Presentation on theme: "A history of enterprise wide integration"— Presentation transcript:
1 A history of enterprise wide integration From acronym to acronymEOQ / BOMP / MRP / MRP II / ERP / ERM / ERPII
2 Time frame and key milestones EOQSafety StockBOMPWork Orders1950sMRP1965Theoretical / conceptualImprovements in managementtechniquesMRPII1975ERP1990ERM / ERPII2000
3 Time frame and key milestones EOQSafety StockBOMPWork Orders1950sMRP1965Computing power enables completely integrated manufacturing solutionMRPII1975ERP1990ERM / ERPII2000
4 Time frame and key milestones EOQSafety StockBOMPWork Orders1950sMRP1965More functions becomeIntegrated in the processMRPII1975ERP1990ERM / ERPII2000
5 Time frame and key milestones EOQSafety StockBOMPWork Orders1950sMRP1965MRPII1975More functions becomeIntegrated in the process + technology improvementsERP1990ERM / ERPII2000
6 Time frame and key milestones EOQSafety StockBOMPWork Orders1950sMRP1965MRPII1975More functions becomeIntegrated in the process to add up to complete business solutionERP1990ERM / ERPII2000
7 Material Requirement Planning Emerged from BOMP in 60sConversion of production plan for parent items (finished products) into a production plan of production or purchasing for component itemsExplosion of the requirements for a top level item through the BOM to generate component demandExecuted at each level of Assembly / sub-assemblyDiscrete Manufacturing: Manufacturing items based on a definitive bill of material or recipe as opposed to batch formulas. The bill of material or recipe is typically expressed in quantities per each as opposed to percentage per batch.
8 Principles of MRPSystem to plan and control production and material flowscore principle:demand for material, parts and components depends upon the demand for finished productChain of causality from finished goods back to inventories:possible to reduce inventory to the minimumplan for procurement based on actual needsable to cater for “lumpy” (i.e. dependent) demand
9 BOM = Recipe or formula How to produce our products List of components including possible substitutesHow much of eachSpecial conditions of operationExpected yields and labour productivity (i.e. standards)Extrapolate a cost per unitStored in a Bill of Material (BOM)
10 Example: Bill of Material for desk 1 – List out the components2 – describe the steps required for assembly3 – arrange them in a possible manufacturingsequence
11 Solution Desk Top (1) Adjustable legs (4) Screw Kit (1) Frame (1) 3 way junctions (4)Painted tubing (4)Painted metal legs (4)Leg Tubes (4)Paint (0.6 dl)Long Tubes (2)Short Tubes (2)Paint (1 dl)
12 How MRP worksMaster production schedule: drives the system based on customer ordersBill of material (dependent demand)Inventory status fileMRP package - contains the logicSee diagram next page
13 Is this a good plan??? MRP logic Module Master Production Schedule Open Purchase OrdersOpen Shop OrdersMRP logicModuleInventorymaster part fileBOMReports:+ planned order releases+ Purchasing plan+ work ordersIs this a good plan???
14 Is this a good plan??? MRP logic Module Master Production Schedule Open Purchase OrdersOpen Shop OrdersMRP logicModuleInventorymaster part fileBOMReports:+ planned order releases+ Purchasing plan+ work ordersIs this a good plan???
15 Benefits of MRPUnderstanding the implications of changes in production schedule (by de-expediting parts)Keeping inventory low (25% decreases reported) while removing risk of stock-outsBetter planning leading to:reduction in lead timesbetter use of capacitylowered risk of obsolete production (e.g. engineering firms)Early warning system: earliest delivery dates are known before promises are made
18 Integration of design and manufacturing integration of operations with upstream design activities and downstream sales activitydownstream: e.g. by integrating CAD with Bill of Materialnew designs go on-line immediatelyno production of obsolete products / assembliesshorter time to market for new pdts
19 The Rise of MRPSnowball effect as companies moving to MRP imposed business changes to their partnersMRP logic was always around, but switching costs in manufacturing made it worthwhile:data processing costs decreasinginventory costs risingSophisticated CIM systems easier to justifyOther external pressures mean that tighter control is required
20 MRP II logic Module Move to MRP II Master Production Schedule Planned productionSales ordersOpen Purchase OrdersOpen Shop OrdersBill of resourcesMRP II logicModuleInventorymaster part fileBOMProduct routingsCRP / RCCPReports:+ planned order releases+ Purchasing plan+ work orders+ dispatch planMove to MRP IIOK Y/N?
21 Extension to ERP functionalities Natural extension of MRPIIMix of two competences:EngineeringFinanceMix of targetsEfficiencyControl / consolidationEnd to end business processes
22 ERP Capabilities Accounting / finance: Fixed Assetscash managementproduct cost accountingA/R & A/P & G/L…Production planning and materials planningPurchasing / purchase order managementp/o receivinginventory managementBill of materialsEngineering changesProduct routingsMRP, production planning, CRPWork ordersWarehouse managementmaintenance
23 ERP capabilities (2) HR management sales and distribution travel expensesPayrollpersonnel planningsales and distributionsales planningSales order managementquality controlForecastingConfiguration management / sales quotesAddress book function:Customer file, supplier file, employee file etc…e.g. Microsoft spent 10 months and $25 ms replacing 33 different systems in 26 sites with SAP
24 ERP storiesWhirlpool: hundreds of distributors receive no deliveries after the update of the SAP software.Hershey: Despite $112 million spent on SAP R/3 all shops empty on Halloween week.Allied Waste Industries: ERP project stopped after $130 million investmentWaste Management Inc.: same after $45 million investmentUnisource Worldwide and Dell also cancelled their projectsFoxmeyer: after three years of unsuccessful implementation, company sues SAP and AA before going bankrupt……………
25 Buying software Untypical IS projects Balancing analysis of requirement with search for right supplierTrading off conflicting requirementsPreparing for the projectProject managementHandling business disruptionMeasuring progress and success
26 AcceleratedSAP - The Tool for Successful Implementations Provide initial planning, scoping, and preparation for SAP transformation projects.Conceptualise and document the final SAP and non-SAP operational environment based on new information and business process designed requirements.Implement the information, business process and technical requirements based on the Business Blueprint developed during the previous phase.Complete testing, end-user training, system management and cutover activities.Take client from a pre-production environment to a live production operation and to design and implement a long-term end users support organisation.BusinessBlueprintProject PreparationRealisationFinal PreparationGo-LiveSupport
27 Decision making process Intelligence Design Choice Review(Herbert Simon)ERP SoftwareImplementationERPSoftwareSelectionVendor Independent ProcessVendor guided ProcessOrganisational Analysis Business Process Selection Implementation ReviewPreparation of needs Design of Software of benefits
28 Issues/Obstacles Until Now 0%2%4%6%8%10%12%14%16%18%Issues/Obstacles Until NowTop Issues Organisations Face During Enterprise Resource Planning1%KNOWLEDGE ASSETS 3%DataReporting3%5%Program ManagementProcess ReengineeringStage/TransitionBenefit RealisationPROCESS 20%TECHNOLOGY 7%Software FunctionalityApplication Portfolio ManagementEnhancements/Upgrades7%15%PEOPLE 57%Change ManagementInternal Staff AdequacyTrainingProject TeamPrioritisation/Resource AllocationConsultantsOwnership (of benefits to others)Top Management SupportPercentage of Total Mentions (Multiple answers per respondent)
29 Intelligence phase / requirements analysis UnderstandIdentify stakeholdersDevelop common visionMake up a business caseDesignDraw up business mapsDesign the ITTIdentify vendorsSolicit tender documentsChoiceAnalyse / find best fitNegotiatechose
30 Analysing Fit Functionality grid Break down per functional area Down to process stage levelAsk vendors to rate fitNot supportedSupported with mod / workaroundSupported with minor alterationFully supportedScore and recommend (see diagram)
31 Package Enabled Approach Develop WorkaroundNoYesBusiness Impact?Implement ERP Base PackageDoes ERP Fit?ERP Enabled ReengineeringBestPractice?Review As-Is Process
32 Team creation Multi-disciplinary Full time Decision making power BudgetRepresentative – team leadsBalance between allegiance to team and to area of competenceTeam spiritTeam awarenessMust have support from organisation