Transcript MRPII is an outgrowth of MRP - Department of Mechanical

What does a company’s strategy consist of ?
Company strategies concern,
• How to grow the business
• How to satisfy customers
• How to out compete rivals
• How to respond to changing in market conditions
• How to manage each functional piece of the business and develop
needed organizational capabilities
• How to achieve strategic and financial objectives
Introduction
 Manufacturing Organizations are complex `Systems' where
the interactions between the various functions Sales,
Distribution, Manufacturing, Materials, Finance, Human
Resources, Maintenance have to be managed towards a
common purpose of delivering the customers maximum
value at the optimum price.
 However, since most of these organizations have a
`Functional Structure', each function/department works
towards their own goals and objectives, rather than the
organizational goals.
 These are the issues addressed by `Enterprise Resource
Planning' software solutions providing a common,
consistent system to capture data organization wide, with
minimum redundancy.
What is ERP?
 ERP integrates the information across functions, and
provides a set of tools for planning and monitoring the
various functions and processes and ensuring progress
towards a common purpose
 A business management system that integrates all facets of
the business, including planning, manufacturing, sales,
and marketing.
 ERP helps business managers to implement ERP in
business activities such as inventory control, order
tracking, customer service, finance and human resources
MRP – the predecessor to and backbone of
MRP II
And
ERP
a joint effort between J.I. Case, a manufacturer of
tractors and other construction machinery, in
partnership with IBM.
Initial MRP solutions were big,
clumsy and expensive.(1960-1970)
Trends
objective
Demand
management
Reports
Inventory Transaction
(Sales forecasting)
Inventory level
Strategic
management &
Business plan
Master production
plan
Resource
requirement
planning
Resource req.
scheduling
MRP :
MRPII
Elements
-BOM
-Lead Time
-Lot sizing
-Planned purchase
report
-Performance
reports
Capacity req.
Buy
Planning(CRP)
Realistic
Factory coordination
Realistic
Supplier
In 1972 five engineers in Mannheim, Germany, started up SAP
(Systemanalyse und Programmentwicklung).
The purpose of the company was to produce
and market standard software for integrated
business solutions.
The term Enterprise resource planning (ERP) was
coined in the early 1990s by the Gartner Group (Wylie,
1990). Their definition of ERP included criteria for
evaluating the extent that software was actually
integrated both across and within the various functional
A typical Example
Data Flow Diagram to
support Part product
approval process
Warranty Form
Transpotation
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How WIP could be improved by implementation of ERP (Work in
Process )
Without using of any integrated system
using of integrated system
Some Questions
 What are the major types of systems in a business? What role
do they play?
 How do information systems support the major business
functions?
 Why should managers pay attention to business processes?
Major Types of
Systems
• Executive Support Systems (ESS)
• Decision Support Systems (DSS)
• Management Information Systems (MIS)
• Knowledge Work Systems (KWS)
• Office Systems
• Transaction Processing Systems (TPS)
Transaction Processing Systems (TPS):
• Basic business systems that serve the operational
level
• A computerized system that performs and records
the daily routine transactions necessary to the
conduct of the business
Types of TPS Systems
Payroll TPS
Executive Support System (ESS):
Strategic level
 Inputs: Aggregate data
 Processing: Interactive
 Outputs: Projections
 Users: Senior managers
Example: 5-year operating plan
Management Information System (MIS):
Management level
 Inputs: High volume data
 Processing: Simple models
 Outputs: Summary reports
 Users: Middle managers
Example: Annual budgeting
Decision Support System (DSS):
Management level
 Inputs: Low volume data
 Processing: Interactive
 Outputs: Decision analysis
 Users: Professionals, staff
Example: Contract cost analysis
Knowledge Work Systems (KWS):
Knowledge level
 Inputs: Design specs
 Processing: Modeling
 Outputs: Designs, graphics
 Users: Technical staff and professionals
Example: Engineering work station
Decision Support System (DSS)
Decision Support System (DSS)
Relation Between 5 systems
(MIS)
With out any Integrated system
(ESS)
(KWS)
(TPS)
Using Integrated system
ERP elements
Enterprise resources planning software
Supply
Best Practice :
Chain management
Comparing your process with similar processes
In higher companies
6 level of sys.(ESS,MIS,TPS,…) +MRPII
ERP Software Companies
& Marketshares
Software
SAP; 15,6
Peoplesoft;
4,9
Oracle ; 4,8
Market Share
SAP
15.6
Peoplesoft
4.9
Oracle
4.8
Baan
3.0
CA
3.0
JDE
2.2
SSA
2.1
GEAC
2.0
IBM
1.8
JBA
1.7
Others
59.0
Baan; 3
Others ; 59
CA; 3
JDE; 2,2
SSA; 2,1
GEAC; 2
IBM; 1,8
JBA; 1,7
TABLE 1.2 Business Functions Potentially Supported by
ERP
source :T.H . Davenport,” Putting the Enterprise into the Enterprise System.”
Harvard Business Review, July-August 1998.
Financial
Human Resources
Operations and Logistics
Sales and Marketing
Accounts receivable and payable
Time accounting
Inventory management
Order management
Asset accounting
Payroll
Materials Requirement Planning
(MRP)
Pricing
Cash forecasting
Personnel planning
Plant maintenance
Sales management
Cost accounting
Travel expenses
Production planning
Sales planning
Executive information systems
Project management
Financial consolidation
Purchasing
General ledger
Quality management
Profitability analysis
Shipping
Standard costing
Vendor evaluation
Modules Offered by Leading Vendors
Functional
Description
SAP
Oracle
People Soft
JD Eswards
Records sales orders and
scheduled deliveries
,customer information
SD( Sales and Distribution)
Marketing Sales Supply
Chain
Supply chain management
Order management
Purchasing and raw
materials inventory,
work- in-process.
customer information
MM (Materials
Management
Procurement
Supplier Relationship
Management
Inventory Management
Procurement
Production Planning
and scheduling actual
production
PP (production planning )
Manufacturing
Product inspections
,material certifications
,quality control
QM (quality Management)
Preventive maintenance,
resource management
PM (plant Maintenance)
Service
Enterprise Service
Automation
Recruiting, hiring
training ,payroll
,benefits
HR (Human Resources
Human Resources
Human Capital
Management
Manufacturing
Management
Enterprise Performance
Management
Technical Foundation
Workforce Management
Reasons for Implementing ERP-Rating 1(Not Important) to 5(very Important)
Reason
United States
Sweden
Replace legacy systems
4.06
4.11
Simplify and standardize systems
3.85
3.67
Improve interactions with suppliers & customers
3.55
3.16
Gain strategic advantage
3.46
3.18
Link to global activities
3.17
2.85
Pressure to keep up with competitors
2.99
2.48
Ease of upgrading systems
2.91
2.96
Restructure organization
2.58
2.70
Modules Offered by Leading Vendors
Functional Description
SAP
Oracle
People Soft
JD Eswards
Internal management,
cost analysis by cost
center
CO (Controlling)
Fixed-asset purchase
and depreciation
AM (Asset
Management)
Asset Management
Enterprise Asset
Management
R&D ,construction,
marketing projects
PS (Asset
Management)
Projects
Project Management
Contracts
Subcontract
Management Real
Estate Management
Automate system, task –
flow analysis, Prompt
actions
WF (Workflow)
Best practices
IS (Industry
Solutions)
Time and Expense
Management
Relative ERP Module Use
Module
Midwestern ERP Users
Swedish ERP Users
91.5%
87.3%
Materials management
89.2
91.8
Production planning
88.5
90.5
Order entry
87.7
92.4
Purchasing
86.9
93.0
Financial control
81.5
82.3
Distribution/logistics
75.4
84.8
Asset management
57.7
63.3
Quality management
44.6
47.5
Personnel/human resources
44.6
57.6
Maintenance
40.8
44.3
R&D management
30.8
34.2
Financial and Accounting
Advantages and Disadvantages of Alternative ERP Development Methods
Method
Advantages
Disadvantages
Develop in-house
Best fit with organizational needs
Most difficult to develop
Most expensive
Slowest
In-house system
With vendor supplements
Gain commercial advantages
Combined with organizational fit
Difficult to develop
Expensive
slow
Best-of-breed
Customized vendor system
Theoretically while keeping
Retain flexibility while keeping
Vendor expertise
Difficult to link modules
Slow
Slower
Usually more expensive
Selected vendor modules
Less risk
If expand, long run time and cost higher
Relatively fast
Least expensive
Full vendor system
Fast
Less expensive
Efficient
Inflexible
Application device provider
Least risk
Least cost
Fastest
Least subject to vendor change
At the mercy of ASP provider
No control
Subject to price increases
Expected ERP Project Installation Time Requirements
Installation Time
United States
Sweden
12 months or less
34%
38%
13 to 24 months
45
49
25 to 36 months
11
8
35 to 48 months
6
4
Over 48 months
2
1
ERP Estimated Installation Project Cost
Installation Cost
United States
Sweden
Less than $5 million
42%
48%
$5 million to $25 million
33
35
$26 million to $50 million
10
18
7
7
7
(in prior category)
$51 million to $100 million
Over $100 million
ERP Installation Project Cost Proportions
Installation Cost Proportion
Project
Installation Cost
Proportion in United States
Cost Proportion
in Sweden
Software
30%
24%
Consulting
24
30
Hardware
18
19
Implementation team
14
12
Training
11
14
Other
3
1
A supply chain is characterized by the flow of materials and
information both within and between business entities including
suppliers, manufacturers and customers. The ultimate goal of
supply chain management is to meet customer’s demand more
efficiently. For a manufacturing company, it is to make the right
product, for the right customer, in the right amount, at the right
time.
ERP System Options and Selection Methods
Enterprise resource planning systems are very large IS/IT projects .The
cost range is enormous, depending upon the size of the firm
implementing the system ,as well as on how many modules are used.
ERP Implementation And Maintenance
ERP Systems Are Adopted In The Hopes That They Will Improve The
Performance Of An Organization On A Number Of Key Performance
Indicators , Such As Profitability , Efficiency , And Accuracy In
Information System Data And Reports . ERP Vendors Typically
Promise Gains Of 10 To 15 Percent In Revenue , Customer
Satisfaction , And Other Measures Of Value . The Effort Required To
Build These Systems Is Significant . Meta Group found that the
average ERP implementation takes 23 months with total Ownership
cost of $15 million .
Business Intelligence Systems And ERP
Enterprise Resource Planning Systems Offer Powerful Tools To Better Measure
And Control Organizational Operations . Many Organizations Have Found That
This Valuable Tool Can Be Enhanced To Provide Even Greater Value Though The
Addition Of Powerful Business Intelligence Systems . Business Intelligence In
This Context Is Supported By Sorting Data (Data Warehouse And Related
Systems) And Conducting Studies Using This Data To Solve Business Problems
( One Means To Do This Though Data Mining ) . One Of The Most Popular Forms
Of Data Mining In ERP Systems Is Support Of Customer Relationship
Management (CRM). Data Warehouses Are One Of The Most Popular Extensions
To ERP Systems , With Over Two-Thirds Of U.S. Manufacturers Adopting Or
Planning Such Systems ( And Slightly Less Than Two – Thirds of Swedish
Manufacturers doing the same ).
There Has Been Tremendous Progress In Computer Storage Of Data . Many
Applications Are Being Found For This new capacity . one major user of
massive storage capacity is ERP systems, witch have large storage
requirements due to their comprehensive nature .
Data Mining Overview
Data Mining Overview Refers To The Analysis Of The Large Quantities Of Data
Stored In Computers . For Example , Grocery Stores Have Large Amounts Of
Data Generated By Purchases . Bar Coding Has Made Grocery Checkout Very
Convenient . Grocery Stores And Other Retail Stores Are Able To Quickly
Process Purchases , And Use Computers To Accurately Determine Product
Prices . These Same Computers Help The Stores With Inventory Management By
Instantaneously Determining The Quantity Of Items Of Each Product On Hand .
Stores Can Also Apply Computer Technology To Contact Their Vendors So That
They Do Not Run Out Of Items . Computers Allow The Store’s Accounting System
To More Accurately Measure Costs And Determine The Profit That Store
Stockholders Are Concerned About . All Of This Information Is Available Based
Upon The Bar Coding Information Attached To Each Product . The Benefits Of
Bar Coding Encompass For More Than Faster Checkout Service . The Entire
Business Management Process Can Use The Information Generated .
ERP And Supply Chains
Supply Chain Are Collections Of Organizations That Work Together To
Provide Raw Materials That Are Converted Into Products And Delivered
To Retail Outlets Where Customers Can Obtain Them . In The Past ,
Monopolies Would Sometimes Seek Vertical Integration So That They
Could Control The Entire Supply Chain ( Standard Oil Went A Long Way
Toward Total Vertical Integration ; Steel Companies Also Attained At
Lest Something Approaching It ) . The Dutch East India Companies Are
An Early Example Of A Global Supply Chain . Military Logistics
Systems Are The Epitome Of Supply Chain Is Control And Efficiency .
Today‘S Companies Gain Efficiency Through A Higher Degree Of
Specialization . This Appears In Various Forms , Including Outsourcing
. The Idea Behind Outsourcing Is That There Are Specialists
Throughout The Supply Chain Who Can Do A Better Job Of The
Specific Function They Perform .
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Conclusion
•The growing information needs of an enterprise make it imperative
to improve or replace old systems.
•Especially under the present business environment, where the
globalization has been initiated, full convertibility is coined.
•Infrastructure Projects are nearing completion, and it is expected
that the whole business system will undergo a major shift.
•Implementation of ERP solutions is one of the largest
drivers of growth in the consultancy business.
•The introduction of such a large and complex software like
ERP, enables an organization to integrate their
manufacturing, finance and marketing operations at all
levels, is in itself a challenge, since it calls for technical and
functional skills and a change in user mindsets.