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  • Breaks down, or disaggregates, the production plan into product families: The production plan is broken into product families for the Master Production Schedule and Production is planned based on demand forecasts provided by marketing. Promotes valid order promises: Order promises can be made against planned production. This job falls to marketing and is referred to as “consuming” the Inventory.Provides a communication medium between Marketing/Sales and Operations. When more product has been promised than will be produced, marketing and operations must work together to develop a strategy to meet customer requirements. This can take the form of many options including; subcontract, allow overtime, increase capacity through equipment acquisition, expand facilities, increasing staffing levels, improve processes, etc…Proactively control ability to deliver goods to customers: The MPS allows for better understanding of capacity and gives visibility to capacity shortfalls. This allows action to be taken to meet demand or prioritize customer orders ahead of time.Resource availability control: Understanding future capacity shortfalls creates the ability to plan the best uses of resources or increase resources if needed.Proactively control inventory levels: MPS gives a firm the ability to not rely on safety stock or “reactive” EOQ models.
  • Erp Presentation

    1. 1. Enterprise Resource Planning (ERP)<br />Presented by:<br />Rick Bekanich<br />Pete Brenkosh<br />AmandeepKaur<br />Dee Walski<br />
    2. 2. Overview<br />What is ERP?<br />Evolution of ERP<br />Components of ERP<br />Advantages/Disadvantages<br />Success/Failures<br />Summary<br />
    3. 3. Definitions<br />Enterprise<br />Organization designed to provide goods and/or services to consumers<br />Resource<br />Any physical or virtual entity of limited availability, or anything used to help one earn a living (e.g. employees, materials, etc.)<br />Planning<br />The organizational process of creating and maintaining a plan.<br />
    4. 4. What is ERP?<br />4<br />Enterprise Resource Planning (ERP)<br />Business Planning<br />1<br /><ul><li>Is a method for the effective planning of all resources of a manufacturing and repair facility
    5. 5. Predicts and balances demand and supply. It is an enterprise-wide set of forecasting, planning and scheduling tools .
    6. 6. Links customers and suppliers into a complete supply chain</li></ul>Sales and Operations<br />Planning<br />2<br />Master Production <br />Scheduling<br />3<br />Capacity Requirements<br />Planning<br />4<br />Material Requirements<br />Planning<br />5<br />Production Executionand Control<br />6<br />
    7. 7. What is ERP?<br />5<br />Enterprise Resource Planning (ERP)<br />Business Planning<br />1<br /><ul><li>Employs proven processes for decision-making
    8. 8. Coordinates sales, marketing, operations, logistics, purchasing, finance, product development, and human resources.</li></ul>Sales and Operations<br />Planning<br />2<br />Master Production <br />Scheduling<br />3<br />Capacity Requirements<br />Planning<br />4<br />Material Requirements<br />Planning<br />5<br />Production Executionand Control<br />6<br />
    9. 9. What is ERP?<br />6<br />Enterprise Resource Planning (ERP)<br />Business Planning<br />1<br /><ul><li>It’s goals include high levels of customer service, productivity, cost reduction, and inventory turnover, and it produces the foundation for effective supply chain management and e-business.
    10. 10. It does this by developing valid plans and schedules so that the right resources – manpower, materials, machinery, and money – are available in the right amount when needed.</li></ul>Sales and Operations<br />Planning<br />2<br />Master Production <br />Scheduling<br />3<br />Capacity Requirements<br />Planning<br />4<br />Material Requirements<br />Planning<br />5<br />Production Executionand Control<br />6<br />
    11. 11. What is ERP?<br />7<br />Enterprise Resource Planning (ERP)<br />Business Planning<br />1<br /><ul><li>Applies a single set of resource planning tools across the entire enterprise
    12. 12. Provides a real time integration of sales, operating, and financial data
    13. 13. Connects resource planning approaches to the extended supply chain of customers and suppliers.</li></ul>Sales and Operations<br />Planning<br />2<br />Master Production <br />Scheduling<br />3<br />Capacity Requirements<br />Planning<br />4<br />Material Requirements<br />Planning<br />5<br />Production Executionand Control<br />6<br />
    14. 14. What is ERP?<br />Enterprise Resource Planning<br />ERP is a real time system<br />ERP is an integrated information system for identifying and planning the enterprise-wide resources needed to take, make, ship, and account for customer orders<br />ERP is an extension of MRP. Where MRP focused mainly on manufacturing, ERP includes all of the processes required to operate a business<br />8<br />
    15. 15. ERP Common Definition and Evolution <br />Moving from the Informal to the Formal System (Valid <br />Schedules) is the key to ERP Business Benefits Realization<br />9<br />
    16. 16. 10<br />Closed<br />Loop<br />MRP<br />(70’s)<br />MRP<br />(Late 60’s)<br />MRP<br />II<br />(80’s)<br />ERP<br />(90’s)<br />ERP Common Definition and Evolution <br />MRP / ERP Evolution<br />Source: ERP Making It Happen, Thomas F. Wallace and Michael H. Kremzar<br />
    17. 17. 11<br />Closed Loop MRP<br />ERP Common Definition and Evolution <br />
    18. 18. MRP, MRPII and ERP<br />12<br />Material Requirements Planning<br />MRP is a process that uses the bill of material, inventory data, <br />and planned receipts to calculate requirements and recommend<br />the release and/or reschedule of materials (Original concept of <br />scheduling the quantity and timing of production and related <br />purchase orders for raw materials)<br />MRP<br />70’s<br />MRP<br />Manufacturing Resource Planning<br />Shop Floor <br />Control<br />Sales &<br />Operations<br />Planning<br />Demand <br />Management<br />Business <br />Planning<br />MRP<br />Supplier <br />Scheduling<br />MRP II<br />80’s<br />Feedback<br />MRPII<br />Enterprise Resource Planning<br />Customer &<br />Product <br />Information<br />Customer<br />Service<br />Logistics &<br />Materials<br />Management<br />MRP II<br />Integrated<br />Financial <br />Functions/<br />Processes<br />ERP<br />90’s<br />ERP<br />Feedback/ Real Time Access to Information<br />The concept of ERP has evolved over time. <br />The acronyms are used in three different but related contexts.<br />
    19. 19. With ERP<br />13<br />The benefits for an organization that is using ERP.<br /><ul><li>Orders, promised to customers on certain dates, are more often fulfilled.
    20. 20. Data can now be entered “on-time”.
    21. 21. People no longer heavily rely on hot lists, shortage lists or who yells the loudest.
    22. 22. There are fewer inaccuracies in inventory causing fewer production problems.
    23. 23. Less money gets tied up in unwanted inventory</li></li></ul><li>With ERP (Cont’d)<br />14<br /><ul><li>Fewer expensive rush orders are placed to replenish inventory the computer did not know was needed, because master data (BOM’s, Routes, etc…) changes were not processed.
    24. 24. Net Operating Results (NOR) is positively affected by more accurate data and transaction reporting. </li></li></ul><li>15<br />ERP MANUFACTURING MODEL<br />Capacity Requirements Planning<br />4<br />Business Planning<br />1<br />Material Requirements Planning<br />Sales and Operations Planning<br />5<br />2<br />Master Production Scheduling<br />Production Execution & Control<br />6<br />3<br />
    25. 25. Business Planning<br />16<br />Business Planning<br />1<br />Business Planning<br />1 <br />2<br />Sales and Operations<br />Planning<br />3<br />Master Production <br />Scheduling<br />4<br />Capacity Requirements<br />Planning<br />5<br />Material Requirements<br />Planning<br />6<br />Production Executionand Control<br />Business Planning is:<br /><ul><li>Customer driven and usually done on an annual basis.
    26. 26. Five year funding priorities (current plus four)</li></li></ul><li>Sales and Operation Planning<br />17<br />Sales and operations Planning<br />2<br />Business Planning<br />1 <br />2<br />Sales and Operations<br />Planning<br />3<br />Master Production <br />Scheduling<br />4<br />Capacity Requirements<br />Planning<br />5<br />Material Requirements<br />Planning<br />6<br />Production Executionand Control<br />Sales and Operations planning:<br /><ul><li>It is an integrated business management process through which the executive continually achieves focus, alignment and synchronization among all functions of the organization</li></li></ul><li>Sales and Operation Planning<br />18<br />Sales and operations Planning<br />2<br />Business Planning<br />1 <br />2<br />Sales and Operations<br />Planning<br />3<br />Master Production <br />Scheduling<br />4<br />Capacity Requirements<br />Planning<br />5<br />Material Requirements<br />Planning<br />6<br />Production Executionand Control<br />Sales and Operations Planning (S&OP) Includes:<br /> <br /><ul><li>It includes an updated sales plan, inventory plan, customer lead time(backlog) plan, new product development plan, strategic initiative plan and resulting financial plan.
    27. 27. Stated in terms of dollars</li></ul>Change is inevitable<br />
    28. 28. Master Production Scheduling<br />19<br />Capacity Requirements<br />Planning<br />4<br />Material Requirements<br />Planning<br />5<br />Master Production Scheduling<br />3<br />Production Executionand Control<br />6<br />Key Components of ERP<br />
    29. 29. Master Production Scheduling (MPS)<br />20<br />The Master Production Schedule (MPS) is:<br /><ul><li>It is the plan for production, staffing, inventory etc. it is linked to manufacturing where the plan indicates when and how much of each product will be demanded.
    30. 30. It supports all production strategies including make-to-stock, assemble-to-order, engineer-to-order, and make-to-order
    31. 31. A realistic Monthly and Weekly Schedule determined by looking at capacity and resources
    32. 32. The schedule that the Master Scheduler maintains, and in turn, it becomes a set of planning numbers that drives Material Requirements Planning</li></li></ul><li>Master Production Scheduling (MPS)<br />21<br />The Role Of The Master Scheduler: <br />Maintaining a Perfect Balance between Demand & Supply<br />
    33. 33. 22<br />Master Production <br />Scheduling<br />3<br />Material Requirements<br />Planning<br />5<br />Capacity Requirements Planning<br />4<br />Production Executionand Control<br />6<br />Capacity Requirements Planning (CRP)<br />Key Components of ERP<br />
    34. 34. Capacity Requirements Planning (CRP)<br />23<br />Capacity Requirements Planning Process<br /><ul><li>Is the function of establishing, measuring and adjusting limits or levels of capacity (workload)
    35. 35. Determines, in detail, the amount of labor and machine resources required to accomplish the tasks of production by exploding quantities in the schedule against the hours and work centers identified in the routing.</li></li></ul><li>Capacity Requirements Planning (CRP)<br />24<br />Capacity Requirements Planning (CRP) (Cont’d)<br /><ul><li>Capacity – How much work of a given type can a shop do in a given period of time.
    36. 36. Required Capacity – How much machine time and labor will be needed from that shop to complete their work relating to an asset or assets.
    37. 37. Load – What was Planned and what was released to the shops.
    38. 38. Work Center- Is a specific production area, consisting of one or more people and/or machines with similar capabilities, which can be considered as one unit for purposes of capacity requirements planning, detailed scheduling, and costing.</li></li></ul><li>Capacity Requirements Planning (CRP)<br />25<br />A Work Center (Cont’d)<br /><ul><li>The following types of information is needed when defining the capacity of a Work Center
    39. 39. Shop Calendar
    40. 40. Shifts per day
    41. 41. Shift durations
    42. 42. Breaks / Non-productive time
    43. 43. Number of individuals/machines available per shift
    44. 44. Utilization
    45. 45. Efficiency</li></li></ul><li>Capacity Requirements Planning (CRP)<br />26<br />Capacity Requirements Planning Process (cont’d)<br /><ul><li>Requires valid asset schedules to properly analyze and manage future capacity over/under load conditions
    46. 46. Capacity imbalances will be worked by Master Scheduling.</li></li></ul><li>Capacity Requirements Planning (CRP)<br />27<br />There are four factors affecting available capacity.<br /><ul><li>Type of Work
    47. 47. Plant and Equipment
    48. 48. Skill level/Work effort required
    49. 49. Material</li></li></ul><li>Capacity Requirements Planning (CRP)<br />28<br />Priority:<br /><ul><li>What is needed, how much is needed, and when it is needed.</li></ul>In the long and short term…… priority and capacity must be balanced.<br />
    50. 50. Capacity Requirements Planning (CRP)<br />29<br />LMS’s and Master Schedulers:<br /><ul><li>Review Projects Received from Item Managers
    51. 51. Analyze requested delivery schedules.
    52. 52. Review Capacity
    53. 53. Accept or re-negotiate dates with Item Managers</li></li></ul><li>30<br />Master Production <br />Scheduling<br />3<br />Capacity Requirements<br />Planning<br />4<br />Material Requirements Planning<br />5<br />Production Executionand Control<br />6<br />Material Requirements Planning (MRP)<br />Key Components of ERP<br />
    54. 54. Material Requirements Planning (MRP)<br />MRP is a process that uses the:<br />Bill Of Material (BOM, components lists) <br />Material Master<br />Route data or Production Order after creation (this is used to create the MPS schedule)<br />Inventory data<br />31<br />
    55. 55. Material Requirements Planning (MRP)<br />32<br />MRP:<br /><ul><li>Uses Delivery Schedule, Production Order BOM/Route, and Inventory Data to calculate requirements for materials)
    56. 56. Creates detailed schedules for material: make, repair, buy</li></li></ul><li>33<br />Definitions and Terminology<br /><ul><li>The MRP Controller
    57. 57. Is the person responsible for a material or group of materials in MRP
    58. 58. Material Requirements Planning (MRP)
    59. 59. MRP is a calculation method geared toward determining how much of which materials are required and roughly when they should be ordered to fulfill a set of product orders. The results of the calculation are recommended planned orders by time period.</li></li></ul><li>Definitions and Terminology<br />Manufacturing (MBOM)<br />All the materials needed for completion of an assembly<br />Repair (R-BOM) - A1, IO etc.<br />List of of what “MAY” be needed<br />If we don’t order what we think we “Might” need, we can’t have the material ahead of the asset.<br />34<br />
    60. 60. 35<br />BOM<br />BOM<br /><ul><li>A BOM is a comprehensive list of materials necessary for a build or repair of a quantity of one (1)
    61. 61. The components list is a list of parts for the total production order</li></li></ul><li>Route<br />Route<br />Where the work is done for a Project Shops/Machines/People/Hours/Project Dates<br />Work Centers<br />Capacity<br />Manufacturing Route<br />Repair Route<br />36<br />
    62. 62. BOM Allocation<br />37<br />Materials can be assigned to a specific routing operation, especially when total cycle times are long, to distribute shop floor deliveries and minimize work in process inventories. Without this assignment, ERP systems must assume the material is needed at the start of the first operation of the order.<br />
    63. 63. 38<br />MATERIAL DELIVERY<br />PARTS:<br /><ul><li>The Right Parts
    64. 64. In the Right Quantities
    65. 65. At the Right Time</li></ul>MY PARTS<br />
    66. 66. 39<br />The Basic Logic of MRP<br />Have Enough?<br />Yes<br />No<br />Ordered Enough?<br />Done<br />No<br />Yes<br />Due On Time?<br />Place Order<br />Yes<br />No<br />*Reschedule Order<br />Done<br />Done<br />After determining what will be made (MPS) and what it will take (BOM), the MRP logic works through a series of questions. <br />Determine the material needed to meet the MPS.<br />What to Order<br />How Much to Order<br />When to Order<br />When to Schedule Deliveries<br />Keep Priorities Current<br />Only Reschedule as last resort<br />
    67. 67. 40<br />MRP LOGIC<br /><ul><li>TIME
    68. 68. Some Assets take longer to repair than others so there is more time involved
    69. 69. MATERIAL
    70. 70. Some Materials have longer lead times than others so more time is involved
    71. 71. QUANTITY
    72. 72. If we have it or are going to have it we don’t need to order it</li></li></ul><li>41<br />MRP<br />Master Scheduled Item<br />(Independent Demand Item)<br />Dependent Demand Items (Planned by MRP - includes both Buy and Make / Repair Items)<br />The Bill of Material provides the scheduling framework around which the entire ERP process & system operates<br />
    73. 73. 42<br />MRP<br />MRP uses Backwards Scheduling<br />Production<br />Order Finish Date<br />(Delivery Date)<br />Production<br />Order Start Date<br />Production Order<br />08 Dec<br />30 Dec<br />OP10<br />1 day<br />OP20<br />3 days<br />OP30<br />5 days<br />OP40<br />1 day<br />OP50<br />2 days<br />OP60<br />10 days<br />20 Dec<br />18 Dec<br />17 Dec<br />12 Dec<br />09 Dec<br />08 Dec<br />Production Order <br />Material Allocated to OP 10<br />Purchase Order<br />Exception Message Generated “05”<br />Planned Delivery time<br />CRA to Stock<br />Material Stored in<br />Inventory<br />Opening<br />Period<br />10 days<br />Lead (Ship) time<br />from Vendor<br />(Varies)<br />Goods Receipt<br />Processing Time<br />5 Days<br />Contracting<br />Local Proc<br />23 days<br />07 Dec<br />Opening<br />Date<br />Release<br />Date<br />MRP<br />Date<br />
    74. 74. 43<br />Master Production <br />Scheduling<br />3<br />Capacity Requirements<br />Planning<br />4<br />Material Requirements<br />Planning<br />5<br />Production Executionand Control<br />6<br />Production Execution and Control<br />Key Components of ERP<br />
    75. 75. Production Execution and Control<br />44<br />Production execution and control consists of three main parts:<br /><ul><li>Scheduling:
    76. 76. Operational dispatching to satisfy production requirements
    77. 77. Execution:
    78. 78. Physically execute the production schedules
    79. 79. Reporting and Monitoring:
    80. 80. Track work progress and report the statusof production activities (type 8’s)</li></li></ul><li>Advantages Of ERP<br />Integrates processes so a company can perform more efficiently<br />Design Engineering , the process used to create it is just as important as end result (how to make the best product)<br />The revenue cycle from invoice through cash receipts<br />
    81. 81. Advantages of ERP<br />Managing interdependencies of complex bill of materials<br />Tracking the 3-way match between purchase orders (what was ordered), inventory receipts (what arrived) , and costing ( what the vendor invoiced)<br />Order tracking allows the company to get detailed information on customers<br />
    82. 82. Advantages of ERP<br />The accounting for all of these tasks, tracking the revenue, cost and profit on a granular level.<br />Use of a dating structure which can allow the company to be informed when the product should be updated<br />ERP security , protect a company against crimes such as embezzlement or industrial espionage<br />Allow product to be produced of higher quality<br />
    83. 83. Disadvantages of erp<br />Cost:<br />Average cost to implement: SAP: $16.8 million Oracle: $12.6 million Microsoft: $2.6 million Tier 2: $3.46 million  <br />Time:<br /> Average time to implement: SAP: 20 months Oracle: 18.6 months Microsoft: 18 months Tier 2: 17.8 months   Source: 2008 ERP Report Part II: Comparing Leading Tier 1 and Tier 2 ERP Solutions <br />
    84. 84. Disadvantages of ERP<br />Continually trained on how to use it<br />Success is fully dependent on how the workers utilize it<br />Biggest problem is it is hard to customize very few companies can use it ‘right out of the box”<br />Modifications are expensive and tedious<br />Even after changes still limited in certain areas<br />
    85. 85. Disadvantages of ERP<br />Making the necessary changes may make the company less competitive in the market place<br />License fees<br />Technical support from ERP departments has been questioned<br />Security, corporate representatives must give sensitive information to tech support department<br />
    86. 86. ERP success<br />Business benefits realized: SAP: 72.2% Oracle: 58% Microsoft: 68% Tier 2: 68.6%   Source: 2008 ERP Report Part II: Comparing Leading Tier 1 and Tier 2 ERP Solutions <br />
    87. 87. ERP Success<br />Airbus<br />Overall cost savings of €4 million<br />since the project began in March<br />2005<br />• Increased user friendliness, with<br />solution fully integrated into the<br />Airbus employee portal<br />• Reimbursement cycle significantly<br />reduced from over 15 days to<br />less than 10 days<br />• Single reporting tool with increased<br />transparency for travel management,<br />procurement, controlling,<br />and line management<br />• Increased productivity and<br />satisfaction of Airbus employees<br />Canadian national Railway<br />Canadian National Railway Company realized significant financial benefits,<br />including the following:<br />Over CAD 400 million in hard benefits on a CAD 200 million investment<br />CAD 84 million in one-time inventory and financial savings<br />Over CAD 100 million savings per year in asset, procurement, labor, and<br />technology<br />
    88. 88. ERP Success<br />Nestle<br />Gained ability to track products through<br />the complete production and delivery<br />cycle<br />• Complied with requirements for tracing<br />foodstuff products<br />• Retained internal identification codes<br />while supporting multiple external business<br />partner needs<br />• Accelerated time to market for new products<br />by capturing process and product<br />Hewlett Packard<br />Increased response to forecasting accuracy<br />• Achieved service levels of 94% to 97%<br />• Improved accuracy of inventory targeting<br />based on variation analysis<br />• Implemented a better mix of inventory at<br />individual locations<br />• Gained the ability to track inventory at the<br />location, SKU-item, and time-frame level<br />• Provided on-time information for decision<br />making<br />• Tightly integrated planning and execution<br />
    89. 89. ERP Failures<br />Hershey Foods - lead to massive distribution failures loss of 27 % of market<br />Foxmyer Drug – system implementation failure lead to collapse of company<br />IRS- Took 10 yrs to complete and cost $50 Billion <br />Oregon Dept of Motor Vehicles- took eight years and public out cry killed project<br />
    90. 90. ERP Failures<br />State of Florida welfare system- plagued with numerous computational errors and $260 million in overpayment<br />GreyHound Bus – trip reservations and bus dispatch system lost $6 million<br />Norfolk Southern Rail Road lost $113 Million<br />
    91. 91. Reasons for ERP Failures<br />When the management is not controlling the scope of the project especially when you expect the consultant to provide a magic bullet, is a recipe for failure.· Changing the sails in midstream, by certain deliverables expected within a third of the documented times and volumes is a recipe for failure.· By engaging in other corporate projects competing for the meager finances midway, is a recipe for failure· By not having proper change management policies and procedures, is a recipe for failure· By going for consultants without prior experience or ERP solutions in which you are the only company within your industry, could be a recipe for failure· If you do not have a knowledge transfer inscribed in the consulting contract, is a recipe for failure· If the vendor does not understand your business, is a recipe for failure· If the project has no clear phases, deliverables and quality control components, is a recipe for failure· If you have not re-engineered your business processes to be compatible with the capabilities of the technology, is a recipe for failure· Having multiple vendors within the one project, is a recipe for failure· Not having an external project audit committee, is a recipe for failure· Not having a clear end-user training program to transfer skills to employees, is a recipe for failure· Having the project run as a "one-man show", is a recipe for failure· Having the management over- committed (excessively ambitious, prompting unrealistic deadlines), is recipe for failure<br />· Team member not being accountable for actions, is recipe for failure· Low morale within team, is recipe for failure· Unclear statement of requirement, is a recipe for failure· In no standard implementation methodology use, is a recipe for failure· Inadequate requirements definition (current processes are not adequatelyaddressed), is a recipe for failure· Poor ERP package selection (the package does not address the basicbusiness functions of the client), is a recipe for failure· Inadequate resources employed by the client, is a recipe for failure· Internal resistance to changing the 'old' processes, is a recipe for failure· A poor fit between the software and users procedures, is a recipe for failure· A bottom up approach is employed (the process is not viewed as a topmanagement priority), is a recipe for failure· The client does not properly address and plan for the expenses involved, is a recipe for failure· If any functional gaps have not been identified (GAP analysis), is a recipe for failure· If the implementation does not take into account future technological convergence, is a recipe for failure<br />
    92. 92. ERP in a nutshell<br />ERP attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments, particular needs.<br />ERP automates the tasks involved in performing a business process<br />
    93. 93. ERP in a nutshell<br />
    94. 94. ERP in A Nutshell<br />
    95. 95. Example of ERP at work<br />
    96. 96. Summary<br />ERP is a business wide common system<br />Can integrate all of the business units<br />Very expensive and time intensive<br />Proper implementation can help the business function better<br />Poor implementation can hurt the business immensely<br />Training<br />
    97. 97. References <br />ERP Making It Happen, Thomas F. Wallace and Michael H. Kremzar<br />2008 ERP Report Part II: Comparing Leading Tier 1 and Tier 2 ERP Solutions<br />
    98. 98. Questions??<br />