14.

Chapter 14

Enterprise resource planning

(ERP)

Pearson Education Ltd. Devon Obugenga Shaw

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14.2
Enterprise resource planning (ERP)

Operations
strategy

Design Improvement

Enterprise resource Planning and

planning (ERP) control
The market requires
specified time, quantity
and quality of products
and services
The operation supplies
the informational ability to
deliver products and
services

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14.3
Key operations questions

In Chapter 14 Enterprise resource planning

(ERP) Slack et al. identify the following key
questions:

What is ERP?

How did ERP develop?

How should ERP systems be implemented?

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14.4
The development of ERP
Increasing impact on the whole supply

Web-integrated enterprise resource

planning (collaborative commerce,
c-commerce)

Enterprise resource
planning (ERP)
network

Manufacturing resource
planning (MRPII)

Material
requirements
planning (MRP)

Increasing integration of information systems

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14.5
The process of MRP1

Explode the master production schedule.

Identify what parts and assemblies are required.

Check whether the required parts and assemblies are available.

For every part or assembly that is required, but not available, identify
when work needs to be started for it to be made available by its due
date.

Generate the appropriate works and purchase orders.

Repeat the process for the next level of the bill of materials.

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14.6
Component structure for a product

Product
On hand
Part inventory Order
quantities
Part A (2) Part B (2) Part C (1) Part D (1) A 0 600
LT=1 LT= 2 LT=1 LT=1 B 30 600
C 60 500
D 0 600
Part E (2) Part F (1) Part G (1) Part H (4) E 100 600
LT= 2 LT= 2 LT=2 LT=1 F 20 500
G 0 500
H 50 500
Part I (2) Part J (1) I 100 600
LT= 2 LT=1 (X) = quantity J 60 600
LT = lead time

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Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.7
Product structure for a simple board game

Level 0 Board
game
00289
Level 1

Box lid Box base Quest Character Dice TV label Game Rules
10077 assembly cards set 10045 10062 board 10056
10089 10023 10045 10033
Level 2

Box Inner TV label

base tray 10062
20427 23988

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14.8
Product structures

A-shape T-shape V-shape X-shape

product product product product
structure structure structure structure

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14.9
Materials requirements planning (MRP) schematic

Master
Customer Forecast
production
orders demand
schedule

Material
Bill of materials Inventory
requirements
records
planning

Purchase Materials plans Works orders

orders

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 Master production schedule (MPS)
14.10

Known
orders
Forecast Key
demand capacity
constraints
Sister plant Master
demand Inventory
production levels
R&D schedule
demand Spares
demand
Promotion
requirements Safety stock
etc. requirements

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14.11
Example of a master production schedule

Week number

1 2 3 4 5 6 7 8 9
Demand 10 10 10 10 15 15 15 20 20

Available 20 10 0 0 0 0 0 0 0
MPS 0 0 10 10 15 15 15 20 20

On hand 30

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 Example of a level master production schedule
14.12

Week number
1 2 3 4 5 6 7 8 9
Demand 10 10 10 10 15 15 15 20 20
Available 31 32 33 34 30 26 22 13 4
MPS 11 11 11 11 11 11 11 11 11
On hand 30

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14.13 Example of a level master production schedule including
available to promise

Week number
1 2 3 4 5 6 7 8 9
Demand 10 10 10 10 15 15 15 20 20
Sales 10 10 10 8 4
orders
Available 31 32 33 34 30 26 22 13 4
ATP 31 1 1 3 7 11 11 11 11
MPS 11 11 11 11 11 11 11 11 11
On hand 30

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14.14
The MRP netting calculations for the simple board game

Master production schedule

10 Board games (00289) required
Inventory file
3 Board games (00289) in
Works order for level 0 parts stock
Level 0 Assemble 20 Board games (00289)

Bill of materials Inventory file

Require 20 box base Works and purchase 10 box base assemblies
assemblies (10089) orders for level 1 parts (10089) in stock
Assemble 50 box base
Level 1 assemblies (10089)

Bill of materials Inventory file

Require 50 box bases (20467),
50 inner trays (23988) and 50
TV labels (10062)
Level 2
Works and purchase orders
for level 2 parts
Purchase 40 box bases
(20467) and 60 inner trays
(23988)
15 box bases, 4 inner
trays and 65 TV labels in
stock
= re-order quantity

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14.15
Closed-loop MRP

Materials plans Capacity plans

We wish to make Resource Can we make

Production 300 units per
300 units per realistic? requirement
month plan month?
plan

Master Rough-cut
We wish to make Can we make 7
production realistic? capacity units for day 35?
7 units for day 35
schedule plan

Therefore we will Capacity Can we make 5

need to make 5 Materials box assemblies
realistic? requirements
box assemblies plan for week 35?
plan
for week 35

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14.16
The concept of MRP II

Marketing Finance

Central
database

Design Operations

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14.17
The benefits of ERP

Because software communicates across all functions, there

is absolute visibility of what is happening in all parts of the
business.

The discipline of forcing business-process-based changes is

an effective mechanism for making all parts of the business
more efficient.

There is a better sense of control of operations that will

form the basis for continuous improvement.

It enables far more sophisticated communication with

customers, suppliers and other business partners.

It is capable of integrating whole supply chains including

suppliers suppliers and customers customers.

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14.18
ERP integrates several systems
Senior management and stakeholders

Strategic
reporting
applications Sales and
Financial
applications marketing
applications

Front-office staff
Back-office staff

Customers
Suppliers

Delivery and
Operations Integrated
logistics
applications database applications

Purchasing and Service

supply applications
applications
HRM applications

Employees Employees

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