“backwards,” the activity is probably not a reverse logistics activity. Reverse
logistics also includes the processing of returned merchandise caused by
damage, seasonal inventory, restock, salvages, recalls and excess inventory. It
also includes recycling programs, hazardous material programs, obsolete
equipment disposition and asset recovery.
3.1
Reverse Logistics Activities
Typical reverse
logistics activities would be the processes a company uses to collect used, damaged,
unwanted (stock balancing returns) or outdated products, in addition to the packaging
and shipping materials from the end-user or the reseller. Once a product has been
returned to a company, the firm has many disposal options from which to choose.
If the product can be returned to the supplier for a full refund, the firm may
choose this option first. If the product has not been used, it may be resold to
a different customer or it may be sold through an outlet store. If it is not of
sufficient quality to be sold through either of these options, it may be sold
to a salvage company that will export the product to a foreign market.
If the product
cannot be sold “as is” or if the firm can significantly increase the selling
price by reconditioning, refurbishing or remanufacturing the product, the firm
may perform these activities before selling the product. If the firm does not
perform these activities in-house, a third party firm may be contracted or the
product can be sold outright to a reconditioning/remanufacturing/refurbishing
firm. After performing these activities, the product may be sold as a
reconditioned or remanufactured product, but not as new. If the product cannot
be reconditioned in any way, because of its poor condition, legal implications
or environmental restrictions, the firm will try to dispose of the product for
the least cost. Any valuable materials that can be reclaimed will be reclaimed
and any other recyclable materials will be removed before the remainder is
finally sent to a landfill.
3.2
Reverse Logistics Example – Dell
Dell is one of
the market leaders in the computer industry and has created a unique model to
develop a competitive edge. Dell claims to be close to the customers with its
built-to-order program, which not only allows customers to order customized
computers but also helps eliminate obsolete inventory. Dell’s strategy is to
directly target the customers through internet. The customers can put their
orders in three ways: mail orders, online orders or orders through sales team.
The first two strategies are for individual customers while the third one is
for business customers.
Large Internet
sales imply high rates of returns, but Dell’s modular system has enabled it to
manage the large return flow. The system has to deal with three types of
returned products: new products, used products that are flown back either for
donation, resale or reuse and products that are disposed of. For individual
customers, the return policy requires customers to return the computers within
21 days of the possession, through a 3PL. The returned computers are entered
into Dell’s inventory and shipped to a logistic hub. For business customers,
Dell provides an asset recovery program. Asset recovery teams visit customer
sites and haul away the computers.
The returned
products that are received from business and individual customers will be under
examination to determine their condition. They are transported to Dell’s
equipment processing site where a functional test is performed to check and
record their degree of functionality. Dell’s reuse hierarchy favors full system
reuse and resold it to Dell’s outlet website, and moved to a logistics hub.
However, if a full system reuse is not possible, refurbishment is the next
priority. If refurbishment is not possible,
component reuse is the next option: the usable components and materials are
retrieved and are moved into the logistics hub. Disposal of the system through
outsourced recycling partners is not considered unless all of these options are
exhausted. If the recovered computers are sent for donations, they are checked
and refurbished if necessary, and then they are sent to the National Cristina
Foundation.
Dell’s reverse
logistics operations flow Diagram
4. Disintermediation
Disintermediation is the removal of intermediaries in a supply chain, or
"cutting out the middleman". Instead of going through traditional
distribution channels, which had some type of intermediate (such as a distributor,
wholesaler, broker, or agent), companies may now deal with every customer
directly, for example via the Internet or open
up own retail stores. Often, a business-to-consumer
electronic commerce (B2C) company functions as the bridge between buyer and
manufacturer.
This concept was originally
applied to the banking industry in 1967. Disintermediation
referred to consumers investing directly in securities (government and private
bonds, and stocks) rather than leaving their money in savings accounts, then
later to borrowers going to the capital markets rather than to banks. The
original cause was a U.S. government regulation (Regulation Q) which
limited the interest rate paid on interest bearing accounts that were insured
by the Federal Deposit Insurance Corporation. It was later applied more
generally to "cutting out the middleman" in commerce.
Disintermediation is also closely associated
with the idea of just-in-time (JIT) manufacturing, as the removal of the need for inventory removes one
function of an intermediary.
4.1
Advantages
4.1.1 Manufacturer
Disintermediation
reduces the cost of servicing customers directly. It costs a certain amount of money in each of the
processes in the flow of product and information. Bypassing several
intermediaries enable manufacturer to lower the cost and thus increase profit
margin.
Due to high
market transparency, manufacturer can comprehend the market situation and
provide the most suitable products for customers. This helps the manufacturer
capture customer relationship and increase the loyalty of the customers.
As
intermediaries are skipped, manufacturer can obtain customer’s response
immediately and make changes to adapt to the new situations.
4.1.2 Buyer
High market
transparency enables customers to be aware of supply prices direct from the
manufacturer. Besides, they can compare the products of different manufacturers
to choose for a better value.
As
intermediaries’ presence may limit the choices, now under disintermediation
customers can have more diverse product choice.
4.2 Disadvantages
There are still some disadvantages of dis-intermediaries. At the first beginning, there were sale-men in retail stores to promote that products or service. Nowadays, the manufacturers can approach clients directly, so the job nature of salesmen has been decayed. They may face the problem of unemployment. Secondly, some traditional/ old/ low skill organizations achieve relatively lower profit margin compared with the companies who use internet explosion. Thirdly, the conflicts would happen between business partners. It is because at the first beginning, the manufacturers rely strong on the retailers providing services of promotion. Nowadays, the manufacturers can contact with customers directly. Of course the retailors would be unhappy so conflict exists. For the buyer’s side, they have too many choices and information over internet, information will be overloaded and they spend more time on purchasing than before.
4.3 Impact of internet-related disintermediation
It is more common that people purchase products or
services from the service provider or manufacturer through Internet directly. For
example, Dell computers, songs, movies, books from iTunes, online booking of
travelling packages are most popularly purchased products in Hong Kong.
It is still in progress especially for education. Textbooks
may be purchased through the Internet. However, due to legal obstacles,
disintermediation develops in a slow pace, thus buyers should still rely on
intermediaries.
This is difficult to purchase furniture and
groceries from the manufacturer directly. Consumers purchase these kinds of
products of different brands. It is more convenient for consumers to buy them
in a shop.
4.4 Reintermediation
Reintermediation can be defined as the
reintroduction of an intermediary between end consumers and a producer.
Reintermediation occurred due to many new
problems associated with the e-commerce disintermediation concept, largely
centered on the issues associated with the direct-to-consumers model. The high
cost of shipping many small orders, massive customer service issues, and
confronting the wrath of disintermediated retailers and supply channel partners
all presented real obstacles. Huge resources are required to accommodate
presales and postsales issues of individual consumers.
Before disintermediation, supply chain
middlemen acted as salespeople for the producers. Without them, the producer
itself would have to handle procuring those customers. Selling online has its
own associated costs: developing quality websites, maintaining product
information, and marketing expenses all add up. Finally, limiting a product's
availability to Internet channels forces the producer to compete with the rest
of the Internet for customers' attention, a space that is becoming increasingly
crowded over time.
4.5 Disintermediation Example - Dell
Dell sells
computers to customers through the Internet directly. Buyers can customize
their own computer through the online purchasing system. This is a kind of E-commerce.
Process:
1. Customers go
to the company’s website
2. Pick a
product
3.
Customize if necessary
ü
Operating system
ü
Security software
ü
Office software
ü
Warranty and other services
ü
Keyboard
ü
Dell installation
4. Order and Pay
5. Wait for it
to arrive
5. OEM versus OBM
5.1 Original equipment
manufacturer
An
original equipment manufacturer, or OEM, manufactures product or components
that are purchased by another company and retailed under that purchasing
company's brand name. OEM refers to the company that originally manufactured
the product. When referring to automotive parts, OEM designates a replacement
part made by the manufacturer of the original part.
OEMs
rely on their ability to drive down the cost of production through economies of
scale. Also, using an OEM allows the purchasing company to obtain needed
components or products without owning and operating a factory.
Originally
OEM was an adjective only used to describe a company that produced items,
usually hardware or component parts, to be marketed under another company's
brand. Although this is still the norm, OEMs have begun in recent years to sell
their products more widely and in some cases, directly to the public.
5.2
OEM Example – General Motors
General
Motors recommends that consumers request Goodwrench parts when replacements are
needed for a GM vehicle. In fact, the GM Web site says, "GM parts are the
highest-quality products for your GM vehicle and the only ones specifically
designed, made, and tested to keep it running at peak performance and
appearance. “Hence, they're the same ones it was born with. No matter customers
are restoring an old favorite or personalizing their newest automobile, they
can count on GM parts to provide genuine dependability. To stress the exact
standards of OEM parts, they stated in their website, "It's reassuring to
know you have a partner like GM Parts behind you. We offer a full line of
products, all designed and manufactured to exacting standards specifically for
your GM vehicle. So you know whenever you use GM parts, the feeling is
genuine." This shows they are one of the major representatives of OEM.
5.3
Original brand manufacturer (OBM)
An original brand manufacturer, or OBM, is
typically a company that sells an entire product made by a second company or
including a component thereof from a second company sources as its own branded
product. Selling the product of the second company under its own brand just
adds a virtual extrinsic value to the product. In other word, Common practice
where a manufacturer markets a good or family of goods under its own brand
name(s). The objective is to attract and retain satisfied-customers whose
loyalty may be transferred to the manufacturer's other products.
OBM actually is
responsible for the whole supply chain, such as production, development, and
delivery and marketing. OBM actually refer to the entire retailers in the
market, as they sell the product to the market, no matter they produce the
product or not.
5.4
OBM Example – Samsung
Today,
Samsung is becoming as one of the world’s leading brands. In TV sets, video
recorders and flat-panel screens Samsung is number one. In cell phones, Samsung
is threatening Motorola’s once rock solid position as the worlds’ number two.
In OBM practice, Samsung product development has its own technology and equipment
to manufacture their advanced device such as processor, screen, and ram which
make their production become more powerful. Samsung also act the role of
retailer in the electronic market which is responsible for marketing and
selling its products with its own brand name in its outlet around the world.
Samsung,
Haier, BenQ, Lenovo (formerly Legend) and other firms have accomplished what
many other Asian firms would like to do – make the jump from OEM (original
equipment manufacturer) to OBM (original brand manufacturer).
The
motivations are clear to understand since OBM firms are more profitable. On
average, the gross margin for OEM products is 19%, while the margin for OBM
goods is 27%. However, margins for branded consumer goods can be more than
100%. As a result of the low margins, the profits of the top 100 OEMs in
Asia-Pacific totaled only $4 billion, according to BusinessWeek magazine.
5.5
From OEM to OBM - Fenix
Fenix
began a brand retailing operation in the early 80s by opening two retail
counters in the Sogo department store in Hong Kong with one for men and one for
women. They mainly sold multiple designer brand merchandise sourced from their
Japanese customers. Since the profits from the two outlets in Sogo were
limited, Fenix further created their own brands which consisted of several
lines. The initial steps for these two brands were to simply source the
merchandise directly from known knitwear manufacturers and retail them using
the Fenix labels. The next venture in the brand retailing business was in 1986 when
Fenix became Prada’s Hong Kong agent. The experience of being the Prada franchised
retailer for twelve years led Fenix into the high-end market and resulted in successful
business. After having acquired the franchise for retailing from Prada, Fenix
discontinued its own ladies’ brand and expanded its menswear, Lordy Ferri. Two
separate companies, the Fenix boutique and Sidefame, were formed to operate the
brand business for Lordy Ferri and Prada respectively. In 1997, with nine shops
and having reached a breakeven balance, Lordy Ferri was discontinued by Fenix
for financial reasons.
At
present, their fashion retailing business ranges from the middle to high end
markets in seven countries. In addition to their own fashion brands; Anteprima
and Anteprima Plastiq, the franchised brands of Fenix include designer brands,
corporate brands, multiple brand boutiques and their merchandise includes
ladies fashion, handbags and golf apparel.
The
effects were gradually noticed between the transition from OEM to OBM, especially
at the starting stage. With the manufacturing background as part of the
business profile, Fenix was able to obtain financial loans from banks during the
Asia crisis which began in 1997. On the other hand, Fenix’s experience in OBM was
beneficial to its OEM business in two ways. First, Fenix could more easily
understand the requests of its OEM customers. Secondly, there was more common
ground between Fenix and its OEM customers, most of which had brands themselves,
and this led to better working relationships.
Furthermore,
since Anteprima has a higher requirement for design and quality than most of Fenix’s
OEM customers, this assisted Fenix in promoting its OEM business.
6. Global Sourcing
Network
Global sourcing is the
practice of sourcing or purchasing of goods and services in the most cost
efficient location across geological boundaries globally. Also, there
are some concerns about global sourcing because of different politics and
legislation among different countries such as cost of raw materials, labor cost
related with minimum wages and taxes systems. For examples, Indian and Eastem
Europe have low-cost programmers and engineers, Philippines have low-cost maids
and English speakers, and China has low-cost labor forces.
6.1 Disadvantages of
global sourcing network
However, there are some disadvantages of global
sourcing. First of all, different countries have different cultures and values.
The extra hidden cost solving the diverse cultures cannot be quantified.
Secondly, the home country has unique skills or competitive advantages, that
skills may be exploded and leant by others. The manufactures establish
factories in foreign location, it is difficult to manage the operation and
control the quality. Moreover, the distribution across country boundaries
require longer lead time and more comprehensive and well established supply
chain management system.
6.2 Advantages of
global sourcing network
It can achieve economies of scale to purchase
centrally in order to reduce the complicated procedures of order processing. Secondly,
it can broader the resources pool in order to explore the potential new market.
Thirdly, the problems of deficiencies of certain products or skills in home
country can be solved. Moreover, the new vendors can be explored to increase
the competitive around the world.
6.3 Global sourcing
network example – Wal-Mart
Wal-Mart is an international groceries retailer.
Wal-Mart sources and merchandise raw materials across the countries for
customers in order to improve the profit margin and maintain and improve the
product qualities. Wal-Mart has both local and global purchase departments.
Locally, they work with the local farmers to meet local demand. Globally, the
global E-commerce division is responsible for sourcing. Moreover, Wal-Mart can
also provide job position to help people and economies of communities.
Therefore, Wal-Mart recruits breaches of people and
positions such as Manager Replenishment Global Sourcing Walmart Merchandising,
Senior Manager Global Merchandising Centers Ethical Sourcing, Senior Sourcing
Specialist Ecommerce Sourcing Apparel, Sr Director Strategic Sourcing, etc.
7. Electronic Data Interchange
Electronic data
interchange (EDI) is a system that transferring data between different computer
systems or computer networks. Most big organizations apply this method for
electronic commerce purposes, e.g. sending order information to warehouses or
tracking their order. Organizations might replace bills of lading and even
cheques with appropriate EDI messages. EDI can be integrated into many aspects,
such as supply chain management, strategic planning, enterprise resource
planning, etc.
7. 1 Advantages for
using EDI
EDI could save
time cost and labour cost because it can replace the human interaction and
material, e.g. paper documents processing, meetings, faxes, identification
time, etc. EDI allows a company easily implements storing and manipulating data
electronically without the cost of manual entry. What’s more, EDI can reduce
human errors on shipping and building because EDI can change all the data in
different destinations. Any changes for the EDI system will be update real
time. For this reason, EDI is a very vital component of just-in-time operation
systems.
7.2 Implementation
barriers
The most obvious
barrier for implementing EDI is that companies may need to change their
operation process because the existing business process. Some special processes
applied currently by the companies may be processed wrongly by EDI system.
For example, a
business may receive the bulk of their inventories by few days shipping and all
of their invoices by mail. The existing process may assume that inventories are
typically received before the invoice. With implementation of EDI, the invoice
only can be sent when the inventories ship. That will require a process handles
large numbers of invoices at the same time.
Apart from that,
there is a cost for the EMI system initial setup such as preliminary expenses,
implementation time, customization and training cost, etc. Choosing the correct
level of integration to match the operation requirement is a must.
7.3 Example - FedEx
FedEx uses EDI
and a growing menu of web-based tools to communicate with customers, regulatory
agencies, and their global network of air, ocean, and ground carriers. Customers
can keep tracking of the shipments at every step at any time and place. That
gives customers comprehensive information for planning delivery time and
cost-based advantages.
EDI processes
all FedEx invoicing data for both domestic and international shipping
electronically. The data combines with customers’ accounts payable systems, assist
eliminating paperwork. Customers can consolidate their invoices for all
shipping locations.
FedEx regularly
delivers very successful EDI and electronic commerce solutions for their
customers. FedEx can impact logistics and business processes of customers via
services that include electronic transmission of customs entry information,
commercial invoices and status information in a standard format, so customers
can reduce paperwork and quickly adjust various entries. These audits assist customers
to meet Customs Modernization Act (Mod Act) obligations, ensuring that inventories
are classified and valued correctly.
Moreover, costs
analyses and management of product flows can meet demand for manufacturing, which
can improve bottom line of their partners. Streamlined business processes can
make fewer errors in manual entry and eliminating the need for a variety of
data quality checks.
8. Enterprise Resource
Planning
ERP is a system that integrates internal and
external management of information between several areas, includes
finance/accounting, sales and service, manufacturing, customer relationship
management, etc.
ERP system is a system in order to strength
the communication in the flow of information between the internal and external
party of the business. By the help of computer hardware and internet network,
ERP can use computer to create a database as the storage of information, in
other words, ERP system is quite a lot related to computer system.
8.1 Characteristic of ERP (Enterprise Resource
Planning)
Traditionally, ERP (Enterprise Resource
Planning) include the following characteristics. Firstly, system runs in real
time( or closed to real time)but not update information in periodic time, in
order to make a prompt action or response to the information.
Also ,a database(storage for all information
of company) that is supportive for all applications, which means that is very
useful for supply all information needed for company.
Lastly ,system should be user-friendly, means
that system could be setup easily and not complicated which ERP can be run
easily even are new machines launch by the company.
8.2 Coverage on ERP
ERP system can cover many areas in a company.
The functional areas covered financial accounting, Human resources,
Manufacturing, Supply chain management, Project management or Customer
relationship management.
There are many big manufacturers are using
ERP, such as TAL(TAL Apparel Limited), TAL leads the industry in the full
application of an Enterprise Resource Planning (ERP) system to apparel
manufacturing. Their ERP system covers the majority of our business processes
such as: order management, capacity planning, production planning, inventory
management, procurement, vendor managed inventory, material requirements
planning and finance.
Lawson ERP system – TAL’s ERP system that are
using, manages everything from order and capacity reservation, can response so
soon in order to satisfied the customers’ need and for the supply order. This
is what they claimed, SPEED TO MARKET. Their POS data-mining expertise, enables
their customers to reduce risk and cost of new product launches. Sales data are
closely monitored for new products. Therefore, by using this real time data
system, they can act promptly in order to give the best suggestion for
customers. Their website’s “continuous replenishment” ensures the popular products’
stock can always be fulfilled. It can avoid the loss from lapses in product
availability.
These are also why TAL Group can be so
successful in these years.
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