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P e o p le
G o a ls & O b je c t iv e s
Re s ource s
The Enterprise
3
Traditional Organization
• The organization is divided into different units based on the
functions they perform— finance, manufacturing, production
planning, purchasing, sales and distribution, R&D, HR, etc.
• The various departments have their own goals.
• The different departments function in isolation and have their own
data collection & analysis systems.
• The result is that, instead of taking the organization towards the
common goal the various departments end up pulling it in different
directions as one department does not know what the other does
and for what purpose.
• So unless all the departments know what the others are doing and
for what purpose, the inter-departmental conflicts will arise thus
disrupting the normal functioning of the organization.
• The solution is to have a centralized information storage and
management facility.
4
Traditional Organization
5
Enterprise Way…
• In the enterprise way, the entire organization is
considered as a single system.
• Information about all the aspects of the organization is
stored centrally and is available to all departments, thus
avoiding conflicts.
• ERP systems help to make this task easier by integrating
the information systems, enabling smooth and seamless
flow of information across departmental barriers, and
automating business process and functions.
• ERP systems help the organization to work and move
forward as a single entity.
6
Resources
Some Ms
7
Functional Areas and Business
Processes
• To understand ERP, you must understand how a
business works
– Functional areas of operation
– Business processes
Figure 1-1 Examples of functional areas of operation and their business functions
16
Business Processes (cont’d.)
• Businesses must always consider customer’s
viewpoint in any transaction
• Successful customer interaction
– Customer (either internal or external) is not required
to interact with each business function involved in
the process
• Successful business managers view business
operations from the perspective of a satisfied
customer
22
Functional Areas and Business
Processes of a Very Small Business
• Example: A fictitious coffee shop
– Examine business processes of the coffee shop
– See why coordination of functional areas helps
achieve efficient and effective business processes
– Look at how integration of the information system
improves the business
Figure 1-4 The Marketing and Sales functional area exchanges data with
customers and with the Human Resources, Accounting and Finance, and
Supply Chain Management functional areas
Concepts in Enterprise Resource Planning, Fourth Edition 33
Marketing and Sales (cont’d.)
• M/S needs to interact with Human Resources to
exchange information on hiring needs, legal
requirements, etc.
• Inputs for M/S
– Customer data
– Order data
– Sales trend data
– Per-unit cost
– Company travel expense policy
Figure 1-5 The Supply Chain Management functional area exchanges data
with suppliers and with the Human Resources, Marketing and Sales, and
Accounting and Finance functional areas
Figure 1-6 The Accounting and Finance functional area exchanges data with
customers and with the Human Resources, Marketing and Sales, and Supply
Chain Management functional areas
Figure 1-7 The Human Resources functional area exchanges data with the
Accounting and Finance, Marketing and Sales, and Supply Chain
Management functional areas
51
Production Planning Process
52
Production Process
53
Fulfillment Process
54
Information Islands
• No organization can function as islands of different
departments.
• All the departments should have access to the
organization’s information.
• In today’s competitive business environment, the key
resource of every organization is information.
• If all the information islands, which are functioning in
isolation, are integrated into a single system, the impact
of that would be dramatic.
• If the organization does not have an efficient and
effective mechanism then the chances of that
organization succeeding are very remote.
55
Integrated Data Model
• The most critical step in the ERP implementation is the creation of an
integrated data model as all the employees from the different departments
get access to the integrated data and this will help in better decision-
making.
• With the implementation of ERP systems all the data will be from the
integrated database.
• Maintaining and managing the integrated data constantly updated and up-
to-date is one of the biggest challenges of ERP implementation and
operation.
• The integrated database will reduce data redundancy and give all
employees access to the updated and up-to-the minute information about
the entire organization.
• When designing the data model for the ERP system, the most important
thing that should be kept in mind is the information integration and the
process/ procedure automation.
• The data model should reflect the entire organization and should
successfully depict and integrate the data structures of the entire
organization.
56
What is ERP?
• ERP is an abbreviation for Enterprise Resource Planning and
means, the techniques and concepts for integrated management of
businesses as a whole from the viewpoint of the effective use of
management resources to improve the efficiency of enterprise
management.
• ERP packages are integrated (covering all business functions)
software packages that support the ERP concepts.
• ERP software is a mirror image of the major business processes of
an organization, such as customer order fulfillment and
manufacturing.
• ERP integrates all business functions into a single, integrated
software program that runs on a single database so that the various
departments can more easily share information and communicate
with each other.
• The integrated approach of ERP has tremendous power and
potential in improving the efficiency, productivity, and
competitiveness of the organization.
Define ERP
Just how much power the supplier has is determined by factors such as:
Why use ERP Software?
Benefits of ERP
Implementation Challenges: Support/ Maintenance Challenges:
Managing People:
Managing Change
Managing Large Project Team
Managing employee retention and relocation
Top Management Support
Is ERP the Solution for Sawhney &
Sawhney?
http://sapbrainsonline.com/help/list-of-
sap-companies-in-india.html
Independent and Dependent
DemandIndependent Demand
(end item)
A Dependent Demand
(component parts)
B(4) C(2)
Independent demand is
uncertain.
Dependent demand is certain.
Dependant vs. Independent
Demand
• Independent demand:
demand Demand for end items.
• Dependent demand:
demand Demand for items that
are subassemblies or component parts to be
used in production of finished goods.
– Once the independent demand is known, the
dependent demand can be determined.
Independent demand Dependent demand
100 x 1 =
100 tabletops
Continuous demand
400 – Discrete demand
400 –
300 –
300 –
200 –
No. of tables
200 –
No. of tables
100 –
100 –
1 2 3 4 5
Week M T W Th F M T W Th F
Material requirements planning
•
(MRP)
Material requirements planning (MRP):
(MRP)
Computer-based information system that translates
master schedule requirements for end items into
time-phased requirements for subassemblies,
components, and raw materials.
• MRP works backward from the due date using lead
times and other information to determine when and
how much to order.
Item:
Gross requirements
Scheduled receipts
Projected on hand
Net requirements
Planned-order
receipts
Planned-order
releases
Terms Defined
• Item – name or number for the item being
scheduled
• Low-Level Code – the lowest level of the
item on the product structure file
• Lot Size – order multiples of quantity
• Lead Time – the time from when an order is
placed to when it is received
Terms Defined
• Gross Requirements – demand for an item by
time period
• Scheduled Receipts – material already ordered
• Projected on Hand – expected ending inventory
• Net Requirements – number of items to be
provided and when
• Planned Order Receipts – net requirements
adjusted for lot size
• Planned Order Releases – planned order
receipts offset for lead times
Master Production Schedule
PERIOD
MPS ITEM 1 2 3 4 5
Clipboard 85 95 120 100 100
Lapdesk 0 50 0 50 0
Lapboard 75 120 47 20 17
Pencil Case 125 125 125 125 125
Product Structure Tree
Clipboard Level 0
(1)
Product Structure Tree
Clipboard
Rivets (2)
Finished clipboard Pressboard (1)
Figure 12.6
Indented Bill of Material
Clipboard Level 0
Lapdesk Level 0
20 units available
(20 - 120) = -100 — 100 additional Clipboards are required
Order must be placed in Period 2 to be received in Period 3
School Mate Products
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Gross Requirements 0 60 0 60 0
Scheduled Receipts
Projected on Hand 20
Net Requirements
Planned Order Receipts
Planned Order Releases
Example 12.1
School Mate Products
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Gross Requirements 0 60 0 60 0
Scheduled Receipts
Projected on Hand 20 20 10 10 0 0
Net Requirements 0 40 50
Planned Order Receipts 50 50
Planned Order Releases 50 50
Example 12.1
School Mate Products
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Planned Order Releases 100 100 100
ITEM: LAPDESK LLC: 0 x1 PERIOD x1 x1
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Planned Order Releases 50 50
ITEM: PRESSBOARD LLC: 0 x2 x2 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5
Gross Requirements 100 100 200 100 0
Scheduled Receipts
Projected on Hand 150
Net Requirements
Planned Order Receipts
Planned Order Releases
Example 12.1
School Mate Products
ITEM: CLIPBOARD LLC: 0 PERIOD
LOT SIZE: L4L LT: 1 1 2 3 4 5
Planned Order Releases 100 100 100
ITEM: LAPDESK LLC: 0 PERIOD
LOT SIZE: MULT 50 LT: 1 1 2 3 4 5
Planned Order Releases 50 50
ITEM: PRESSBOARD LLC: 0 PERIOD
LOT SIZE: MIN 100 LT: 1 1 2 3 4 5
Gross Requirements 100 100 200 100 0
Scheduled Receipts
Projected on Hand 150 50 50 0 0 0
Net Requirements 50 150 100
Planned Order Receipts 100 150 100
Planned Order Releases 100 150 100
Example 12.1
School Mate Products
Example 12.1
MRP II
MRP II Module
Capacity Requirements Planning
(CRP)
Load profile
Compares released and planned
orders with work center capacity
Capacity
Productive capability; includes
utilization and efficiency
Utilization
% of available working time spent
working
More Capacity Terms
Efficiency
Load
The standard hours of work
assigned to a facility
Load percent
The ratio of load to capacity
Load % = (load/capacity)x100%
Capacity Requirements Planning
MRP planned
order
releases
Capacity Open
Routing
requirements orders
file planning file
2 copiers, 2 operators
5 days/wk, 8 hr/day
1/2 hr meals, 1/2 hr maintenance per day
Efficiency = 100%
Utilization = 7/8 = 87.5%
Daily capacity = 2 machines x 2 shifts
x 8 hours/shift x 100% efficiency
x 87.5% utilization
= 28 hours or 1,680 minutes
Determining Loads
and Capacities
JOB NO. OF SETUP RUN TIME
NO. COPIES TIME (MIN) (MIN/UNIT) TOTAL TIME
10 500 5.2 0.08 5.2 + (500 x 0.08) = 45.2
20 1,000 10.6 0.10 10.6 + (1,000 x 0.10) = 110.6
30 5,000 3.4 0.12 3.4 + (5,000 x 0.12) = 603.4
40 10,000 11.2 0.14 11.2 + (10,000 x 0.14) = 1,411.2
50 2,000 15.3 0.10 15.3 + (2,000 x 0.10) = 215.3
2385.7 min
Load percent = 2,385.7 / 1,680 = 1.42 x 100% = 142%
Add another shift:
Daily capacity = 2 machines x 3 shifts x 8 hours/shift
x 100% efficiency x 87.5% utilization
= 42 hours or 2,520 minutes
Revised load percent = 2,385.7 / 2,520 = 0.9467 x 100% = 94.67%
Initial Load Profile
120 –
110 –
100 –
Hours of capacity
90 –
80 –
70 –
60 –
50 –
40 – Normal
30 – capacity
20 –
10 –
0–
1 2 3 4 5 6
Time (weeks)
Remedies for Underloads
90 –
80 –
70 – Work
60 – an
extra Push back
50 – Pull ahead
shift
40 – Overtime Push back Normal
30 – capacity
20 –
10 –
0–
1 2 3 4 5 6
Time (weeks)