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Component B
SS
Assembly
Customer
SS
MITSloan
Bill of Materials
Demand for T = 100
T
300
Level 0
V (3) Y (2)
600
U (2) 200
Level 1 Level 2
W (1)
200
X (2)
400
W (2)
600
MITSloan
Overview of MRP
LT T U V W X Y 1 2 2 3 1 1
Req.
Ord. Ord. Ord. Ord. Ord. Ord.
WEEKS 1 2 3
Req. Req. Req. Req. Req. 800 400 600
6
100 200 300
7
100
MITSloan
MITSloan
MRP Nervousness
Information Updates Rescheduling Actions Dampening Methods
MPS Freeze Order Freeze Safety Stock Safety Time Safety Capacity Expediting
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Safety Time
Primarily Raw Materials
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If no feasible Solution
Capacity Reconciliation
Sub Contract
End Parts Components
Transfer Capacity
Machines Personnel
BOM
T2
Level 0
Wholesaler
Level 1
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MRP Shortcomings
Lead Times
LT = f(Part), f(shop) or f(schedule)? Inflate LT ?
Lot Sizes
Optimization difficult EOQ, LFL, Heuristics?
Safety Stocks
In isolation?
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MRP Shortcomings
Improvement Incentives
Significant Effort to Gather and Input Data Reluctance to Change Inputs Initialization with Inflated Values Keep Inflated Values to avoid Problems Excessive Trust in Computer Data
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Application Traps
Continuous Processes
Simple BOMs Factory like one Machine Setup Costs drive Schedule
Job Shops
LT f(part) Simple BOMs Shifting BNs
MITSloan
ERP
Enterprise Resource Planning An Overview
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What is ERP?
Client Server Software Integrates Majority of Business Processes Processes Majority of Transactions Enterprise wide Database
Each data point is stored once
ERP Modules
Purchasing Manufacturing Marketing
HR
ERP
Sales
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Stake Holders
ERP Vendors Consultants Hardware Providers Databases Operating Systems Complementary Tool Providers
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BOPSE
Baan ~5% Oracle ~ 10% People Soft ~5% SAP ~30% J.D. Edwards ~7% Others (30%)
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ERP Factoids
>60% of Multinationals use SAPs R/3 SAPs revenue:
1995: 90% from large companies 1997: 70% from large companies
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ERP Factoids
Market Growth
1993: $ 319 M 2000: $ 2400 M
Wrap Up
Clean Sheet vs. Technology Enabled Big Bang vs. Phased Introduction Best of Breed vs. Single Vendor Managing Complex Procedures vs. Procedure Petrifaction
MITSloan
Wrap Up
Best Practices vs. Continuous Improvement Operations as Strategy? Importance of Buy-In The Role of Consultants
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