Introduction to ERP based Enterprise system


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Introduction to ERP based Enterprise system

  1. 1. Introduction to ERP based Enterprise system
  2. 2. • ERP provides an integrated application environment with fast and seamless access to a single unified business information system.• It cost between 50 Lakh to 500 Crores depending on the size of the organization . It is being used by govt , insurance companies ,banks and universities ,oil companies , defense.
  3. 3. • ERP is a fully integrated management system and it includes :• It provides real time online information for decision making.
  4. 4. Evolution of ERP• The evolution of SAP is from SAP R1 to SAP R2 to SAP R3 to MY SAP.• From EOQ to MRP (MPS) to ERP.
  5. 5. • Application of ERP for a manufacturing concern. Bring the raw material from the supplier----Schedule it in to production to make thefinished products-----planning preventivemaintaince(effect of such maintaince oncustomer orders) -----depreciation of equipmentin financial system---scrap it from system.
  6. 6. Challenges in Implementation of ERP• Structural & Cultural in nature.• Most ERP projects are failed to be implemented on time and higher cost.• ERP needs Re-engineering of process.
  7. 7. Potential benefit of ERP(Tangible & Intangible)• Enterprise integration :Functional & Geographical.• Standardization of systems.• Transparency• Reduction in paper work.• On time and accurate information.• Better monitoring and quicker response of queries.• Increased customer satisfaction.
  8. 8. Modules of ERP• ERP has a client server architecture.• It deals with the following modules.----- Human Resource------1.Payroll ----Handles accounting and preparation ofcheques related to employee salary , wages andbonuses.2. Human resources administration: Personnelmanagement including recruitment ,business ,travel and vacation allotment
  9. 9. • Financial module:1. Accounts recievable2. Accounts payable3. Fixed assets4. Treasury assets----Monitors and display cash holding,financial deals.
  10. 10. • Manufacturing and logistics:1.Production planning:2Materials management3.Sales and distribution4.Order entry and process of customer orders5.Warehouse management6.Transportation management7.Plant maintaince8.Customer service management
  11. 11. Vendors of ERP• ORACLE- CRM ,SCM, Financial Management module.• SAP• Microsoft• Infor• Epicor• ABB Automation
  12. 12. Advantages of using ERP :• 1.Scheduling the operations to deliver the product to the customer.• 2.Planning preventive maintaince of equipment.
  13. 13. Sales & Distribution ERP Module:• Eg : A company manufacture motors. They encountered the following problem Subsystems Problem Sales Order entry Incorrect pricing , incorrect credit information , calls to customer to get the correct information Inventory Incorrect inventory , delays in inventory update ,Inadequate inventory to fill orders. Shipping Delay in shipping and delivery Invoicing Inaccurate or incomplete invoice
  14. 14. Payment Processing Incorrect posting of paymentAccount receivable Delay in accounts receivable posting ,reminder letters are generated to customers who have already paid
  15. 15. Sales & Marketing ProcessOperational Prospecting , contact management, telemarketing .Management Control Sales management ,product pricing , advertising and promotion ,sales forecasting.
  16. 16. Implementation of ERP in this SALES and Marketing module• Implementing ERP provide integrated marketing support systems which include contact files , order entry files , sales history files , CRM software( previous experience of customer , including purchases , product preferences & payment history world wide).
  17. 17. • Now here with the help of ERP module: Customer places an order-----Sales order is recorded----ERP systemsschedules shipping(works backward from shipping date to reservematerials to order parts from suppliers and to schedulemanufacturing)------ERP checks the customer credit limit update thesales forecast----creates the bills of materials-----sales personcommission is updated----Product cost and profitability is calculated-Finally accounting data is updated(balance sheet , accounts payable,Ledgers.
  18. 18. • The major advantage of Sales & Marketing module provides the benefit of standard codes , common data base, standard document , audit trail.
  19. 19. ERP (CRM)Key features CharacteristicsOne to One marketing Tailors product ,pricing , promotions to the customer.Telemarketing Facilitates customer contact and call list management.Call Centre automation Enables queries to a productSales & Marketing ERP (CRM) helps in Sales & Territory management , Contactmanagement ,lead management.
  20. 20. Interfacing of Sales & MarketingModule with the other modules.
  21. 21. Accounting & Finance ERP• Suppose a Company is selling motors :Now the following problem can occur if there isno Accounting & Finance ERP : Credit Management Accounts Receivable balances on customer can fall out of date and result in mis -information in sales about customer credit limits. Product Profitability Inconsistent recordkeeping keyed in to multiple data bases may result in correct data on product profitability.
  22. 22. Finished goods inventory Delays in increasing finished goods inventory when goods are transferred from manufacturing in to the warehouse.Consolidating information from Difficulty closing books at the end ofsubsdaries accounting period which is complicated when multiple subsidiaries with multiple currencies ,difficulty integrating financial information from incompatible system with different data base.Management reporting Separate data base for marketing ,production and purchasing make it difficult to provide management with an integrated analysis of profitability and cash flow.Creating an audit trial Difficulty creating an audit trial of transactions when multiple transactions use multiple databases
  23. 23. Accounting & Finance Process• Accounting & Finance functions produces transactions such as paychecks , checks to vendors ,customer invoices , purchase orders. The accounting processes begin when asales order is entered -------This generates aninventory update to the inventory system whichmaintains information about each item in stock andtriggers the purchase of additional stock when thestock level reaches a certain point------
  24. 24. ------The purchase order system creates thepurchase order and tracks which purchase ordershave been fulfilled , which items are on back orderand which orders are expected to be received ------The sales order generates an invoice to thecustomer from account receivable system-------when the payment is made the account receivablebalance is updated(When the payments areoverdue the Account receivable system generates areport that shows account balances which are30,60,90 days overdue .
  25. 25. Side by side Accounting & Finance module doesthe budgeting ,cash management, capitalbudgeting also.
  26. 26. Production & Material Management ERP.
  27. 27. Without ERP –The Problems Faced• Problem of shortages , Capacity Planning , Supplier Problem.• Last minute change in the product specifications can fail to make it to the shop floor.• When a totally new product is to be designed the engineering department does not have the information from marketing what actually a customer wants.
  28. 28. • Purchasing requisitions get lost in the approval process because paperwork is all manual . So it creates multiple purchase requisitions.• Production Planning Problem: Production planning may not be linked to expected sales levels , difficulty in adjusting production to actual sales to meet the sales demand.• Inaccurate production forecast may lead to incorrect purchasing decision.
  29. 29. • So in all there is a problem of integration between production planning , sales , purchasing and accounting.
  30. 30. Production Planning Process• Production Planning Process includes the following activities:1. Producing the production plan- **Operational & Management control.2. Acquiring raw materials3. Scheduling equipment , facilities and workforce to process these materials.4. Designing products and services
  31. 31. • Operational level activities include daily activities like purchasing , receiving , Quality Control , inventory control, materials management (Bills of material),cost accounting(cost of personnel , materials,equipment)
  32. 32. • Managerial Requirements Planning include:-------Identifying stocks that planned productionscalls for.------Determining the lead time to get the stockfrom the suppliers.------ Calculating safety stock levels.------- Calculating the most cost effective orderquantity.
  33. 33. Implementation of ERP in Production PlanningSubsystems How an ERP worksSales Forecasting Production has access to sales forecast so it can adjust production levels to actual sales.Sales & Operations Planning Determine if production facilities can produce enough to meet the consumer demand.Purchasing Generates the purchase orders for raw materialsInventory Determine which material you need ,in what quantity and at what time.Accounting ERP captures data on the shop floor for accounting purposes.
  34. 34. ERP-Human ResourceSubsystems ProblemsEmployee Information Need to query employee information to identify the candidates with required skill sets.Applicant selection and placement Need to develop selection criteria to provide a more stable workforce.Government reporting Need to maintain and update data for government reporting requirements.Job Analysis and design Need to design positions which will minimize turnover by providing breadth and depth of responsibilities.Compensation Need to develop competitive salary and benefit packages for key positions.Benefit administration Need to analyze alternative benefits scenarios to minimize costs and maximize employee loyalty and satisfaction.
  35. 35. • More of the problems exist due to lack of access to information about employees , skill sets ,job description , turnover data , retention data . Failure to link HR data with financial data.
  36. 36. Implementation of ERP in HRSubsystem How ERP worksEmployee information Maintains personnel information, including job history, salary , retirement and benefit choices.Skills inventory Maintains information on special skills , work experience.Position Control Defines each position with in the organisation :Providing common job categories ,descriptions , and specifications which can be used across the organisation.Compensation Maintain the compensation data, maintain the employee compensation changes(salary history , job evaluation results)
  37. 37. Performance Management Maintains performance appraisal data and productivity data.Training & development Tracks information about the courses , I instructions,students and registrationsGovernment reporting Provides reports in response to government statutes including the Age discrimination act,the equal pay act ,,the occupational act etc.Payroll Generates payroll and various statements.
  38. 38. • In addition to these capabilities it supports attendance reporting , determination of overtime and bonus wages ,tracking of absences which are due to vacation , illeness or leave.
  39. 39. ERP Project Life Cycle• ERP project is not only expensive but also require high attention in its implementation efforts.Once the need is established then its feasibility report should be prepared so as to ensure the smooth adoption and benefits likely to derive out of this investment.
  40. 40. Business Case AnaylsisStage 1- Pre Implementation Stage Business Case Anaylsis 1.Business Practices 1.Cost –benefit Analysis 2.Business Processes 2.Organisational Analysis 3.IT Infrastructure 4.Competitive environment 5. Strategic FeasibilityAnalysis(Technical,Organisational,Schedule )) Product /Partner Evaluation
  41. 41. Stage II : Implementation Change Management: BPR ,Training, Organisational Project Management readiness Implementation Approach Phased/Big -bang
  42. 42. Stage 3: Post Implementation Extended according to Optimization Utilization requirements Impact on Business Performance
  43. 43. Strategic Need Analysis• Feasibility Analysis: Feasibility analysis guides the company in determing whether to process with the project or not.It identifies the important risk associated with the project.
  44. 44. Feasibility Analysis Parameters:• 1. Technical :Familiarity with application/TechnologyProject SizeCompatibilityRelated to determining methodology to be used.
  45. 45. • 2.Organisational1. Top management support2. User involvement and support3. Be a part of development team-incorporate their support.4. Stakeholders : Customers,Vendors,Government
  46. 46. • 5. Strategic Alignment: Fits with company goals , mission.• 6. Political Scenario
  47. 47. • 3. Schedule:1.Time & Cost2.Use PERT/CPM techniques to access if theproject is on Track
  48. 48. • Other issuesAvailabilityReliabilitySecurityResources required.Risk:Cost Benefit Anaylsis:ROI,Present value anaylsis
  49. 49. Cost Element Associated with ERP• There are some fixed cost elements that are associated with implementation of ERP: Hardware cost , software cost , system integration cost , training cost , staff cost , consultant cost to estimate the overall investment. The company should also consideroperational and financial parameter like theworking capital , fixed assets , inventory turnoverratio , manpower productivity ratio , businessprocess lead time.
  50. 50. • Approximate investment required for a small/medium scale organization with turnover< 20 Crore is 35 Lakh Approximately. This amount includes: Networkinfrastructure for 5 LAN points ,Hardware(database and applicationserver),Operating system , database , Annualmaintaince ,IT skill manpower.
  51. 51. • Some of the global benchmarks for benefits of ERP driven business : 30-35 % reduction in cost of sales65-70 % reduction in cost of quality75-80 % reduction in delivery time35-40 % reduction in manpower60-80 % reduction in inventory. Also there is reduction in engineering &design time , supply chain optimisation , machinedown time
  52. 52. Analysis of ERP software• Some ERP solutions are tailor made but it can be modified and customized to cover a range of industry segment
  53. 53. ERP Market• Its growing• Lack of skill full people.
  54. 54. SAP• It occupies the 30 % of the market share.• It’s the world leader in ERP solutions• It stands for Systems Application and Product in Data processing.• Current version of SAP that is being used is SAP R3.• It operates on operating system like UNIX,NT.
  55. 55. • It has more then 7500 clients . It uses ABAP/4(Advance Business Application Programming) and has 14 different modules.• It is the first mover of ERP.• It serves Aero space , defense ,automotives , chemicals , healthcare , engineering & construction,phramaceutical.
  56. 56. SAP R3• r/3 system R/3 employees’ three-tier client/server architecture widely recognized bySAP customers, industry analysts and technology partners to solving some oftoday’s most demanding information management challenges. There are three functional layers and each support the demands of itsfunctions.• 1. The first layer is data layer resides on control servers.• 2. Second layer i.e. the application layer holds the processing logic of the system, prepares and formats the data for individual offices and departments.• 3. The presentation layers handles all the tasks related to presentation of data including tasks interfaced by users of personal computers.
  57. 57. Strengths of SAP• Long term Partnership with the customers.• In-depth knowledge of business.• Brand recognition• Experience• Sound financial situation• Covering 27 different industries.• Sustained investment in R&D• Strong qualified consultant.
  58. 58. Weakness• Its too big and complex.• Costly• It takes between 18 months to 5 years.
  59. 59. • Oracle: Next challenger to SAP. Its product name is Oracle E-business Suite .• Peoplesoft: It has three products: People soft enterprise , people soft entreprise one , people soft world catering- HR , Finance , IT ,procurement ,marketing , services,sales.
  60. 60. • IFS : Industrial financial system : Only for Large and medium size companies
  61. 61. Role of vendors1.Vendors are the people who have developedthe ERP software’s. These people have investedhuge amount of time and efforts in research anddevelopment to create the software solutions.The ERP vendors spend billions of rupees inresearch to come-up with innovations that makethe package more efficient, flexible and easy toimplement and use.
  62. 62. 2.Along with development and research, thevendors are also responsible for up gradations inthe technology. The vendors constantly upgradetheir products to become best and latest inadvancements of technology.
  63. 63. 3.The vendor should supply the product and itsdocumentation as soon as the contract issigned.For fixing any problem inimplementation, a vendor should have licenseofficer who should interact with theimplementation team.
  64. 64. 4.The another role or responsibility of a vendor is asa trainer – to offer initial training for company’s keyusers. This informs the users how the packageworks and what are the major components, howthe data and information flows across the system,what is flexible and what’s not, what can beconfigured and what cannot, what are thelimitations, what are the strengths and weaknesses,what can be customized and what should not andso
  65. 65. • The vendors also support the project functions and must exercise the quality control when product is implemented• Vendors should continue to participate in all phases of implementation of a project.• Rather than these responsibilities, vendors should also involve in customizing the product filling the gaps between package and actual business and offer the guarantee of customization.
  66. 66. ERP Market Share
  67. 67. criteria ifs marshal oracle sap Baan people soft J.D.edwardsCompleteness of functionalitywith in core package. Comparison of Software Yes, except project and advanced production scheduling. Yes, except project and advanced production scheduling. Yes, but maintenance modue is available through Maximo. Project scheduling and advanced scheduling are add ons. Yes, except advanced Yes, except project and Complete solution production scheduling. advanced production scheduling. is not internal. Yes, except project and advanced production schedulingProject scheduling Primavera link Primavera link Primavera link internal internal Primavera link No linkAdvanced planning and Proposed i2 No link I1 Rhythm Limited internal and i2 No link Available No linkscheduling Rhythm RhythmMulti plant Available Available Maximo link Available Not complete Available availablemaintenanceLocalization Planned Available Available Available Available Available Not availableArchitecture 3 tier web thin client 3 tier web 3 tier web 3 tier 3 tier 3 tier 3 tierChoice in OS Unix,NT NT Unix,NT,OS 400 Unix,NT Unix,NT Unix,NT Unix,NT,OS 400Data base Oracle MS SQL Oracle Multiple Multiple DB2/400 multiple SQL server oracleDevelopment tools Rational rose MS visual Oracle designer ABAP Baan 4GL ANSI C
  68. 68. Role of End users
  69. 69. In-house Implementation Pros & cons• The system that their in-house team develops are not having quality, scope, functionality or technology as compared to software created by software firms.. But to get maximum benefit – out of packaged solution, the company should participate fully during a package implementation
  70. 70. • The people who are implementing ERP system should have the good knowledge of product along with following skills:1. Knowledge of how to organize and run aproject of this magnitude, i.e., goodorganizational skill, project management, teammanagement skill and knowledge of scientificmethod of software project management
  71. 71. • 2. Enough experience in handling problem and issues that arise during the implementation e.g. problems like cost over runs, time overruns etc.• 3. Good people skills: ERP implementation will face resistance from the employee i.e. will be ignorance about the product, fear of an un- employment, fear of training, fobia of technology etc. That’s why it is very important that people in the implementation team are very good, diplomats, adapt at diffusing crises situations
  72. 72. • Good leadership skills: An ERP implementation involves many people, thus is necessary for vendors to adapt good communication and leadership skills. This is required for implementation with existing employees.• Excellent – training skills: As the team training and end user training are the important phases of implementation process, the excellent training should provided by the vendor
  73. 73. ERP Product Life cycle• It’s a modified BCM. A new company would start as a Baby andthen continues it way to become star and thenafter it becomes in to maturity stage it is amongthe cash cows.When the technology gets old andit loses its client it becomes it ends up in thecategory on Dogiee.
  74. 74. Technology: ImmatureTechnology: Mature Vendor:New VendorVendor : Growing & established Functinoality:BasicFunctionality: Many add on’s Costs:LowLiabilty:Less Support:ExtendedCost:Moderate Installed base: None/fewInstalled base: Growing Liabilty:high Technology: Modern Technology: Old Vendor: Established Vendor:Declining Functinality: New Support :Passive Support: Sturctured Functanlity:No development Liabilty:Stable Liability: Unstable Costs: High Costs: Unacceptable Installed base : Large Installed base:Decliing
  75. 75. Evaluation of ERP SolutionsIs ERP a technical or is it a Strategic Solution:Whether it is a technical or it is strategic, theother is bound to be impacted.
  76. 76. ERP as an Technical Solution• If the company views ERP as a technical solution the main reason for changing over is that its present information system are too old. Many companies still use the systems that were developed in house and are specially adopted for the company . Most of the companies have several systems developed by different vendors.The capacity of these systems is often not enough or they cannot be upgraded because they are not supported any more.
  77. 77. ERP as a Strategic solution• For larger enterprises it is very difficult to get a general overview of its organisation.This can be simplified with a uniform system where everybody works according to the same routine. An integrated ERP systems gives opportunities to rationalize and develop the organizational ERP system may be seen as a tool to obtain the information that can be important when forming the company future staretergies.Information technology to an increasing degree concerns the management and the decision to buy the ERP is almost always taken by the top management
  78. 78. • To further breakdown the above two categories there are three level that affected when implementing an ERP system:a) Business Development : Development of the business strategies.b) Operational Development: Development of the company’s business process and their relationship with the concerned functions with in the organizations.c) System Development: Development and administration of necessary IT services where the ERP system is an Important part
  79. 79. Methadology For ERP evaluation:• Since ERP involves huge investment it is like do it right the first time.Vendor selection is a multilayered process.Intially a request for information is delivered to some potential vendors after doing research in market.The various steps are as follows.
  80. 80. Step-1 RFI• RFI summarizes the requirements of the company to the potential vendor . The level of details needs to enough to allow a good understanding of the effort involved in the proposed contract. However vendors are only going to express an interest and not a detailed proposal with the pricing details. In addition to a statement of the project requirements the RFI should also state any preconditions of the contract. The preconditons may be the quality standards ,size of the vendor organization ,location of corporate and support centers market position etc. Evaluation of the RFI document helps narrow down the vendors to a preferable limit.
  81. 81. Functional Requirements Specification• Identifying the detailed functional requirements is the most intricate task of the management and the project committee.------- The first step in defining specifications is tobreak the job down in to manageable pieces bybusiness functions . Specifications for each functioncan be defined with the help of experts in thatfunctional area.Perhaps the most difficult aspect ofdefining in detail the functional requirements isdeterming how much detail is enough and howmuch is too much.
  82. 82. • After gathering all the functional requirements their importance is to be weighed. The main issues are to be focused . Some of the most important areas are finance ,marketing , project management , production planning & control. So to address these areas companies create their functional criteria and ask the vendors whether they comply with the given criteria by filling up some compliance materials provided in the next step of RFP preparation.
  83. 83. Request for Proposal (RFP)• Request for Proposal is the next step in vendor selection.Once the vendor are narrowed down to a particular number in the RFI stage RFP’s are sent to them from organisation asking them for detailed proposal both in terms of technical & financial results.
  84. 84. • RFP must do the following:1. Describe the company to the supplier2. Provide an understanding of the needed software capabilities as it relates to the functional requirements.3. Solicit bids(price estimate based on system requirements)
  85. 85. • RFP should contain the following information:1.Introduction of the company,the industry itserves and the scope of the planned system.2.Objectives for adopting ERP based informationsystem3.Instructions to be followed by the bidders4.Criteria that will be used to make the selection
  86. 86. • 5. Detailed functional requirements to which the bidders capabilties response is expected• 6. Conditions of the contract between the company and the bidders for implementing the ERP based information system.
  87. 87. • Some if the standard methods that are followed are:1) Open tendors:Tenders are invited openly from ERP vendors .2) Limited tender: In this in comparison to open tender is restrictive process as a limited number of RFP’s are sent to a few pre-ferable vendors.
  88. 88. Evaluation Procedures:
  89. 89. ERP enabled BPR• Business Process Re-engineering is the fundamental rethinking and radical redesign of business process of an organization to achieve dramatic improvement in critical contemporary measures of performance such as cost , quality , service and speed.It involves radical redesign of business process , information technology and the organisation structure.
  90. 90. Why Process re-engineering?• To gain Core competency.• Customer demand :Significant gap exist between the actual and the desired results.**** almost 70 % of the projects fail due to lackof senior management sponsorship or failure tomake commitement.
  91. 91. How is ERP different from other Process Improvements.• Quick Hits :These are typically low risk , easily achievable efforts that provide immediate payback opportunities.• Incremental Improvements : Focusing on small performance gaps , delivers small degree of change that achieve small but meaningful business results. Document the process problem-----Establish the measures-----Follow the process----Measure the performance------Identify andimplement improvements.
  92. 92. • 3.Re-engineering - But it says the current process is irrelevant itdoes not work , it is broken , forget it , just startover again. Initiating(defining the scope & objectivesof the re-engineering project) ----Documentingusing Porters value chain-----Focus on AS-ISProcess-----Design TO- BE process------Implementation.
  93. 93. Characteristics of BPR• Cross-functional Orientation & Process Innovation:• Customer focus and outcome orientation.
  94. 94. Workflow management system in BPR• Workflow management integrates aspects of technology ,organization &methodology and support in communication and coordination of business processes in the organization.
  95. 95. Workflow Process• 1. Initiation------ 10 % of the total time• 2. Documenting the processes using Michael Porters value chain.-------- 10 % of the total time• 3.Focus on the AS-IS processes------ 20 % of the total time.• 4.Design the “ TO-BE” processes.--- of the 40 % of the total time.• 5. Implementation of ERP enabled BPR- 20 % of the total time.
  96. 96. Five stage Model of AS-IS/TO-BE Analysis• In this model the thorough analysis of the ability to meet core business needs and identifying of gaps between the core needs 7 existing applications features and functionality is documented with all the alternatives , including estimates of all resource and schedule impacts.
  97. 97. • It covers the following aspects:a) Process Analysisb) Product analysisc) IT infrastructured) Competitive analysise) Strategic analysis
  98. 98. • Process Analysis : A clear understanding of the current process is needed to be done to have a migration from “AS-IS” environment to the “ TO-BE” environment..
  99. 99. • AS ----IS TO-BE 1. Customer dissatisfaction because of delays 1.Matrix structure is 2. Inefficient manufacturing process required to reduce 3. Increased labour cost ,raw material cost. bureaucracy 4. Lack of innovation in business 2. Need for efficient cellular system 3. Needed to reduce product cycle time. ERP helps in 4. Need for proper Reducing inventory implementation of supply Decentralization of decision making. chain Management Creating sense of ownership among workers Reduce cycle time
  100. 100. • Product Anaylsis : Same as in Process analysisThe AS-IS and TO-BE analysis of the product isdone. AS-IS TO-BE1.Lack of innovation in 1. New product developmentproduct development2. Decline in sales because of 2. Integration of all departments tonon-competitive products produce innovative product.3. Low productivity 3. Increasing productivity.
  101. 101. • IT infrastructure: It is important to understand the current systems that are supporting the current processes. Most of the time the newtechnology will replace some or all of theexisting technology.By understanding thecurrent systems data migration , integration andplan for a smooth transition to the newtechnology can be defined.
  102. 102. • Competitive Analysis : AS-IS TO-BE1. Decline in sales because Implementing latest technologyof rise in competition2. Lack of innovation in Increasing network within andProducts comparing to outside of the organizationCompetitors.3. Lack of technological advantage Leading organization towards SBU.
  103. 103. Strategic Analysis• 1. Programs in Isolation 1. Rebuild process from scratch• 2. No synergy gain 2. Redesign the methods• 3. Bureaucratic hierarchical 3. Design & develop customer organization structures centric ,decentralized decision making flexible systems
  104. 104. ERP –ES enabled best business practises.• Lean manufacturing• Vendor managed inventory• Condition based scheduled maintaince (CBM) to launch a journey towards excellence for achieving dual goals viz zero defect & zero breakdown.• Competency based appraisal
  105. 105. • All the above management practices demand availability of accurate information and coordination between various departments , parties and business processes.So for this ERP based integrated information system become inevitable.
  106. 106. Lean Manufacturing• Lean manufacturing is a means by which the overall business processes are organized so as to deliver products with greater variety and superior quality using less resource and in a shorter time.It can be implemented by having:1. Faster throughput times for inbound , work in progress.2. Smaller manufacturing batch sizes.3. Shorter set up and changeover time.
  107. 107. 4. Greater schedule stability5. Lower rework and rectification costs.
  108. 108. Adapting LM principles for automobile producers• Three inter-related components necessary are:1. Design for logistics and manufacture. Agile process2. Organizing manufacturing along LM and consistent principles. performance measures.3. Integrative supplier relationships.
  109. 109. Design for logistics• Part count is very necessary if not managed carefully will tend to proliferate very fast . In the interest of speedy new product development new product designs do not always take sufficient account of existing parts . As a result the part count for raw materials part , finished parts and subsystems can go up. The lean manufacturing principle for design for logistics is therefore very critical.
  110. 110. • Commonising raw materials part :• Common finished parts & use of modular designs.• Staged engineering change control.: All manufacturing process data , tooling and quality plans.• Multifunctional teamwork.
  111. 111. • Organizing manufacturing along LM principles:The first element here entails the effectiveintegration of marketing and planning. Themanufacturing system for lean manufacturingdo not always integrate the customer enquirystage and the order release stage.
  112. 112. • The first is to take orders as they come on a first come first serve basis and build them in to master production schedule . These are then sequenced to balance the work content of the assembly line. Now here the work content may fluctuate and this may lead to volume and mix turbulence. The tight coupling between the different levels of the product structure could also schedule turbulence after
  113. 113. • Unforeseen circumstances such as component non-supply, quality or production problems . The weakness of this process in to the customer enquiry process thereby effectively decoupling them. The best option is tointegrate the customer enquiry stage and orderrelease stage with the help of ERP.This can bedone in two steps . Firstly MPS is prepared
  114. 114. • Second the customer order is taken before a due date can be promised the order is matched to the closest unoccupied order slot in MPS.If the customer order and the proposed oder slot are deemed to be compatible then the order is accepted in to that slot and the delivery due date is calculated and promised.
  115. 115. • Integrative Supplier relationships:Agile Processes and consistent performancemeasures:
  116. 116. Vendor Managed Inventory (VMI)• Vendor managed inventory is a process where the manufacturer generates orders for the distributor based on demand information sent by the distributor. Under VMI instead of distributormonitoring sales and inventory for the purposeof triggering replenishment orders the vendorassumes responsibility for these activitiesthrough enterprise resource planning.
  117. 117. • There are basically two models :1. The conventional business model : Here the distributor is in full control of the timing and size of the order being placed.2. Vendor Managed Inventory Model: The manufacturer receives electronic data that informs it about the distributor’s sales and stock levels.The manufacturer can view every item that the distributor stocks as well as the
  118. 118. • True point of sale data. The manufacturer is responsible for creating and maintaining the inventory plan.
  119. 119. How does VMI work• There are basically two transactions in the ERP system at the heart of the process . The first is the product activity record . The data contained in this document are sales and inventory information . The inventory data is typically segmented in to various groups such as on hand on order , committed ,back ordered and so forth . This transaction is the backbone of VMI and is sent by the distributor
  120. 120. on a prearranged schedule daily . The decisionto order is based on this data. The manufacturer reviewsthe information that has been sent in by thedistributors to determine if an order is needed.1. The first step is automatic verification of the data as accurate and meaningful2. ERP calculates a re-order point for each item
  121. 121. 3. ERP system compares the quantity availableat the distributor with the reorder point foreach item at each location . This determines ifan order is needed.4. The order quantities are then calculated.
  122. 122. • The second VMI transaction informs the distributors what product to expect from the manufacturer. There are two transactions being used for this function . The most frequently used is the purchase order acknowledgement .This document contains the product numbers and quantities ordered by the manufacturer on the distributors behalf.
  123. 123. Benefits to Manufacturer & Distributor• Lower distributors Inventories• Lower administrative costs.• Increased sales• A true partnership is formed.• Stabilize the timing of purchase orders.
  124. 124. Condition Based Maintaince (CBM)• There are three types of machine maintaince: Unplanned breakdown maintaince , planned scheduled maintaince , condition based maintaince. Unplanned maintaince increase thecost of downtime and costs . The plannedscheduled maintaince is normally based on thestatistical analysis of the machine failure historyand maintaince recommendation of machine
  125. 125. • Spare parts manufacturer . The third type is the condition monitoring based strategy .It is planned maintaince based on the measuring the conditions of the critical elements of the machine during operation.The anaylsis can be done to predict the time to failure and thus allow maintaince to be planned.The object of condition monitoring is not only to identify defects but also to identify the root cause of
  126. 126. • Failure.Predictive maintaince is one main type ofcondition based maintaince . While performingpredictive maintaince tasks a user must accesswarning signs that a failure is about to takeplace and react to those warning signs.Thisapproach pulls together operating data,designdata ,maintaince logs and condition basedassessements in order to schedule future
  127. 127. • Maintaince.How does it work ?The information of the machine is extracted byinstruments like infra-red thermal image andanalyzed to extract information to detectmachine ‘health state’ based on decision makingalgorithms (like BI software).Then the presentcondition of the machine is determined and thefuture condition can be predicted.
  128. 128. The ERP package uses real time data from theequipment monitoring devices to accessequipment conditions against predefinednormal operating parameters. Provides real time alerts ( via pager ,email or other messaging systems when theequipment is operating outside of normalbounds so that appropriate maintaince actioncan be taken place.
  129. 129. • Benefits of condition based apporach is :1. Increased plant uptime generates profit2. Enables reduction in spares stockholding3. Reduces maintaince costs4. Reduces the number of catastrophic failures5. Extends the interval between maintaince period6. Reduce the number of costly emergency repairs.
  130. 130. • Improved man power utilization