Enterprise Business Processes and Applications IS 6006

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Enterprise Business Processes and
Applications(IS 6006)

• Masters in Business Information Systems
• 4th Nov 2008

Fergal Carton Business Information Systems
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Last week

• Discussion of Dearden / Vizard
• Examples of issues with OVOTT
• Wastage / discrepancies in inventory
• Plan, Buy, Make, Deliver model
• Bill of Materials links raw materials to finished
  goods

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This week

• MRP
• ERP modules (Sales, Finance, Logistics,
  Procurement, Manufacturing)
• ERP is single instance
• PCB exercise assignment practice
• Bill of Materials matching supply with demand
• Addditional reading

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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

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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

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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)

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

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Without MRP
Safety Stock
Demand variations
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With MRP
Safety Stock
Demand variations
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Keeping tabs on Work-in-Progress (WIP)

• Inventory consumption
• Something must trigger inventory consumption as
  production proceeds (BO, WO, PO, SO, )
• Visibility of inventory in Work-in-Progress (WIP)
  is low
• You can measure output / consumption at
  intermediate points but beware of disrupting
  process

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ERP is often single instance

• Single point of data entry (POs, SOs, )
• Inventory control
• Opportunity to re-design processes
• Single technical platform (support)
• Common language, common pool of data

Sales
Shipping
Collect cash
Production
Customer information (ship-to, bill-to,
install-at, )
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(No Transcript)
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Manufacturing - Core functionality

• 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

• Quality Management.
• Basic quality reporting and issue tracking

• Maintenance Management
• Ability to integrate maintenance work orders and
  inventory in system
• Robust integration with fixed assets
• Good tracking of maintenance costs

Quality Mgmt
Planning Scheduling
Maintenance Mgmt
Product
Process Monitoring Control
Resource Mgmt

• Resource Management
• Capacity requirements based on standards machine
  time, labor time, etc.
• Rough cut capacity planning

• Process Monitoring Control
• Not covered in core ERP functionality

Production Mgmt

• 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

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Procurement - Core functionality

• Vendor Performance Management
• Good granularity of data and control over
  receiving date
• Basic vendor ratings/qualifications mgmt.
• Basic quality and delivery tracking

• Financial Interfaces
• Fully integrated w/AP for 2-way or 3-way matching
• Fully integrated with costing for variance
  analysis
• automatic voucher generation

• Quote/Contract Management
• Limited RFQ quote tracking
• Blanket orders
• Basic contract management

Vendor Performance Mgmt
Quote/ Contract Mgmt
Financial Interfaces
Purchase
Purchase Order Mgmt
Product Performance Mgmt

• Purchase Order Management
• Orders automatically generated for items through
  MRP, Min/Max, or manual requisitions
• Integrated receiving inspection and quality
  tracking

• Product Performance Management
• Good granularity of data
• Basic quality and defect tracking

Receiving Mgmt

• Receiving Management
• Integrated receiving inspection and quality
  tracking
• Items non-nettable until approved
• Receiving routings, matched with PO at dock

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Logistics - Core functionality

• Transportation Management.
• Supports basic transportation processing,
  shipping documents, and organization of shipments

• Network Infrastructure
• Hierarchical system of branch/plants can include
  suppliers and virtual warehouses

• Warehouse Management
• Basic inventory location tracking
• RF capable
• Limited advanced capabilities (pick/put away
  strategies, cross-docking)

Transportation Mgmt
Network Infrastructure
Warehouse Mgmt
Fulfillment
Distribution Planning
Trade Mgmt

• Distribution Planning
• Distribution requirements planning with multiple
  replenishment strategies and inventory stocking
  strategies

• Trade Management
• Landed costs, multinational taxation and currency

Inventory Mgmt

• Inventory Management
• Visibility across organization
• Serial and lot control

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Sales - Core functionality

• Sales/Order Entry.
• Order templates, blanket orders and interbranch
  orders
• UCC 128 compliance
• Automatic credit check, order validity check

• Customer Demand Management
• Forecasts generated from sales history or other
  algorithms

• Specification / Configuration Management
• Feature and option-based system with simple
  if/then rule checking
• Robust integration with fixed assets
• Good tracking of maintenance costs

Sales\Order Entry
Customer Demand Mgmt
Specification/ Configuration Mgmt
Sale
Sales Force Mgmt
Price Promotion 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

Client Information Systems

• Client Information Systems
• Customer hierarchies
• Multiple ship-to, bill-to addresses and contacts
• Very limited customer information

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http//www.sap.com/solutions/business-suite/crm/fe
aturesfunctions/sales.epx
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http//www.sap.com/solutions/manufacturing/feature
sfunctions/index.epx
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PCB exercise

• Read narrative
• Draw a process map of the sales order process
• Show how you would take into account specific
  customer requirements.
• What are the strengths / weaknesses of the
  process mapping exercise?
• How will you use this process map in the next
  stage of the project?

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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,

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Weaknesses of process mapping

• Biased representation?
• Difficult to meet all people involved
• Dependent on accuracy of information given by
  participants
• Holes in understanding -gt poor process
• Doesnt 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

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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

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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

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Model names (sales)
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Model numbers (manufacturing)
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Additional reading from library

• The enterprise resource planning decade lessons
  learned and issues for the future (Adam,
  Frédéric) Hershey, PA Idea Group Pub., c2004.
• Second-wave enterprise resource planning systems
  implementing for effectiveness (Graeme Shanks,
  Peter B. Seddon and Leslie P. Willcocks.)
  Cambridge, U.K. New York Cambridge University
  Press, 2003.
• Mission critical realizing the promise of
  enterprise systems (Davenport, Thomas H.) Boston,
  MA Harvard Business School Press, 2000.
• Enterprise resource planning global
  opportunities and challenges (Liaquat Hossain,
  Jon David Patrick, Mohammad A. Rashid.) Imprint
  Hershey, PA Idea Group Pub. London
  Information Science Pub., 2002.