Demand-Driven Inventory Optimization and Replenishment

Chapter 3Just-in-Time and Enterprise Resource Planning Rise Together

Throughout the 1990s, organizations were upgrading their internal computer systems to embrace enterprise resource planning (ERP) systems from companies like SAP and Oracle. These systems were designed to facilitate all of the transactional activities that would occur and provide aggregated and hierarchical reporting. Given that a supply chain is like a river running through an organization, it was only natural for the ERP system to be used for inventory control and replenishment planning. It is interesting that the just-in-time (JIT) and ERP movements intersected as both were rising at the same time and, because of their respective shortcomings, quite naturally dovetailed together.

This dovetailing is due to the single site or facility concentration of JIT and ERP. As you remember from the previous chapter, the JIT production methodology focuses the cost improvements on production and moves the inventory risk back onto the supplier. The ERP system, due to its underlying data structures, makes assumptions about upstream and downstream inputs so that it can focus on the costs at the single location. The focus of a methodology and a technology toward single-echelon efficiencies allowed a lot of JIT methodologies to transition into the ERP calculations that are still in inventory management processes to this day.

Denormalized Tables

The transactional nature of ERP systems requires them to operate in near–real ...