ERP - Enterprise Resource Planning
ERP - Enterprise Resource Planning
ERP - Enterprise Resource Planning
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ERP
Enterprise Resources Planning
APICS-ID-subscribe@yahoogroups.com Acknowledgement: We got this material from a public domain, i.e., the Internet. If you would like to get more information, please visit
1. Indonesian Production and Operations Management Society (IPOMS). http://www.ipoms.or.id/mambo and then click Knowledge Resources. 2. Ahmad Syamil website http://www.clt.astate.edu/asyamil/
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ERP
(Enterprise Resources Planning)
Operations Management Dr. Mark P. Van Oyen
Notes based in part on the work of Mark Spearman, Georgia Tech. & SAK Logistics Scott Moses, Univ. Oklahoma (formerly of i2) Stevenson, Chapter 14
Filename: ERP-lec.ppt
Q3: How many of you are considering an ERP system at your firm?
What has the value to your firm been? Does your firm use ERP for Planning? (planning when to make products, procurement of raw materials, )
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ERP Sales:
$2.8 Billion in 1995 $4.2 Billion in 1996 $5.8 Billion in 1997 (SAP alone sold 3.2 Billion)
1997 Monsanto: SAP/R3 installation saves $200 million per year May-2000: Grainger, (the leading MRO parts supplier to companies, aggressively blazing B2B e-commerce trails) loves (at least a representative gave that perception) SAP/R3. Note: Grainger does inventory and logistics as a reseller, but they do not actually make things. Also, reports from the field do not really match this projected love affair with ERP.
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Example: Grainger
What is MRO?
Maintenance, Repair, and Operating supplies such as lighting, janitorial supplies, motors, tools, fasteners, generators,
MRO is BIG #1 cited e-commerce purchasing category. By 2002, 90% of [purchasing professionals] will be buying over the Internet Mark Vigorosa, Purchasing Online. Their costs are 60% product and 40% processand they think their process costs can be reduced to 20%. (e-commerce facilitates a large part of this). Cost reduction is crucial: a 5% cost decrease has the same impact on net profit after tax as a 30% increase in sales.
Example: Grainger
Grainger Stats: 560+ branches with total of 15,000+ employees 130,000 transactions per day processed 250,000 customer contacts per day > 2 million customers > 5 million products > $1 billion in inventory > $4.3 billion in sales Grainger B2B e-commerce loves SAP/R3 for efficient global transaction execution and linkages to ecommerce.
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ERP: True or False? ERP is new. is comprehensive. uses state of the art techniques to schedule production. will solve all logistical problems, provided it is installed properly.
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In the beginning
Around 1960 was Joe Orlicky at IBM
Recognized difference between dependent and independent demand Independent demand should use statistical reorder points (ROP), reorder quantities (EOQ), and safety stocks (SS) Dependent demand is deterministic and should not be controlled statistically as in classical inventory.
Developed MRP as a computer-based information system designed to handle ordering and scheduling of dependent-demand jobs/parts.
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Dependent Demand (MRP can back-figure release times given due dates for independent demands) Independent AA Dependent e f2 g1
g2
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d f1
Think about the process of preparing a Thanksgiving Day dinner: an explosion of parts (foods) traced backward in time from the start of dinner. Best applied to process-focused operations (associated with job shops, customized products and/or high product variety, make-to-stock production)
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Assembly
Subassembly
Fabrication
Procurement
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Subassembly B
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Y! NL IO FY
Final Product
(2)
MRP EXAMPLE
P1 1 day
Product P1 Gross Reqmts On Hand Scheduled Receipts Net Reqmts Order Releases 0 1 2 3 4 5 6 400
Y! NL IO FY
400 400 6
S2 1 day
Assembly S2 0 1 2 3 4 5 Gross Reqmts 800 On Hand 10 10 10 10 10 110 Scheduled Receipts 100 Net Reqmts 690 Order Releases 690 Component C4 0 1 2 3 4 Gross Reqmts 1380 On Hand 50 50 50 50 50 Scheduled Receipts 400 Net Reqmts 930 Order Releases 930 5
C4 2 days
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Starting with independent demand and working down the bill of material, do following 1. Net demand against existing orders and inventory 2. Lot-size (determine batch size, possibly by EOQ) the netted demand for efficiency in presence of setups and inventory carrying costs 3. Time-phase lot-sized, netted demand to determine planned order release times 4. Planned order release times become demand for next level in Bill-of-Matl (BOM)
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MRP
MRP Inputs MRP Processing MRP Outputs Changes Order releases Master Prod. schedule Primary reports Bill of materials file MRP computer programs Secondary reports Planned-order schedules
Exception reports
Inventory transaction
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Joseph Orlicky
The problems were by design. They assumed INFINITE Capacity plants! And a lack of a better way, which we still struggle with today.
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MRP Planning
No
No
Yes
Change capacity
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Done!
MRP II
MRP II expanded MRP with and emphasis placed on integration
Financial planning Marketing Engineering Purchasing Manufacturing
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Procedure was to iterate by changing the Master Production Schedule (see next slide for details)
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MRP II
Figure 14-19 Stevenson
Finance Marketing MRP Run Market Demand Manufacturing
Master Production Master Production Schedule (MPS) Schedule (MPS)
No Requirements Requirements
Schedules Schedules Were Done! Were Done!
Yes
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Adjust MPS
Strategy
Tactics
Capacity Requirements Planning (CRP) Routing Data
Control
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More Incarnations
I am sure you have all heard of these Closed-loop MRP MRP III RRP MRP 8 JRP BRP (were they really serious!?) These never quite stuck.
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CITED Reasons for Failure (Excuses) Inaccurate data Lack of top management commitment Unrealistic master production schedules Lack of education of those who use the system Why dont many people talk about MRP IIs flawed production models? Thats still ahead of us.
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Who is ERP?
SAP: SAP AG is the leader in ERP: 31%of market. SAP's R/3 software package is a favorite among big users. Oracle: The leading provider of relational database management systems, 14% of the market. Modular approach to ERP, offering separate applications, such as Oracle Financials and Oracle Manufacturing, that use common computing tools. The complete package is also available as Oracle Applications. PeopleSoft: Provider of human resources software, PeopleSoft Inc., now has 7% of ERP market. Offers Enterprise Solutions for financials, materials management, distribution, and manufacturing. J.D. Edwards: Total ERP solution in World and One World (clientserver based) or a process-based solution with modules for finance, manufacturing, and logistics/distribution. Baan: ERP solutions as individual applications: manufacturing, finance, and distribution/transportation, or complete as Baan IV. Note: This data as of July 1998. Current condition (as of September 2005): PeopleSoft bought J.D. Edwards and later Oracle bought PeopleSoft.
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The Dirty Little Secret of ERP Is that within ERP we find our long-lost friend, MRP II, used for
Materials Management & Production Planning.
It gets worsethe new ERP software has the Same functions as in MRP II Used in same way as in MRP II
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1990s
= ERP
2000s ????
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Have the problems with MRP been remedied? (Recall the list of Excuses) Inaccurate data Manufacturing Execution Systems now collect the data automatically Lack of top management commitment $100 million is a lot of commitment Unrealistic master production schedules (MPSs) MPS is a major component in ERP Lack of education of system users MRP education has become a multi-million dollar industry in itself
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Transaction example
1. Take customer order and log it into database (e.g. calling inbound call center) 2. If Make-to-Stock (MTS) system: Allocate inventory (If no stock on hand (stockout), then must place backorder and possibly order from supplier) If Make-to-Order (MTO) system: Fabricate order from raw materials or semi-finished goods. 3. Coordinate all parts in the order; pack them; ship to customer 4. Bill the customer (accounts receivable)
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Inventory DB
3. Pack & Ship
accounts receivable
DATABASE
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3-Tiers
ERP System Presentation Layer Application Layer
Data Layer
Big Bang implementation approach is very risky (Hershey, Whirlpool, FoxMeyer, etc. suffered greatly)
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The United States has a tremendous data processing industry that caters to the managerial conviction that better information means better management. Machine processing of business data is usually justified on the basis of machine-processing costs relative to costs in the previously existing system.
Data !!
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Multiple database Distributed databases instances (therefore, separate transaction Information latency and systems). uncertainty Partial adoption across enterprise / supply chain. 800-lb. Industry Gorillas that are really good at one thing. Best of breed Application integration (Semantic translation) 45
Only finished goods inventory (possibly only at a single location) is easily checked.
Fit org. & bus. processes to software. Poured liquid concrete into your org.[Hammer]
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Who is APS?
BDM International Inc.--Supply Chain Div. 703-848-5000 www.bdm.com i2 Technologies Inc. 800-800-3288 www.i2.com ILOG 800-367-4564 www.ilog.com Industri-Matematik Inc. 914-631-2700 www.imi.se Logility 800-762-5207 www.logility.com Manugistics 301-984-5000 www.manugistics.com Red Pepper/PeopleSoft 888-773-8277 www.peoplesoft.com ThinkSystems/i2 973-299-4500 ThruPut Technologies 408-920-9711 www.thru-put.com and many, many more!
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90
80
70
60 Cycle Time
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40
30
20
10
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Consequently
fat production schedules with long lead times and large inventory levels. Lead times tend to be pessimistic, because
Customers can scream (so dont promise optimistically) Inventory cannot even make a peep
Fact: SAP R/3 has many, many production and inventory methods (like EOQ) built in; however, none of them are designed to minimize flow time!
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Perform finite capacity scheduling of MRP output Some optimize (in the strong sense of the term), but many just simulate alternatives Most are black-box without documented performance (how we do it is our business not yours! Many are too little, too late but we can expect to see (soon) a NEXT generation of ERP systems that learns from the APS vendors, or at least integrates with them more successfully
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3.
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Connected
Scalable to a large number of casual users
Optimizing
Meaning optimization in the broad sense, including heuristic methods and interactive decision support
Collaborative
Based on defined Authority Domains
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