Electronic Business: Concepts, Methodologies, Tools, and Applications (4-Volumes) P144 pps

1364 E-Supply Chain System at Valvex and Its Integration with ERP Systems Initial Project Planning This involved initial requirements gathering, IT LQIUDVWUXFWXUHSODQQLQJSURMHFWVWDI¿QJGHWDLOHG VFKHGXOLQJEXGJHWLQJDQG¿QDQFLQJDQGWUDQVL- tion planning. The project management team consisted of project managers from all three organizations involved: Valvex, Entreplan (ERP provider), and Excelvision (e-SCM provider). The team reported to the vice general manager RI 9DOYH[ 7KH PDQDJHPHQW WHDP GH¿QHG WKH scope of the project very clearly. Few key issues in inventory tracking, order management, and resource allocation were targeted to ensure rapid return on investment. Plans were made to execute necessary functional changes in the existing busi- ness processes, aligning them with the technical PRGL¿FDWLRQV 6RPH RI WKH PDQXDOO\ LQWHQVLYH activities were strategically planned to be replaced by automated processes. Progress Monitoring and Control All parties involved in the project conferred to come up with the project plan. Some of the tasks were carried out concurrently to keep the project GXUDWLRQVKRUW,QLWLDOO\RQHPRQWKZDVVSHQW¿- nalizing the project scope. After the kick-off, the SURMHFWZDV¿QLVKHGLQZHHNV5HSUHVHQWDWLYHV from all groups with various job responsibilities met every other day to resolve the issues encoun- tered during implementation. The issues were prioritized and logged, and the status of issues is updated in the next meeting. Sharing responsibili- ties and exchanging ideas among all team members ensured consistent progress. Most of the project went as planned except a few unexpected issues that caused changes in due dates of some tasks a few times. Progress was monitored closely by the three project managers from the three parties. At the end of the weekly update meetings, the project manager from Valvex reported the status to the vice general manager, who was the execu- tive sponsor of the project. His intervention was QHFHVVDU\LIDFRQÀLFWLVVXHFRXOGQRWEHUHVROYHG by the teams. Also he attended the status update meetings occasionally and met with project team members quite frequently on an informal basis. Active involvement of a top executive helped the WHDP¿QLVKWKHSURMHFWRQWLPH Transition and Maintenance Planning Extensive testing initiatives were undertaken before going live. Required functionalities of both the e-SCM system and the updated ERP system ZHUHLQGHSHQGHQWO\WHVWHG7KHDFWXDO¿HOGGDWD was loaded into the newly integrated system, and the system was tested and validated thoroughly. $IWHU¿QLVKLQJDOOIXQFWLRQDODQGWHFKQLFDOWHVWLQJ the go-live was announced. Valvex personnel were trained well in advance to take over responsibili- ties of running the systems from Entreplan and Excelvision. Some of their early involvement in the project helped in making a smooth transition. The system was designed to make an incremental GDWDEDFNXSRQFHLQHYHU\¿YHPLQXWHVDQGDIXOO backup for all data every night automatically. Other maintenance work was performed at night WRDYRLGFRQÀLFWZLWKEXV\GD\WLPHRSHUDWLRQV The core system maintenance team consisted of a hardware engineer from Valvex and one system engineer from Excelvision who created the system log. The IT department manager at Valvex checked the log daily and pointed out potential problems to Excelvision’s system engineer for possible resolution. Valvex paid 20% of the license fee to Excelvision for maintenance support per year, which included assistance in software upgrade and resolution of day-to-day issues. ISSUES AND CHALLENGES ENCOUNTERED DURING IMPLEMENTATION During the course of the implementation, the project team faced a number of issues and chal- 1365 E-Supply Chain System at Valvex and Its Integration with ERP Systems lenges. In the following section we discuss how these issues were discussed and resolved. System Interface Design Due to the complexities of the ERP and e-SCM V\VWHPVLWZDVGLI¿FXOWWR¿JXUHRXWZKLFKLQ- formation should be exchanged at what stage of the business process. Also the implementation team had to decide on how the information was to be exchanged so as to ensure accuracy and VHFXULW\ ,Q RUGHU WR GHDO ZLWK WKH ¿UVW VHW RI issues, roles of the ERP and e-SCM systems in UXQQLQJ WKH EXVLQHVV ZHUH FOHDUO\ GH¿QHG DQG GXSOLFDWHIXQFWLRQDOLWLHVZHUHLGHQWL¿HG$OVRWKH information requirements of these two systems at YDULRXVVWDJHVRISURFHVVÀRZZHUHGHWHUPLQHG Personnel from Valvex, Entreplan, and Excelvi- sion took part in a number of meetings to come to a consensus. Data transmission from ERP to the e-SCM system included item masters, initial inventory levels, inbound orders, and outbound orders. Data sent from the e-SCM system to ERP included receiving and put-away information, inspection result, pick-up and shipping informa- tion, and inventory adjustments. Regarding the means of exchanging informa- tion between the ERP and e-SCM systems, the system specialist from the two system providers agreed on using XML so that data accuracy could be maintained. Change in Business Processes Successful use of e-SCM system required changes in some of the existing business processes. The task was quite challenging. A good amount of time was spent preparing for the transition. All the Valvex employees who were affected by the change were trained rigorously so that they could be effective in the new working environment. As the new processes were complex and involved new task-like operating handheld devices, training the workers was not easy and it required thorough planning. The training sessions were designed to cover both theoretical concepts and practical hands-on exercises in simulated environments. Also the training programs were tailored accord- ing to varying needs of system users. Initial Data Loading Most of the data that were loaded initially into the e-SCM system came from the databases of the ERP system. There were a few issues with these datasets. Data structures were different between the ERP and e-SCM systems, and the inventory data in the ERP system was inaccurate and outdated. Also there were many tasks that were being processed, and the corresponding data were not entered in the ERP system. Since the ERP system had to keep running during the data loading process, data often changed during this period and the data transfer was not up to date. A two-step solution was adopted to address the DERYHLVVXHV)LUVWDOOLQSURFHVVWDVNVZHUH¿Q- LVKH GE\DVSHFL¿FGDW H7KHQW KHG DWDZD VORDGHG DWPLGQLJKWRIDVSHFL¿FGDWHWUDQVIRUPHGLQWR acceptable format, and loaded into the database of the e-SCM system. Secondly, live cycle counts for all SKUs in the warehouse were performed and accurate data were sent to the ERP system. This ensured that inventory data in both systems were in sync and accurate. . Handheld Devices and Barcode Printers The handheld devices were to access the e-SCM system using a variety of telnet emulation terminal software. Two models of handheld devices were selected. There were some incompatibility issues with one model. Although emulation terminal software that used telnet protocol was installed in this model, it could not display Chinese characters. It was found out that incompatible character sets between the host system and the emulation termi- nal software was causing the problem. Compatible 1366 E-Supply Chain System at Valvex and Its Integration with ERP Systems Chinese character set was reinstalled in the emula- tion terminal to resolve the problem. Also some information could not be displayed in one whole screen and some characters even disappeared. This was due to the small display screen and limited range of possible adjustment for character size. In order to address this issue, display information ZDV VLPSOL¿HGDQG WKH LQIRUPDWLRQ DWWKH KRVW system side was adjusted according to the size of display of the handheld devices. The barcode printers also had issues with Chinese characters. Initially the printers were not able to print the Chinese characters. Compatible characters were reinstalled to eliminate the problem. Network There was a 2 MB bandwidth optical network connecting the two manufacturing facilities that were 10 kilometers apart. Before the e-SCM sys- tem was implemented, data transfer in the ERP system consumed almost all the network capacity. 7KHH[LVWLQJRSWLFDOQHWZRUNZDVQRWVXI¿FLHQW to handle the large volume of data transfer that was going to take place in a real-time system like the e-SCM system. Response time of handheld devices was quite slow due to the limited band- width, particularly when the ERP system was also exchanging data. In order to address the capacity issue, another optical network connection between the two manufacturing facilities was built; this took one month. The e-SCM system was not able to run well during this period. As a result, progress of the project was stalled to an extent. The lessons learned from this glitch helped the project team to be more proactive in designing IT infrastructures at later stages of the implementation. Model Selection for Handheld Devices A number of models of handheld devices equipped with a scanner, telnet emulation terminal, and wireless network card met the basic requirements for working with the e-SCM system. It was im- SRUWDQWWR¿JXUHRXWZKLFKRQHVZRXOGEHPRVW VXLWDEOH7KHSULFHRITXDOL¿HGKDQGKHOGGHYLFHV varied from US$500 to US$2,500. After long GHOLEHUDWLRQWZRPRGHOVZHUH¿QDOO\VHOHFWHG One of them was manufactured by Symbol, the world’s leading handheld provider for logistics applications; this had a price tag of US$1,625. The other model was manufactured by a Taiwanese company named Biotech with a price tag of only US$500. Since this model had not been used in the logistics industry before, there were concerns about using it in a demanding environment of a dirty and crowded warehouse. However, the price was attractive and risk was not very high as a small number of devices were to be purchased initially. Hence, the project team decided to buy a few cheaper units as well. The project was LPSOHPHQWHG LQWZRSKDVHV ,QWKH¿UVWSKDVH RXWRIHLJKWKDQGKHOGGHYLFHVQHHGHG¿YHZHUH expensive units and three were cheaper units. As WKHFKHDSHUPRGHOGLGQRWSHUIRUPZHOOLQWKH¿UVW phase, all 12 units required in the second phase were procured from Symbol. Coordination Among Team Members from Three Organizations As project team members were drawn from three organizations, coordination among them was challenging. Especially when dealing with system interface negotiation between ERP and H6&0V\VWHPSURYLGHUVLWZDVGLI¿FXOWWR¿QG D¿QDODJUHHPHQW,IWKHUHZHUHPXOWLSOHZD\VWR resolve one issue, each of the system providers would choose the one(s) that minimized their workload and degree of responsibility. Often they argued for a long period of time without coming to a consensus. In order to resolve such issues, involvement of Valvex’s senior manage- ment in the project was required. Every week the project manager had to evaluate the progress of implementation and take corrective actions when the status lagged behind schedule. As the project 1367 E-Supply Chain System at Valvex and Its Integration with ERP Systems manager was from the e-SCM system provider, it ZDVGLI¿FXOWIRUKLPWRSXVKWKHSHUVRQQHOIURP the ERP system provider to expedite their tasks. Many times senior management’s interference was needed. Also the team members from the ERP system provider worked on multiple projects VLPXOWDQHRXVO\+HQFHLWZDVGLI¿FXOWWRJHWIXOO FRPPLWPHQWIURPWKHPWR¿QLVKWKHLUMRELQWKH e-SCM project on time. Often negotiation and insistence from senior management was needed to complete the tasks as planned. Unexpected Problems Even if the project team prepared well, at the initial stage many unexpected issues surfaced which included software bugs, incorrect data, inconvenient software functionalities, human errors, and information exchange errors between ERP and e-SCM systems. Hence a problem-solv- ing mechanism was put in place. Every two days, a meeting among representatives from all parties was arranged so that problems were recognized and necessary actions could be taken without much delay. Outstanding issues and their resolu- tions were discussed in the subsequent meetings. ,QRUGHUWRPDNHWKHSURFHVVHI¿FLHQWSUREOHPV ZHUHFODVVL¿HGLQWRGLIIHUHQWFDWHJRULHVDFFRUGLQJ to importance and urgency, and different resolu- tion strategies were applied for each category. Also there was a weekly status update meeting involving all team members. Effectiveness of the E-SCM Implementation There were many operational problems associated with the existing ERP system at Valvex which ranged IURPLQDFFXUDWHDQGLQHI¿FLHQWLQYHQWRU \FRQWUROWR SRRURUGHUIXO¿OOPHQW7KHH6&0FKDQJHGPDQ\ of the basic business processes at Valvex’s facilities DQGZDVDEOHWREULQJLQDQXPEHURIEHQH¿WVLQFOXG- ing real-time inventory information update, better picking activities, and establishment of effective collaboration with vendors and customers. Table VXPPDUL]HVWKHEHQH¿WVREWDLQHGE\9DOYH[LQ terms of operational measures, one to two months after the integration of the e-SCM system with the ERP system was completed. FUTURE IMPROVEMENTS The traditional techniques used by Valvex for making production schedules are based on meet- ing forecasts or reaching preset inventory levels. Frequently, large batch orders are processed at each GHSDUWPHQWEDVHGRQWKHZRUNÀRZDQGPDWHULDOV are pushed to the next department after the jobs DUH ¿QLVKHG 7KLV W\SH RI ÀRZ XVXDOO\ FDXVHV excess inventories, long cycle times, and some non-value-added activities. Even after implement- ing the e-SCM system, these issues were not fully resolved. However, these issues can be tackled by embedding daily demand-pull subroutine in the e-SCM system, which instructs the system to react to new or changed customer orders that create the actual demand for a product. This subroutine can provide the suppliers with precise descriptions and amounts of materials to deliver to meet the demands at Valvex. The subroutine is particularly effective in reducing the capital commitments for expensive raw materials or components with short lead time when suppliers are within close proxim- ity of Valvex’s manufacturing facility. At Valvex inexpensive items and expensive items with long lead time are replenished according to a min/max inventory policy. Appropriate safety stock levels for these items are maintained, and they are or- dered in economic order quantities. The demand pull subroutine can reduce the inventory levels for these items, as well result in less investment LQLQYHQWRU\$GGLWLRQDOEHQH¿WVLQFOXGHUHGXFHG space requirements in the warehouse and on the PDQXIDFWXULQJÀRRU The demand pull or Kanban system was invented and successfully implemented by the Japanese manufacturing companies. The main 1368 E-Supply Chain System at Valvex and Its Integration with ERP Systems idea is to minimize inventory by supplying inven- tory only when it is needed. Work in progress is closely monitored to avoid shortage. This concept can be used for low value inventory by utiliz- ing electronic Kanban or e-Kanban. The use of e-Kanban enables the system to pull materials HI¿FLHQWO\DVQHHGHGIURPWKHPRVWFRQYHQLHQW locations. When production line personnel detect a low inventory level, they can scan the SKU’s barcode label to transmit the information on item description and location to the e-SCM system. Then the system displays open deliveries and open 7DEOH%HQH¿WVRIXVLQJWKHLQWHJUDWHG(53DQGH6&0V\VWHPDW9DOYH[ Operational Measures Pre-Implementation Post-Implementation 2XWERXQGRUGHUIXO¿OOPHQW &RPPLWPHQWWRIXO¿OOPHQWSHUFHQWDJH 80% 98% Average lead time 45 min 30 min On-time delivery percentage 80% 95% Inventory Average safety stock period 40 days 25 days Inventory accuracy 85% 99% Average monthly purchase frequency 50 10 )LJXUH:RUNÀRZLQWKHGHPDQGSXOOH.DQEDQVXEURXWLQH 1369 E-Supply Chain System at Valvex and Its Integration with ERP Systems RUGHUVIRUWKDW6.8,WDOVRLGHQWL¿HVFKDQJHVLQ usage patterns for that SKU so that appropriate adjustments can be made to order quantities and/or GHOLYHU\VFKHGXOHV$IWHUWKHXVHUVFRQ¿UPWKH requirements, the system determines the best course of action and assigns tasks to appropriate personnel to transfer inventory. Inventories are pulled in a predetermined sequence. One example RIWKHVHTXHQFHLVDVHDUFKIRUD6.8¿UVWLQWKH bin next to the production line followed by a search in the consignment warehouse location. After the search is over, inventory is allocated to the production line in a particular order, and SHUVRQQHODUHGLUHFWHGWRWKHVSHFL¿FLQYHQWRU\ locations to perform pick, pack, and ship opera- tions. At times, it can be found that for certain SKUs, inventory is not kept internally or inven- WRU\OHYHOLVQRWVXI¿FLHQWWRPHHWGHPDQG,QWKDW FDVHWKHV\VWHPGHWHUPLQHV¿UVWZKHWKHUWKHUHLV an open blanket purchase order and then issues a pull order (or e-Kanban card) to the supplier via XML, e-mail, or fax to trigger delivery activi- ties. In the event that an open order for the SKU GRHVQRWH[LVWRUDQH[LVWLQJRUGHULVLQVXI¿FLHQW to cover the demand, the system provides alerts DQGQRWL¿HVWKHSXUFKDVLQJGHSDUWPHQWWKDWDQ additional purchase order is required. Suppliers are required to provide electronic or manual ac- knowledgements after receiving the orders. The ZRUNÀRZLQWKHGHPDQGSXOOVXEURXWLQHWKDWPD\ be added in the future is provided in Figure 5. CONCLUSION Although the existing ERP had a number of prob- lems, it had established a good infrastructure at Valvex to implement other information technology applications. Hardware and local area network had been established, and personnel were accustomed to working with decision support tools. Also the ERP system acted as a repository of many critical datasets that might be needed in other application software. The e-SCM system implementation at 9DOYH[EHQH¿WHGIURPWKHSUHYLRXV(53SURMHFW Nonetheless, there were many challenges includ- ing business processes reengineering, integration with a legacy ERP system, and new supply chain system development and installation. Eventually the challenges were handled successfully with the help of competent team selection, active execu- tive supports, sound system architecture design, appropriate use of project management method- ologies, and proper end user training. Several lessons can be learned from the case VWXG\ RI 9DOYH[ 9DOYH[ KDG ULJKWO\ LGHQWL¿HG that it needs to look beyond the existing ERP system and implement an e-SCM system in or- der to maintain its competitive advantage. Also, it did not select companies like SAP or Oracle, but gave the contract to Excelvision, which had a Chinese-speaking implementation team and stressed customization. Valvex is a large manu- facturing organization with a great variety of products. Hence, Valvex put emphasis on a few key manufacturing processes such as receiving and put away, picking up, and order management, which narrowed the scope of the project. This ensured rapid return on investment. During implementation of the e-SCM system, Valvex had to deal with problems and/or issues related to design of appropriate interfaces between the two systems, data management, handling of Chinese characters in handheld devices and barcode printers, computer network capacity, and handheld device selection. Among these challenges, some were distinct for a Chinese enterprise and might not be seen in other parts of the world where standard English characters are used. The selection of XML as the standard for data exchange between the ERP and e-SCM systems proved useful because of its simplicity. There are some interesting lessons in project management in this case. The senior manage- ment had to be responsible for moving forward the project on schedule. This was particularly important in a set up where a number of teams from different organizations worked together. 1370 E-Supply Chain System at Valvex and Its Integration with ERP Systems Had the entire task of coordination been left with the ERP provider and e-SCM provider, the project might not have completed on time. The ERP provider had already implemented the ERP system, and there were few people from that or- ganization who were present on-site. The active involvement of top management ensured due diligence from all sides involved. Timely meet- LQJVDQGZHOOGH¿QHGIROORZXSSURFHGXUHVIRU various issues encountered during implementation helped smooth the progress. Staff planning with necessary skill set was also found to be one of the critical factors for success. The consultants from the ERP provider and SCM system provider comprehended the requirements of a Chinese manufacturing organization quite well. Most of the team members were Chinese and native speakers of Mandarin, which made communica- tion among them a non-issue. The implementation VWDUWHG ZLWK D UHODWLYHO\ VLPSOH ZRUNÀRZDQG eventually more complex functionalities were added. The success of this type of approach was reported earlier in the literature (Kobayashi et al., 2003). Past implementations elsewhere have GHPRQVWUDWHG WKDW ZHOOGH¿QHG SULRU SODQQLQJ for undertaking the business process changes is crucial, although it often gets lost among the mess of complex technical details (Chang, 2002). The ability of the Valvex project management team to balance between the two was important for the success of the implementation. $IWHUWKHLPSOHPHQWDWLRQ9DOYH[EHQH¿WHG from increased accuracy of inventory, lower inventory tracking cost, elimination of various non-value-added activities, and improved col- laboration with customers and vendors. The existing ERP system had many shortcomings that UDQJHGIURPLQDFFXUDWHDQGLQHI¿FLHQWLQYHQWRU\ FRQWURO WR SRRU RUGHU IXO¿OOPHQW 7KH e-SCM changed many of the basic operational processes at Valvex’s manufacturing facilities and was able WR EULQJ LQ WDQJLEOHEHQH¿WV LQ WHUPV RIEHWWHU picking activities, real-time inventory informa- tion update, and provisions of collaboration with vendors and customers. Valvex paid Excelvision US$15,000 as the license fee for the e-SCM sys- tem. The annual maintenance fee for the system was US$3,000. Valvex had to pay US$6,000 to (QWUHSODQIRUPRGL¿FDWLRQDQGFXVWRPL]DWLRQRI the ERP system and US$30,000 to Excelvision as a consultation fee for installation. The initial budget required for implementation of the e-SCM system and the integration project amounted to nearly US$92,000. The project resulted in direct cost savings for Valvex. The reduction in the safety stockholding period by 15 days resulted in inventory cost reduction by approximately $1 mil- lion per year. By reducing the monthly purchase frequency from 50 to 10, the e-SCM system was able to produce a savings of US$4,800 per year. The reduction of lost sales due to unavailable inventory resulted in savings of US$20,000 per \HDUDSSUR[LPDWHO\7KHVH¿JXUHVJRRQWRVKRZ that the overall supply chain operations at Valvex KDYHEHFRPHPRUHHI¿FLHQWDOWKRXJKWKHUHLV scope for further improvement. REFERENCES Bakowski, M. (2002). C-commerce. Would mix- ing ERP, CRM, e-procurement and SCM be an HI¿FLHQWVWUDWHJ\IRUWKHIXWXUH",QProceedings of the 10 th International Systems Integration Confer- ence, Prague, Czech Republic (pp. 107-114). Ball, M.O., Ma, M., Raschid, L., & Zhao, Z. (2002). Supply chain infrastructures: System integration and information sharing. SIGMOD Record, 31(1), 61-66. Boston Consulting Group Report. (2005, June 1). 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International Journal of Production Eco- nomics, 98(1), 56-80. ENDNOTE 1 Fictitious names Valvex, Entreplan, and Excelvision have been used to protect the identity of the valve manufacturer, ERP pro- vider, and e-SCM provider respectively. This work was previously published in E-Supply Chain Technologies and Management, edited by Q. Zhang, pp. 208-231, copyright 2007 by Information Science Reference (an imprint of IGI Global). 1373 Copyright © 2009, IGI Global, distributing in print or electronic forms without written permission of IGI Global is prohibited. Chapter 4.24 The Demise of a Business-to-Business Portal Arthur Tatnall Victoria University, Australia Alex Pliaskin Victoria University, Australia ABSTRACT This chapter describes the development and ulti- mate demise of the Bizewest portal in the Western Region of Melbourne, Australia. We argue that no matter how good the SRUWDOVRIWZDUHWKH¿QDO success or failure of the portal is primarily related to how well it is adopted and used. We begin E\GLVFXVVLQJWKHFRQFHSWDQGEHQH¿WVRI:HE portals, and especially those that are applicable to SMEs, as the Bizewest portal was primarily aimed at SMEs. We describe how the portal was FRQFHLYHGDQGGHYHORSHGDQGWKHGLI¿FXOW\WKDW its proponents had in persuading regional SMEs to change their business processes to make best use of online trading with each other. The research was socio-technical in nature, and was based on considering this innovation through the lens of innovation translation, informed by actor-network theory. Although Bizewest has ceased operations, the portal project must be considered a success, DVLWSURGXFHGVXEVWDQWLDOEHQH¿WV INTRODUCTION After receiving a government grant under an e- FRPPHUFH³HDUO\PRYHUV´VFKHPHWKHWestern Region Economic Development Organisation in Melbourne, Australia, conceived and developed a business-to-business portal for use by Small to Medium Enterprises (SMEs) in the region. This innovative project was to create a horizontal portal, Bizewest, which would enable the whole range of small to medium enterprises in Melbourne’s western region to engage in an increased number of business-to-business e-commerce transactions with each other (Tatnall & Pliaskin, 2005). This chapter does not describe the Bizewest portal software technology to any degree, but . in sync and accurate. . Handheld Devices and Barcode Printers The handheld devices were to access the e-SCM system using a variety of telnet emulation terminal software. Two models of handheld. different between the ERP and e-SCM systems, and the inventory data in the ERP system was inaccurate and outdated. Also there were many tasks that were being processed, and the corresponding data. inbound orders, and outbound orders. Data sent from the e-SCM system to ERP included receiving and put-away information, inspection result, pick-up and shipping informa- tion, and inventory