Enterprise Business Processes and Applications (IS 6006) Masters in Business Information Systems 4 th Nov 2008 Fergal Carton Business Information Systems

Last week MRP principles –BOM crystallises connection between supply and demand –Build process takes account of space, yield, time, cost, labour, equipment … –Outsource or not for sub-components, influence on BOM –Lead time for customer and commit time for production –MRP reduces buffer stocks Look up examples of Bills of Materials What is so difficult about connecting supply and demand? –Why can’t actual demand be forecasted? –Dell, Aer Lingus, Glaxo SmithKline –Fiat car design : 18 months because of sub-contracting parts Work orders / process orders allow inventory to be consumed –Mirror image of the sales order –Drives customer demand through to batches in the production process Additional Reading –Look at paper titles for relevance to this course (eg. Supply Chain) –We focus on reality of using integrated systems and issues arising

This week BOM example iPhone Process orders / work orders ERP modules (Sales, Finance, Logistics, Procurement, Manufacturing) ERP is single instance Production planning: assignment practice

What is a Bill of Materials? Links demand and supply Sales require a customer oriented language to describe functionality –See example for iPhone Manufacturing need a supplier oriented language to describe Bill of Materials

Model names (sales)

Model numbers (manufacturing)

Other BOM examples? ?

Work order / Process order ?

Production planning Planning approaches (build to plan) –Top down quarterly plan drives both Production (units) and Sales (€) targets –Takes into account sales forecast, historical performance and market expectations –Production plan must then be broken down into units, configurations, geograpahies –Local production planners then turn this into: an MRP plan to drive purchasing and a Master production schedule to drive manufacturing

Manufacturing modes and lead times Difference between process and discrete manufacturing –Process manufacturing consumes inventory at a steady rate, but yield of finished goods may vary –Discrete manufacturing consumes a predefined amount of inventory per article of finished goods Lead times: –key to replenishment policy: what’s my buffer stock? –Fiat Idea : re-uses previous model components to reduce cost & lead time

ERP is often single instance Single point of data entry (PO’s, SO’s, …) Inventory control Opportunity to re-design processes Single technical platform (support) Common language, common pool of data SalesShippingCollect cashProduction Customer information (ship-to, bill-to, install-at, …)

Finance Value Real-Time Decision Support Costing Human Resource Mgmt Asset Mgmt Accounts Receivable Accounts Payable General Ledger Sales Real-Time Decision Support Sale Customer Demand Mgmt Specification/ Configuration Mgmt Sales Force Mgmt Client Information Systems Price & Promotion Mgmt Sales\Order Entry Engineering Specification Real-Time Decision Support Release Mgmt Test Mgmt Revision Mgmt Product Development Process Definition Product Definition Procurement Purchase Real-Time Decision Support Vendor Performance Mgmt Financial Interfaces Product Performance Mgmt Receiving Mgmt Purchase Order Mgmt Quote/ Contract Mgmt Manufacturing Product Real-Time Decision Support Quality Mgmt Maintenance Mgmt Process Monitoring & Control Production Mgmt Resource Mgmt Planning & Scheduling Real-Time Decision Support Customer Logistics Fulfillment Real-Time Decision Support Transportation Mgmt Warehouse Mgmt Trade Mgmt Inventory Mgmt Distribution Planning Network Infrastructure VendorsCustomers

Process Monitoring & Control Not covered in “core” ERP functionality Resource Management Capacity requirements based on standards; machine time, labor time, etc. Rough cut capacity planning Maintenance Management Ability to integrate maintenance work orders and inventory in system Robust integration with fixed assets Good tracking of maintenance costs Planning & Scheduling Basic APICS standard planning (MS, RCCP, MRP, SFC) - requirements netted against on- hand inventories, lead times, etc. Multilevel master scheduling Multiplant MRP and DRP Basic shop floor control utilizing workorders, backflush and repetitive options Actual orders consume forecast Product Quality Mgmt Maintenance Mgmt Process Monitoring & Control Production Mgmt Resource Mgmt Planning & Scheduling Manufacturing - Core functionality Production Management Support for variety of production strategies; kanban, etc. for JIT, production planning process Track WIP inventory Record detailed costs Integration to quality management Quality Management. Basic quality reporting and issue tracking

Product Performance Management Good granularity of data Basic quality and defect tracking Receiving Management Integrated receiving inspection and quality tracking Items non-nettable until approved Receiving routings, matched with PO at dock Purchase Order Management Orders automatically generated for items through MRP, Min/Max, or manual requisitions Integrated receiving inspection and quality tracking Vendor Performance Management Good granularity of data and control over receiving date Basic vendor ratings/qualifications mgmt. Basic quality and delivery tracking Quote/Contract Management Limited RFQ & quote tracking Blanket orders Basic contract management Procurement - Core functionality Purchase Vendor Performance Mgmt Financial Interfaces Product Performance Mgmt Receiving Mgmt Purchase Order Mgmt Quote/ Contract Mgmt Financial Interfaces Fully integrated w/AP for 2-way or 3-way matching Fully integrated with costing for variance analysis automatic voucher generation

Trade Management Landed costs, multinational taxation and currency Network Infrastructure Hierarchical system of branch/plants can include suppliers and virtual warehouses Logistics - Core functionality Fulfillment Transportation Mgmt Network Infrastructure Distribution Planning Distribution requirements planning with multiple replenishment strategies and inventory stocking strategies Warehouse Management Basic inventory location tracking RF capable Limited advanced capabilities (pick/put away strategies, cross-docking) Inventory Management Visibility across organization Serial and lot control Transportation Management. Supports basic transportation processing, shipping documents, and organization of shipments Inventory Mgmt Trade Mgmt Distribution Planning Warehouse Mgmt

Sales Force Management Some support for configured quotes and quote tracking Automatic generation of orders from quotes Price & Promotion Management Multiple pricing methods (by item, family, customer) Basic promotions management (effectivity dates, volume or value discounts) Limited complex promotions and pricing management Customer Demand Management Forecasts generated from sales history or other algorithms Sales - Core functionality Sale Customer Demand Mgmt Sales Force Mgmt Client Information Systems Price & Promotion Mgmt Sales\Order Entry Specification / Configuration Management Feature and option-based system with simple if/then rule checking Robust integration with fixed assets Good tracking of maintenance costs Client Information Systems Customer hierarchies Multiple ship-to, bill-to addresses and contacts Very limited customer information Sales/Order Entry. Order templates, blanket orders and interbranch orders UCC 128 compliance Automatic credit check, order validity check Specification/ Configuration Mgmt

suite/crm/featuresfunctions/sales.epx

uring/featuresfunctions/index.epx

Apple iPod manufacturing process Sales forecast Build plan for quarter Procurement schedule for raw materials Starts plan by week (Master production Schedule – MPS) Work-in-progress / process control Test, quality control and material purge Adjust build plan / starts plan for actual demand Deliver goods to finished goods area Handover to distribution

iPhone Production planning –Read narrative –Draw a process map of the proudction planning process –What are the strengths / weaknesses of the process mapping exercise?

Strengths of process mapping Separates physical from virtual flows Flexible Intuitive Fast Facilitates sharing of ideas Helps define roles and responsibilities Highlights potential for automation –Bottlenecks, delays, errors, redundancy, …

Weaknesses of process mapping Biased representation? –Difficult to meet all people involved –Dependent on accuracy of information given by participants –Holes in understanding -> poor process –Doesn’t take into account new processes –Interpreted differently –Consistency in analysis when using multiple analysts –Only maps repetitive processes? –What about manual work? Find right level of abstraction Only theoretical? Complexity / overcomplication

How will you use the process map? Spot problems Optimise process Tool to explain / educate Map alternatives Draw “how we would like the process to work”