 Hello and welcome back to the course on supply chain digitization the NPTEL course offered by IIM Mumbai, IIM professor Shrutan Aran and I am handling this particular lecture which is related to digital infrastructure in supply chain management. Up till now, we have seen the concept of product tracking and traceability and how it is an important aspect of figuring out where the products are moving, where they are stored and how they are travelling through the entire supply chain giving us a lot of important information with respect to the productivity of the supply chain. That is just by following the footprint of the product we can figure out what are some of the productivity aspects of the supply chain. Now, this is from the tools and devices perspective where we are embedding hardware and technology into the products or the packaging and identifying their actual movement, actual storage conditions to identify what is happening with the supply chain. But what more can be done when it comes to digital infrastructure for supply chain management. So, on the one hand we have the technology which is of the nature of hardware and on the other hand we need to look at the software aspects of technology which are used in supply chain management. So, when we think of software aspects when it comes to supply chain management, we go back to the very common aspects which is namely the information systems that are used in supply chain management. Information systems are a part and parcel of a lot of businesses today. It is not necessary that all businesses have good information systems in place, but they are part and parcel of almost a lot of businesses which are working in supply chain management. Otherwise it is very difficult for them to survive and it will be very difficult for them to compete and succeed across variety of industries because information systems help bring in a lot of transparency, information systems also help bring in lot of opportunities to improve efficiency within the systems. So, hence information systems are very very important for supply chain management. And given that supply chains are always looking at identifying ways to reduce cost or improve the accessibility of products to the customers, improve service levels with these objectives in mind. We need proper support systems which can help us in taking proper decisions when it comes to the various aspects of supply chain decision making, whether it is with respect to location, whether it is with respect to inventory, network design, whichever aspects that are there. So, we need essentially a very sound support system which can help us manage vast amounts of data, manage vast amounts of information and interactions between variety of processes which are going to be there within a supply chain. Now, there are many types of information systems which are present. Some of the common ones that we are going to discuss in this couple of lectures is that of ERP, WMS and TMS. To give an idea of the discussion overview in this particular lecture, I would be looking at ERP and overview of ERP and then we will be looking at how ERP is implemented or what are the implementation possibilities for ERP in supply chain management. And then we will briefly introduce what is meant by WMS and TMS namely warehouse management systems and transport management systems which are also used and very common in supply chain management today. Before we get into the particular discussion of ERP and the overview of ERP, what we need to understand is information systems are integral to managing all kinds of businesses, whether it is in supply chains, whether it is in service industries, whichever kind of industry we are looking at information systems are very important over there. How we implement information systems is also equally important. It is very important to understand this because there is quite often the thought process that we have to purchase some solution or procure some solution just because it is available in the market or just because it has to be used because another competitor is using that is not necessarily the case. We need to understand the role that information systems play within our organization and within our supply chain before we can make such decisions. Just like with any kind of technology, let us say the track and trace technology or information systems technology, all of these aspects have cost implications, revenue generation implications and hence we need to be very careful when we take up the decisions with respect to any kind of information systems adoption as well. So, let me now proceed with an overview of what we mean by ERP. So, when we look at ERP, the first and foremost thing that we need to understand is why do we look at something called as ERP or Enterprise Resource Planning. Now, one of the main reasons why we look for ERP systems is from the need that we need to look at how to carry out planning, right. So, I am not even talking about technology over here, but I am talking about what is the need for bringing in an information system. The first and foremost thing that we need to look at in supply chain management is how do we carry out planning and as you can understand from the variety of lectures that we have had till now, the supply chain processes are many in number, supply chain entities are many number and there are several interactions between them that take place on a regular basis. So, hence if we have to carry out activities within a supply chain, we need to have a proper plan to implement these activities, to implement some of the strategies that we have otherwise our supply chain is going to work in a very haphazard manner. There will be very, it will be very difficult for us to understand how it is performing and what are some of the reference points for us. So, one of the foremost things that we need to understand in supply chain management, the key to good supply chain management starts from planning. Of course, measurement is one of the aspects, but one of the requirements for us is to understand that planning is very, very crucial for any kind of operations and supply chain activities. This is a general statement as well. Any business has to look at planning activities with a lot of due diligence, with a lot of focus, otherwise the business or the supply chain or the operations that are there are going to fail. So, what do we need to do in planning? One of the things that we need to do is identify what kind of tasks need to be carried out in the near as well as in the distant future. If this is the case, try to imagine in a supply chain we have so many kinds of entities and networks as well as processes that need to be managed. We have manufacturing, we have procurement, we have materials management, we have logistics management, warehousing, so many activities that need to be carried out, which activity should come first, which activity should come second, how do these activities interact with each other. We cannot take these decisions on a daily basis, we cannot take a decision that today we are going to carry out warehousing and in the warehouse we are going to store only this much. If we were to do this, we would be taking decisions on a daily basis and this is not a very efficient way of working. We need to be able to take decisions for a longer horizon or longer time period such that we do not have to take daily decisions, right. So, with this kind of viewpoints in mind, one of the requirements for us is to carry out proper planning and this kind of planning is possible if we have some kind of an idea as to what our future requirements are going to be like, what kind of demand can we expect from the market, what kind of schedules can we expect from the vendors, these are the kinds of information and inputs that we need to really have on hand. The second requirement that ERP is emerging from is that of execution. You might have a plan, but you also need to execute these plans on a regular basis. In a similar way, execution can be carried out as a decision on a daily basis. What activities need to be carried out today to achieve the plan that we have for today? So, we have to take decisions as to who is going to carry out what kind of activity, whether it is in manufacturing, whether it is in finance, whether it is in consulting, whether it is in marketing, we need to figure out what somebody is going to do on a per day basis. If this is not going to be present on a per day basis, the kind of plan that we want to achieve will not be possible. Then you can think in a supply chain, there will be multiple such activities that need to be carried out on a regular basis. Every day there will be some amount of inventory that needs to be sorted through, that needs to be tracked, that needs to be sent across from one place to another. Every day there will be some kind of invoicing or billing concerns that we need to take into consideration. Every day some execution of work has to happen and for this we will require some kind of resources, whether it is manpower, whether it is materials so on and so forth. So, every day we have some requirement of work to be carried out and this needs to be executed, this needs to be carried out and completed. Then the need that we have is to look at automation and this is related to the first two steps which is that of planning and execution. Remember I said that it is very inefficient for us to do daily decision making or in other words it is very inefficient for us to carry out what we commonly call as firefighting. This is not a very efficient way of working. Now let us say we want to implement plans and execute these plans properly. If we have to execute these plans which have been developed by us on a regular basis, then in other words we need to have information available with us on a regular basis as well. Now for this information to be available with us, there will be a lot of processes that need to be carried out, perhaps some of these processes will be very repetitive. For example, every day you might need to send out an email to your vendor to supply you some materials. This is a very repetitive activity which is being carried out. Can this be automated in some way? Can an automated reminder be sent to the vendor that the materials are due for dispatch? Is it possible for us to have some kind of automation even within our internal processes? So these are the scope that we have for automation of activities and this is something which can really reduce the amount of non-value added work that we carry out on a regular basis. Reminding a vendor on a regular basis is a non-value added work, he has to just get a reminder. It does not matter whether the reminder comes from a person or from a system. So if this is the case, then automation is a good opportunity and it is a need that we have, a pressing need that we have today. Next one of the reasons why we would be interested in looking for or considering an ERP implementation is to carry out monitoring. Just like planning and execution and automation opportunities, we need to identify on a regular basis what is the status of the system, how much inventory is available with us, how many orders have been dispatched, how many manpower have come today to work. All of these aspects need to be monitored. The data can be captured through some kind of devices, but it also needs to be monitored whether there is huge amount of absenteeism in the workforce for example. This needs to be monitored and understood and analyzed on a regular basis. If this is not being carried out, we will not realize when the system is going to go into some kind of an issue or concern which we need to resolve right. So for this purpose again, can we carry out daily monitoring and have a person assigned to carry out this daily monitoring? It would again be an inefficient or non-value adding activity if a lot of these metrics can be captured in digital format easily. Finally, once we have captured all this information, we also need to have some way of carrying out control. Suppose there is some issue which is happening with respect to a process in the system. Let us say there was huge amount of defects which were happening in one of the assembly lines. Now this is being monitored, this information is being monitored and now we have to take certain action or certain control. So we have to perhaps send a signal to the line operators or to the workforce or the work personnel who are on the job that this particular process has to be stopped. This is a mechanism for carrying out control. Then the question comes as to whether this mechanism should be person dependent or if this mechanism can be automated in some way. So as you can see here, when we consider the supply chain, there are a vast amount of activities, there are a vast amount of processes as well as interactions which happen between stakeholders. But at the same time, we have a lot of opportunities for automation, for digitization, for creating long term plans which can be used to convert to shorter term plans in a very easy manner. Now this obviously requires first of all some kind of regular system to be available which is up all the time which is going to control. But at the same time we may be also interested in having some kind of support in decision making as well. For example in carrying out the planning, we would want to know what are all the possible plans that we could carry out and then select the best plan. Perhaps it would be helpful for us if a best plan is suggested to us rather than us going through all of the plans one by one and then making a decision. So this kind of support is required as well when it comes to carrying out regular activities within the supply chain. So here what we have seen is what is the need for an ERP system. But what exactly is an ERP system that can fulfill this need that we have in supply chain management. So an ERP system stands for Enterprise Resource Planning and this is a term which is used quite popularly in businesses. A lot of companies have some kind of an ERP solution or the other. And typically this is a software or a system of software which is a collection of different kinds of applications put together or just a few applications which are going to be present in a single module. So it depends upon how the ERP has been designed for that particular set of processes within the organization or across organizations. And as we look at the term Enterprise Resource Planning, we can understand that we are speaking about an enterprise. We are not speaking about a single organization but several organizations that are interacting with each other to deliver some kind of a value. So the word enterprise stands for connection of several of these entities or processes together to deliver value to the customer. And hence we can use the ERP system for as the name suggests for resource planning activities. But this planning activities can spread across a variety of processes, business processes within an organization. Some of the popular applications of ERP are actually in accounting and finance, human resource management, manpower planning. Suppose you have to look at how many leaves a person is entitled to, then the person who is an employee can actually log into the ERP system and figure out how many leaves they have and apply for a leave as well. Then we have project management. So project management relates to some kind of activities that are being carried out for a defined period of time. Let us say it is in supply chains also we could have projects. Let us say we have the launch of a product which needs to be carried out as a project. So for that end to end supply chain management we may have certain set of activities that need to be monitored on a regular basis for which cost valuations have to be done. We have to see whether there is any cost overrun which is happening and any kinds of incidents or exigencies that happen need to be managed on a regular basis. So if we have to have a lot of stakeholders working together in project management it would be very helpful for us to have some kind of a software application that gives us a visibility of all the processes involved. Then we have application of ERP in procurement, we have application in asset management to figure out how our assets are being utilized, where they are located so on and so forth, materials management so on and so forth. And the main idea in enterprise resource planning is since it is trying to connect across different processes and activities it is going to be based upon working on large amounts of business transactional data that could be interconnected in nature. And the ERP solution like I said in the very beginning it is not necessary that you have to procure an ERP solution. An ERP solution can be developed in house provided there is some amount of technical proficiency within the organization to develop an ERP solution. The basic fundamental idea in ERP solutions is that they look at interaction between different kinds of transactional data which can be connected through some kind of formulae. So for example like I was mentioning earlier we are talking about how many leaves are going to be available to you, this is a metric which can be calculated and presented to you or it can be designed and presented to you. And depending upon how many leaves you have availed and how many leaves have been approved for you, the number of leaves totally available to you will get lesser and lesser. So this is a simple formula which is connecting how many leaves are allocated to you versus how many leaves were availed through an approval system right. So the basic idea over here is we try to figure out what is the connection between these different kinds of metrics for which decisions are associated with them, approvals and tasks are associated with them. So we need to find a way to do this in a repetitive and seamless manner. Hence this can be developed in house using open source tools, using spreadsheets, using even some kind of programming tools also it is possible to develop an ERP solution in house may not be for the entire organization but perhaps for a specific process of interest such as let us say for human resource management or for accounting it could be used. And there are a variety of solutions as well available in the market that are quite popular for the specific modules itself. In fact some of the popular solutions that many of you would have heard of would be SAP and Oracle and you can visit their websites as well, we have Tali for accounting, we have so many such kind of solutions which are available in the market. As I was mentioning earlier it is not necessary that you have to procure. So hence please do not consider this as an ad or something but I am just letting you know that there are lot of solutions available in the market. Now one of the things which has happened in the recent times is related to how we store and share the data in ERP systems. In older ERP systems the typical practice was to store it on a computer or on different computers which are then connected through some kind of internet connection and then file sharing was still carried out on an email and this was not very convenient. So now we have you know cloud based solutions or cloud based ERP systems as well which are very very popular and very convenient to use as well. And again even these can be designed in an open source manner. So giving an overview of ERP, where does ERP really come from? Enterprise resource planning actually stems from operations itself. So the foundations of ERP are in operations management and more particularly in material requirements planning. The concept is stemming from material requirements planning where the basic idea in material requirements planning is planning production activities let us say assembly or let us say some kind of a manufacturing activity that is to be there for a specific finished good. Using information such as the bill of materials, what is the requirement for the final product and what inventory records we have and what kind of processes are possible, should we purchase or should we carry out in house production, all of this information is usually used in order to create material requirements plan or MRP. And the idea over here in ERP is that it takes it one step forward in fact many steps forward. Because as you can see material requirements planning is confined to mostly the production processes or manufacturing processes with some extensions possible to service industries as well. But the ERP is not concerned with just the operations aspect, it is also concerned with other functions as well let us say in finance, let us say in accounting for budgeting and all of those activities as well in project management. It is a much more larger encompassing solution when it comes to managing resources and information and data as opposed to material requirements planning which has a much narrower focus so to speak. So, just to give you an idea the bill of materials typically looks something like this where we want to figure out how do we create an automobile from different components let us say seats and frame of course there are going to be many other parts that are put together and this flows down through the hierarchy that is shown over here. And then for every component as per the amount of time it takes to create the component or to assemble the components together we have to figure out what will be the plan of action that is going to be carried out on a daily basis. So, this is usually the MRP output that we have to obtain that tells us what is going to be carried out at what point in time assembly operation how many units so on and so forth. So, this is in a typical MRP. Now, coming to a little bit more on the ERP overview let us look at some use cases just as an example. So, let us take a first case. So, the first case I am just considering and it has nothing to do with supply chain management, but just to give you an idea how an ERP system works in other areas. Let us say we are talking about a consultancy service where we are working as an organization in consultancy services and we work on multiple projects. So, we would be interested in knowing as an organization I am definitely interested in carrying out a lot of consultancy projects, but when I think of a planning perspective I need to be able to figure out how many consultants are actually required to be hired right and how many consultants should be working per week given that we have a set number of projects that are already ongoing and a number of projects that are going to come up. And I need to carry out this planning such that this can inform my hiring and recruitment practices and this can also inform other activities that need to be carried out as a result. So, let us say this is a quarterly requirement that we are seeing. So, we would be looking at various aspects or attributes of the different kinds of consultants who we already have, what kind of skill sets they have, all of these aspects are pulled together and we are able to create this measure based upon the information that we have on the kind of projects that we are working on with a variety of clients. So, this is one place that we could use and as you can see this can be linked with another functionality such as invoicing where the number of hours that we are using for every consultant per week and the total number of hours that we have can be used in order to generate invoices for the client's basis how many hours we can actually build them for. And it can also be linked with the salaries to be paid to the staff, to the personnel who are working. Let us say we have staff other than the consultants who are going to be there and they are working overtime. So, we can have these records also getting captured and it can be used to calculate additional benefits. Remember you can do all of this using pen and paper systems as well, but it is just not efficient to do this when you are looking at scaling up your businesses or when you want to focus on value adding activities. See here the value adding activity would be carrying out the consultancy activity itself to the best possible extent, but not managing the consultant right. So, the value adding activity over here is to deliver value to the client. And these are the backend activities which we need to automate in a very efficient manner so that the consultant is free to work easily and is also able to deliver the projects on time. Now similarly another use case example, this is now slightly related to operations. This is on the procurement side of it. Let us say we have already selected a vendor through an e-procurement process, tendering and all of that has been carried out. And now we have already onboarded the vendor on to our ERP system. And through this we want to communicate to the vendor as to what kind of components, quantities need to be delivered on a regular basis. So, this is the schedule that we are looking at and let us say for the next three weeks we are looking at a schedule that needs to be generated. So, like I mentioned earlier we do not need to send regular reminders to the vendor. He has the information present to him on his ERP module which we have given him access to. And the dispatch data once he is sending out the materials he has to just log in this dispatch data and once we get the deliveries we can record them on arrival and complete the process that we have with the vendor. And hence this can then be connected to invoicing at his side and the accounts payable at our side basis the interactions which we have carried out. And once all of this information has got captured as to how much we have paid and all of that then we can now also proceed to carry out spend analysis of how much money that we have spent upon engaging this vendor. So, this is also sometimes part of the ERP solutions that can be procured. Now coming to the final idea of ERP implementation in supply chain management when we look at some of the benefits of ERP we can see it is helping us connect various entities on a digital platform. So, it reduces the requirement for frequent in person interactions and it helps provide a very transparent and accountable means of carrying out all our business transactions. That we do have some challenges associated with it with any ERP system. The first foremost thing when it comes to supply chain management is that onboarding all supply chain partners or entities on the same ERP system will become a bit challenging. Because remember that not all supply chain partners are going to be of the same scale. Some of them may be small businesses, some of them may be very large businesses or large MNCs with a global footprint. They have a different kind of ERP system, but there could be a small components manufacturer who does not have any ERP altogether and does not even have the means to procure an ERP solution. So, how can you even engage with this particular component manufacturer? So, there may be no level of there will be very poor levels of digital maturity within the supply chain as a result of this. So, onboarding them on to your ERP system also becomes a bit tough. So, in such cases it is very crucial to actually invest in vendor management processes where they can be onboarded on to your ERP solutions. The other thing which could be challenging for onboarding the partners on to the same supply chain ERP platform would be the problem of fit between the software and a company's process. Now, I am probably a company which is involved in pure assembly operations. There could be another organization that is involved purely in warehousing activities only. Now, the activities are completely different in an assembly process and in a warehouse. So, as a result the processes are different. So, we have to figure out whether the ERP that we have actually has the capabilities of handling the automation of those processes on the digital platform. So, if this is not going to be possible again the fit between supply chain partners will become tough. Whereas, theoretically the assembly operations can be you know connected to the warehousing facility, but because of the incompatibility between process and the software you might not be able to come connect the partners on a digital platform. The other issue that could happen is let us say I am again a vendor and I am a vendor not just for you, but also for other clients and each of these clients have different ERP solutions which are going to be present. So, in that case how can I onboard myself on to multiple ERP solutions it is a cost intensive exercise for me. So, which is why it becomes a bit difficult or challenging to onboard all supply chain entities on same ERP platforms, which is why we still see that ERP implementation is not end to end in supply chain management, but to a large extent companies are trying their best to close these gaps by working with variety of ERP solutions as well as working closely with the vendors. If they figure out that the vendor works only on these ERP solutions and it is a constraint sometimes the company might even adopt it at least for only that set of processes and de-link it from the ERP of other processes within the organization. So, there are difficulties and challenges here, but it is possible for both parties to be working on some digital platform at the end of the day. So, in the next lecture I am going to talk about warehouse management systems and transportation management systems and we will see that they are also actually linked to what we have discussed in ERP for supply chains. Thank you very much and see you in the next lecture.