A history of enterprise wide integration

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A history of enterprise wide integration

• From acronym to acronym
• EOQ / BOMP / MRP / MRP II / ERP / ERM / ERPII

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Time frame and key milestones
EOQ
Safety Stock
BOMP
Work Orders
1950s
1965
MRP
Theoretical / conceptual Improvements in
management techniques
MRPII
1975
ERP
1990
ERM / ERPII
2000
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Time frame and key milestones
EOQ
Safety Stock
BOMP
Work Orders
1950s
1965
MRP
Computing power enables completely integrated
manufacturing solution
MRPII
1975
ERP
1990
ERM / ERPII
2000
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Time frame and key milestones
EOQ
Safety Stock
BOMP
Work Orders
1950s
1965
MRP
More functions become Integrated in the process
MRPII
1975
ERP
1990
ERM / ERPII
2000
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Time frame and key milestones
EOQ
Safety Stock
BOMP
Work Orders
1950s
1965
MRP
MRPII
1975
More functions become Integrated in the process
technology improvements
ERP
1990
ERM / ERPII
2000
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Time frame and key milestones
EOQ
Safety Stock
BOMP
Work Orders
1950s
1965
MRP
MRPII
1975
More functions become Integrated in the process
to add up to complete business solution
ERP
1990
ERM / ERPII
2000
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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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Master Production Schedule
Open Purchase Orders
Open Shop Orders
MRP logic Module
Inventory master part file
BOM
Reports planned order releases Purchasing
plan work orders
Is this a good plan???
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Master Production Schedule
Open Purchase Orders
Open Shop Orders
MRP logic Module
Inventory master part file
BOM
Reports planned order releases Purchasing
plan work orders
Is this a good plan???
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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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Integration of design and manufacturing

• integration of operations with upstream design
  activities and downstream sales activity
• downstream e.g. by integrating CAD with Bill of
  Material
• new designs go on-line immediately
• no production of obsolete products / assemblies
• shorter time to market for new pdts

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The Rise of MRP

• Snowball effect as companies moving to MRP
  imposed business changes to their partners
• MRP logic was always around, but switching costs
  in manufacturing made it worthwhile
• data processing costs decreasing
• inventory costs rising
• Sophisticated CIM systems easier to justify
• Other external pressures mean that tighter
  control is required

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Master Production Schedule Planned
production Sales orders
Open Shop Orders
Open Purchase Orders
Bill of resources
MRP II logic Module
Inventory master part file
BOM
Product routings
CRP / RCCP
Reports planned order releases Purchasing
plan work orders dispatch plan
Move to MRP II
OK Y/N?
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Extension to ERP functionalities

• Natural extension of MRPII
• Mix of two competences
• Engineering
• Finance
• Mix of targets
• Efficiency
• Control / consolidation
• End to end business processes

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ERP Capabilities

• Accounting / finance
• Fixed Assets
• cash management
• product cost accounting
• A/R A/P G/L
• Production planning and materials planning
• Purchasing / purchase order management
• p/o receiving
• inventory management
• Bill of materials
• Engineering changes
• Product routings
• MRP, production planning, CRP
• Work orders
• Warehouse management
• maintenance

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ERP capabilities (2)

• HR management
• travel expenses
• Payroll
• personnel planning
• sales and distribution
• sales planning
• Sales order management
• quality control
• Forecasting
• Configuration management / sales quotes
• Address book function
• Customer file, supplier file, employee file etc
• e.g. Microsoft spent 10 months and 25 ms
  replacing 33 different systems in 26 sites with
  SAP

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ERP stories

• Whirlpool hundreds of distributors receive no
  deliveries after the update of the SAP software.
• Hershey Despite 112 million spent on SAP R/3
  all shops empty on Halloween week.
• Allied Waste Industries ERP project stopped
  after 130 million investment
• Waste Management Inc. same after 45 million
  investment
• Unisource Worldwide and Dell also cancelled their
  projects
• Foxmeyer after three years of unsuccessful
  implementation, company sues SAP and AA before
  going bankrupt

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Buying software

• Untypical IS projects
• Balancing analysis of requirement with search for
  right supplier
• Trading off conflicting requirements
• Preparing for the project
• Project management
• Handling business disruption
• Measuring progress and success

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AcceleratedSAP - The Tool for Successful
Implementations
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Decision making process
Intelligence Design Choice Review
(Herbert Simon)
ERP Software Implementation
ERP Software Selection
Vendor Independent Process
Vendor guided Process
Organisational Analysis Business
Process Selection Implementation Review
Preparation of needs Design of
Software of benefits
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Intelligence phase / requirements analysis

• Understand
• Identify stakeholders
• Develop common vision
• Make up a business case
• Design
• Draw up business maps
• Design the ITT
• Identify vendors
• Solicit tender documents
• Choice
• Analyse / find best fit
• Negotiate
• chose

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Analysing Fit

• Functionality grid
• Break down per functional area
• Down to process stage level
• Ask vendors to rate fit
• Not supported
• Supported with mod / workaround
• Supported with minor alteration
• Fully supported
• Score and recommend (see diagram)

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Team creation

• Multi-disciplinary
• Full time
• Decision making power
• Budget
• Representative team leads
• Balance between allegiance to team and to area of
  competence
• Team spirit
• Team awareness
• Must have support from organisation