Product Research in Marshal

A C o n c e p t P a p e r
 PRODUCT RESEARCH

PRODUCT RESEARCH IN MARSHAL

Introduction
Business practices across an organization or an industry revolve around the
nature of business, infrastructure available in the country, behavioral and cultural
patterns and environmental influences. For instance, electronic currency,
telephonic orders and business on the Internet may be common place in
developed countries. These practices are not yet popular in developing countries
in Asia & Africa where telephonic & other infrastructural facilities are still primitive.

In spite of such differing environments however, many business practices and

processes are similar across the globe. This makes it possible to abstract them,
so that a simple set of requirements can work for most organizations. The level of
abstraction would depend on the level of technology and architecture of the
product. Understanding the business processes and practices, their genesis,
current status and their value addition to business is critical to evaluating and
abstracting them.

Applications research refers to the exercise of understanding well-accepted

business practices, generalizing of multiple requirements and finally abstracting
them into a model or architecture. Ramco Marshal incorporates significant
applications research to make it a versatile product with a multitude of facilities
compared to conventional products.

Established Best business

IT business practices
practices

Innovate

Business
IT
practice
innovation
innovation

Innovative
New business
business
practices
practices

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This paper highlights the usage and depth of some business practices.
Implementation of these business practices will provide organizations with a
sustainable competitive advantage. These practices have been classified as,
Best business practices
These business practices are a result of the combination of some of the well
researched and time tested management practices and the power of
technology
New business practices
Best business practices when combined with the emerging technologies of
information technology will result in new business practices
Innovative business practices
They are improved methodologies of performing various activities,
developed as a result of improving best business practices and combining it
with innovative methodologies

Best business practices

Advances in information technology has significantly eased the deployment of
standard practices. Marshal enables the following business practices to be
deployed in the organization.

Manufacturing resource planning

With advances in information technology, organizations wanted manufacturing to
reach beyond material planning and have closer integration with customer
demand management. This led to the evolution of MRP II (Manufacturing
Resources Planning) systems. Apart from automation of material planning with
well-structured procedures and algorithms, these systems were broader in scope
as they planned for all resources needed for manufacturing. Ramco Marshal
uses advanced MRP II techniques in the production application to plan and
schedule for material and capacity. Different models of MRP II are used in the
Discrete and Process functions addressed by Marshal. Organizations with
varying production policies like ‘made to demand’ or ‘made to stock’ or ‘configure
to order’ are addressed clearly in Marshal. As a result of abstraction in Marshal,
these policies are not statically defined (either for organization or for an item) but
are dynamically interpreted based on the demand-supply scenario.

Material costing
Inventory valuation in Marshal allows globally accepted costing methods such as
FIFO (First in, First out), LIFO (Last in, First out), Weighted Average and
Standard Costing. Apart from these methods, all costs related to production /
procurement of an item are tracked and charged on ‘Realization’ basis. This
makes the flow of information efficient. For example, the costs (basic price with
all taxes, charges and discounts) from purchase order flow into the Goods Inward
(GI) note. Other expenses such as taxes, charges and discounts are recorded in

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the GI note and accounted in the material cost, when they occur (e.g., freight
cost being known only at the time of material arrival). GI note automatically posts
financial entries thereby integrating information across functions in the
organization.

Sales forecasting and planning

A good forecast reduces the risk of uncertainty due to market changes. Sales
Forecasting and Analysis module in Marshal collects the sales information in user
definable performance indicators. Using well accepted statistical techniques, the
historical information is extrapolated into forecasts. Using planning workbench,
planners can convert forecasts into realistic plans by top-down, or bottom-up or
middle-out methods. The sales plan (forecast) so prepared is the basis on which
production begins its planning exercise.

Sales orders when recorded typically consume against the forecast. Exceptional
orders can be indicated specifically so that the information is passed on to
production planners to work for these orders beyond the forecast.

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Planning for dependent and independent demand

When production depends on the sales orders and trends made available from
sales forecast, the planning activity for raw material is termed as dependent
demand planning. In such a case, activities such as MRP and RCCP will be
performed only after the independent demand is ascertained. All firm planned
inflow and outflow of material is maintained in a process called Disposition. It
considerably eases the method of netting off the actual independent demand
recorded. Depending on the demand calculated, MRP is run to raise requests for
either procurement of raw material or production orders to produce finished
material.

Dependent planning however, is a complex operation using MRP based

techniques involving the presence of large amount of detailed information. While
it is cost effective for high value items, it might not be efficient for low value or ‘C’
class items. For such items, a simpler solution would be to generate a production
order when the reorder level is reached. The quantity to be produced will be
decided by the reorder quantity. Though the demand for such items is not always
visible, an assumption that demand is continuous and consistent is made. This
type of material planning is termed as independent planning.

Marshal allows for both dependant and independent planning to suit an

organization’s varied requirements. In Marshal, production for some items can be
based on dependant planning and other items could follow independent planning.

Authorization for expenses

Many organizations use budgets as a means of cost control. For instance, a
department is allocated funds for a given period. For every transaction, the
relevant amount will be deducted from the funds available. This will ensure that a
department spends the allocated money judiciously. Though many organizations
have greatly benefited from this type of control, it has certain pitfalls. Often, in
spite of such budgetary constraints payments might have to be released to an
external entity like a supplier.

However, if organizations would still like to use such allocations for control then
Authorization For Expenses (AFE) concept of Marshal comes handy. AFE is a
fund allocated for expending money for a purpose. For every purpose, a code is
assigned along with amount allocated. For instance, consider a notebook
purchase fund to buy notebooks and associated accessories for senior
management. Any PR that is made for notebooks consumes against this fund.
Therefore when the PR is authorized, it proposes expense against the AFE. So
right from proposal, a control is exercised, unlike budgets where control is
exercised only when money is expended (paid). The four-step process of
expense disbursement ensures that adequate control is exercised in all stages
right from raising the PR to recording expenses in the books of accounts.

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Purchase Process AFE Process in Marshal

Raise PR Establish limits

Generate PO Record proposals

Receive GI note Make commitments

Commit payments to
Create liabilities
creditors

AFE master keeps track of allocated amount, committed amount, liable amount
and actual amount expended. There is a facility to move funds from one AFE to
another.

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New business practices

New business practices are variant of established business practices, which use
the power of emerging technologies significantly. Business solutions such as
Marshal make such practices available so that organizations can make use of
such technology based new alternatives in their business solution to gain
competitive and operational advantages. The business practices elaborated
below are available in Marshal.

Flexible and hierarchy-less codes

Computerized systems use codes only for speeding up the access time. Codes
in computerized systems such as Marshal have no in-built intelligence
categorizing them to a particular type. They do not follow a hierarchical structure.
In case there is a change in details associated with the code, it need not be
modified. Even in the few codes in Marshal like Chart of Account code which
have hierarchy, the levels of hierarchy and length of code in each hierarchy are
user defined, making Marshal truly versatile. Marshal can adopt many coding
practices followed in an organization.

Precision values
Precision values in Marshal can be categorized into several classes. This is
mainly provided so that the items of the same kind are associated with the same
precision value. Standard cost of an item, its procurement price and its sale price
will inherit the same precision value. This will eliminate any rounding off errors.
Optionally two parameters forming a computed value, such as quantity and price
of a commodity could take on different precision values.

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Precision values are associated with a class. For example, the class ‘Rate’ could
comprise of the fields relating to cost and price. Grouping all fields into precision
classes ensures that consistent data is maintained across all processes and
functions in the organization. Setting a precision value for a class is defined as
an installation parameter so that each organization can choose precision values
it requires.

Constitution of account codes

In many organizations, cost center codes and analysis related codes are
embedded into the account codes. The purpose is to find out the contribution of a
Strategic Business Unit (SBU), process or an item (depending on the
organizational hierarchy) towards the total contribution to the organization. This
may be used for taking certain strategic and tactical plans. However having such
lengthy Chart of Account codes is unproductive, complex and prone for errors.
Instead, in Marshal, Chart of Accounts code is kept simple and analysis code and
cost center code are treated as other dimensions of the financial transaction.
Such multi-dimensional analysis capability not only reduces complex coding and
associated errors, but also greatly improves ability to present the financial
information in multiple perspectives.

Rule-based computing
As a result of rapidly changing environmental factors, government policies,
competitors’ strategies and market conditions, organization’s policies are
constantly in a state of flux. It is imperative that values like taxes, charges &
discounts, must be such that they should not be hard coded on to a system but
be based on a rule. Such rules defined through ‘Stored Procedure Builder’ and
‘Formula Builder’ in Marshal allows definition of dynamic and flexible values that

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are soft-coded into the system. They can be changed as and when required
without any coding.

Innovative business practices

Established business practices when combined with innovative methodologies
give rise to new business practices that could be improved methodologies of
performing various activities. In Marshal, innovative business practices are
offered as futuristic alternatives to established processes. They are made
available as options that can be chosen on a ‘need’ basis.

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Available to promise
Demand management (disposition) of material is implemented in Marshal follow
well accepted principles. The disposition information about an item contains the
information about current physical stock and all future firm supplies (from
production or procurement) and demands (from scheduled sales orders). This
gives a clear picture of availability of items at a future date so that sales
representatives can promise realistic and correct delivery dates to the customer.
The Available-to-Promise (ATP) functionality is provided along with sales order
shipment, and a variant of this is used for reservation of material from other
Marshal applications. In conventional processes, reservation is made against
stock available on hand, while in Marshal reservation extends to the future.

Layered planning
Material Requirement Planning (MRP) generally assumes equal importance to
items and capacity resources. In reality however, there are items that are more
important than others and are usually planned by different sets of people for
longer time horizons and with more care. These are typically long lead-time
items, high value items or bottleneck resources. Planning for items usually
happens at an aggregate value and the Bill of Materials (BOM) need not be
exploded fully.

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Marshal uses a method called Layered Planning by which different items can be
placed in different layers based on importance. MRP and CRP (Capacity
Requirement Planning) can be run on each of these layers. The ability to take the
right planning decision at higher planning level will minimize problems at the
execution stage.

Business
plan
Production planning for
planning groups

MPS RCCP
Firm
MRP MPS
Order release

Long term planning

Generate /
modify orders

Feedback RCCP MRP

Amend WO Order release

Intermediate planning

MRP CRP WO Release Activity Item Order

Modn. Reporting Reporting closure
Planning Execution
Short term planning & execution

Marshal Discrete Production allows an organization to plan for items or item

groups across different planning horizons. Long term planning can be performed
at an aggregate level, as a result of an organizational vision or approach. For
instance, in an automobile manufacturing plant, chassis may be planned for a
longer time horizon - a period of eight months, whereas a short term planning
horizon (spanning a few weeks) will be planned for nuts and bolts.

Inspection of incoming raw material from vendor

Each organization has its own unique practices for quality check. Of late most
organizations prefer to do the quality check directly at the vendor site. This
eliminates substandard goods coming from vendor site to the organization and
then being returned. The transport costs and carrying costs are reduced leading
to cost advantages and Just In Time (JIT) becomes easier.

This practice has also changed the payment processing cycle slightly. Where
there used to be a 4-way document match between purchase order, vendor
invoice, goods inward note and record of accepted material, now the practice is
to look for a 3-way match between the purchase order, vendor invoice and goods
inward note. Extending this philosophy, to reduce cycle time, low value items like
stationary Items go through only 2-way match process between the purchase
order and vendor invoice. In fact, this process can be adopted if the trust
between the supplier and the customer is very high.

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However, since each organization might have various kinds of material coming
in, Marshal allows the organization to choose any one of the above mentioned
practices. In fact, each line item in a purchase order can follow any of such
matching processes.

Purchase request pooling & purchase list

Purchase Requests (PRs) raised in many organizations are based on dependant
demand. Typical instance would be the PRs raised based on an MRP or DRP
run. These are netted out against the net stock availability, and create a net
requirement. In Marshal the PRs are sent to the Purchase module, where they
are pooled together to form a Purchase Order (PO). Such a practice is termed as
PR pooling. It is a common practice in many manufacturing organizations. It is
performed when the organization is certain that requirements converted to PRs
are netted requirements.

Another practice prevalent in many organizations is that of purchase lists. PRs

for items with independent demand (e.g., stationery items) is not generally netted
against demand. When the Purchase Department receives such a PR, a PO is
not immediately raised; rather, PRs are checked against the stock and pending
POs. If the demand can be met with expected receipts then the requesting
department is intimated and items are issued when fresh supplies arrive from the
supplier; else, a fresh PO to cover the shortfall is raised. In Marshal, it is possible
to compare the PRs against the pending POs so that shortfall can be met by
either a fresh PO or by amending a pending PO.

PR pooling or purchase list can be chosen as an option for individual items in

Marshal.

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Conventional & ABC Costing

In order to analyze costing information under various groups such as labor cost,
material cost etc., in conventional costing systems, the financial codes or chart of
account codes are consolidated under various cost elements. Such information is
then used to perform costing for a process, product or a profit center.

Cost codes are distinct from the financial codes in Marshal. Definition of cost
objects such as product or work order and cost centers such as geographical
location or division are user configured in Marshal. Each cost center accumulates
cost under many cost elements. Cost elements can be defined as components of
cost. Definition of cost elements are also user configurable. Therefore, cost
elements can be defined either as traditional cost types or as cost activities.

Leading management practitioners advocate costing groups based on activities,

rather than types like ‘material’ or ‘labor’. Therefore costing information must be
collected along with source activity instead of cost types. Since each activity has
an activity driver, it is easier for envisaging action plan for effective cost planning.
This new approach to costing is termed as ABC costing. A typical example of
ABC costing will be where costs will be grouped under order procurement cost
and order shipment cost instead of labor cost or overhead expense. Marshal
product’s abstraction capability allows for both conventional and ABC costing
methods.

To sum up…
The Marshal suite of business applications helps an organization visualize and
link all the activities in the organization. This is achieved through comprehensive
and continuous product and applications research. This research helps Marshal
gain a tremendous insight into the way that the organizations work and into the
practices advocated by leading management experts. After extensive evaluation
of these practices, those deemed the best are incorporated into Marshal. These
practices are incorporated in such a manner that the integrated information of the
organization is always maintained.

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