Supply Chain Management

andMRP & ERP

Submitted To,

Md. Asraful Islam ChowdhuryLecturer

Department of Business Administration

LEADING UNIVERSITY

Ehsan Ahmed Chy.1201010230

Mahmudul Karim Newaz1201010205

Masum Hussain1201010202

Abdul Motin1201010219

Abu Ahmed Shahib1201010247

What is supply chain?

Supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer request. Supply chain includes manufacturer and suppliers, plus transporters, warehouses, retailers, and customers themselves.

Principles of SCM (contd.)1. Segment customers based on the service needs of distinct groups and adapt the supply chain to serve these segments profitably.

2. Customize the logistics network to the service requirements and profitability of customer segments.

3. Listen to market signals and align demand planning accordingly across the supply chain, ensuring consistent forecasts and optimal resource allocation.

4. Differentiate product closer to the customer and speed conversion across the supply chain.

Principles of SCM

5. Manage sources of supply strategically to reduce the total cost of owning materials and services.

6. Develop a supply chain-wide technology strategy that supports multiple levels of decision making and gives a clear view of the flow of products, services, and information.

7. Adopt channel-spanning performance measures to gauge collective success in reaching the end-user effectively and efficiently.

Importance of Supply Chain Management

• SCM is Globally Necessary

• Reasons for SCM in Society

– Cyclone Sedor,2007

– Foundation for Economic Growth

• Reasons for SCM in Business

– Boosts Customer Service

– Improves Bottom Line

Growing Interest in SCM – Why?

• As manufacturing becomes more efficient (or is

outsourced), companies look for ways to reduce costs

• Several significant success stories:

– Efficient SCM at Wal-Mart, HP, Dell Computer

• SCM considers the broad, integrated, view of materials

management from purchasing through distribution

• The huge growth of interest in the web has spawned

web-based models for supply chains: from “dot com”

retailers to B-2-B business models

Focusing on the Distribution Problem

• The Goal is to reduce total transportation costs throughout the supply chain

• Usually solved with some approach to the “Transportation Problem”

Trends in Supply Chain Management

• Outsourcing of the logistics function (example: Saturn outsourced their logistics to Ryder Trucks. Outsourcing of manufacturing is a major trend these days)

• Moving towards more web based transactions systems

• Improving the information flows along the entire chain

Global Concerns in SCM

• Moving manufacturing offshore to save direct costs complicates and adds expense to supply chain operations, due to:

– increased inventory in the pipeline

– Infrastructure problems

– Political problems

– Fluctuating exchange rates

SOCIAL MEDIA:

Now, people can use technology to do it at a scale without

boundaries

Material resource planning (MRP)

MRP is a production planning and inventory control system used to manage manufacturing processes. Most MRP systems are software-based, while it is possible to conduct MRP by hand as well.

Objectives of MRP

An MRP system is intended to simultaneously meet three objectives:

Ensure materials are available for production and products are available for delivery to customers.

Maintain the lowest possible material and product levels in store

Plan manufacturing activities, delivery schedules and purchasing activities.

History of MRP• Prior to MRP, and before computers dominated industry,

reorder-point/reorder-quantity (ROP/ROQ) type methods like EOQ (Economic Order Quantity) had been used in manufacturing and inventory management. In 1964, as a response to the TOYOTA Manufacturing Program, Joseph Orlicky developed Material Resource Planning (MRP). The first company to use MRP was Black & Decker in 1964, with Dick Alban as project leader.

The scope of MRP in manufacturing

The basic functions of an MRP system include: inventory control, bill of material processing, and elementary scheduling. MRP helps organizations to maintain low inventory levels. It is used to plan manufacturing, purchasing and delivering activities.

Making a bad decision in any of these areas will make the company lose money. A few examples are given below:

Purchases insufficient quantities of an item.

Purchases excessive quantities of an item.

Beginning production of an order at the wrong time.

Problems with MRP systems

• First problem - If there are any errors in the inventory data then the output data will also be incorrect ("GIGO": Garbage In, Garbage Out).

• Second problem - systems is the requirement that the user specify how long it will take for a factory to make a product from its component parts that’s mean ‘’lead time’’.

Solutions to data integrity issues (contd.)

• Bill of material :- The best practice is to physically verify the bill of material either at the production site or by un-assembling the product.

• Cycle count - The best practice is to determine why a cycle count that increases or decreases inventory has occurred.

• Scrap reporting - Start with isolating the scrap by providing scrap bins at the production site and then record the scrap from the bins on a daily basis.

Solutions to data integrity issues

• Receiving errors - The best practice is to implement the system of receiving by ASN (Advanced Shipping Notification).

• Shipping Errors - The container labels are printed from the shipper. The labels are affixed to the containers in a staging area or when they are loaded on the transport.

Enterprise resource planning (ERP)

• ERP provides an integrated view of core business processes, often in real-time, using common databases maintained by a database management system. ERP systems track business resources—cash, raw materials, production capacity—and the status of business commitments: orders, purchase orders, and payroll.

Enterprise resource planning (ERP)

Enterprise resource planning (ERP) is a business management software—usually a suite of integrated applications—that a company can use to collect, store, manage and interpret data from many business activities, including:-

• Product planning, cost and development

• Manufacturing or service delivery

• Marketing and sales

• Inventory management

• Shipping and payment

Origin of "ERP"

• In 1990, Gartner Group first used the acronym ERP as an extension of material requirements planning (MRP), later manufacturing resource planning and computer-integrated manufacturing. Without replacing these terms, ERP came to represent a larger whole that reflects the evolution of application integration beyond manufacturing.

• Not all ERP packages developed from a manufacturing core. Vendors variously began with accounting, maintenance, and human resources. By the mid–1990s ERP systems addressed all core enterprise functions. Governments and non–profit organizations also began to use ERP systems.

Characteristics of ERP

ERP systems typically include the following characteristics:

An integrated system that operates in (or near) real time without relying on periodic updates

A common database that supports all applications

A consistent look and feel across modules

Installation of the system with elaborate application/data integration by the Information Technology (IT) department, provided the implementation is not done in small steps.

Advantages of ERP (contd.)

The fundamental advantage of ERP is that integrating myriad businesses processes saves time and expense. Management can make decisions faster and with fewer errors. Data becomes visible across the organization. Tasks that benefit from this integration include:

Sales forecasting, which allows inventory optimization.

Advantages of ERP

Chronological history of every transaction through relevant data compilation in every area of operation.

Order tracking, from acceptance through fulfillment

Revenue tracking, from invoice through cash receipt

Matching purchase orders (what was ordered), inventory receipts (what arrived), and costing (what the vendor invoiced)

Disadvantages of ERP Systems (contd.)

Customization is problematic. Compared to the best-of-breed approach, ERP can be seen as meeting an organization’s lowest common denominator needs, forcing the organization to find work arounds to meet unique demands.

Overcoming resistance to sharing sensitive information between departments can divert management attention.

Integration of truly independent businesses can create unnecessary dependencies.

Disadvantages of ERP Systems

Re-engineering business processes to fit the ERP system may damage competitiveness or divert focus from other critical activities.

High ERP switching costs can increase the ERP vendor's negotiating power, which can increase support, maintenance, and upgrade expenses.

Harmonization of ERP systems can be a mammoth task (especially for big companies) and requires a lot of time, planning, and money.

Thanks for patient hearing