1. (Mt) – MBUS 306 Final Exam Study Guide
Operations Management MBUS 306 Lecture 12 – Business Systems – ERP/APS/SCM/CRM
Al Baharmast, Ph.D. Enterprise Resource Planning (ERP) Fundamentals •ERP
Fundamentals: Not just another business software system…, ERPs are •Packaged business
solutions comprised of multiple components, that, when implemented in tandem, automate,
integrate and optimize extended business processes across organizational value chains
•They enable sharing of common data and business practices both within the enterprise
and across supply chains •Also referred to as “Packaged Software,” “Standard Software,”
and “Best Practices Software” ERP Solution Drivers What Compels the Adoption of Best
Practices Software Solutions? ERP Standards Software (COTS) applications Deliver a lower
Total Cost of Ownership (TCO)* over an extended lifecycle: Development, Implementation,
Integration and Support/Maintenance Costs Longer Life Cycles than custom applications
Provide proven methodologies (Embedded resources) for implementation, testing, training,
documentation Limit financial risks (vendor/systems knowledge dissolution) Provide
scalability Allow businesses to focus on their core competencies (unless you are a software
development firm …) Ultimately, ERP implementations are driven by the desire to Obtain
better information on process performance Improve operational efficiency & implement
system-enforced controls Support process transformation, product innovation and partner
integration * TCO reductions rarely realized in isolation; benefits accrue from operational
improvements & process innovations ERP Evolution ERP’s Manufacturing Roots Material
Requirements Planning (MRP) Material Resource Planning (MRP II) Enterprise Integration
ERP (Back-office – Human Resources, Financials, Supply Chain) Industry Vertical Solutions
Expanding Enterprise Integration ERP (Services Offerings), Supply Chain Management
(SCM), Supplier Relationship Management (SRM) and Customer Relationship Management
(CRM) The Newest Wave ERP II (Lehman, 2001) – “C-commerce and collaborative business
models are beginning to replace standard strategies focused on operational efficiency and
value chain management.” Collaborative Commerce – Sharing business processes across
the enterprise bounds within “communities of interest” – automating process interactions
with customers/clients and third parties. ERP Vendors Big market players – SAP and Oracle
The Financial Picture (from FY 2018) – SAP Revenues – $24.7 Billion R&D Expenditures –
$3.6 Billion Net Income – $5.3 Billion Oracle* Revenues – $39.8 Billion R&D Expenditures
– $6.1 Billion Net Income – $13.7 Billion * Includes Oracle Database and other non-ERP
product/service lines ERP Concepts Best Practices Software Embedded Business Processes
ERP Concepts Best Practices Software ERP as “Best Practices Software” – All ERP

2. applications execute extended business processes either as explicitly represented or
implicitly understood (increasingly becoming explicit) Embedded business processes are
those developed from years of research and synthesis into “best practices” Allows you to
map your business processes to those executed in the system (solution reference models)
Thousands of ways to configure the embedded business processes to better suit your needs
May require modification of business processes If neither configuration nor adaptation is
possible, other alternatives may be sought (i.e., bolt-ons and extensions; customization is
seldom recommended) If all else fails, only then seek alternative solutions that customize
and/or integrate with external system (bolt-on/extension) Generally Rule – Configuration –
Good Customization – Bad Not All Customizations are Made the Same Key to Customization
Reduction – Business Process Reengineering & Governance Having just said customizations
are bad, now you have to know you will need them Though ERPs are generally enabled via
industry best practice configuration, customers often need to enhance standard
functionality to address product gaps or customer-specific requirements (e.g., printing,
reporting, systems interfaces, etc.). We categorize customizations by the following
groupings – Reports, Interfaces, Conversion, Extensions, Forms, Workflow, Authorizations
(RICE-FWA) and other Business Intelligence (BI)-unique custom content (Data-Stores,
Multi-Providers, Info-Cubes, Reports, etc.). This custom code introduces complexity, but
there are methods of retaining these customizations with through baseline software
releases from the vendor. – Customization of core code is a separate distinct category. It will
often require a vendor key to make this type of change, and there is much greater risk these
customizations!! Customizations are not equally complex; some are more challenging and
time-consuming to develop/maintain. Generally… More Complex – Interfaces, Conversions,
Extensions (Vary Greatly) Less Complex – Reports, Workflow Least Complex & Often Most
Numerous – BI-Unique Custom Content SAP Supply Chain Collaboration Process Model
(High Level) With hundreds of best practices incorporated into the SAP system,
organizations have a ready-made facility for adopting proven processes without the
burdens of trialand-error operational design and of benchmarking themselves against
another organization [Curran, 1997] Source: SAP Business Process Management The
Antithesis of “Clean-Slate” Business Process Reengineering Reengineering, as some have
conceptualized it, calls for “clean slate” process redesign prior to searching for technology
solutions. A standard software solution is implemented in an opposite fashion: – A set of
“reference” process, data, and function models are purchased. – Internal processes are
aligned with the standard software solution reference processes. – Through configuration
analysis, many options exist for finding the most suitable variant of a reference process.
Standard software-based Business Process Management (BPM) – Anticipates alignment to
reference business processes and the systems configuration that will build a process variant
that is most suitable for the adopting organization. ERP Concepts Process Orientation
Functionally-Oriented Operations Management Domain “A” Acquisition (Purchasing)
Domain “B” Logistics (Receiving) Domain “C” Finance (Payables) Input A Vertical Processes
B 2 β C 3 γ D 4 δ E Vertical, Non-Integrated Systems “Stovepipes” α 1 ε 5 Output Acq. IS Log.
IS Fin. IS Process-Oriented Operations Management – Driven by ERP Domain “A”
Acquisition (Purchasing) Input Process Variant 1 Domain “B” Logistics (Receiving) Domain

3. “C” Finance (Payables) Functions A Output α 1 Process Variant 2 B C β 2 γ 3 D δ 4 Process
Variant 3 Process Variant 4 E 5 ε Solution Spotlight Oracle – Maintenance, Plan to Schedule
Process Asset to Maintenance Plan Signal to Replenishment Assess to Progress Strategic
Staffing to Hire Payroll to Payment Plan to Project Budget Schedule to Maintain AM7513
AM7527 AM7515 AM7516 Determine Asset Availability Manage Work Request Process
Schedule and Resource Asset Create Maintenance Schedule • Perform constraint based
scheduling, what-if analysis, and adjustment of variables (overtime, contract labour,
deferrals, etc.) • Schedule work orders, identify dependencies, and identify resources
(People/ Equipment/ Parts) • Review production orders, property usage/hours,
shutdown/holidays etc. in order to determine asset availability. • Create a work request,
approve the work request, and associate the work request to a work order. Schedule to
Maintain Signal to Replenishment Assess to Progress Strategic Staffing to Hire Payroll to
Payment Plan to Project Budget Source: Oracle Enterprise Roles Maintenance Planner
Maintenance Supervisor ERP Concepts Enterprise-Level Standards Enterprise-Level
Standards Business Process Standardization – Results in significant reduction in or
elimination of the different ways of doing the same job. Configuration Standardization &
Management – Embeds process standardization in the ERP system. – Requires a pre-defined
configuration control process to avoid constant change and/or the development of process
variances. User Roles Standardization – Identifies logical groups of users based on common
activities and organizations. System functions and data visibility are constrained (or
enabled) by user role. User Training Standardization – Provides the discrete information to
user groups necessary to enable process standardization. ERP Concepts Single Source of
Data Single Source of Data One of the central tenets of ERP is the consolidated and
centralized management of all the instances of identical data (both Master Data and
Transactional Data) … based on the foundational efficiency principle of data reutilization
Process 1 Requisition Process 2 P.O. Issuance Process 3 Receiving Process 4 A.P. SAP –
Quality Inspection Example Define Product Quality Characteristics and Leverage One Set of
Master Data that to Manage Inspections Vendor A Data ERP Database Master data –
relatively static referential data against which variable transactions will be posted (e.g.,
Vendors, Customers, Materials). Transactional data – variable data that define the
parameters of a business event and make reference to master data (units ordered, lots held
in inventory) Source: SAP ERP Concepts Broad Scope of Integrated Solutions SAP Modules
SAP Business Suite and Industry Solutions Defense Forces & Public Security Public Sector
Oracle E-Business Suite ERP and Functional Activites Managing Business Functions with
ERP Select Examples Functional Business Activities Of utility in defining scope and
organizational support requirements Examples – Financial Management – Procurement –
Project Management – Quality Management – Supply Chain Management Financial
Management Procurement Project Management Quality Management Business Functions as
Part of Extended ERP Business Processes •Business functions are interwoven throughout
each extended business process enabled by an ERP. ERP functional component capabilities
enable organizations to execute their part of a comprehensive end to end process.
•Examples of business functions as part of extended ERP business processes: – Creating an
obligation to reflect a financial liability at the time of Purchase Order Issuance (Financial

4. Management) – Enabling Goods Receiving and Invoice Receiving with Reference to a
Previous Procurement Action/Document (Procurement) – Enabling Goods Quality
Inspection Upon Receipt and Based on Pre-specified Contractual Terms and Conditions
(Quality Management) – Recognizing Goods Receiving to Project Stock and Updating Task
Completion or Percent Completion (Project Management) Managing Business Processes
with ERP Select Examples of Quality Management Functions Interwoven into Varied End to
End Business Processes Supported by ERP • • • • • Procure to Pay Order to Cash Concept to
Product/PLM Prospect to Order Service Request to Resolution QM and Procure-to-Pay
(PTP) Master Data •Material Master – Material Masters exist for all materials that are
purchased, produced or stocked • Services, Raw Materials, Semi-Finished Goods, Finished
Goods, Non-Stock (Consumables), Non-Valuated Materials, Packaging, etc – Defines the
basic quality requirements for a material • Goods Receipts from PO, Goods Receipt from
Production Order, Stock Transfer, Goods Issue, Customer Delivery, etc. • Post to “Inspection
Stock” or “Unrestricted Stock” •Vendor Master – Vendors can be evaluated (scored) and/or
blocked for all or some materials (for quotations, purchase orders and/or goods receipts)
•Material Master + Vendor Master – Modify Material Master Goods Receipt rules (e.g.
Source Inspections) – Valid date range, valid quantity level, dynamic rules PTP – Goods
Receipt from Vendor •In this scenario, materials are procured from a vendor and inspected
on receipt – Condition: QM Master Data determines that an inspection is required; items
will be received into Inspection Stock; the Vendor is not “blocked” for this shipment 1.
Purchase Requisition creates a Purchase Order which leads to an Inbound Delivery 2. On
Goods Receipt, an Inspection Lot is created, the items are received (posted) into Inspection
Stock 3. The Inspection Plan (with tasks, characteristics, sample size, etc.) is performed –
Optionally, the items may require a “quality certificate” from the vendor, which can be
processed via EDI. Source Inspections may also be required (including for third parties) 4.
Inspection Results and Defects are recorded and Quality Notifications created 5. The
Inspection Lot is completed, a score is calculated and usage decisions are made 6. Stock
postings are performed, the Vendor is updated, and a quality certificate may be produced
7.If the items fail inspection, the Return Delivery process is triggered Order to Cash – Sales
and Delivery • In this scenario, materials sold to one specific customer require
characteristics that most but not all materials meet and that no other customer requires. • •
Condition: The combination of Customer A and Material B has an associated Quality
Inspection plan that requires Inspection Before Delivery Note: the intent is not to “re
inspect” materials that have already been inspected on Goods Receipt or during Production,
rather it is to meet customer-specific requirements and minimize overall cost 1. Sales Order
is received from Customer A for Material B 2. The Sales Order creates an Inspection Lot and
materials are produced or moved from inventory 3. QM performs the Inspection 4.
Inspection results are recorded and a usage decision is made 5. If the items pass inspection,
the Sales Order generates a Delivery Order and the Shipping process is initiated 6. A Quality
Certificate may be produced Concept to Product and PLM ERPs enable innovation quality
and efficiency in new product design and engineering – Target customer market and
customer requirements identification (CRM, NDPI) Collaborative product engineering
(NDPI, cFolders and PLM), mechanical and electronic-CAD (PLM), and project management

5. (PS) Product quality engineering and specifications (NDPI, PLM, MM and QM), including ISO
9001 and 14000 Product and component sourcing (SCM & SRM), Network Planning (NDPI),
Cost and Quotations (CQM) Prospect to Order & Service Request to Satisfaction Managing
quality in services delivery with Customer Relationship Management – •Enforcing business
rules and standardizing interactions with scripts, alerts and messages and knowledge
management tools (Interaction Center) •Online help procedures and step-through training
aids for customer service representatives •Managing customer history and cross-channel
engagement information (CRM Marketing, Sales, Service) •Service contract management
(CRM Service), service history and entitlement, SLAs and warranties, return material
authorizations, billing and shipping history ERP Implementers and Users (Sampling)
Companies that Implement ERPs: -Accenture -HP -IBM -Capgemini -CSRA -Deloitte -KPMG -
PWC -Many other smaller companies Companies/Organizations -AMD -ALCOA -BP/Amoco -
Bristol Myers Squibb -Chevron -CITGO -Coca Cola -Compaq -Compass Group -CONOCO -DHL
-DirecTV -Exxon/Mobil -General Mills -Halliburton -Honeywell -Intel that Use ERPs: -Kodak
-Lockheed -NASA -Nokia -OfficeMax -Pennzoil -Phillips -Proctor & Gamble -Saralee -Shell -
Siemens -Statoil -Many other large and smaller companies Implementation Methods – ASAP
Accelerated SAP (ASAP) is SAP’s standard implementation methodology. It contains the
Roadmap, a step-by-step guide that incorporates experience from many years of
implementing the solution. Accelerated SAP contains a multitude of tools, accelerators and
useful information to assist all team members in implementing the solution. Quality checks
are incorporated at the end of each phase to easily monitor deliverables and critical success
factors. 37 ASAP Phase 1 : Project Preparation Goal Setting Define project goals & objectives
Implementation strategy 1.Clarify the scope of implementation 2.Establish the project
organization and relevant committees and assign resources Implementation Sequence
During this phase the team goes through initial planning and preparation for SAP project.
Define sequence in project has to be executed Team Core team+ project team+ consultant
team Sign Off At the end of phase every above steps will be documented & will be signed off
with the client 39 Phase 1 : Project Preparation 40 Phase 2 : Business Blueprint SCOPE
DOCUMENT This document will consists of questionnaire of entire business process AS IS
1.Understanding the business Process from the core team. 2.Based on the input ASIS
document has to be created according to module wise TO BE 1.In this process will map the
business process in SAP based on ASIS 2.Module wise TOBE document has to be created The
purpose of this phase is to achieve a common understanding of how the company intends to
run SAP to support their business. The result is the Business Blueprint, a detailed
documentation of the results gathered during requirements workshops. GAP ANALYSIS
1.The GAP b/w ASIS process & TOBE process is called GAP analysis ie., The inputs or the
business process which can’t mapped into standard SAP will be analyzed here 2.GAP
document has to be created SIGN OFF Each process above has to be taken sign off from
client 41 Phase 2 : Business Blueprint 42 Phase 3 : Realization Baseline Major scope Final
Configuration Remaining scope The purpose of this phase is to implement all the business
process requirements based on the Business Blueprint. The system configuration
methodology is provided in two work packages: Baseline (major scope); and Final
configuration (remaining scope). SIGN OFF Each process above has to be taken sign off from

6. client 43 Phase 3 : Realization Phase 4 : Final Preparation Unit Testing Testing within each
module Integration Testing Integrate testing of modules ie., combine testing of all the
modules User Training Cut over Strategy legacy system will be migrated to SAP system. The
purpose of this phase is to complete the final preparation (including testing, end user
training, system management and cutover activities) to finalize your readiness to go live.
The Final Preparation phase also serves to resolve all critical open issues. On successful
completion of this phase, you are ready to run your business in your live SAP System. SIGN
OFF Each process above has to be taken sign off from client 45 Phase 4 : Final Preparation
46 Phase 5 : Go Live & Support Production Support Monitor System Transactions Optimize
Performance The purpose of this phase is to move from a project-oriented, pre-production
environment to live production operation. Help Desk & Competency Center 47 Phase 5 : Go
Live & Support 48 ASAP Roadmap Project Preparation Business Blueprint Realization Final
Preparation GoLive and Support Setup of Local Project Organization General Project
Management General Project Management General Project Management General Project
Management Adaption of Strategic Framework OCM Organizational Alignment + Change
Analysis OCM OCM OCM Establish OCM Procedures + Responsibles Early Adoption of Best
Business Practice Processes Early Adoption of Best Business Practice Processes End User
Training System Support Early Adoption of Best Business Practice Proceesses Training
Planning Training Preparation Cutover Management Business Support Training and
Documentation Strategy Local Business Blueprint Documentation Configuration &
Development Business Simulation Infrastructure Requirements and Design Security
Requirements Unit / Process / Integration / Business Acceptance Testing End User Practice
in the System Data Management Standards Implementation Infrastructure Planning
Infrastructure Implementation Infrastructure Finalization Data Cleansing and Data
Preparation System Operation Stategy Completion Check & Prepare for Next Phase Data
Cleansing and Data Preparation Completion Check & Prepare for Next Phase Data
Preparation & Data Migration Simulation Data Migration to Production Cutover Planning &
Preparation Pre-Go-Live Operations Business Transition Planning for Cutover Final Cutover
and Controlled Process GoLive Completion Check & Prepare for Next Phase Completion
Check & Prepare for Next Phase Project Closing Systems Integrator Implementation
Methodologies SI Methods/Tools Extend Upon ASAP Methodology* * Accenture Example
Operations Management MBUS 306 Lecture 10 – Supply Chain Management Al Baharmast,
Ph.D. The Strategic Importance of the Supply Chain Supply-chain management is the
integration of the activities that procure materials and services, transform them into
intermediate goods and the final product, and deliver them to customers Competition is no
longer between companies; it is between supply chains Objective – structure the supply
chain to maximize its competitive advantage and benefits to the ultimate consumer Supply-
Chain Management Important activities include determining 1. Transportation 2. Credit and
cash transfers 3. Supplier management 4. Distribution 5. Accounts payable and receivable 6.
Warehousing and inventory 7. Order fulfillment 8. Sharing customer, supplier, forecasting,
and production information A View of the Supply Chain Supply Network More reflective of
reality – much more complex! e-tailer • Multiple agents across the stages of supply •
Multiple channels of distribution (ways of selling a company’s goods) • Multi-directional

7. flows Manufacturer Supplier Consumers Retailer Manufacturer Supplier Consumers
Retailer Distributors Manufacturer Supplier Consumers Retailer Consumers Distributors
Manufacturer The Supply Chain’s Strategic Importance • The coordination of all supply
chain activities, starting with raw materials and ending with a satisfied customer • Includes
suppliers, manufacturers and/or service providers, distributors, wholesalers, retailers, and
final customers The Supply Chain’s Strategic Importance • Large portion of sales dollars
spent on purchases • Supplier relationships increasingly integrated and long term •
Improve innovation, speed design, reduce costs • Managing supplier relationships has
added emphasis Global Supply-Chain Issues Supply chains in a global environment must be
technologies to schedule and manage the shipment of materials in and finished products out
-
Chain Economics Supply Chain Costs as a Percent of Sales Make-or-Buy Decisions Reasons
for Making 1. 2. 3. 4. 5. 6. 7. 8. Maintain core competence Lower production cost Unsuitable
suppliers Assure adequate supply (quantity or delivery) Utilize surplus labor or facilities
Obtain desired quality Remove supplier collusion Obtain unique item that would entail a
prohibitive commitment for a supplier 9. Protect personnel from a layoff 10. Protect
proprietary design or quality 11. Increase or maintain size of company Table 11.4 Make-or-
Buy Decisions Reasons for Buying 1. Frees management to deal with its primary business 2.
Lower acquisition cost 3. Preserve supplier commitment 4. Obtain technical or management
ability 5. Inadequate capacity 6. Reduce inventory costs 7. Ensure alternative sources 8.
Inadequate managerial or technical resources 9. Reciprocity 10. Item is protected by a
logistics, and
production Supply- -term
mmonly used for
more willing to participate in JIT programs and contribute design and technological
l Integration Vertical Integration Raw
material (suppliers) Examples of Vertical Integration Iron ore Silicon Farming Flour milling
Backward integration Steel Current transformation Automobiles Integrated circuits
Forward integration Distribution systems Circuit boards Dealers Computers Watches
be forward, towards the customer, or bac
industries with rapid technological change Joint Ventures • Formal collaboration – Enhance

8. skills – Secure supply – Reduce costs • The challenge is to cooperation without diluting
Often provide financial su
long-
relation
performance, low capital investment, flexibility, and speed Managing the Supply Chain
There are significant management issues in controlling a supply chain involving many
– focusing
on l
Large lots – low unit cost (resulting from shipping and production efficiencies) but higher
– demand becomes progressively distorted the
further upstream we go in the supply chain Why Supply Chain Management is so difficult? •
Nonlinearities – 1. Reliance on forecasts at each stage for basing decisions 2. Different
demand patterns of different products over time 3. Different constraints (lot-sizing,
transport capacity etc.) 4. Different supply chain structures 5. Dynamic nature of
relationships and information • Results into upstream demand amplification (Bull-whip)
Courtesy of Partha Datta Martin Christopher & Peter Allen Cranfield University
right-
Vendor- nishment
(CPFR) – supply chain coordination Purchasing Process Individual initiates requisition
Purchasing department/buyer Prepares requisition Buyer reviews requisition Inputs
request into computer system and transmits to purchasing department Enters data into
Internet system Assigns suppliers to bid; gives closing dates and conditions
Collects/reviews bids submitted electronically Selects a supplier based on quality, cost,
delivery performance; issues purchase order Supplier Receives electronic purchase order
stablish
-Based Price Model –
-Based Price Model – price based on published,
– common practice for most purchases but
may not be conducive to establishing long-term relationships if contract durations are short
-based, fixed price, or time and materials
Vendor Evaluation Criteria Weights Scores (1-5) Engineering/research/innovation skills
.20 5 1.0 Production process capability (flexibility/technical assistance) .15 4 .6

9. Distribution/delivery capability .05 4 .2 Quality systems and performance .10 2 .2
Facilities/location .05 2 .1 Financial and managerial strength (stability and cost structure)
.15 4 .6 Information systems capability (ecommerce, Internet) .10 2 .2 Integrity
(environmental compliance/ ethics) .20 5 1.0 Total 1.00 Weight x Score 3.9 Using Auctions
items for which long-term
contracts do not exist or where goods/ services requirements are standardized and
Buyer’s Reverse Auctions Seller’s (Forward) Auctions – Traditionally, auctions were seller-
initiated events – means of getting a highest price – A seller identifies a single product or a
lot that they intend to sell – Often requires an intermediary – an auctioneer/qualifier –
Generally, the highest bidder (English auction) or the first high bidder (Dutch auction)
‘wins’ – B-2-B seller auctions are most viable for – Commoditized goods (wheat, cattle,
steel) – Consortium-controlled goods (oil, flowers) Buyer’s (Reverse) Auctions – Very
successful for B-2-B buy environments – as a means of getting the lowest price – A buyer
identifies a single product or a lot that they intend to buy – Often requires an intermediary –
an auctioneer/qualifier – Generally, the lowest bidder (English auction) or the first low
bidder (Dutch auction) ‘wins’ – B-2-B buyer auctions are most viable for – Standardized
product acquisitions – Simple services with broadly applicable performance criteria
advantage i
for
two costs to better understand the trade-off Introduction to SCOR • Supply Chain Council –
A leading interindustry organization consisting of about 1000 top international firms
including manufacturers, services, distributors, and retailers. • SCOR – The Supply Chain
Council’s “Supply Chain Operations Reference Model” From the Supply Chain Council’s
SCOR Version 10.0 Overview Introduction to SCOR • A Process Reference Model Contains: •
Standard descriptions of management processes • A framework of relationships among the
standard processes • Standard metrics to measure process performance • Management
practices that produce best-in-class performance • Standard alignment to features and
functionality From the Supply Chain Council’s SCOR Version 10.0 Overview Introduction to
SCOR • SCOR spans: – All customer interactions, from order entry through paid invoice – All
product (physical material and service) transactions, from your supplier’s supplier to your
customer’s customer, including equipment, supplies, spare parts, bulk product, software,
etc. – All market interactions, from the understanding of aggregate demand to the
fulfillment of each order • SCOR does not attempt to describe every business process or
activity, including: – Sales and marketing (demand generation) Research and technology
development Product development Some elements of post-delivery customer support From
the Supply Chain Council’s SCOR Version 10.0 Overview Introduction to SCOR Five Supply

10. Chain Management Processes From the Supply Chain Council’s SCOR Version 10.0 Overview
Introduction to SCOR • Demand/Supply Planning and Management – Balance resources
with requirements and establish/communicate plans for the whole supply chain, including
Return, and the execution processes of Source, Make, and Deliver. – Management of
business rules, supply chain performance, data collection, inventory, capital assets,
transportation, planning configuration, and regulatory requirements and compliance. –
Align the supply chain unit plan with the financial plan. Note- Planning is required in
aggregate and for other, detailed processes PLAN From the Supply Chain Council’s SCOR
Version 10.0 Overview Introduction to SCOR • Sourcing Stocked, Make-to-Order, and
Engineer-to-Order Product – Schedule deliveries; receive, verify, and transfer product; and
authorize supplier payments. – Identify and select supply sources when not predetermined,
as for engineer-to-order product. – Manage business rules, assess supplier performance,
and maintain data. – Manage inventory, capital assets, incoming product, supplier network,
import/export requirements, and supplier agreements. SOURCE From the Supply Chain
Council’s SCOR Version 10.0 Overview Introduction to SCOR • Make-to-Stock, Make-to-
Order, and Engineerto-Order Production Execution – Schedule production activities, issue
product, produce and test, package, stage product, and release product to deliver. – Finalize
engineering for engineer-to-order product. – Manage rules, performance, data, in-process
products (WIP), equipment and facilities, transportation, production network, and
regulatory compliance for production. MAKE From the Supply Chain Council’s SCOR Version
10.0 Overview Introduction to SCOR • Order, Warehouse, Transportation, and Installation
Management for Stocked, Make-toOrder, and Engineer-to-Order Product – All order
management steps from processing customer inquiries and quotes to routing shipments
and selecting carriers. – Warehouse management from receiving and picking product to
load and ship product. – Receive and verify product at customer site and install, if
necessary. – Invoicing customer. – Manage Deliver business rules, performance,
information, finished product inventories, capital assets, transportation, product life cycle,
and import/export requirements. DELIVER From the Supply Chain Council’s SCOR Version
10.0 Overview Introduction to SCOR • Return of Raw Materials and Receipt of Returns of
Finished Goods – All Return Defective Product steps from source – identify product
condition, disposition product, request product return authorization, schedule product
shipment, and return defective product – and deliver – authorized product return, schedule
return receipt, receive product, and transfer defective product. – All Return of Maintenance,
Repair, and Overhaul product steps from source – identify product condition, disposition
product, request product return authorization, schedule product shipment, and return MRO
product – and deliver – authorize product return, schedule return receipt, receive product,
and transfer MRO product. – All Return Excess Product steps from source – identify product
condition, disposition product, request product return authorization, schedule product
shipment, and return excess product – and deliver – authorize product return, schedule
return receipt, receive product, and transfer excess product. – Manage Return business
rules, performance, data collection, return inventory, capital assets, transportation, network
configuration, and regulatory requirements and compliance. RETURN From the Supply
Chain Council’s SCOR Version 10.0 Overview Introduction to SCOR Level Name Top Level

11. (Process Types) Description ➢
Defines the scope and content for the Supply Chain
Operations Reference-model. Basis of competition performance targets are set.
Configuration Level (Process Categories) ➢
Configuration from 30 core “process categories.”
Companies implement their operations strategy through the supply chain configuration
they choose. Process Element Level (Decompose Processes) ➢
Defines a company’s ability to
compete successfully in its chosen markets, and consists of: Process element definitions,
Process element information inputs, and outputs, Process performance metrics, Best
practices, where applicable, System capabilities required to support best practices, and
Systems/tools; Companies “fine tune” their Operations Strategy at Level 3. Implementation
Level (Decompose Process Elements) ➢
Companies implement specific supply-chain
management practices at this level. Level 4 defines practices to achieve competitive
advantage and to adapt to changing business conditions. From the Supply Chain Council’s
SCOR Version 10.0 Overview Introduction to SCOR From the Supply Chain Council’s SCOR
Version 10.0 Overview Operations Management MBUS 306 Lecture 12 – Business Systems –
ERP/APS/SCM/CRM Al Baharmast, Ph.D. Enterprise Resource Planning (ERP)
Fundamentals •ERP Fundamentals: Not just another business software system…, ERPs are
•Packaged business solutions comprised of multiple components, that, when implemented
in tandem, automate, integrate and optimize extended business processes across
organizational value chains •They enable sharing of common data and business practices
both within the enterprise and across supply chains •Also referred to as “Packaged
Software,” “Standard Software,” and “Best Practices Software” ERP Solution Drivers What
Compels the Adoption of Best Practices Software Solutions? ERP Standards Software
(COTS) applications Deliver a lower Total Cost of Ownership (TCO)* over an extended
lifecycle: Development, Implementation, Integration and Support/Maintenance Costs
Longer Life Cycles than custom applications Provide proven methodologies (Embedded
resources) for implementation, testing, training, documentation Limit financial risks
(vendor/systems knowledge dissolution) Provide scalability Allow businesses to focus on
their core competencies (unless you are a software development firm …) Ultimately, ERP
implementations are driven by the desire to Obtain better information on process
performance Improve operational efficiency & implement system-enforced controls
Support process transformation, product innovation and partner integration * TCO
reductions rarely realized in isolation; benefits accrue from operational improvements &
process innovations ERP Evolution ERP’s Manufacturing Roots Material Requirements
Planning (MRP) Material Resource Planning (MRP II) Enterprise Integration ERP (Back-
office – Human Resources, Financials, Supply Chain) Industry Vertical Solutions Expanding
Enterprise Integration ERP (Services Offerings), Supply Chain Management (SCM), Supplier
Relationship Management (SRM) and Customer Relationship Management (CRM) The
Newest Wave ERP II (Lehman, 2001) – “C-commerce and collaborative business models are
beginning to replace standard strategies focused on operational efficiency and value chain
management.” Collaborative Commerce – Sharing business processes across the enterprise
bounds within “communities of interest” – automating process interactions with
customers/clients and third parties. ERP Vendors Big market players – SAP and Oracle The
Financial Picture (from FY 2018) – SAP Revenues – $24.7 Billion R&D Expenditures – $3.6

12. Billion Net Income – $5.3 Billion Oracle* Revenues – $39.8 Billion R&D Expenditures –
$6.1 Billion Net Income – $13.7 Billion * Includes Oracle Database and other non-ERP
product/service lines ERP Concepts Best Practices Software Embedded Business Processes
ERP Concepts Best Practices Software ERP as “Best Practices Software” – All ERP
applications execute extended business processes either as explicitly represented or
implicitly understood (increasingly becoming explicit) Embedded business processes are
those developed from years of research and synthesis into “best practices” Allows you to
map your business processes to those executed in the system (solution reference models)
Thousands of ways to configure the embedded business processes to better suit your needs
May require modification of business processes If neither configuration nor adaptation is
possible, other alternatives may be sought (i.e., bolt-ons and extensions; customization is
seldom recommended) If all else fails, only then seek alternative solutions that customize
and/or integrate with external system (bolt-on/extension) Generally Rule – Configuration –
Good Customization – Bad Not All Customizations are Made the Same Key to Customization
Reduction – Business Process Reengineering & Governance Having just said customizations
are bad, now you have to know you will need them Though ERPs are generally enabled via
industry best practice configuration, customers often need to enhance standard
functionality to address product gaps or customer-specific requirements (e.g., printing,
reporting, systems interfaces, etc.). We categorize customizations by the following
groupings – Reports, Interfaces, Conversion, Extensions, Forms, Workflow, Authorizations
(RICE-FWA) and other Business Intelligence (BI)-unique custom content (Data-Stores,
Multi-Providers, Info-Cubes, Reports, etc.). This custom code introduces complexity, but
there are methods of retaining these customizations with through baseline software
releases from the vendor. – Customization of core code is a separate distinct category. It will
often require a vendor key to make this type of change, and there is much greater risk these
customizations!! Customizations are not equally complex; some are more challenging and
time-consuming to develop/maintain. Generally… More Complex – Interfaces, Conversions,
Extensions (Vary Greatly) Less Complex – Reports, Workflow Least Complex & Often Most
Numerous – BI-Unique Custom Content SAP Supply Chain Collaboration Process Model
(High Level) With hundreds of best practices incorporated into the SAP system,
organizations have a ready-made facility for adopting proven processes without the
burdens of trialand-error operational design and of benchmarking themselves against
another organization [Curran, 1997] Source: SAP Business Process Management The
Antithesis of “Clean-Slate” Business Process Reengineering Reengineering, as some have
conceptualized it, calls for “clean slate” process redesign prior to searching for technology
solutions. A standard software solution is implemented in an opposite fashion: – A set of
“reference” process, data, and function models are purchased. – Internal processes are
aligned with the standard software solution reference processes. – Through configuration
analysis, many options exist for finding the most suitable variant of a reference process.
Standard software-based Business Process Management (BPM) – Anticipates alignment to
reference business processes and the systems configuration that will build a process variant
that is most suitable for the adopting organization. ERP Concepts Process Orientation
Functionally-Oriented Operations Management Domain “A” Acquisition (Purchasing)

13. Domain “B” Logistics (Receiving) Domain “C” Finance (Payables) Input A Vertical Processes
B 2 β C 3 γ D 4 δ E Vertical, Non-Integrated Systems “Stovepipes” α 1 ε 5 Output Acq. IS Log.
IS Fin. IS Process-Oriented Operations Management – Driven by ERP Domain “A”
Acquisition (Purchasing) Input Process Variant 1 Domain “B” Logistics (Receiving) Domain
“C” Finance (Payables) Functions A Output α 1 Process Variant 2 B C β 2 γ 3 D δ 4 Process
Variant 3 Process Variant 4 E 5 ε Solution Spotlight Oracle – Maintenance, Plan to Schedule
Process Asset to Maintenance Plan Signal to Replenishment Assess to Progress Strategic
Staffing to Hire Payroll to Payment Plan to Project Budget Schedule to Maintain AM7513
AM7527 AM7515 AM7516 Determine Asset Availability Manage Work Request Process
Schedule and Resource Asset Create Maintenance Schedule • Perform constraint based
scheduling, what-if analysis, and adjustment of variables (overtime, contract labour,
deferrals, etc.) • Schedule work orders, identify dependencies, and identify resources
(People/ Equipment/ Parts) • Review production orders, property usage/hours,
shutdown/holidays etc. in order to determine asset availability. • Create a work request,
approve the work request, and associate the work request to a work order. Schedule to
Maintain Signal to Replenishment Assess to Progress Strategic Staffing to Hire Payroll to
Payment Plan to Project Budget Source: Oracle Enterprise Roles Maintenance Planner
Maintenance Supervisor ERP Concepts Enterprise-Level Standards Enterprise-Level
Standards Business Process Standardization – Results in significant reduction in or
elimination of the different ways of doing the same job. Configuration Standardization &
Management – Embeds process standardization in the ERP system. – Requires a pre-defined
configuration control process to avoid constant change and/or the development of process
variances. User Roles Standardization – Identifies logical groups of users based on common
activities and organizations. System functions and data visibility are constrained (or
enabled) by user role. User Training Standardization – Provides the discrete information to
user groups necessary to enable process standardization. ERP Concepts Single Source of
Data Single Source of Data One of the central tenets of ERP is the consolidated and
centralized management of all the instances of identical data (both Master Data and
Transactional Data) … based on the foundational efficiency principle of data reutilization
Process 1 Requisition Process 2 P.O. Issuance Process 3 Receiving Process 4 A.P. SAP –
Quality Inspection Example Define Product Quality Characteristics and Leverage One Set of
Master Data that to Manage Inspections Vendor A Data ERP Database Master data –
relatively static referential data against which variable transactions will be posted (e.g.,
Vendors, Customers, Materials). Transactional data – variable data that define the
parameters of a business event and make reference to master data (units ordered, lots held
in inventory) Source: SAP ERP Concepts Broad Scope of Integrated Solutions SAP Modules
SAP Business Suite and Industry Solutions Defense Forces & Public Security Public Sector
Oracle E-Business Suite ERP and Functional Activites Managing Business Functions with
ERP Select Examples Functional Business Activities Of utility in defining scope and
organizational support requirements Examples – Financial Management – Procurement –
Project Management – Quality Management – Supply Chain Management Financial
Management Procurement Project Management Quality Management Business Functions as
Part of Extended ERP Business Processes •Business functions are interwoven throughout

14. each extended business process enabled by an ERP. ERP functional component capabilities
enable organizations to execute their part of a comprehensive end to end process.
•Examples of business functions as part of extended ERP business processes: – Creating an
obligation to reflect a financial liability at the time of Purchase Order Issuance (Financial
Management) – Enabling Goods Receiving and Invoice Receiving with Reference to a
Previous Procurement Action/Document (Procurement) – Enabling Goods Quality
Inspection Upon Receipt and Based on Pre-specified Contractual Terms and Conditions
(Quality Management) – Recognizing Goods Receiving to Project Stock and Updating Task
Completion or Percent Completion (Project Management) Managing Business Processes
with ERP Select Examples of Quality Management Functions Interwoven into Varied End to
End Business Processes Supported by ERP • • • • • Procure to Pay Order to Cash Concept to
Product/PLM Prospect to Order Service Request to Resolution QM and Procure-to-Pay
(PTP) Master Data •Material Master – Material Masters exist for all materials that are
purchased, produced or stocked • Services, Raw Materials, Semi-Finished Goods, Finished
Goods, Non-Stock (Consumables), Non-Valuated Materials, Packaging, etc – Defines the
basic quality requirements for a material • Goods Receipts from PO, Goods Receipt from
Production Order, Stock Transfer, Goods Issue, Customer Delivery, etc. • Post to “Inspection
Stock” or “Unrestricted Stock” •Vendor Master – Vendors can be evaluated (scored) and/or
blocked for all or some materials (for quotations, purchase orders and/or goods receipts)
•Material Master + Vendor Master – Modify Material Master Goods Receipt rules (e.g.
Source Inspections) – Valid date range, valid quantity level, dynamic rules PTP – Goods
Receipt from Vendor •In this scenario, materials are procured from a vendor and inspected
on receipt – Condition: QM Master Data determines that an inspection is required; items
will be received into Inspection Stock; the Vendor is not “blocked” for this shipment 1.
Purchase Requisition creates a Purchase Order which leads to an Inbound Delivery 2. On
Goods Receipt, an Inspection Lot is created, the items are received (posted) into Inspection
Stock 3. The Inspection Plan (with tasks, characteristics, sample size, etc.) is performed –
Optionally, the items may require a “quality certificate” from the vendor, which can be
processed via EDI. Source Inspections may also be required (including for third parties) 4.
Inspection Results and Defects are recorded and Quality Notifications created 5. The
Inspection Lot is completed, a score is calculated and usage decisions are made 6. Stock
postings are performed, the Vendor is updated, and a quality certificate may be produced
7.If the items fail inspection, the Return Delivery process is triggered Order to Cash – Sales
and Delivery • In this scenario, materials sold to one specific customer require
characteristics that most but not all materials meet and that no other customer requires. • •
Condition: The combination of Customer A and Material B has an associated Quality
Inspection plan that requires Inspection Before Delivery Note: the intent is not to “re
inspect” materials that have already been inspected on Goods Receipt or during Production,
rather it is to meet customer-specific requirements and minimize overall cost 1. Sales Order
is received from Customer A for Material B 2. The Sales Order creates an Inspection Lot and
materials are produced or moved from inventory 3. QM performs the Inspection 4.
Inspection results are recorded and a usage decision is made 5. If the items pass inspection,
the Sales Order generates a Delivery Order and the Shipping process is initiated 6. A Quality

15. Certificate may be produced Concept to Product and PLM ERPs enable innovation quality
and efficiency in new product design and engineering – Target customer market and
customer requirements identification (CRM, NDPI) Collaborative product engineering
(NDPI, cFolders and PLM), mechanical and electronic-CAD (PLM), and project management
(PS) Product quality engineering and specifications (NDPI, PLM, MM and QM), including ISO
9001 and 14000 Product and component sourcing (SCM & SRM), Network Planning (NDPI),
Cost and Quotations (CQM) Prospect to Order & Service Request to Satisfaction Managing
quality in services delivery with Customer Relationship Management – •Enforcing business
rules and standardizing interactions with scripts, alerts and messages and knowledge
management tools (Interaction Center) •Online help procedures and step-through training
aids for customer service representatives •Managing customer history and cross-channel
engagement information (CRM Marketing, Sales, Service) •Service contract management
(CRM Service), service history and entitlement, SLAs and warranties, return material
authorizations, billing and shipping history ERP Implementers and Users (Sampling)
Companies that Implement ERPs: -Accenture -HP -IBM -Capgemini -CSRA -Deloitte -KPMG -
PWC -Many other smaller companies Companies/Organizations -AMD -ALCOA -BP/Amoco -
Bristol Myers Squibb -Chevron -CITGO -Coca Cola -Compaq -Compass Group -CONOCO -DHL
-DirecTV -Exxon/Mobil -General Mills -Halliburton -Honeywell -Intel that Use ERPs: -Kodak
-Lockheed -NASA -Nokia -OfficeMax -Pennzoil -Phillips -Proctor & Gamble -Saralee -Shell -
Siemens -Statoil -Many other large and smaller companies Implementation Methods – ASAP
Accelerated SAP (ASAP) is SAP’s standard implementation methodology. It contains the
Roadmap, a step-by-step guide that incorporates experience from many years of
implementing the solution. Accelerated SAP contains a multitude of tools, accelerators and
useful information to assist all team members in implementing the solution. Quality checks
are incorporated at the end of each phase to easily monitor deliverables and critical success
factors. 37 ASAP Phase 1 : Project Preparation Goal Setting Define project goals & objectives
Implementation strategy 1.Clarify the scope of implementation 2.Establish the project
organization and relevant committees and assign resources Implementation Sequence
During this phase the team goes through initial planning and preparation for SAP project.
Define sequence in project has to be executed Team Core team+ project team+ consultant
team Sign Off At the end of phase every above steps will be documented & will be signed off
with the client 39 Phase 1 : Project Preparation 40 Phase 2 : Business Blueprint SCOPE
DOCUMENT This document will consists of questionnaire of entire business process AS IS
1.Understanding the business Process from the core team. 2.Based on the input ASIS
document has to be created according to module wise TO BE 1.In this process will map the
business process in SAP based on ASIS 2.Module wise TOBE document has to be created The
purpose of this phase is to achieve a common understanding of how the company intends to
run SAP to support their business. The result is the Business Blueprint, a detailed
documentation of the results gathered during requirements workshops. GAP ANALYSIS
1.The GAP b/w ASIS process & TOBE process is called GAP analysis ie., The inputs or the
business process which can’t mapped into standard SAP will be analyzed here 2.GAP
document has to be created SIGN OFF Each process above has to be taken sign off from
client 41 Phase 2 : Business Blueprint 42 Phase 3 : Realization Baseline Major scope Final

16. Configuration Remaining scope The purpose of this phase is to implement all the business
process requirements based on the Business Blueprint. The system configuration
methodology is provided in two work packages: Baseline (major scope); and Final
configuration (remaining scope). SIGN OFF Each process above has to be taken sign off from
client 43 Phase 3 : Realization Phase 4 : Final Preparation Unit Testing Testing within each
module Integration Testing Integrate testing of modules ie., combine testing of all the
modules User Training Cut over Strategy legacy system will be migrated to SAP system. The
purpose of this phase is to complete the final preparation (including testing, end user
training, system management and cutover activities) to finalize your readiness to go live.
The Final Preparation phase also serves to resolve all critical open issues. On successful
completion of this phase, you are ready to run your business in your live SAP System. SIGN
OFF Each process above has to be taken sign off from client 45 Phase 4 : Final Preparation
46 Phase 5 : Go Live & Support Production Support Monitor System Transactions Optimize
Performance The purpose of this phase is to move from a project-oriented, pre-production
environment to live production operation. Help Desk & Competency Center 47 Phase 5 : Go
Live & Support 48 ASAP Roadmap Project Preparation Business Blueprint Realization Final
Preparation GoLive and Support Setup of Local Project Organization General Project
Management General Project Management General Project Management General Project
Management Adaption of Strategic Framework OCM Organizational Alignment + Change
Analysis OCM OCM OCM Establish OCM Procedures + Responsibles Early Adoption of Best
Business Practice Processes Early Adoption of Best Business Practice Processes End User
Training System Support Early Adoption of Best Business Practice Proceesses Training
Planning Training Preparation Cutover Management Business Support Training and
Documentation Strategy Local Business Blueprint Documentation Configuration &
Development Business Simulation Infrastructure Requirements and Design Security
Requirements Unit / Process / Integration / Business Acceptance Testing End User Practice
in the System Data Management Standards Implementation Infrastructure Planning
Infrastructure Implementation Infrastructure Finalization Data Cleansing and Data
Preparation System Operation Stategy Completion Check & Prepare for Next Phase Data
Cleansing and Data Preparation Completion Check & Prepare for Next Phase Data
Preparation & Data Migration Simulation Data Migration to Production Cutover Planning &
Preparation Pre-Go-Live Operations Business Transition Planning for Cutover Final Cutover
and Controlled Process GoLive Completion Check & Prepare for Next Phase Completion
Check & Prepare for Next Phase Project Closing Systems Integrator Implementation
Methodologies SI Methods/Tools Extend Upon ASAP Methodology* * Accenture Example
Operations Management MBUS 306 Lecture 7 – Design of Goods & Services Al Baharmast,
-
satisfaction, not just a physical goo
organization’s strategy with implications throughout the operations function Product

17. The operations function must be able to introduce new products successfully Sales, cost,
and cash flow Product Life Cycles Cost of development and production Sales revenue Net
revenue (profit) Cash flow Negative cash flow Introduction Loss Growth Maturity Decline
Figure 5.1 Product Life Cycle Costs 100 – Costs committed Percent of total cost 80 – 60 –
Costs incurred 40 – 20 – Ease of change 0– Concept design Detailed Manufacturing design
prototype Distribution
forecasting of c
down of product lin
contribution to the organization, must plan to terminate offering Importance of New
Products Percentage of Sales from New Products 50% 40% 30% 20% 10% Industry leader
Top third Middle third Bottom third Position of Firm in Its Industry Figure 5.2 Product-by-
evaluate alternative strategies Product-by-Value Analysis Sam’s Furniture Factory
Individual Contribution ($) Total Annual Contribution ($) Love Seat $102 $36,720 Arm
Chair $87 $51,765 Foot Stool $12 $6,240 Recliner $136 $51,000 New Product Opportunities
1. Understanding the customer 2. Economic change 3. Sociological and demographic change
4. Technological change 5. Political/legal change 6. Market practice, professional standards,
suppliers, distributors Employing tools such as Brainstorming, Mind Mapping, Surveys, and
Devel
desirable technical attributes QFD House of Quality Interrelationships What the Customer
Wants Relationship Matrix Technical Attributes and Evaluation Analysis of Competitors
How to Satisfy Customer Wants House of Quality Example Your team has been charged with
designing a new camera for Great Cameras, Inc. The first action is to construct a House of
Quality House of Quality Example Interrelationships What the Customer Wants Technical
Attributes and Evaluation What the customer wants Lightweight Easy to use Reliable Easy
to hold steady No double exposures Relationship Matrix Customer importance rating (5 =
highest) 3 4 5 2 1 Analysis of Competitors How to Satisfy Customer Wants House of Quality
Example Interrelationships Relationship Matrix Ergonomic design Auto film advance Auto
exposure Auto focus Technical Attributes and Evaluation Aluminum components Low
electricity requirements What the Customer Wants Analysis of Competitors How to Satisfy
Customer Wants How to Satisfy Customer Wants Representations of Form, Fit and Function
of the Product House of Quality Example Interrelationships What the Customer Wants High
relationship – 5 points Medium relationship – 3 points Low relationship – 1 point
Lightweight Easy to use Reliable Easy to hold steady No double exposures 3 4 5 2 1

18. Relationship matrix Relationship Matrix Technical Attributes and Evaluation Analysis of
Competitors How to Satisfy Customer Wants House of Quality Example Interrelationships
What the Customer Wants Relationship Matrix Ergonomic design Auto film advance Auto
exposure – Or negative Auto focus – May be positive Aluminum components Relationships
between the things we can do Low electricity requirements Technical Attributes and
Evaluation Analysis of Competitors How to Satisfy Customer Wants House of Quality
Example Interrelationships What the Customer Wants Relationship Matrix Technical
Attributes and Evaluation Lightweight Easy to use Reliable Easy to hold steady No double
exposures Our importance ratings Weighted rating 3 4 5 2 1 22 9 27 27 32 25 Analysis of
Competitors How to Satisfy Customer Wants House of Quality Example Interrelationships
Technical Attributes and Evaluation How well do competing products meet customer wants
Lightweight Easy to use Reliable Easy to hold steady No double exposures Our importance
ratings 3 4 5 2 1 22 5 Company B Relationship Matrix Company A What the Customer Wants
Analysis of Competitors How to Satisfy Customer Wants G G F G P P P G P P House of Quality
Example Interrelationships 2’ to ∞ 75% 0.5 A Technical attributes 2 circuits Technical
Attributes and Evaluation Panel ranking Relationship Matrix Failure 1 per 10,000 What the
Customer Wants Analysis of Competitors How to Satisfy Customer Wants Company A 0.7
60% yes 1 ok G Technical evaluation Company B 0.6 50% yes 2 Us 0.5 75% yes 2 ok F ok G
House of Quality Example Completed House of Quality House of Quality Sequence Deploying
resources through the organization in response to customer requirements Quality plan
Customer requirements House 1 House 2 House 3 Production process Design
characteristics Design characteristics Specific components Specific components Production
process House 4 Figure 5.4 Organizing for Product Development Traditionally – distinct
Today – – representatives from all disciplines or
– cross functional tea
drives the product through the product development system and related organizations
Manufacturability and Value Engineering Benefits: 1. 2. 3. 4. 5. 6. 7. Reduced complexity of
products Reduction of environmental impact Additional standardization of products
Improved functional aspects of product Improved job design and job safety Improved
maintainability of the product Robust design Cost Reduction of a Bracket through Value
Engineering Figure 5.5 Issues for Product Developmen
Modular design Computer-aided design (CAD) Computer-aided manufacturing (CAM)
Virtual reality technology Value analysis Sustainability and Life Cycle Assessment (LCA)
s in production or assembly do
Modular Design Products designed in easily segmented components Adds flexibility to both
production and marketing Improved ability to satisfy customer requirements Computer
Aided Design (CAD) Using computers to design products and prepare engineering
documentation Shorter development cycles, improved accuracy, lower cost Information and
designs can be deployed worldwide Extensions of CAD • Design for Manufacturing and
the Internet • 3- -D Printing •

19. International data exchange through STEP Computer-Aided Manufact
develop an interactive, 3- Allows people to
-scale
designs such as plant layout Ethics and Environmentally Friendly Designs It is possible to
enhance productivity, drive down costs, and preserve resources The Ethical Approach 1.
View product design from a systems perspective 2. Consider the entire life cycle of the
product Goals for Ethical and Environmentally Friendly Designs 1. Develop safe and more
environmentally sound products 2. Minimize waste of raw materials and energy 3. Reduce
environmental liabilities 4. Increase cost-effectiveness of complying with environmental
regulations 5. Be recognized as a good corporate citizen Legal and Industry Standards For
laws dealing with employment standards, discrimination, etc. Legal and Industry Standards
worldwide Time- roduct life cycles are becoming shorter and the rate
competitive advantage Product Development Continuum Figure 5.6 External Development
Strategies Alliances Joint Ventures Purchase Technology or Expertise by Acquiring the
Developer Internal Development Strategies Migrations of Existing Products Enhancement to
Existing Products New Internally Developed Products Internal Lengthy High Cost of Product
Development Speed of Product Development Risk of Product Development Shared Rapid
will have an enginee
Shows product structure Monterey Jack Cheese (a) U.S. grade AA. Monterey
cheese shall conform to the following requirements: (1) Flavor. Is fine and highly pleasing,
free from undesirable flavors and odors. May possess a very slight acid or feed flavor. (2)
Body and texture. A plug drawn from the cheese shall be reasonably firm. It shall have
numerous small mechanical openings evenly distributed throughout the plug. It shall not
possess sweet holes, yeast holes, or other gas holes. (3) Color. Shall have a natural, uniform,
bright and attractive appearance. (4) Finish and appearance – bandaged and paraffin-
dipped. The rind shall be sound, firm, and smooth providing a good protection to the cheese.
Code of Federal Regulation, Parts 53 to 109,. Revised as of Jan. 1, 1985, General Service
Administration Engineering Drawings Figure 5.8 Bills of Material (BOM) Panel Weldment
NUMBER DESCRIPTION QTY A 60-71 PANEL WELDM’T 1 A 60-7 R 60-17 R 60-428 P 60-2
LOWER ROLLER ASSM. ROLLER PIN LOCKNUT 1 1 1 1 A 60-72 R 60-57-1 A 60-4 02-50-
1150 GUIDE ASSM. REAR SUPPORT ANGLE ROLLER ASSM. BOLT 1 1 1 1 A 60-73 A 60-74 R

20. 60-99 02-50-1150 GUIDE ASSM. FRONT SUPPORT WELDM’T WEAR PLATE BOLT 1 1 1 1
Figure 5.9 Bills of Material (BOM) BBQ Bacon Cheeseburger Description Qty Bun
Hamburger patty Cheddar cheese Bacon BBQ onions Hickory BBQ sauce Burger set Lettuce
Tomato Red onion Pickle French fries Seasoned salt 11-inch plate HRC flag 1 8 oz. 2 slices 2
strips 1/2 cup 1 oz. 1 leaf 1 slice 4 rings 1 slice 5 oz. 1 tsp. 1 1 Figure 5.9 Group Technology
manufacturing cells Group Technology Scheme (b) Grouped Cylindrical Parts (families of
parts) (a) Ungrouped Parts Grooved Slotted Threaded Drilled Machined Figure 5.10 Group
Technology Benefits • • • • Improved design Reduced raw material and purchases
Simplified production planning and control Improved layout, routing, and machine loading
• Reduced tooling setup time, work-inprocess, and production time Documents for
Production Assembly drawing Assembly chart Route sheet Work order Engineering change
e
locations to show how to assemble the product Figure 5.11 (a) Assembly Chart 1 2 3 4 5 6 7
8 9 R 209 Angle R 207 Angle Bolts w/nuts (2) Left bracket SA A1 1 assembly R 209 Angle R
207 Angle Bolts w/nuts (2) Right bracket SA A2 2 assembly Bolt w/nut R 404 Roller A3
flow into subassemblies and ultimately into the final product Poka-yoke inspection A4 Box
w/packing material 11 A5 Figure 5.11 (b) Route Sheet Lists the operations and times
required to produce a component Process Machine Operations 1 Auto Insert 2 2 3 Manual
Insert 1 Wave Solder 4 Test 4 Insert Component Set 56 Insert Component Set 12C Solder all
components to board Circuit integrity test 4GY Setup Time Operation Time/Unit 1.5 .4 .5 2.3
1.5 4.1 .25 .5 Work Order Instructions to produce a given quantity of a particular item,
usually to a schedule Work Order Item Quantity Start Date Due Date 157C 125 5/2/06
5/4/06 Production Dept Delivery Location F32 Dept K11 Engineering Change Notice (ECN)
lead times, or rapidly changing technologies Conf
product’s planned and changing components are accurately identified and control and
accountability for change are identified and maintained Pr
Integrated software that brings together most, if not all, elements of product design and
includes direct interaction
utomation Moments of
lose business
Moments-of-Truth Computer Company Hotline Experience Enhancers Standard
Expectations Experience Detractors I had to call more than once to get through A recording

21. spoke to me rather than a person While on hold, I get silence,and wonder if I am
disconnected The technician sounded like he was reading a form of routine questions The
technician sounded uninterested I felt the technician rushed me Only one local number
needs to be dialed I never get a busy signal I get a human being to answer my call quickly
and he or she is pleasant and responsive to my problem A timely resolution to my problem
is offered The technician is able to explain to me what I can expect to happen next The
technician was sincerely concerned and apologetic about my problem He asked intelligent
questions that allowed me to feel confident in his abilities The technician offered various
times to have work done to suit my schedule Ways to avoid future problems were suggested
tomer interaction necessitates
-of-
product moves through its life cycle Operations Management MBUS 306 Lecture 8 –
y in transit because there is total control of
to maximize the benefit of location to the firm Varied Focus by
Industry Location decisions often relate to business type: – Industrial location decisions
(e.g., manufacturing, processing, inventory, maintenance operations – focus is generally cost
reduction – Retail and services facilities – focus is generally revenue generation –
Exceptions for remote support services (help-desks, customer service call centers) –
Warehouses and distribution center facilities – focus is generally a combination of cost
red
Even when very relevant, cost is not always the most important aspect of a strategic
nt
-
- made
location, many resource and cost issues are difficult to change Factors Affecting Global
Location Decisions Drivers of globalization – Access to markets (customers, suppliers,
labor) – Economic imperatives – Tax / Other Government Inducements (positive &
negative) – Communication – Rapid, reliable transportation / infrastructure – Ease of
capital flow / reduced friction (e.g., exchange rate risk) – Differing labor costs and
productivity rates – Political factors Counters – – Where there is no strategic/ economic
value – Contending with the protectionism and nationalism! Location Decisions Country
Decision Key Success Factors 1. Political risks, government rules, attitudes, incentives 2.
Cultural and economic issues 3. Location of markets 4. Labor/talent availability, attitudes,

22. productivity, costs 5. Availability of supplies, communications, energy 6. Exchange rates and
currency risks Figure 8.1 Location Decisions Region/ Community Decision MN WI MI IL
Figure 8.1 IN OH Critical Success Factors 1. Corporate desires 2. Attractiveness of region 3.
Labor availability, costs, attitudes towards unions 4. Costs and availability of utilities 5.
Environmental regulations 6. Government incentives and fiscal policies 7. Proximity to raw
materials and customers 8. Land/construction costs Location Decisions Site Decision
Critical Success Factors 1. Site size and cost 2. Air, rail, highway, and waterway systems 3.
Zoning restrictions 4. Nearness of services/ supplies needed 5. Environmental impact issues
er unit
Productivity (units per day) South Carolina Juarez $70 = $1.17 per unit 60 units $25 = $1.25
Tangible – – less
easy to quantify and include education, public transportation, community, quality-of-life
towards punctuality, legal, and
high transportation co
of Companies Industry Locations Reason for clustering Wine makers Napa Valley (US)
Bordeaux region (France) Natural resources of land and climate Software firms Silicon
Valley, Boston, Bangalore (India) Talent resources of bright graduates in scientific/technical
areas, venture capitalists nearby Race car builders Huntington/North Hampton region
(England) Critical mass of talent and information Table 8.3 Clustering of Companies
Industry Locations Reason for clustering Theme parks Orlando A hot spot for
entertainment, warm weather, tourists, and inexpensive labor Electronic firms Northern
Mexico NAFTA, duty free export to US Computer hardware manufacturers Singapore,
Taiwan High technological penetration rate and per capita GDP, skilled/educated workforce
with large pool of engineers Table 8.3 Clustering of Companies Industry Locations Reason
for clustering Fast food chains Sites within one mile of each other Stimulate food sales, high
traffic flows General aviation aircraft Wichita, Kansas Mass of aviation skills Table 8.3
Growth Competitiveness Index Factor-
factors called key success factors 2. Assign a weight to each factor 3. Develop a scale for
each factor 4. Score each location for each factor 5. Multiply score by weights for each factor
and total the score for each location 6. Make a recommendation based on the highest point
score Factor-Rating Example Key Success Factor Labor availability and attitude People-to
car ratio Per capita income Tax structure Education and health Totals Scores (out of 100)

23. Weight France Denmark Weighted Scores France Denmark .25 70 60 (.25)(70) = 17.5
(.25)(60) = 15.0 .05 50 60 .10 .39 85 75 80 70 (.10)(85) = 8.5 (.10)(80) = 8.0 (.39)(75) =
29.3 (.39)(70) = 27.3 .21 60 70 (.21)(60) = 12.6 (.21)(70) = 14.7 (.05)(50) = 2.5 1.00 70.4
Table 8.3 (.05)(60) = 3.0 68.0 Locational Cost- -volume
analysis used for industrial loc
variable costs for each location 2. Plot the cost for each location 3. Select location with
lowest total cost for expected production volume Locational Cost-Volume Analysis Example
Three locations: Fixed Variable City Cost Cost Akron $30,000 $75 Bowling Green $60,000
$45 Chicago $110,000 $25 Selling price = $120 Expected volume = 2,000 units Total Cost
$180,000 $150,000 $160,000 Total Cost = Fixed Cost + (Variable Cost x Volume) Locational
Cost-Volume Analysis Annual cost Example Figure 8.2 – $180,000 – – $160,000 – $150,000
– – $130,000 – – $110,000 – – – $80,000 – – $60,000 – – – $30,000 – – $10,000 – | – 0 Akron
lowest cost Chicago lowest cost Bowling Green lowest cost | | | | | | 500 1,000 1,500 2,000
2,500 3,000 Volume Center-of-
-of- Place existing
proportional to distance and volume shipped Center-of-Gravity Method x-coordinate of the
-
Where xi = x − coordinate of location i y i = y − coordinate of location i Qi = Quantity of
goods moved to or from location i Center-of-Gravity Method North-South New York (130,
130) Chicago (30, 120) 120 – Pittsburgh (90, 110) 90 – 60 – 30 – | – Atlanta (60, 40) | 30
Arbitrary origin | | | | 60 90 120 150 East-West Center-of-Gravity Method Number of
Containers Store Location Shipped per Month Chicago (30, 120) 2,000 Pittsburgh (90, 110)
1,000 New York (130, 130) 1,000 Atlanta (60, 40) 2,000 (30)(2000) + (90)(1000) +
(130)(1000) + (60)(2000) x-coordinate = 2000 + 1000 + 1000 + 2000 = 66.7 (120)(2000) +
(110)(1000) + (130)(1000) + (40)(2000) y-coordinate = 2000 + 1000 + 1000 + 2000 = 93.3
Center-of-Gravity Method North-South New York (130, 130) Chicago (30, 120) 120 –
Pittsburgh (90, 110) + 90 – Center of gravity (66.7, 93.3) 60 – 30 – | – Atlanta (60, 40) | 30
Arbitrary origin | | | | 60 90 120 150 East-
Worldwide Distribution of Volkswagens and Parts Figure 8.4 Service Location Strategy • 1.
Purchasing power of customer-drawing area • 2. Service and image compatibility with
demographics of the customer-drawing area • 3. Competition in the area • 4. Quality of the
competition • 5. Uniqueness of the firm’s and competitors’ locations • 6. Physical qualities of
facilities and neighboring businesses • 7. Operating policies of the firm • 8. Quality of
management Location Strategies Service/Retail/Professional Location Goods-Producing
Location Revenue Focus Cost Focus Volume/revenue Drawing area; purchasing power
Competition; advertising/pricing Physical quality Parking/access; security/lighting;
appearance/image Cost determinants Rent Management caliber Operations policies (hours,
wage rates) Tangible costs Transportation cost of raw material Shipment cost of finished

24. goods Energy and utility cost; labor; raw material; taxes, and so on Intangible and future
costs Attitude toward union Quality of life Education expenditures by state Quality of state
variables and worked to refine a regression model to pred
key variables! Telemarketing/Inter -to-face contact nor
Information Systems (
Information Systems (GIS) Geographic Information Systems (GIS) Geographic Information
Systems (GIS) Operations Management MBUS 306 Lecture 9 – Layout Strategies Al
Baharmast, Ph.D. Innovations at McDonald’s • Indoor seating (1950s) • Drive-through
window (1970s) • Adding breakfast to the menu (1980s) • Adding play areas (late 1980s) •
Redesign of the kitchens (1990s) • Self-service kiosk (2004) • Now three separate dining
sections Six out of the seven are layout decisions! McDonald’s New Layout • Seventh major
innovation • Redesigning all 30,000 outlets around the world • Three separate dining areas
1. Linger zone with comfortable chairs and Wi-Fi connections 2. Grab and go zone with tall
counters 3. Flexible zone for kids and families – Self-service kiosks • Facility layout is a
source of competitive advantage Strategic Importance of Layout Decisions The objective of
layout strategy is to develop an effective and efficient layout that will meet the firm’s
competitive requirements Layout Design Considerations • Higher utilization of space,
equipment, and people • Improved flow of information, materials, or people • Improved
employee morale and safer working conditions • Improved customer/client interaction •
Flexibility Types of Layout (1 of 4) 1. Office layout 2. Retail layout 3. Warehouse layout 4.
Fixed-position layout 5. Process-oriented layout 6. Focus Facility/ Work-cell layout 7.
Product-oriented layout Types of Layout (2 of 4) 1. Office layout: Positions workers, their
equipment, and spaces/offices to provide for movement of information 2. Retail layout:
Allocates display space and responds to and attempts to influence customer behavior 3.
Warehouse layout: Addresses trade-offs between space utilization and material handling
efficiency Types of Layout (3 of 4) 4. Fixed-position layout: Addresses the layout
requirements of large, bulky projects such as shipbuilding and building construction 5.
Process-oriented layout: Deals with low-volume, highvariety production (also called job
shop or intermittent production) Types of Layout (4 of 4) 6. Focused Facility/ Work cell
layout: Arranges machinery and equipment to focus on production of a single product,
select menu of products or group of related products 7. Product-oriented layout: Seeks the
best personnel and machine utilizations in repetitive or continuous production (low
variability) Table 9.1 Layout Strategies (1 of 2) Blank Objectives Examples Office Locate
workers requiring frequent contact close to one another Allstate Insurance Microsoft Corp.
Retail Maximize profitability per sq. ft. of floorspace and expose customer to high-margin

25. items/ direct traffic flow (influence consumer behavior) Kroger’s Supermarket Walgreen’s
Bloomingdale’s Warehouse (storage) Balance trade-offs between cost of storage/space with
low-cost material handling Federal-Mogul’s warehouse The Gap’s distribution center
Project (fixed position) Move material to the limited storage areas around the site Ingall
Ship Building Corp. Trump Plaza Pittsburgh Airport Table 9.1 Layout Strategies (2 of 2)
Blank Objectives Examples Job Shop (process oriented) Manage varied material flow for
Arnold Palmer Hospital each product (differentiation Hard Rock Cafe and responsiveness
are more Olive Garden important that cost) Focused Facility/ Work Cell (product families)
Identify a product family, build teams, cross-train team members (increased efficiency and
cost reduction but differentiation and responsiveness still important) Hallmark Cards
Wheeled Coach Ambulances Repetitive/ Continuous (product oriented) Equalize the task
time at each workstation (focus is on efficiency and cost reduction) Sony’s TV assembly line
Toyota Scion Office Layout (1 of 2) • Grouping of workers, their equipment, and spaces to
provide comfort, safety, and movement of information • Movement of information is main
distinction • Typically in state of flux due to frequent technological changes Who is the
single biggest office space tenant in New York City? Innovations in office layout • Hoteling
areas • Innovation spaces • Collaboration rooms • Open design • Shared workspace/ offices
Office Relationship Chart Figure 9.1 The Muther Grid for a software firm. Office Layout (2 of
2) • Three physical and social aspects – Proximity – Privacy – Permission • Two major
trends – Information technology – Dynamic needs for space and services Retail Layout •
Objective is to maximize profitability per square foot of floor space • Sales and profitability
vary directly with customer exposure Five Helpful Ideas for Supermarket Layout 1. Locate
high-draw items around the periphery of the store 2. Use prominent locations for high-
impulse and highmargin items 3. Distribute power items to both sides of an aisle and
disperse them to increase viewing of other items 4. Use end-aisle locations 5. Convey
mission of store through careful positioning of lead-off department Store Layout Figure 9.2
Store Layout with Dairy and Bakery, High-Draw Items, in Different Areas of the Store
Slotting • Manufacturers pay slotting fees to retailers to get the retailers to display (slot)
their product • Contributing factors – Limited shelf space – An increasing number of new
products – Better information about sales through POS data collection – Closer control of
inventory Servicescapes – physical surroundings and how they affect customers and
employees 1. Ambient conditions – background characteristics such as lighting, sound,
smell, and temperature 2. Spatial layout and functionality which involve customer
circulation path planning, aisle characteristics, and product grouping 3. Signs, symbols, and
artifacts – characteristics of building design that carry social significance Warehouse and
Storage Layouts • Objective is to find the optimum trade-offs between handling costs and
costs associated with warehouse space • Maximize the total “cube” of the warehouse –
utilize its full volume while maintaining low material handling costs Warehousing and
Storage Layouts (1 of 2) Material Handling Costs • All costs associated with the transaction
– Incoming transport – Storage – Finding and moving material – Outgoing transport –
Equipment, people, material, supervision, insurance, depreciation • Minimize damage and
spoilage Warehousing and Storage Layouts (2 of 2) • Warehouse density tends to vary
inversely with the number of different items stored • Automated Storage and Retrieval

26. Systems (ASRSs) can significantly improve warehouse productivity • Dock location is a key
design element Cross-Docking • Materials are moved directly from receiving to shipping
and are not placed in storage in the warehouse • Requires tight scheduling and accurate
shipments, bar code or RFID identification used for advanced shipment notification as
materials are unloaded Random Stocking 1. Maintain list of “open” locations 2. Maintain
accurate records 3. Sequence items to minimize travel, “pick” time 4. Combine picking
orders 5. Assign classes of items to particular areas • Typically requires automatic
identification systems (AISs) and effective information systems • Allows more efficient use
of space • Key tasks Customizing • Value-added activities performed at the warehouse •
Enable low cost and rapid response strategies – Assembly of components – Loading
software – Repairs – Customized labeling and packaging Fixed-Position Layout • Product
remains in one place • Workers and equipment come to site • Complicating factors –
Limited space at site – Different materials required at different stages of the project –
Volume of materials needed is dynamic Alternative Strategy • As much of the project as
possible is completed off-site in a product-oriented facility • This can significantly improve
efficiency but is only possible when multiple similar units need to be created Process-
Oriented Layout (1 of 4) • Like machines and equipment are grouped together • Flexible
and capable of handling a wide variety of products or services • Scheduling can be difficult
and setup, material handling, and labor costs can be high Process-Oriented Layout (2 of 4)
Figure 9.3 An Emergency Room Process Layout Showing the Routing of Two Patients
Process-Oriented Layout (3 of 4) • Arrange work centers so as to minimize the costs of
material handling • Basic cost elements are – Number of loads (or people) moving between
centers – Distance loads (or people) move between centers Work Cells • Reorganizes people
and machines into groups to focus on single products, menu of products or product groups •
Group technology identifies products that have similar characteristics for particular cells •
Volume must justify cells • Cells can be reconfigured as designs or volume changes
Advantages of Work Cells 1. Reduced work-in-process inventory 2. Less floor space
required 3. Reduced raw material and finished goods inventories 4. Reduced direct labor
cost 5. Heightened sense of employee participation 6. Increased equipment and machinery
utilization 7. Reduced investment in machinery and equipment Requirements of Work Cells
• Identification of families of products • A high level of training, flexibility and
empowerment of employees • Being self-contained, with its own equipment and resources •
Test (poka-yoke) at each station in the cell Improving Layouts Using Work Cells (1 of 2)
Figure 9.9 Improving Layouts by Moving to the Work Cell Concept Improving Layouts Using
Work Cells (2 of 2) Figure 9.9 [continued] U-shaped line may reduce employee movement
and space requirements while enhancing communication, reducing the number of workers,
and facilitating inspection Staffing and Balancing Work Cells Determine the takt time (pace
of production) Total work timeavailable Takt time = Units required to satisfy customer
demand Determine the number of operators required Total operation time required
Workers required = Takt time Staffing Work Cells Example (1 of 2) • 600 mirrors per day
required • Mirror production scheduled for 8 hours per day • From a work balance chart
total operation time = 140 seconds Figure 9.10 Work Balance Chart for Mirror Production
Staffing Work Cells Example (2 of 2) (8hrs x 60mins) Takt time = 600units = .8 min = 48

27. seconds Total operation time required Workers required = Takt time 140 = = 2.92 48 Work
Balance Charts • Used for evaluating operation times in work cells • Can help identify
bottleneck operations • Flexible, cross-trained employees can help address labor …