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A history of enterprise wide integration From acronym to acronym EOQ / BOMP / MRP / MRP II / ERP / ERM / ERPII.

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Presentation on theme: "A history of enterprise wide integration From acronym to acronym EOQ / BOMP / MRP / MRP II / ERP / ERM / ERPII."— Presentation transcript:

1 A history of enterprise wide integration From acronym to acronym EOQ / BOMP / MRP / MRP II / ERP / ERM / ERPII

2 Time frame and key milestones EOQSafety StockBOMPWork Orders MRP MRPII ERP ERM / ERPII 1950s 1965 1975 1990 2000 Theoretical / conceptual Improvements in management techniques

3 Time frame and key milestones EOQSafety StockBOMPWork Orders MRP MRPII ERP ERM / ERPII 1950s 1965 1975 1990 2000 Computing power enables completely integrated manufacturing solution

4 Time frame and key milestones EOQSafety StockBOMPWork Orders MRP MRPII ERP ERM / ERPII 1950s 1965 1975 1990 2000 More functions become Integrated in the process

5 Time frame and key milestones EOQSafety StockBOMPWork Orders MRP MRPII ERP ERM / ERPII 1950s 1965 1975 1990 2000 More functions become Integrated in the process + technology improvements

6 Time frame and key milestones EOQSafety StockBOMPWork Orders MRP MRPII ERP ERM / ERPII 1950s 1965 1975 1990 2000 More functions become Integrated in the process to add up to complete business solution

7 Material Requirement Planning Emerged from BOMP in 60s Conversion of production plan for parent items (finished products) into a production plan of production or purchasing for component items Explosion of the requirements for a top level item through the BOM to generate component demand Executed at each level of Assembly / sub- assembly

8 Principles of MRP System to plan and control production and material flows core principle: demand for material, parts and components depends upon the demand for finished product Chain of causality from finished goods back to inventories: –possible to reduce inventory to the minimum –plan for procurement based on actual needs –able to cater for “lumpy” (i.e. dependent) demand

9 BOM = Recipe or formula How to produce our products List of components including possible substitutes How much of each Special conditions of operation Expected yields and labour productivity (i.e. standards) Extrapolate a cost per unit Stored in a Bill of Material (BOM)

10 Example: Bill of Material for desk 1 – List out the components 2 – describe the steps required for assembly 3 – arrange them in a possible manufacturing sequence

11 Screw Kit (1) Desk Top (1) Frame (1) Adjustable legs (4) Painted metal legs (4)Painted tubing (4) Long Tubes (2)Paint (1 dl) Leg Tubes (4)Paint (0.6 dl) Short Tubes (2) Solution 3 way junctions (4)

12 How MRP works Master production schedule: drives the system based on customer orders Bill of material (dependent demand) Inventory status file MRP package - contains the logic See diagram next page

13 Master Production Schedule Open Purchase Orders Open Shop Orders MRP logic Module Inventory master part file BOM Reports: + planned order releases + Purchasing plan + work orders Is this a good plan???

14 Master Production Schedule Open Purchase Orders Open Shop Orders MRP logic Module Inventory master part file BOM Reports: + planned order releases + Purchasing plan + work orders Is this a good plan???

15 Benefits of MRP Understanding the implications of changes in production schedule (by de-expediting parts) Keeping inventory low (25% decreases reported) while removing risk of stock-outs Better planning leading to: –reduction in lead times –better use of capacity –lowered risk of obsolete production (e.g. engineering firms) Early warning system: earliest delivery dates are known before promises are made

16 Without MRP Safety Stock Demand variations

17 With MRP Safety Stock Demand variations

18 Integration of design and manufacturing integration of operations with upstream design activities and downstream sales activity downstream: e.g. by integrating CAD with Bill of Material new designs go on-line immediately no production of obsolete products / assemblies shorter time to market for new pdts

19 The Rise of MRP Snowball effect as companies moving to MRP imposed business changes to their partners MRP logic was always around, but switching costs in manufacturing made it worthwhile: –data processing costs decreasing –inventory costs rising Sophisticated CIM systems easier to justify Other external pressures mean that tighter control is required

20 Master Production Schedule Planned production Sales orders Open Shop Orders MRP II logic Module BOM Reports: + planned order releases + Purchasing plan + work orders + dispatch plan Bill of resources Product routings CRP / RCCP Inventory master part file Open Purchase Orders OK Y/N? Move to MRP II

21 Extension to ERP functionalities Natural extension of MRPII Mix of two competences: –Engineering –Finance Mix of targets –Efficiency –Control / consolidation End to end business processes

22 ERP Capabilities Accounting / finance: –Fixed Assets –cash management –product cost accounting –A/R & A/P & G/L… Production planning and materials planning –Purchasing / purchase order management –p/o receiving –inventory management –Bill of materials –Engineering changes –Product routings –MRP, production planning, CRP –Work orders –Warehouse management –maintenance

23 ERP capabilities (2) HR management –travel expenses –Payroll –personnel planning sales and distribution –sales planning –Sales order management –quality control –Forecasting –Configuration management / sales quotes Address 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 stories –Whirlpool: 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 investment –Waste Management Inc.: same after $45 million investment –Unisource Worldwide and Dell also cancelled their projects –Foxmeyer: 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 supplier Trading off conflicting requirements Preparing for the project Project management Handling business disruption Measuring 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. Business Blueprint Project Preparation Realisation Final Preparation Go-Live Support

27 ERP Software Implementation Decision making process Intelligence DesignChoiceReview ERP Software Selection OrganisationalAnalysis Business ProcessSelectionImplementation Review Preparationof needs Design of Software of benefits (Herbert Simon) Vendor Independent Process Vendor guided Process

28 0%2%4%6%8%10%12%14%16%18% Issues/Obstacles Until Now Top Issues Organisations Face During Enterprise Resource Planning 1% KNOWLEDGE ASSETS 3% Data Reporting 3% 2% 5% 10% Program Management Process Reengineering Stage/Transition Benefit Realisation PROCESS 20% 1% 3% TECHNOLOGY 7% Software Functionality Application Portfolio Management Enhancements/Upgrades 4% 5% 6% 7% 8% 15% PEOPLE 57% Change Management Internal Staff Adequacy Training Project Team Prioritisation/Resource Allocation Consultants Ownership (of benefits to others) Top Management Support Percentage of Total Mentions (Multiple answers per respondent)

29 Intelligence phase / requirements analysis Understand –Identify stakeholders –Develop common vision –Make up a business case Design –Draw up business maps –Design the ITT Identify vendors Solicit tender documents Choice –Analyse / find best fit –Negotiate –chose

30 Analysing Fit Functionality grid Break down per functional area Down to process stage level Ask vendors to rate fit –Not supported –Supported with mod / workaround –Supported with minor alteration –Fully supported Score and recommend (see diagram)

31 Package Enabled Approach Develop Workaround No Yes No Yes No Business Impact? Implement ERP Base Package Does ERP Fit? ERP Enabled Reengineering Best Practice? Best Practice? Does ERP Fit? Review As-Is Process

32 Team creation Multi-disciplinary Full time Decision making power Budget Representative – team leads Balance between allegiance to team and to area of competence Team spirit Team awareness Must have support from organisation


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