M ERP (Enterprise Resources Planning) M ERP (Enterprise Resources Planning) Session 6 Production and Operation Information System Ir. Ekananta Manalif, MM, MKom (D2664) Jurusan Sistem Informasi Universitas Bina Nusantara

M0254 Enterprise Resources Planning ©2004 Production and Materials Management Planning Need accurate forecasts from Marketing and Sales Compare costs with Accounting

M0254 Enterprise Resources Planning ©2004

Learning Objectives Describe steps in the production planning process of a high volume manufacturer like Fitter Snacker Describe Fitter Snacker’s production and materials management problems Describe how a structured process for production and materials management planning enhances efficiency and decision making Describe how production planning data in an ERP system can be shared with suppliers to increase supply-chain efficiency

M0254 Enterprise Resources Planning ©2004 Production and Materials Management at Fitter Snacker Must answer the following questions: How much of each bar should be produced? What quantities of raw materials should be ordered? When should raw materials be ordered

M0254 Enterprise Resources Planning ©2004 General Approaches to Production Make-to-stock: Items produced in anticipation of orders Make-to-order: Items produced to meet specific customer orders Assemble to order: Final product assembled from make-to-stock items

M0254 Enterprise Resources Planning ©2004 Fitter Snacker Manufacturing Process Raw Material Warehouse Mixer FormBakePack Finished Goods Warehouse Snack Bar Line

M0254 Enterprise Resources Planning ©2004 Fitter Snacker Production Problems Communications Marketing does not share data with production (sales promotions and large, unexpected orders) Inventory True inventory status not known No real-time data on actual sales Accounting and Purchasing Difficulty forecasting raw material and labor costs Adjusting accounts for actual vs. standard costs time consuming and done infrequently

M0254 Enterprise Resources Planning ©2004 Production Planning Process Work from sales forecast to create aggregate production plan Break down aggregate plan into more specific plans Use production plan to determine raw material requirements

M0254 Enterprise Resources Planning ©2004 ERP Approach to Production Planning Sales and Operations Planning Demand Management MRP Detailed Scheduling Sales Forecasting Purchasing Production

M0254 Enterprise Resources Planning ©2004 Fitter Snacker’s sales forecast for January through June

M0254 Enterprise Resources Planning ©2004 Figure 4.6: Sales and operations planning—the second step of the production planning process Sales and Operations Planning Demand Management MRP Detailed Scheduling Sales Forecasting Purchasing Production Starting Inventory

M0254 Enterprise Resources Planning ©2004 Snacker’s sales and operations plan for January through June

M0254 Enterprise Resources Planning ©2004 Sales and Operations Planning in ERP

M0254 Enterprise Resources Planning ©2004 Sales and Operations Planning

M0254 Enterprise Resources Planning ©2004 Sales and Operations Planning

M0254 Enterprise Resources Planning ©2004 Sales and Operations Planning

M0254 Enterprise Resources Planning ©2004 Sales and Operations Planning Demand Management MRP Detailed Scheduling Sales Forecasting Purchasing Production Starting Inventory Demand Management—the third step of the production planning process

M0254 Enterprise Resources Planning ©2004 Demand Management

M0254 Enterprise Resources Planning ©2004 Demand Management Calculation for Week 5 4,134 cases in Jan. x 3 days in week 5 ÷ 22 working days in Jan. = cases 4,1984 cases in Feb. x 3 days in week 5 ÷ 20 working days in Feb. = cases Total = cases

M0254 Enterprise Resources Planning ©2004 Sales and Operations Planning Demand Management MRP Detailed Scheduling Sales Forecasting Purchasing Production Starting Inventory MRP—the Material Planning Process

M0254 Enterprise Resources Planning ©2004 MRP Bill of Material

M0254 Enterprise Resources Planning ©2004 MRP MRP Record

M0254 Enterprise Resources Planning ©2004 MRP List in ERP

M0254 Enterprise Resources Planning ©2004 Stock Requirements List in ERP

M0254 Enterprise Resources Planning ©2004 Detailed Production Scheduling Snack bar production line is bottleneck Scheduling of production line is key to determining detailed production schedule

M0254 Enterprise Resources Planning ©2004 Detailed Production Scheduling Length of production runs Longer runs reduces cost of setups Longer runs increase capacity utilization Shorter runs reduces cost of inventory

M0254 Enterprise Resources Planning ©2004 Providing Production Data to Accounting Production data does not get entered into an ERP system directly Many methods of gathering shop floor data are available ERP allows shop floor data to be collected once for production and accounting purposes, and data is consistent in both areas

M0254 Enterprise Resources Planning ©2004 ERP in Supply Chain Management Supplier Raw Materials ManufacturerWholesalerRetailer Customer Goods $ $ $ $ $ Information

M0254 Enterprise Resources Planning ©2004 Supply Chain Management and ERP ERP not required for Supply Chain Management (SCM) ERP can facilitate sharing information in real time Use of internet can reduce communication costs

M0254 Enterprise Resources Planning ©2004 Supply Chain Metrics Total Supply Chain Cash-to-cash cycle time: Time from paying for raw materials to the time when cash is collected from the customer Total supply chain costs

M0254 Enterprise Resources Planning ©2004 Supply Chain Metrics Buyer-Supplier Initial fill rate Initial-order lead-time On-time performance

M0254 Enterprise Resources Planning ©2004 Chapter Summary An ERP system can improve the efficiency of the production and purchasing processes. Efficiency begins with Marketing sharing sales forecasts with Production, which shares its production plans with Purchasing

M0254 Enterprise Resources Planning ©2004 Chapter Summary continued Production planning can be done without an ERP system, but and ERP system allows production to be linked to Purchasing and Accounting. This data sharing increases a company’s overall efficiency

M0254 Enterprise Resources Planning ©2004 Chapter Summary continued Companies are building on their ERP systems to practice supply chain management. In doing this, the company looks at itself as part of a large process that includes customers and suppliers. Using information more efficiently along the supply chain can significantly reduce costs.