erp evolution

8/3/2019 ERP Evolution

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Enterprise Resource Planning

(ERP)

Evolution of ERPMRP-ERP

Prof. Pratima D. / Prof. D.G. Jha

Email: [email protected]
mailto:[email protected]:[email protected]


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What is ERP?

Enterprise Resource Planning

A collection of software systems that help to

manage business processes for an entire

organization Designed to integrate all information

processing support for an entire organization

ERP is a process of managing all resourcesand their use in the entire enterprise in a

coordinated manner


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What makes ERP different

Integrated modules

Common definitions

Common database

Update one module, automatically updatesothers

ERP systems reflect a specific way of doing

business Must look at your value chains, rather than

functions


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Benefits of ERP

Common set of data

Help in integrating applications for decision

making and planning

Allow departments to talk to each other

Easy to integrate by using processed built into

ERP software A way to force BPR (reengineering)


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Evolution of ERP

In the earlier days of Manufacturing there was

no concept of planning in advance.

Independent Inventory Model (1950-1960)

Master Production Schedule (MPS)

Bill of Material (BoM)

Inventory Record (IR) This approach was evolved based on the observation that the demand for itemscan be calculated from the demand of the assemblies/ Products where the items

are used.


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Master Production Schedule (MPS)

A Master Production Schedule (MPS) is a planfor production, staffing, inventory, etc.

It is usually linked to manufacturing where

the plan indicates when and how much ofeach product will be demanded.

This plan quantifies significant processes,

parts, and other resources in order tooptimize production, to identify bottlenecks,

and to anticipate needs and completed goods.


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Master Production Plan (MPS)

An example of a master production schedule

for "product A".

Independent Demand

Demand Management 12/7 12/8 12/9 12/10 12/11

Monthly Demand for Product A 4000 4000 4000 4000 4000

Working Days in Month 23 23 23 23 23

MPS Daily Demand for Product A 174 174 174 174 174


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Bill of Material

The Refined BOM used to have the followingmajor information: Material requirements for unit of Main item.

Name of the component item

Quantity of component item Any scrap factor that must be taken in to account while

calculating the material requirement.

Expiry information: The date up to which the design is validor used by the manufacturer

In 1960s the BOM approach soon became the main input forInventory Control.

For many years, Inventory control was thought as sufficient inmanufacturing planning and execution.


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14-9

Bicycle(1)

P/N 1000

Handle Bars (1)

P/N 1001

Frame Assembly (1)

P/N 1002

Wheels (2)

P/N 1003Frame (1)P/N 1004

Bill-of-MaterialProduct Structure Tree


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Bill of Material

Dependent Demand


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Material Requirement Planning

(MRP)

So the long time taken for planning and

making the item was not at all an issue.

However with time, the situation was

gradually changing and very soon the industry

realized that the process of making items for

fulfilling an order was taking long time and in

that way they cannot meet the demand.


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Material Requirement Planning

It was also experienced that there was

repetitive effort while planning for materials,

other resources and for ways to make the

items.

Then onwards the Manufacturing Planning

systems went through progressive refinement

in the last 5 decades.


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Material Requirement Planning (MRP)

In 1970s the concept arrived to a complete shape and was

known as Material requirement planning. This Planning is

popularly known as MRP.

A refined MRP briefly takes the demand, important item

related information ( such as Ordering rules, safety stock ,

Inventory information ), Bill of Material ,routing and existing

Shop floor schedule as inputs. Based on the demand and

other supporting information MRP

MRP = Independent Inventory Model + Capacity Planning


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MRP

Calculates the requirements for each

component item that is required to make the

order quantity of end item

Calculates the time taken to make the order

quantity of the end item.

Calculates the needed hours of Man, tools and

Machines for making the Order


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Increased customer satisfaction due to

meeting delivery schedules

Faster response to market changes Improved labor & equipment utilization

Better inventory planning & scheduling

Reduced inventory levels without reducedcustomer service

MRP Benefits


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Forecast &Firm Orders

MaterialRequirements

Planning

AggregateProductionPlanning

ResourceAvailability

MasterProductionScheduling

ShopFloor

Schedules

CapacityRequirements

PlanningRealistic?

No, modify CRP, MRP, or MPS

Yes

MRP and The Production PlanningProcess


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MRP: Material Requirements PlanningMRP: (From the 60's& 70s) includes only

Material Planning ProjectionsBased on Bill of Material Explosions

Typical Functions:Bills of Material

Inventory Management

Work Order Management

Shop Floor SchedulingProduction Activity Control

Material Shortage Management

Fundamental Process Questions:

1. What do you want to make?

2. What materials does it take?

3. What materials do you have?

4. What materials do you need toget?


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Problems in MRP

The major problem with MRP systems is the

integrity of the data. If there are any errors in

the inventory data, the bill of materials

(commonly referred to as 'BOM') data, or themaster production schedule, then the

outputted data will also be incorrect

(colloquially, "GIGO": Garbage In, GarbageOut).
http://www.enotes.com/topic/Bill_of_materialshttp://www.enotes.com/topic/Bill_of_materials


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Extensions of MRP

Closed loop MRP Gives feedback from execution function to

planning function.

Closed loop MRP to provide the ability to translatethe operating planexpressed in manufacturing

terms such as units and kilograms into financial

termsrupees.

MRP II - Material Resource Planning Enterprise Resource Planning (ERP)

Extended ERP


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Manufacturing Resource Planning

(MRPII)

Major identification of MRP II is through the

integrated planning involving all possible

functions in an Industry, which need not

always be a Manufacturing Industry.


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MRP II

In addition to exploiting all the features of earlier

planning versions such as traditional Inventory

control and, MRP , MRP II focused on ensuring the

integration between various functions such asPlanning, Engineering design, Production , Purchase,

Sales, Marketing, Finance, and Human resources.

The seamless integration that was the main feature

of MRPII ensured that the planning was moremeaningful with more transparency to all the

stakeholders of the business.


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MRPII: Manufacturing Resource Planning

MRPII (From the 80's& 90s) includes ALL Manufacturing Resources

for "What If" Pro-Active Process Simulations

Typical Functions:Financial Modules

Business Plan

Resource Planning

Production Plan

Sales and Operations PlanEDI and Customer Orders

Master Production Schedule

Rough-Cut Capacity Planning

Detailed Capacity Planning

Product Costing Modules

Engineering Change Management

MRP: Material Requirements Planning





4. What materials do you need to get?

5. What constraints must be met now or

in the future?


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Enterprise Resource Planning (ERP)

APICS (American Production & Inventory

Control Society) defined ERP as an

accountingoriented information system for

identifying and planning the enterprise wideresources needed to take, make, ship, and

account for customer orders.


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ERP

An ERP system differs from the typical MRP II

system in technical requirements such as

graphical user interface, relational database,

use of fourthgeneration language, andcomputeraided software engineering tools in

development, client/server architecture, and

opensystem portability.


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ERP: Enterprise Resource Planning

ERP (From the 80's& 90s) includes ALL Business Management Systems, Philosophies

and Performance Evaluation at All Levels

Typical Functions:

Financial Planning Simulations

Business Planning Simulations

Sales/Marketing Planning Simulations

Distribution Requirements PlanningResource Management Simulations

Production Management Simulations

Supply Chain Management Simulations

Continual Improvement Strategies

R&D Management Simulations

MRPII: Manufacturing Resource Planning





4. What materials do you need to get?

5. What constraints must be met now orin the future?

6.How will performance be planned,

simulated, measured, and improved?


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Extended ERP

Major factors that contributed the evolution

of Extended ERP are :

1. Requirement to focus on the core strength

and grow family of partners that work

together to deliver the end product and share

directly or indirectly the revenue and

competitive advantage.


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Extended ERP

2. A trend that forced to adopt what is called

Mass customizations. Customers expect a

unique combination of features from a

product and at the same time do not want towait for the long production and delivery

cycles. This situation led to Mass

customization and soon became mandatoryfor the vendors.


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Extended ERP

The Mass customization principles were even

applied to financial services on certain areas

such as Instant approval of loan, instant

opening of account etc. Similarly industriessuch as Automotives devised mechanisms to

deliver the vehicles in days to the customer


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Extended ERP

3. Trend to avoid interaction with systems for

long and expect the system to have enough

intelligence to perform most of the work. If

there are certain rules followed whilescheduling the machine and man resources,

why cant you expect the System to follow

the same and generate the best schedule?


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Extended ERP

4. Urge for Work flow based applications. Even while refiningthe processes in a company through techniques such as

Business Process reengineering, the main focus for

improvement was on logistic activities and the indirect

functions such as administrative functions were not focused

heavily for improvement in the earlier times. Once the logistic

processes were matured enough the focus shifted to

improving the administrative processes.


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Extended ERP

5. Use of the Internet rapidly increased in the

mid 1990s. People quickly became Internet

literate and Internet became part of life for

them. Users liked the Web Browser. Using webbrowser was simple, and over time, only two

versions of the browser (only one version that

is, Microsoft Internet Explorer) had themajority of market share.


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Extended ERP

The demand for the business systems to utilize

these browsers started to grow and continues

to this day. Manufacturing Industry, ever

under competitive pressure recognized thecost reduction possibilities of using the

Internet.


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Extended ERP

The possibility of cost effective Electronic Data

Interchange (EDI) seemed possible. Visionaries

saw the possibility of speeding up the

businessto business (aka B2B) buying andselling processes and reducing the cost of

each business transaction.


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Extended ERP

The Internet made SupplyChain Management

to be simpler. Those who wanted to grab the

market early started making applications

compatible to Internet and instrumental inmaking extended ERPs.


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ERP modules include

Basic MRP

Finance

Human resources

Supply chain management (SCM)

Customer relationship management (CRM)


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ERP and MRP


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ERP and MRP

Customer Relationship Management

Invoicing

ShippingDistributors,

retailers,and end users

Sales Order(order entry,

product configuration,sales management)


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Table 13.6

Bills ofMaterial

WorkOrders

Purchasingand

Lead Times

Routingsand

Lead Times

MasterProductionSchedule

InventoryManagement

ERP and MRP

MRP


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ERP and MRP

Figure 14.11

Supply Chain Management

Vendor Communication(schedules, EDI, advanced shipping notice,

e-commerce, etc.)


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ERP and MRP

Figure 14.11Table 13.6

Finance/

Accounting

GeneralLedger

AccountsReceivable

Payroll

Accounts

Payable


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ERP can be highly customized to meetspecific business requirements

Enterprise application integration software(EAI) allows ERP systems to be integratedwith

Warehouse management

Logistics

Electronic catalogs

Quality management


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ERP systems have the potential to

Reduce transaction costs

Increase the speed and accuracy ofinformation

Facilitates a strategic emphasis on JITsystems and integration


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Advantages of ERP Systems

1. Provides integration of the supply chain,production, and administration

2. Creates commonality of databases

3. Can incorporate improved best processes

4. Increases communication and collaborationbetween business units and sites

5. Has an off-the-shelf software database

6. May provide a strategic advantage


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Disadvantages of ERP Systems

1. Is very expensive to purchase and even more so tocustomize

2. Implementation may require major changes in the

company and its processes

3. Is so complex that many companies cannot adjustto it

4. Involves an ongoing, possibly never completed,process for implementation

5. Expertise is limited with ongoing staffing problems


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AssignmentAssignment -1

The Hunicut and Hallock Corporation makes two versions of the same

basic file cabinet, the TOL (Top-of-the-line) five drawer file cabinet and the

HQ (High-quality) five drawer filing cabinet.

The TOL and HQ use the same cabinet frame and locking mechanism. The

drawer assemblies are different although both use the same drawer frame

assembly. The drawer assemblies for the TOL cabinet use a slidingassembly that requiresfourbearings per side whereas the HQ sliding

assembly requires only two bearings per side. (These bearings are

identical for both cabinet types.) 100 TOL and 300 HQ file cabinets need to

be assembled in week #10. No current stock exists.

Develop a material structure tree for the TOL and the HQ file cabinets.

Assignment-2

Develop a gross material requirements plan and Master Production

Schedule for the TOL and HQ cabinets in the previous example.

erp evolution

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