what is erp 6

8/3/2019 what is erp 6

1/63

ENTERPRISE RESOURCE PLANNING

(ERP)

Presented by:

Rick Bekanich

Pete Brenkosh

Amandeep Kaur

Dee Walski


2/63

OVERVIEW

What is ERP? Evolution of ERP

Components of ERP Advantages/Disadvantages Success/Failures

Summary


3/63

DEFINITIONS

EnterpriseOrganization designed to provide goods and/or

services to consumers

ResourceAny physical or virtual entity of limited availability,

or anything used to help one earn a living (e.g.

employees, materials, etc.) Planning

The organizational process of creating and

maintaining a plan.


4/63

WHAT IS ERP?

4

Is a method for the effectiveplanning of all resources of amanufacturing and repair facility

Predicts and balances demandand supply. It is an enterprise-wide set of forecasting, planningand scheduling tools .

Links customers and suppliers intoa complete supply chain

Sales and Operations

Planning

Master Production

Scheduling

Production Execution

and Control

Capacity Requirements

Planning

Business Planning

1

2

4

3

6

Material Requirements

Planning

5

Enterprise Resource Planning (ERP)


5/63

WHAT IS ERP?

5

Employs proven processes fordecision-making

Coordinates sales, marketing,

operations, logistics,purchasing, finance, productdevelopment, and humanresources.


Planning

Master Production

Scheduling


and Control


Planning

Business Planning

1

2

4

3

6


Planning

5



6/63

WHAT IS ERP?

6

Its goals include high levels of

customer service, productivity, cost

reduction, and inventory turnover,

and it produces the foundation for

effective supply chain management

and e-business.

It does this by developing valid plans

and schedules so that the right

resources manpower, materials,

machinery, and money are available

in the right amount when needed.


Planning

Master Production

Scheduling


and Control


Planning

Business Planning

1

2

4

3

6


Planning

5



7/63

WHAT IS ERP?

7

Applies a single set of resource

planning tools across the entire

enterprise

Provides a real time integration of

sales, operating, and financial data

Connects resource planning

approaches to the extended supply

chain of customers and suppliers.


Planning

Master Production

Scheduling


and Control


Planning

Business Planning

12

4

3

6


Planning5



8/63

WHAT IS ERP?

Enterprise Resource Planning

ERP is a real time system

ERP is an integrated information system for

identifying and planning the enterprise-wideresources needed to take, make, ship, andaccount for customer orders

ERP is an extension of MRP. Where MRPfocused mainly on manufacturing, ERP includesall of the processes required to operate abusiness

8


9/63

ERP COMMON DEFINITION AND

EVOLUTION

Moving from the Informal to the Formal System (Valid

Schedules) is the key to ERP Business Benefits Realization

9

Reorder Point

Estimate of Demand

Excessive Shortages

Hot List Priorities

Front End Loaded Schedules

Funny Numbers

Lack of Accountability

Excessive Mth/Yr End Overtime

Long Cycle Times

Unreliable Customer Promises

Poor Operational Performance

Informal SystemInformal System(Order Launch & Expedite)(Order Launch & Expedite)

Time-Phased Order Point

Actual Calculated Demand

Minimal Shortages

Order Due Date Priorities

Level Loaded Schedules

Reliable / Accurate Numbers

Single Point Accountability

Level Loaded Capacity

Short Cycle Times

On-time Shipments

High Operational Performance

Formal SystemFormal System(Valid Schedules)(Valid Schedules)


10/63


EVOLUTION

MRP / ERP Evolution

10

Closed

Loop

MRP

(70s)

MRP

II

(80s)

MRP

(Late 60s)ERP(90s)

Source: ERP Making It Happen, Thomas F. Wallace and Michael H. Kremzar


11/63


EVOLUTION

11

Closed LoopMRP


12/63

MRP, MRPII AND ERP

12

MRP

Material Requirements Planning

MRP is a process that uses the bill of material, inventory data,

and planned receipts to calculate requirements and recommend

the release and/or reschedule of materials (Original concept of

scheduling the quantity and timing of production and related

purchase orders for raw materials)

MRP II

Manufacturing Resource Planning

Customer &

ProductInformation

CustomerService

Logistics &

MaterialsManagement

MRP II

Integrated

FinancialFunctions/

Processes

Enterprise Resource Planning

70s

80s

90s

Feedback

Feedback/ Real Time Access to Information

The concept of ERP has evolved over time.

The acronyms are used in three different but related contexts.

MRP

MRPII

ERP

Shop Floor

Control

Sales &

Operations

Planning

Demand

Management

Business

PlanningMRP

Supplier

Scheduling

ERP


13/63

WITH ERP

13

The benefits for an organization that is using ERP.

Orders, promised to customers on certain dates, aremore often fulfilled.

Data can now be entered on-time.

People no longer heavily rely on hot lists, shortagelists or who yells the loudest.

There are fewer inaccuracies in inventory causingfewer production problems.

Less money gets tied up in unwanted inventory


14/63

WITH ERP (CONTD)

14

Fewer expensive rush orders are placed to

replenish inventory the computer did not know

was needed, because master data (BOMs, Routes,

etc) changes were not processed.

Net Operating Results (NOR) is positively affected

by more accurate data and transaction reporting.


15/63

15

ERP MANUFACTURING MODEL

Production Execution &

Control


Planning

Master Production

Scheduling

Sales and OperationsPlanning

Business Planning1

2

4

3 6

5 Material RequirementsPlanning


16/63

BUSINESS PLANNING

16

Business Planning is:

Customer driven and usually

done on an annual basis.

Five year funding priorities

(current plus four)


Planning


and Control


Planning


Planning

Master Production

Scheduling

Business Planning

12

3

4

5

6

Business

Planning1


17/63

SALES AND OPERATION PLANNING

Sales and Operations planning:

It is an integrated businessmanagement process throughwhich the executive continuallyachieves focus, alignment and

synchronization among allfunctions of the organization

17


Planning


and Control


Planning


Planning

Master Production

Scheduling

Business Planning

12

3

4

5

6

Sales and operationsPlanning2


18/63

SALES AND OPERATION PLANNING

18

Sales and Operations Planning (S&OP)

Includes:

It includes an updated sales plan,

inventory plan, customer lead

time(backlog) plan, new product

development plan, strategicinitiative plan and resulting

financial plan.

Stated in terms of dollars

Change is inevitable


Planning


and Control


Planning


Planning

Master Production

Scheduling

Business Planning

12

3

4

5

6

Sales and operationsPlanning2


19/63

MASTER PRODUCTION SCHEDULING

19


Planning4


and Control6


Planning5

Key Components of ERP

Master ProductionScheduling3


20/63

MASTER PRODUCTION SCHEDULING (MPS)

20

The Master Production Schedule (MPS) is:

It is the plan for production, staffing, inventory etc. it is linked to

manufacturing where the plan indicates when and how much of

each product will be demanded.

It supports all production strategies including make-to-stock,

assemble-to-order, engineer-to-order, and make-to-order

A realistic Monthly and Weekly Schedule determined by looking

at capacity and resources

The schedule that the Master Scheduler maintains, and in turn, itbecomes a set of planning numbers that drives Material

Requirements Planning


21/63

MASTER PRODUCTION SCHEDULING (MPS)

21

SupplyDemand

Production Supplier Forecast Orders

The Role Of The Master Scheduler:

Maintaining a Perfect Balance between Demand & Supply


22/63

CAPACITY REQUIREMENTS PLANNING (CRP)

22


and Control6


Planning5


Master Production

Scheduling3Capacity

RequirementsPlanning4


23/63

CAPACITY REQUIREMENTS PLANNING

(CRP)

23

Capacity Requirements Planning Process

Is the function of establishing, measuring and adjusting

limits or levels of capacity (workload)

Determines, in detail, the amount of labor and machine

resources required to accomplish the tasks of production

by exploding quantities in the schedule against the hours

and work centers identified in the routing.


24/63


(CRP)

24

Capacity Requirements Planning (CRP) (Contd)

Capacity How much work of a given type can a shop do in a

given period of time.

Required Capacity How much machine time and labor will be

needed from that shop to complete their work relating to anasset or assets.

Load What was Planned and what was released to the shops.

Work Center- Is a specific production area, consisting of one or

more people and/or machines with similar capabilities, which

can be considered as one unit for purposes of capacity

requirements planning, detailed scheduling, and costing.


25/63


(CRP)

25

A Work Center (Contd)

The following types of information is needed

when defining the capacity of a Work Center

Shop Calendar

Shifts per day

Shift durations

Breaks / Non-productive time Number of individuals/machines available

per shift

Utilization

Efficiency


26/63


(CRP)

26

Capacity Requirements Planning Process (contd)

Requires valid asset schedules to properly analyze and

manage future capacity over/under load conditions

Capacity imbalances will be worked by Master

Scheduling.


27/63


27

There are four factors affecting available capacity.

Type of Work

Plant and Equipment

Skill level/Work effort required

Material


28/63


28

Priority:

What is needed, how much is needed, and when it is needed.

In the long and short term

priority and capacity must bebalanced.


29/63


29

LMSs and Master Schedulers:

Review Projects Received from Item Managers

Analyze requested delivery schedules.

Review Capacity

Accept or re-negotiate dates with Item Managers


30/63

MATERIAL REQUIREMENTS PLANNING (MRP)

30

Capacity RequirementsPlanning4

Master Production

Scheduling3


and Control6


Material RequirementsPlanning5


31/63

MATERIAL REQUIREMENTS PLANNING

(MRP)

MRP is a process that uses the:

Bill Of Material (BOM, components lists)

Material Master

Route data or Production Order after creation (this isused to create the MPS schedule)

Inventory data

31


32/63

MATERIAL REQUIREMENTS PLANNING

(MRP)

32

MRP:

Uses Delivery Schedule, Production Order

BOM/Route, and Inventory Data to

calculate requirements for materials)

Creates detailed schedules for material:

make, repair, buy


33/63

33

Definitions and Terminology

The MRP Controller

Is the person responsible for a material or group of

materials in MRP

Material Requirements Planning (MRP)

MRP is a calculation method geared toward determining

how much of which materials are required and roughly

when they should be ordered to fulfill a set of product

orders. The results of the calculation are recommended

planned orders by time period.

DEFINITIONS AND TERMINOLOGY


34/63

DEFINITIONS AND TERMINOLOGY

Manufacturing (MBOM)

All the materials needed for completion of an assembly

Repair (R-BOM) - A1, IO etc.

List of of what MAY be needed If we dont order what we think we Might

need, we cant have the material ahead of the

asset.

34


35/63

35

BOM

BOM

A BOM is a comprehensive list of

materials necessary for a build or repair

of a quantity of one (1)

The components list is a list of parts forthe total production order

ROUTE


36/63

ROUTE

Route

Where the work is done for a ProjectShops/Machines/People/Hours/Project Dates

Work CentersCapacity

Manufacturing Route

Repair Route

36

BOM ALLOCATION


37/63

BOM ALLOCATION

37

Materials can be assigned to a specific routing operation, especially

when total cycle times are long, to distribute shop floor deliveriesand minimize work in process inventories. Without this

assignment, ERP systems must assume the material is needed at

the start of the first operation of the order.

MATERIAL DELIVERY


38/63

38

MATERIAL DELIVERY

PARTS:

The Right Parts

In the Right Quantities

At the Right Time

The Basic Logic of MRP


39/63

39

After determining what will be made (MPS) and

what it will take (BOM), the MRP logic works

through a series of questions.

Yes No

HaveEnough?

Ordered

Enough?

Done

No Yes

Due On

Time?

Done

Yes No*Reschedule

Order Done

Place Order

The Basic Logic of MRP

Determine the material needed to meet the

MPS.

What to Order

How Much to Order

When to Order

When to Schedule DeliveriesKeep Priorities Current

OnlyReschedule

as last resort

MRP LOGIC


40/63

40

MRP LOGIC

TIME

Some Assets take longer to repair than others so there ismore time involved

MATERIAL

Some Materials have longer lead times than others so

more time is involved

QUANTITY

If we have it or are going to have it we dont need to

order it

MRP


41/63

41

The Bill of Material provides the scheduling frameworkaround which the entire ERP process & system operates

A

C

D E4

7

2 5

63

1B

Master Scheduled Item(Independent Demand Item)

DependentDemandItems

(Planned byMRP -

includes bothBuy and Make

/ Repair

Items)

MRP

MRP


42/63

42

Opening

Period

10 days

Lead (Ship) time

from Vendor

(Varies)

Goods Receipt

Processing Time

5 Days

Material Stored in

Inventory

07 Dec

Exception Message

Generated 05 Planned Delivery time

Contracting

Local Proc

23 days

CRA to Stock

OP10

1 day

OP20

3 days

OP30

5 days

OP40

1 day

OP50

2 days

OP60

10 days

Production

Order Finish Date

(Delivery Date)

30 Dec

20 Dec18 Dec17 Dec12 Dec09 Dec

08 Dec

Production

Order Start Date

Production Order

Material Allocated to OP 10

Purchase Order

Production Order

Opening

Date

Release

Date

MRP

Date

MRP uses Backwards Scheduling

08 Dec

MRP


43/63

PRODUCTION EXECUTION AND CONTROL

43

Capacity RequirementsPlanning4

Master Production

Scheduling3


Planning5


Production Executionand Control6

PRODUCTION EXECUTION AND


44/63

PRODUCTION EXECUTION AND

CONTROL

44

Production execution and control consists of three main parts:

Scheduling:

Operational dispatching to satisfy production

requirements

Execution:

Physically execute the production schedules

Reporting and Monitoring:

Track work progress

and report the statusof production

activities (type 8s)


45/63

ADVANTAGES OF ERP

Integrates processes so a company canperform more efficiently

Design Engineering , the process used to

create it is just as important as end result(how to make the best product)

The revenue cycle from invoice through cash

receipts


46/63

ADVANTAGES OF ERP

Managing interdependencies of complex billof materials

Tracking the 3-way match between purchase

orders (what was ordered), inventory receipts(what arrived) , and costing ( what the vendorinvoiced)

Order tracking allows the company to getdetailed information on customers


47/63

ADVANTAGES OF ERP

The accounting for all of these tasks, trackingthe revenue, cost and profit on a granularlevel.

Use of a dating structure which can allow thecompany to be informed when the productshould be updated

ERP security , protect a company againstcrimes such as embezzlement or industrialespionage

Allow product to be produced of higher


48/63

DISADVANTAGES OF ERP

Cost: Average cost to implement: SAP: $16.8 million

Oracle: $12.6 millionMicrosoft: $2.6 million

Tier 2: $3.46 million Time: Average time to implement: SAP: 20 months

Oracle: 18.6 months

Microsoft: 18 monthsTier 2: 17.8 months

Source: 2008 ERP Report Part II: Comparing Leading Tier 1 and Tier 2 ERP Solutions


49/63


Continually trained on how to use it Success is fully dependent on how the

workers utilize it Biggest problem is it is hard to customize

very few companies can use it right out of

the boxModifications are expensive and tedious Even after changes still limited in certain

areas


50/63


Making the necessary changes may makethe company less competitive in the marketplace

License fees Technical support from ERP departments has

been questioned Security, corporate representatives must

give sensitive information to tech supportdepartment


51/63

ERP SUCCESS

Business benefits realized: SAP: 72.2%Oracle: 58%Microsoft: 68%

Tier 2: 68.6%

Source: 2008 ERP Report Part II: Comparing

Leading Tier 1 and Tier 2 ERP Solutions


52/63

ERP SUCCESS

Airbus Overall cost savings of4 million since the project began in March 2005 Increased user friendliness, with

solution fully integrated into the Airbus employee portal Reimbursement cycle significantly

reduced from over 15 days to less than 10 days Single reporting tool with increased

transparency for travel management,

procurement, controlling, and line management Increased productivity and

satisfaction of Airbus employees

Canadian nationalRailway

Canadian National Railway Company realizedsignificant financial benefits,

including the following: Over CAD 400 million in hard benefits on a CAD

200 million investment CAD 84 million in one-time inventory and

financial savings Over CAD 100 million savings per year in asset,

procurement, labor, and technology


53/63

ERP SUCCESS

Nestle Gained ability to track products through the complete production and delivery

cycle

Complied with requirements for tracing

foodstuff products Retained internal identification codes while supporting multiple external

business

partner needs

Accelerated time to market for newproducts by capturing process and product

Hewlett Packard Increased response to forecasting

accuracy

Achieved service levels of 94% to 97%

Improved accuracy of inventory targeting

based on variation analysis Implemented a better mix of inventory at individual locations

Gained the ability to track inventory at

the

location, SKU-item, and time-frame level

Provided on-time information fordecision

making

Tightly integrated planning and

execution


54/63

ERP FAILURES

Hershey Foods - lead to massive distributionfailures loss of 27 % of market

Foxmyer Drug system implementation

failure lead to collapse of company IRS- Took 10 yrs to complete and cost $50

BillionOregon Dept of Motor Vehicles- took eight

years and public out cry killed project


55/63

ERP FAILURES

State of Florida welfare system- plagued withnumerous computational errors and $260million in overpayment

GreyHound Bus trip reservations and busdispatch system lost $6 million

Norfolk Southern Rail Road lost $113 Million


56/63

REASONS FOR ERP FAILURES

When the management is not controlling the scope of the project especiallywhen you expect the consultant to provide a magic bullet, is a recipe for failure.

Changing the sails in midstream, by certain deliverables expected within athird of the documented times and volumes is a recipe for failure.

By engaging in other corporate projects competing for the meager financesmidway, is a recipe for failure

By not having proper change management policies and procedures, is arecipe for failure

By going for consultants without prior experience or ERP solutions in which

you are the only company within your industry, could be a recipe for failure

If you do not have a knowledge transfer inscribed in the consulting contract, isa recipe for failure

If the vendor does not understand your business, is a recipe for failure

If the project has no clear phases, deliverables and quality controlcomponents, is a recipe for failure

If you have not re-engineered your business processes to be compatible withthe capabilities of the technology, is a recipe for failure

Having multiple vendors within the one project, is a recipe for failure Not having an external project audit committee, is a recipe for failure

Not having a clear end-user training program to transfer skills to employees, isa recipe for failure

Having the project run as a "one-man show", is a recipe for failure

Having the management over- committed (excessively ambitious, promptingunrealistic deadlines), is recipe for failure

Team member not being accountable for actions, is recipe for failure

Low morale within team, is recipe for failure

Unclear statement of requirement, is a recipe for failure

In no standard implementation methodology use, is a recipe for failure

Inadequate requirements definition (current processes are not adequately

addressed), is a recipe for failure

Poor ERP package selection (the package does not address the basic

business functions of the client), is a recipe for failure

Inadequate resources employed by the client, is a recipe for failure

Internal resistance to changing the 'old' processes, is a recipe for failure

A poor fit between the software and users procedures, is a recipe for failure

A bottom up approach is employed (the process is not viewed as a top

management priority), is a recipe for failure

The client does not properly address and plan for the expenses involved, is arecipe for failure

If any functional gaps have not been identified (GAP analysis), is a recipe forfailure

If the implementation does not take into account future technologicalconvergence, is a recipe for failure


57/63

ERP IN A NUTSHELL

ERP attempts to integrate all departmentsand functions across a company onto asingle computer system that can serve all

those different departments, particular needs. ERP automates the tasks involved in

performing a business process


58/63

ERP IN A NUTSHELL


59/63

ERP IN A NUTSHELL


60/63

EXAMPLE OF ERP AT WORK


61/63

SUMMARY

ERP is a business wide common systemCan integrate all of the business units Very expensive and time intensive Proper implementation can help the business

function better Poor implementation can hurt the business

immensely Training


62/63

REFERENCES

ERP Making It Happen, Thomas F. Wallaceand Michael H. Kremzar

2008 ERP Report Part II: Comparing

Leading Tier 1 and Tier 2 ERP Solutions


63/63

QUESTIONS??

what is erp 6

Documents