Anicet Yalaho

1
E. R. P SYSTEMS
Presented by

• Anicet Yalaho
• Maria-J. Echeverria
• Seppo Selkälä

2
A Book Review

• ERP- The dynamics of Operations Management,
  Avraham Shtub (1999)

3
1. BPR ERP
2. Introduction to the book
3. Marketing Considerations
4. Purchasing and Inventory Management
5. Scheduling
6. Material Requirement Planning
7. Managing the process using ERP
8. Teaching and Training IPOM
4
BPR ERPWhat is ERPRelationship BPR/ERP
5
Enterprise Resource Planning

• ERP is a software solution, with all the
  organisations records managed from one large
  database. An integrated IS.
• It takes the process view of an organisation to
  meet the organisational goals tightly integrating
  all functions of an enterprise.

6
Relationship BPR - ERP

• A BPR study
• brings out deficiencies of the existing system
• attempts to maximize productivity through
• re-structuring and
• re-organising the human resources as well as the
  divisions and departments in the organisation
• BPR will initially question the value-add of the
  particular process
• Then it will go on to put some systems and
  procedures in place -gt ERP is a key enabler in
  any BPR effort

7
Relationship BPR ERP (2)

• You can
• do BPR without buying an ERP solution,
• unusual
• buy an ERP solution without doing any BPR
• wasteful investment...
• The question is not whether ERP functions or not
  without BPR
• Key question whether every company that
  implements ERP has to reengineer its processes

8
ERP

• ERP doesnt blindly automate- it takes into
  account
• companys internal issues,
• but also factors in the external imperatives in
  terms of competition, time-to-market,...

9
ERP (2)

• ERP is the planning of the 4Ms of the enterprise
  resources Man, Money, Materials, Machines.
• ERP helps in addressing needs like reduced cycle
  time, customer focus, sharing information
  seamlessly across the enterprise and JIT
  management

10
1. BPR ERP
2. Introduction to the book
3. Marketing Considerations
4. Purchasing and Inventory Management
5. Scheduling
6. Material Requirement Planning
7. Managing the process using ERP
8. Teaching and Training IPOM
11
An Introduction to ERP- The dynamics of
Operations Management, Avraham Shtub (1999)
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ERP- Dynamics of Operations Management

• Scope of the book
• to help and support the development of teams to
  implement the Integrated Production and Order
  Management (IPOM) approach
• The Four cornerstones for success
  Flexibility, Time, Quality, Cost
• Four main functional activities
  Marketing, Purchasing, Production, Finance

13
ERP- Dynamics of OM (2)

• A book delivered with a software
• the Operations Trainer
• a dynamic-integrated environment for students
  and executives to experiment with IPOM and to
  learn the ERP concepts

14
Operations Management

• Several approaches to Operations Management
• operations research oriented
• case studies oriented
• A new approach proposed by Hammer and Champy
  (1993) the reengineering of business processes
  to inflect changes on organisations

15
Integrated Production and Order Management
Approach

• New managerial approaches
• Concurrent Engineering
• an integrated, dynamic approach to new product
  development. New product development teams
  composed of experts from different functions.
  Share the same goals.
• Group Technology
• focused cells specialising in a small number of
  similar products.

16
IPOM approach (2)

• Development of IS
• MRP- Material Requirement Planning
• not good enough on its own...
• Integration of modern DBMS, DSS and MIS
• -gt the new generation of ERP systems was borne
• An essential process- The order fulfilment
• -gt Integrated Production and Order Management

17
IPOM approach (3)

• Process-based
• Process order fulfilment- from the reception of
  a customer order to the supply of the right goods
  on time, the required quantities and at a
  competitive cost
• ERP supported
• 3 types of IS support Order fulfilment process
• Transaction Processing System (any transaction
  can be ordered/analysed via the software)
• MIS (a unique database)
• DSS (decisions consequences can be analysed, ...)

18
IPOM (4)

• An Integrated IS
• finance, marketing, production, purchasing
• that supports order fulfilment process
• Transaction processing systems / MIS / DSS
• A single DB
• A model base (for well-structured/routine
  processes, for non-structured/-routine problems,
  or for process control)- used when a problem is
  too difficult to analyse and solve.

19
1. BPR ERP
2. Introduction to the book
3. Marketing Considerations
4. Purchasing and Inventory Management
5. Scheduling
6. Material Requirement Planning
7. Managing the process using ERP
8. Teaching and Training IPOM
20
Marketing Considerations
21
Production and order policies

• Order fulfillment process process triggered by
  customer orders
• Orders entered into Master Production Schedule
• Purchasing and order fulfillment processes are
  based on
• firm customer orders
• demand forecasts

22
Three types of order policies

• Make to stock
• new production triggered by forecasts
• Minimizes the promised lead-time at the cost of
  carrying inventories
• Make to order
• No stocks carried
• Only customer order triggers production
• Assemble to order
• Raw materials and parts stocked but final
  assembly triggered by customer order

23
Master Production Schedule (MPS)

• Statement of planned future, gross requirements
  of end products
• MPS is triggered by the market demand
• combination of orders and forecasts
• Management of MPS
• introduction of new requirements
• updating existing requirements
• monitoring and control of actual performance
  compared to goals

24
Time based competition

• Lead time time from order to delivery
• Importance of time in order fulfillment
• shorter lead-time
• competitiveness and ability to get new business
• delivery on right time
• promised vs. actual lead-time
• Lead-time is affected by
• data processing, decision making, production
• Each operation affects lead-time
• should be studied and optimised
• minimízation, elimination

25
Quality based competition

• Success dependent on customer satisfaction
• Eight dimensions in quality based competition
• performance, features, reliability,conformance,
  durability, serviceability, aesthetics, and
  perceived quality
• Quality in order fulfilment process refers mainly
  to
• DDP Due Date Performance

26
Cost based competition

• Profit selling - buying price
• Higher profit reduce the cost of products
• Problem of measuring costs of a unit
• direct, indirect costs
• fixed, variable costs
• Solution
• Look at the throughput

27
Summary of Marketing Considerations

• Order fulfillment process triggered by
• actual order or forecasts
• 3 types of order policies
• make to stock, make to order, assemble to order
• Dimensions of competition
• time, cost, (flexibility), and quality

28
1. BPR ERP
2. INTRODUCTION OF THE BOOK
3. Marketing Considerations
4. Purchasing and Inventory Management
5. Scheduling
6. Material Requirement Planning
29
Purchasing and Inventory Management
30
The Need for Outsourcing

• Outsourcing purchase some materials, parts, and
  services from outside services
• increase your effective capacity without capital
  requirements
• enhance the organizations competitive edge
• Points to be carefully evaluated
• Make or buy decision
• supplier management
• inventory management

31
OutsourcingMake or Buy Decisions

• Factors to be taken into consideration
• Capacity, Know-how, Cost-Volume, Demand pattern,
  Time, Quality, Control and Feasibility
• Decision making levels
• Strategic level
• what part of production kept in house
• Operational level
• capacity considerations

32
OutsourcingSupplier management

• Importance of order fulfilment process
• purchases constitute 30-50 of sales
• Sub-activities of supplier management
• specifications of requirements
• selection of suppliers
• contract management

33
Supplier ManagementSpecifications of
Requirements

• Definition of the required product or service
  including functional, physical and technical
  specifications
• Definition of the order fulfilment process
  requirements, including required lead time, size
  and number of shipments, shipping arrangements
  and frequency of deliveries
• Definition of quality system the supplier should
  employ and quality requirements applied to the
  product or service

34
Supplier Management Selection of Suppliers

• Different approaches single vs. multiple
• Supplier evaluation considerations
• Process capability
• Quality assurance
• Financial capability
• Cost structure
• Track record
• Production planning and control system

35
Supplier Management Contract management

• The ongoing relationship with supplier
• Three categories of relationships
• Inspection
• focusing on product inspection to eliminate
  defects
• Prevention
• purchaser helps to build quality into the product
  and process
• Partnership
• long term relationship
• e.g. Joint design, delivery directly to the point
  of use
• JIT-approach

36
Inventory Management

• Inventory management
• policies, decisions, actions and the monitoring
  and control of stock
• Stock types
• Raw materials, parts and components, work in
  process, finished goods, supplies

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Inventory ManagementBenefits and costs

• The benefits of using stocks
• Time based competition
• reduce lead time
• Coping with uncertainty
• buffer inventories
• Cost based competition
• order in large quantities
• Inventory costs
• capital costs, operating costs, risk related
  costs
• Many benefits, but still inventories are
  expensive and create waste
• search for trade off btw. benefits and costs

38
Inventory ManagementModels Pareto Model

• ABC or Pareto Analysis
• type A 20 of items, count for 80 of costs
• type B 30 of items, count for 15 of costs
• type C 50 of items, count for 5 of costs

39
Inventory ManagementModels EOQ Model

• Help when to place order and what quantity to
  order?
• the economic order quantity (EOQ) model
• Problems
• assumes demand constant
• stable inventory costs
• lead time constant
• constant parameters

40
Inventory ManagementModels (s,S) Model

• (s,S) Model
• whenever the current inventory level drops below
  predetermined value (s), and order is placed to
  bring the inventory level to the higher
  predetermined value (S)
• Advantage not based on simplifying assumptions
  like EOQ model
• Intuition and expertise driven

41
Summary of Inventory Management

• Outsourcing (Make or buy decision)
• what to keep in house? (strategic decision)
• capacity constraints (operational decision)
• Inventories
• trade off btw. costs and benefits of carrying
  inventories
• coping with uncertainty of demand and capacity
  constraints
• expensive

42
1. BPR ERP
2. INTRODUCTION OF THE BOOK
3. Marketing Considerations
4. Purchasing and Inventory Management
5. Scheduling
6. Material Requirement Planning
43
SchedulingJob ShopFlow ShopJIT
approachDynamic ShopDrumBufferRope approach
44
Scheduling

• Scheduling is concerned with allocation of
  limited resources to tasks over time
• the driver Master Production Schedule (MPS)
• Variety of scheduling models have been developed
  and implemented

45
Job ShopImplementing Priority Rules 1

• Machines performing the same function grouped
• Scheduling objectives
• on time completion of each part according to MPS
• the completion of all jobs as early as possible
• minimization of the time that parts spend in the
  shop (min. process inventory)
• maximization of the utilization of resources by
  minimizing their idle time
• minimization of costs by using less expensive
  materials

46
Job ShopImplementing Priority Rules 2

• When set-up time is significant and machine
  capacity limited --gt batch processing
• Several models exist to provide optimum
• only for very small problems
• based local view of a larger situation
• How to assign priority (simple methods)
• FIFO (First In First Out)
• EDD (Early Due Date)
• Current job (to save set up time)
• SPT (Shortest Processing Time)

47
Job ShopImplementing Priority Rules 3

• How to assign priority (complex methods)
• Critical ratio (CR)
• difference between due date and current date
  divided by time required to complete the
  remaining work.
• Slack Time Remaining (STR)
• difference between the time remaining before the
  due date and the time required for processing the
  remaining jobs.
• Slack Time Remaining per Operation (STR/OP)
• average slack time per remaining operation.
• Smaller values have higher priority (for the 3
  methods)

48
Job ShopImplementing Priority Rules 4

• By monitoring the situation on the shop floor and
  selecting the right priority rules for the
  situation, the management can improve
  performances on the delivery schedule
• Also scheduling manually is possible when job is
  late

49
Job ShopImplementing Priority Rules 5

• The selection of most appropriate priority rule
  as well as decision to expedite a job, is based
  on the Shop floor control system
• current information on the jobs waiting for
  processing in front of each machine
• Priority rules based on single machine
• starvation --gt monitor continuously inventory
  levels in front of each machine
• control by input-output analysis
• identify bottlenecks

50
Flow ShopScheduling

• In the flow job all product types are processed
  in the same order
• problems starvation and blocking
• especially when product units are large and
  in-process inventory is limited (JIT)
• Flexible flow job
• many similar machines operate in parallel

51
Flow ShopScheduling (2)

• Johnsons rule
• for simple cases (2 types of machines)
• objective to minimize make span
• Based on simplifying assumptions
• --gt direct implementation of their results may
  lead to poor performance of the order fulfilment
  process

52
The Just In Time (JIT) Approach

• Profit revenue - costs
• to increase profit
• increase revenue
• reduce costs
• Focus on cost (waste) reduction

53
JIT Approach (2)

• Potential forms of waste according to JIT
• Quality related waste
• Inventory related waste
• Waste of space
• Material handling waste
• Distinction between value-added and non
  value-added operations
• eliminate (if not possible minimize) non
  value-added operations, such as material handling

54
JIT Approach (3)

• Impacts of JIT in scheduling
• minimize process inventories
• use small batch size (ideal batch size 1)
• promote faster set ups
• use of scheduling systems
• limit space available for inventories in process
• preventive maintenance efforts
• quality at the source
• long term, close relationships with suppliers to
  ensure quality and delivery when needed

55
JIT Approach (4)

• The order fulfilment process in the JIT system is
  synchronized and controlled by a special system
• KANBAN cards
• Contains information production order, purchase
  order, inventory control device
• Integrated (all work centers are connected)
• Dynamic (inventories limited by of Kanbans)

56
Approaches forExpediting and Changing Priorities

• Demand fluctuates over time, solutions
• manufacturing to stock
• buffer inventories
• freeze MPS (master production schedule)
• stabilize demand over the freeze period
• monitor each job as it moves
• ERP systems analyse data and support decision
  making
• focus on problematic work centres
• derive the schedule according to bottlenecks

57
The Drum, Buffer, Rope (DBR)Approach

• In this scheduling technique the schedule of all
  work centres is driven by the schedule of
  critical work centres (insufficient capacity)
• Three performance measures
• MAX Throughput (T) Sales - Expenses
• MIN Inventory (I)
• MIN Operating expenses (OE)
• avoid production to stock

58
The Drum, Buffer, Rope (DBR) Approach (2)

• Focus should be on the constraint as it is the
  weakest link in the chain of the order fulfilment
  process

59
Summary of Scheduling

• Job shop
• limited applicability need for shop floor
  control system to monitor management intuition
• Flow shop
• Johnsons rule (limited applicability)
• JIT
• kanban cards and shop floor control system
• Dynamic shop
• approaches for demand fluctuations
• DrumBufferRope approach
• driven by critical work centers (bottlenecks)

60
1. BPR ERP
2. INTRODUCTION OF THE BOOK
3. Marketing Considerations
4. Purchasing and Inventory Management
5. Scheduling
6. Material Requirement Planning
61
Material Requirement Planning
62
Material Requirement Planning (MRP)

• Is an early attempt to develop an integrated MIS
  for the order fulfilment process
• By combining information...
• By integrating the inventory management
  information

63
MRP (2)

• By introducing lead time information for
  purchased items and for manufactured items
  manufacturing and purchasing orders can be time
  phased to ensure delivery exactly when needed

• The original MRP System (MRP I ) combined
• Marketing information in the Master Production
• Technological information about the structure of
  each product and its manufacturing process
• New capabilities were added to these systems
  including
• Planning module that reveal capacity shortage
• Shop floor control modules that utilise limited
  capacity efficiently
• MRP II (Manufacturing resource Planning).Systems
  that deal with resource capacities were born

64
MRP (3)

• MRP II Systems deal with resource
• recent development in this area produced ERP (
  Enterprise Resource Planning) Systems designed to
  support the order fulfilment process of an
  enterprise operating several factories warehouses
  and integrated logistic system a complex known as
  the supply chain

65
The typical data file the Master Production
Schedule(MPS), the Bill of Material(BOM)
inventory data
Basic MRP System
Firm Customers Orders
Demand Forecasts
Master Production Schedule (MPS)
Bill of Material BOM
Inventory Records
Material Requirements Planning (MRP)
Report
Purchase Orders
Work Orders
66
The typical data file (2)

• Many MRP installations did not fulfil the
  expectations to improve the order fulfilment
  process. There are several reasons for the
  failure of MRP System
• Quality of input data
• Team mutual understanding on how to use MRP
• The early MRP System dedicated files were used to
  store the data, as database technology were not
  available.

67
The typical data file (3)

• The important data files in the early MRP
  applications were the following
• The Master Production Schedule (MPS)
• Marketing information on actual customer orders
  and forecasts of future demand.
• Manufacturing information

68
The typical data file (4)

• Purchasing information on suppliers lead-time
  and the availability of purchased parts and
  materials in inventory and in the pipelines
• Cost information on the cost of manufacturing
  each independent demand item.
• Master Production Scheduling is an excellent
  example for the need to integrate the different
  aspects of the order fulfilment process

69
The typical data file (5)

• The time frame used for the MPS is important.The
  minimum planning time period known as time
  buckets specifies the accuracy of the planning
  process, a time bucket of one week is typical
• The minimum length of the planning

70
The typical data file (6)

• Change management is an important part of the
  order fulfilment process
• Change in the MPS create changes in the
  production and purchasing plans
• The MPSis updated continuously
• When current time is over, the next period
  becomes the current one and a new period enters
  the planning horizon

71
The typical data file (7)

• Key issues to consider are who should mange the
  MPS and How
• The Bill of Material
• The Inventory Record

72
Gross to net and time phasing The MRP logic

• MRP systems are designed to support the material
  management function in the order fulfilment
  process
• The Basic idea is that the same logic can be
  used for ordering purchased materials or parts,
  manufactured components and assembled products
• The MPS is the source of information on gross
  requirements for independent demand items
• Basic MRP logic makes use of this information as
  input and translates it into time phased net
  requirements

73
Gross to net and time phasing The MRP logic
The Basic MRP record for product A
74
Gross to net and time phasing The MRP logic
Projected available balance (t1) Projected
available balance Scheduled receipt
(t1) -Gross requirement (t1)

• Based on the calculed projected available balance
  a decision to issue work orders or purchase
  orders is made
• A simple decision rule known as LOT FOR LOT
  (LFL)

75
Modification of The MRP logic

• MPS is used as the resource of Gross
  requirements for independent demand items.
• Basic MRP logic is modified to accommodate
  special situations. a common modification is in
  the lot sizing policy
• The Economic Order quantity (EOQ) logic discussed
  early, is frequently used to calculate this
  minimum size. The same logic applies parts when
  economy to scale is available
• Ex The cost per unit decrease as the order size
  increases

76
Modification of The MRP logic

• Other modifications in the lot sizing policy are
  based on the idea that each order should cover a
  minimum period of demand
• That is know as the Periodic Order quantity
• Unlike LFL logic both EOQ and POQ generate
  inventories
• Another modification of the MRP logic is to
  buffer against uncertainty

77
Modification of The MRP logic

• Two types of buffers
• Buffer stock- in this case the minimum inventory
  level target is set.
• Buffer lead time-this method is designed to
  protect the system from fluctuations in supply
  lead-time. It is based on increasing the lead
  time of part number by a predetermined amount to
  protect the system against uncertainty in the
  actual delivery dates

78
Capacity considerations

• MRP logic of gross to Net and Time Phasing
  derives the requirements for material from the
  MPS
• Early applications of MRP logic focused on
  material requirements
• To coordinate resource availability with resource
  requirements, capacity considerations had to be
  added to the basic MRP system
• One way of doing that is known as Rough cut
  Capacity Planning (RCCP)
• Another approach is known as Capacity Requirement
  Planning (CRP)

79
Capacity considerations Rough cut Capacity
Planning (RCCP)

• Rough cut Capacity Planning (RCCP) is performed
  at the MPS level. Its major inputs are the MPS
  and Information about the processing time per
  unit product on each machine or work centre
• The logic used for Rough cut Capacity Planning
  varies in its complexity and in the accuracy of
  the capacity requirements forecasts generated

80
Capacity considerations Rough cut Capacity
Planning (RCCP)

• Rough cut Capacity Planning is an important tool
  for the management of the MPS
• Rough cut Capacity Planning is also the basis for
  setting priorities in monitoring and controlling
  the shop floor
• This is logic is the basis of the work of
  Goldratt and Fox (1986) which an effort to
  identify the few resources that are short of
  capacity and to schedule the whole operation in
  such a way that these resources will be used
  efficiently and effectively

81
Capacity considerations Rough cut Capacity
Planning (RCCP)

• Goldratts logic is translated into the following
  step
• Identity the systems constraints ( the
  bottlenecks)
• Develop a detailed schedule for the bottlenecks
• Derive the schedule for all non-bottleneck
  resources from the schedule developed for the
  bottlenecks.
• Repeat the process

82
Capacity considerations Rough cut Capacity
Planning (RCCP)

• The use of the MPS as a basis for rough cut
  capacity planning may lead to substantial errors
  in estimating the resource requirements
• To overcome these difficulties a more detailed
  approach for capacity planning is used

83
Capacity considerations Capacity Requirement
Planning (CRP)

• Capacity Requirement Planning (CRP) is based on
  an effort to treat the requirements for resources
  by logic similar to the logic used for material
  planning
• Logic based on the output of the MRP-work orders
  generated by the gross to Net and the Time
  Phasing logic
• Based on the orders released by MRP logic, the
  required periodical capacity of each resource is
  calculated
• The MRP logic that generates work orders takes
  existing in process inventories into account in
  its gross to net analysis the capacity
  requirements are more accurate

84
Capacity considerations CRP Vs. RCCP

• Both CRP and RCCP are tools for testing the
  feasibility of the plans developed by the MIS
• The RCCP test the feasibility of the MPS while
  the CRP tests the feasibility of the MRP plans
• Both tools are based on estimates of available
  capacity and forecasts of expected loads and
  therefore do not provide perfect accuracy
• A module called shop Floor Control is added to
  support the order fulfilment team in its resource
  management tasks

85
Capacity considerationsShop Floor Control (SFC)

• The module implement logic known as Input-Output
  analysis
• The logic is based on monitoring the actual
  queue of work orders in front of each work centre
• The name Input Output analysis comes from the
  analogy between the queue in front of a work
  centre and reservoir
• The complete MRP II system consist of the basic
  MRP I module plus the RCCP,CRP and SFC modules
  (see Schema next)

86
Capacity considerations
The Modules of MRP II System
FIRM CUSTOMERS ORDERS
DEMAND FORECASTS
MPS
RCCP
BOM
INVENTORY RECORDS
MRP
CRP
PURCHASE ORDERS AND SUPPLIERS MANAGEMENT
REPORT
WORK ORDERS AND SHOP FOOR CONTROL
87
Managing the Integrated Order Fulfilment Process
Using ERPSetting goals, Establishing
performance, Measures developing policies and
Taking actions
88
The role of management in the integrated order
fulfilment process

• Organization structures establish clear
  relationships and communication lines between
  managers and subordinates
• The traditional functional organizational
  structure may not provide adequate support for
  the management of the order fulfilment process
  due t the following problems

89
The role of management in the integrated order
fulfilment process (1)

• Problems
• Each functional organizational unit tends to
  focus on its local goals and objectives
• In a functional organization the order fulfilment
  does not have a clear owner responsible for its
  performances from start-getting a customer order,
  to finish-supplying the order efficiency and on
  time

90
The role of management in the integrated order
fulfilment process (2)

• Concurrent Engineering-is based on a team of
  experts in the areas of product development,
  manufacturing and logistics support
• Application of this new approach improved the
  communication between the participants in the
  development process and resulted in a shorted
  development cycle
• Team building is a challenging managerial task
  and it is a process of organizing, staffing,
  motivating and leading people

91
The role of management in the integrated order
fulfilment process (3)

• Responsibility of the order fulfilment team to
  plan, direct and control the activities of the
  resources used to perform the order fulfilment
  process
• Information acquired by marketing, purchasing and
  operations management represents the common
  Knowledge that should be shared by all the
  members of the order fulfilment team
• This common knowledge provides the ability to
  communicate, to set common goals and to develop
  an integrated plan that can be controlled and
  directed efficiently by the team

92
The role of management in the integrated order
fulfilment process (4)

• The common knowledge and the understanding that
  the whole team shares the responsibility for the
  entire order fulfilment process is the
  cornerstone of a successful ERP implementation
• Planning starts with the definition of the goals
  for the whole order fulfilment process and the
  agreement on the frame to reach the goals

93
The role of management in the integrated order
fulfilment process (5)

• A combination of long term and short-term gaols
  is needed
• A short term goal
• a long term goal

94
The role of management in the integrated order
fulfilment process (6)

• The plan provides each team member with exact
  information on what he is supposed to do and when
• The plan integrates and coordinates the efforts
  of individuals involved in the process and
  facilitate teamwork.It serves like
• A note (in an orchestra)
• A Compass
• Deviations from the original plan are likely due
  to
• Uncertainty
• Late delivery

95

• Special action as opposed to long lasting
  policies are needed when deviations are detected
• The ERP concept of a single information system
  that supports all the processes in the
  organisation by providing an integrated data base
  and a comprehensive model base is therefore
  essential for successful implementation
• Learning how to use the ERP, how to work in a
  team, and how to lead in a dynamic, integrate
  environment is equally important

96
The Hierarchy of Goals
Alice in Wonderland
Should with turn right or left?
It does not matter!
In that case you can go either way
Where do you want to go?
Alice
97

• This global goal is translated into several lower
  level goals such as
• Time related Goal
• Deliver in a short lead-time
• Deliver on time to the customers
• Cost related goals
• Deliver at the minimum cost possible
• Minimize the operating cost of the process
• Minimize inventories to minimize the
  inventory-related costs

98
Developing a plan-The road map to the goal

• A plan that coordinates the efforts of the team
  members
• Coordination is easier in a repetitive
  environment where the same hierarchy of goals is
  valid over a long period of time and the same
  plan may be applied rapidly to reach these goals
• As long as the goal does not change, the MRP
  logic is implemented correctly and uncertainty
  does not intervene, the automatic planning
  process should yield the desired results

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Establishing Control-Identifying Problem

• To reduce the effect of uncertainty, management
  tries to establish systems that identify problems
  in implementing its plans as early as possible
• Control systems are common in many engineering
  and organizational applications
• ExThe control of the rooms temperature
• The control of the order fulfilment process is
  based on the same principles, but more human
  decision making is required when the process is
  not repetitive

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• First approach, Monitoring the value of the
  performance measures is one way to go
• Ex If due date performance is an important
  measure it is preferable to detect problems on
  the shop floor that might cause delay in a
  customer order or to detect late deliveries from
  suppliers and fix these problems before due date
  performance level is affected
• The Three aspects of the order fulfilment should
  be monitored continuously
• The interface with customers
• The interface with suppliers
• The performance of the shop floor
• The second approach, fits generative MRP systems
  where translations are collected and processed as
  a batch to update the mater files of the MRP
  systems

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• A combination of continuous and periodic control
  is essential for a successful, flexible order
  fulfilment process
• the design of the control system is an important
  part of any ERP implementation

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Taking Action-Solving Problem

• To analyse the source of problems and decide
  whether there is a need to change the current
  policy in order to avoid the occurrence of
  similar problems in the future
• Problem solving is tricky due to the integrate,
  dynamic nature of the process and the uncertain
  environment
• System behaviours can be difficult to grasp and
  even more difficult to predict

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• First step in solving problems is to recognize
  that there is a problem and to define it clearly
• Next step, is to define it in clear terms. The
  performance measures used to evaluate the process
  are the basis for problem definition
• Then-problem analysis
• The third step-is to generate alternative
  solutions to the problem. Two types of solution
  are needed
• Ad-hoc solution
• Long term solution
• the alternatives expected to yield the best
  results are selected and implemented in the
  process

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• Problem solving approach can be summarized as
  follows
• Identify the problem
• Define the problem in term of the process
  performance measures
• Analyse the problem to find its roots
• Generate alternative long and short range
  solutions
• Evaluate the solutions with respect to their
  effect on the performance measures
• Select the best solutions
• Implement the selected solutions

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Policies Control Systems and Actions in the
Operations

• The integrated dynamic management concept is
  based on managements ability to
• Understand the whole order fulfilment process and
  the interactions between its different aspects
• Establish goals and performance measures
• Develop adequate policies based on the
  understanding of the whole process, its goals,
  its performance measures, its different aspects
  and the dynamic interactions among these aspects
• Design a monitoring system and use its signals to
  control the whole process
• Develop problem-solving skills as individuals and
  as a group
• Implement the policies, controls and solutions to
  problems

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• The selection of policies
• Marketing policies
• Make-to-stock
• Make-to-order
• Production policies
• Dispatching policy
• Purchasing action

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Teaching and Training Integrated Production and
Order Management
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Individual Learning and Organisational Learning

• The essence of Integrated Production order order
  Management is teamwork. A process based
  organization is responsible for each process.
• In the functional organization people are grouped
  according to the function they perform and are
  trained to focus on their part of the order
  fulfilment process.

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• IPOM is based on an integrated approach to the
  order fulfilment process (integration as the
  opposite of de coupling).
• IPOM environment each member of the team have to
  understand the whole process including the role
  of every other team member. all team members
  participate in the decision making process
• The teaching of IPOM at the individual level
  starts with the basic concepts of information and
  its use

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• Building the team and training it to play
  together as a team is very important. Each player
  has to understand his role and to excel in it.
  Coordination between the players is also an
  important part of training a basketball or a
  football team
• The high degree of dependency among the players
  and the dynamic, stochastic environment requires
  team building and team learning

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Individual Learning Curve

• if each individual is an expert in his task the
  integration of individual expertise by well
  planned organizational structure provides the
  organization's competitive edge
• Individual learning can take many forms including
  the learning of verbal knowledge, intellectual
  skills,cognitive strategies and attitude
• Learning by imitation
• Learning by repetition

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Learning curve model
Direct Production time
Unit Number
30
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• Group learning in its simplest form is an
  aggregation of individual learning
• Three problems with the extension of individual
  learning curve to group learning
• First, the learning coefficients of individuals
  in a group are not necessary the same
• Second, Absenteeism turnover and job rotation
  makes the organizational learning curve difficult
  to predict ...
• Third, problem related to synergy in team

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Teambuilding and the Team Performance Curve

• Katzenbach and smith (1993) relates the types of
  group and its performance

Performance impact
High-performing team
In this model five types of groups are defined
Real team
Working group
Potential team
Team effectiveness
Pseudo team
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• The Katzentbach and smith (1993) model explains
  how important it is to combine individual
  learning with team building in order to succeed
  in implementing integrated Production and Order
  Management
• There are several barriers that a new team must
  overcome (Thamhain and Wilemon (1979))
• Unclear objectives
• Differing outlook
• Role conflicts
• Personnel selection

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• Katzenbach and smith (1993) list several hints
  that can help in the process of team building
• Establish urgency and direction-All team members
  need to believe the team has urgent and
  worthwhile purposes
• Select members based on skill and their
  potential. not personalities
• Pay particular attention to first meetings and
  actions. Initial impressions always mean a great
  deal.
• Set some clear rules of behaviour. Rules
  regarding attendance, discussion confidentiality
  and contributions are very important and help the
  team perform its tasks in the early stages

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• 5 . Set and seize upon a few immediate
  performance. By establishing a few challenging
  yet achievable goals members of the team can
  start working together right a way a process that
  forge them together.
• 6 . Challenge the group regularly with fresh
  facts and information. New information helps the
  team shape a common purpose and set clearer
  goals.
• 7 . Spend lots of time together. Creative
  insights as well as personal bonding are created
  early on if the team members spend time together.
• 8.Exploit the power of positive feedback,
  recognition and reward. Positive or
  reinforcing feedback helps the process of team
  building and accelerates it

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• The Operations Trainer is designed to Support
  team building
• Promoting and nurturing individual learning, team
  building and organizational learning are key
  elements in the implementation of IPOM

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Organizational Learning in the IPOM environment

• Individual learning and team building are
  necessary steps in the implementation of IPOM
• The players must learn how to coordinate effort
  in an uncertain environment were "division of
  labour" is important but the process is far from
  being completely repeatable, players are
  dependent on each other as the situation changes
  rapidly in an unpredictable way
• Individual leaning is the basis. but it is not
  sufficient in a highly competitive, dynamic,
  uncertainty environment were the coordinated
  effort of many individuals is required

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• Tasks are not independent and the process is not
  completely repeatable
• Organizational or group learning is the process
  of developing the ability of a group of
  individuals to improve its performances working
  as a team to achieve a common goal
• Argyris and Schon (1978) define two levels of
  organization learning
• Organization learning involves the detection and
  correction
• Double loop learning

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• Successful implementation of IPOM depends on the
  ability of the organization to create an
  environment that encourages single loop and
  double loop learning
• Group learning is based on several mechanism one
  of which is repetition
• Other mechanisms are
• 1. The ability to collect and share knowledge so
  that members of the group can learn from each
  other's experience.
• 2. The ability to learn from the experience of
  other groups or organizations
• 3. The development of an efficient group
  decisions making process
• 4. The ability to share and use information real
  time.

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Teaching IPOM - the Operations Trainer

• The Operations Trainer is designed to provide the
  teaching environment for IPOM.To achieve this
  goalthe trainer is an integration of tree
  different systems
• A simulation system that can simulate a variety
  of scenarios in great detail.
• An information system that handles the
  traditional tasks of transactions processing,
  management information and DSS
• An ERP like system composed of an integrated
  database and a model base

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• The operation trainer supports individual and
  organization learning in tree ways
• As a tool for teaching individuals the concepts
  of information and it use
• As a tool for practicing traditional Operations
  Management by assigning a group of students or
  managers to manage the simulated plan
• As tool for teaching IPOM and ERP concept by
  assigning a group of manager or students to
  manage a simulated plant were the whole group
  serve as a team responsible for the integrated
  process and sharing information

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ERP/ERM
Dale KutnickContributing Analyst, Executive
DirectionsCEO Co-Research Director,
OfficersChairman, Board of Directors

• Barry Wilderman
• Vice President, Application Delivery Strategies

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THANK YOU FORLISTENING
Seppo
Anicet
Maria