Anicet Yalaho, dept. of GT

1
Presented by

• Anicet Yalaho, dept. of GT
• Maria-J. Echeverria, dept. of GT
• Seppo Selkala, dept. of GT

2
A Book Review

• ERP- The dynamics of Operations Management,
  Avraham Shtub (1999)
• Main BPR concepts
• Relationships BPR / ERP
• An Objective Review of the book
• Conclusion

3
What is Business Process Re-engineering?
4
Redesigning Enterprise Processes for
e-Business, Omar A. El Sawy

• BPR
• a performance improvement philosophy that aims
  to achieve quantum improvements by primarily
  rethinking and redesigning the way businesses are
  carried out
• Business Processes a set of activities that
  transform a set of inputs into a set of outputs

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Enterprise Processes
Inputs
Outputs
Your process
Supplier
Customer
Feedback

• A clear objective being competitive in todays
  market
• Continuous improvement model- an effective
  approach to obtain gradual, incremental
  improvement
• Several factors accelerating the need to improve
  BP- Technology

6
The 5 Five Typical Phase of BPR in the Big
Triggering Executive Visioning
BPR Project Mobilization

• Process Redesign
• Scoping
• Modeling, Analysis Redesign
• Integration

Monitoring Maintenance
Implementation Organisational Transformation
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A dynamic environment

• The Leavitt Diamond a conceptual framework for
  balancing IT-enabled transformation

IT use
Business Processes
Organisational Form
Requisite People Skills
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BPR ERPWhat is ERPRelationship with BPR
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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.
• (more about ERP history to come)

10
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

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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

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ERP

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

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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

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ERP- Dynamics of OM

• Scope of the book
• to help and support the development of teams to
  implement the Integrated Production and Order
  Management (OM) approach
• The Four cornerstones for success flexibility,
  time, quality and cost
• Four main functional activities Marketing,
  Purchasing, Production, Finance

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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

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Review of a bookERP-Dynamics of Operations
Management, Avraham Shtub
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Operations Management

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

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IPOM 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.

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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 borned
• An essential process- The order fulfilment
• -gt Integrated Production and Order Management

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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, ...)

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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)

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Marketing Considerations
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Production and order policies

• Process triggered by customer orders
• Written form, long term contract, order issued by
  marketing based on a demand forecast
• Orders entered into Master Production Schedule
• Competition in order fulfillment process
• time, cost, flexibility, and quality

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Production and order policies (2)

• Inventories of finished goods are used to buffer
  against uncertainty (in forecasting)
• Several alternatives to initiate purchasing
  orders and production orders
• based on firm customer orders
• based on demand forecasts (raw mat. inv.)
• based on firm customer orders current inv.
  level of raw materials and parts

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Production and order policies (3)

• Importance of lead-time
• time from order to delivery
• Supermarket approach
• if acceptable lead-time gt actual lead-time
  no inventory
• reduce setup times and batch sizes
• if acceptable lead-time lt actual lead-time
  keep enough inventory to cover for the
  difference

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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

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Master Production Schedule (MPS)

• Statement of planned future, gross requirements
  of end products
• MPS triggered by the market demand
• combination of orders and forecasts
• If order fulfillment process not well integrated
  conflict highly likely
• marketing, production/purchasing
• different measures of performance

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Master Production Schedule

• To avoid conflict
• common set of goals
• Appropriate performance measures
• Management of MPS
• introduction of new requirements
• updating existing requirements
• monitoring and control of actual performance
  compared to goals

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Lead-time and time based competition

• 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
• data processing, decision making, production
• Each operation affects lead-time
• should be studied and optimized

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Optimization of operations

• Elimination of unnecessary operations
• Minimization of the duration of necessary
  operations
• Minimization of delays before, after, and during
  the operations
• batch production --gt reduce setup times
• get rid of bottlenecks (DBR)
• information sequentially - hierarchy levels
• control points --gt data sharing

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Quality and its management - quality based
competition

• Success dependent on customer satisfaction
• Eight dimensions in quality based competition
• performance, features, reliability,conformance,
  durability, serviceability, aesthetics, and
  perceived quality
• Order fulfillment process
• DDP Due Date Performance

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Cost considerations -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

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Summary of Chapter 4

• Add text here later

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Purchasing and Inventory Management
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The Need for Outsourcing

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

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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

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OutsourcingSupplier management

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

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Specifications of Requirements

• Definition of the required product or service
  including functional, physical and technical
  specifications
• Definition of the order fulfillment 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

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Selection of Suppliers

• Different approaches single vs. Multiple
• Supplier evaluation considerations
• Process capability
• Can supplier produce in specific quality level?
• Quality assurance
• Are quality control procedures adequate?
• Financial capability
• the risk associated with doing business with
  supplier
• Cost structure
• Suppliers costs (mat., labor, OH.) and profits

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Selection of Suppliers

• Value analysis effort
• Ability to perform value analysis (past success)
• Production scheduling
• Abilities of production planning and control
  system
• Contract performance
• Performance measures to evaluate suppliers
• Can also rely on standard specifications
• e.g. ISO 9000 series

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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

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Inventory ManagementBenefit and cost
considerations

• 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 ManagementBenefit and cost
considerations (2)

• The benefits of using stocks
• Time based competition
• reduce lead time)
• Coping with uncertainty
• buffer inventories)
• De-coupling activities in the order fulfillment
  process
• Cost based competition
• order in large quantities)
• Technological considerations
• some processes are designed for a batch of a
  given size

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Inventory ManagementBenefit and cost
considerations (3)

• Many benefits, but still inventories are
  expensive and create waste
• search for trade off btw. benefits and costs
• Inventory costs
• capital costs
• operating costs
• risk related costs
• JIT -gt inventory wasteproblems

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Inventory ManagementBenefit and cost
considerations (4)

• 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

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Inventory ManagementModels and their assumptions

• 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
• no interactions between different items
• constant parameters

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Inventory ManagementModels and their
assumptions (2)

• (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

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Summary of Chapter 5

• Add text here later

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Scheduling
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Job ShopImplementing Priority Rules

• 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
• based on assumptions technology, layout,
  objectives and constraints of organization,
  environment

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Job ShopImplementing Priority Rules (2)

• 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

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Job ShopImplementing Priority Rules (3)

• When setup 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 setup time)
• SPT (Shortest Processing Time)

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Job ShopImplementing Priority Rules (4)

• 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)

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Job ShopImplementing Priority Rules (5)

• 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

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Job ShopImplementing Priority Rules (6)

• 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

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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

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Flow ShopScheduling (2)

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

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The Just In Time (JIT) Approach

• Founder Dr. Ohno of Toyota, Japan
• Profit revenue - costs
• to increase profit
• increase revenue
• reduce costs
• Focus on cost (waste) reduction

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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

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JIT Approach (3)

• Impacts of JIT in scheduling
• minimize process inventories
• use small batch size (ideal batch size 1)
• promote faster setups
• 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

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JIT Approach (4)

• To succeed in the elimination of waste while
  keeping the competitive edge in time based
  competition, the order fulfillment 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)

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JIT Approach (5)

• Just in time is a form of synchronous production
• a system in which entire order fulfillment
  process is synchronized (i.e. works in harmony)
  to achieve its multidimensional goals (time,
  cost, flexibility, and quality)
• The synchronizing device - the Kanban card
  provides tight connection between the work centers

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The Dynamic ShopExpediting 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 analyze data and support decision
  making
• focus on problematic work centers
• derive the schedule according to bottlenecks

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The Drum, Buffer, Rope (DBR)Approach

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

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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
  fulfillment process

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Summary of Chapter 6

• Add text here later

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Material Requirement Planning
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Material Requirement Planning (MRP)

• Is an early attempt to develop an integrated MIS
  for the order fulfilment process
• By combining information on the demand for
  products purchased by the customers with
  information on the structure of these
  products,the required quantities of dependent
  demand item do not have to be forecasted-they can
  be calculated.Uncertainty associated with
  forecasting is reduced
• By integrating the inventory management
  information into the system the requirements for
  dependent demand items as well as those for
  independent demand item can be placed against
  existing inventories and pipeline inventories so
  that only the net required can be ordered

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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

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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

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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
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The typical data file (2)

• Many MRP installations did not fulfil the
  expectations 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.

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The typical data file (3)

• The important data files in the early MRP
  applications were the following
• The Master Production Schedule (MPS)- The MPS is
  the anticipated build schedule for selected
  (independent demand) items by quantity per
  planning period
• Marketing information on actual customer orders
  and forecasts of future demand.
• Manufacturing information on the current load on
  the shop floor and the ability to supply
  additional customers orders during each period in
  the planning horizon

74
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

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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 horizon should
  be equal to the total time required to purchase
  raw materials and component parts, to manufacture
  and assemble the independent demand item with the
  longest lead time, to provide enough time for the
  order fufilment process to supply this item when
  needed

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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 that results in
  nerveousness of the system and in low
  efficiencies, excess inventories and an unstable
  order fulfilment process
• The MPSis updated continuously
• When current time is over, the next period
  becomes the current one and a new period enters
  the planning horizon

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The typical data file (7)

• Key issues to consider are who should mange the
  MPS and How
• The Bill of Material-The Bill of Material or BOM
  is the source of information about the structure
  of each independent demand item. Through the BOM
  it is possible to coordinate the requirements for
  subassemblies, components and raw materials
• The Inventory Record-To function properly, the
  MRP system compares the gross requirements for
  each part number to its current inventory.Only if
  the gross requirements exceed the current
  inventory an order for that part number should be
  issued

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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

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Gross to net and time phasing The MRP logic
The Basic MRP record for product A
Week 0 1 2 3 4 5 6 7 8 9
Gross Requirement 3 7 10 8 6
Scheduled receipts
Projected available balance
Planned order release
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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)

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Modification of The MRP logic

• MPS is used as the resource of Gross
  requirements for independent demand items.
• Basic MRP logic is modified to accomodate 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 applíes parts when
  economy to scale is available
• Ex The cost per unit decrease as the order size
  increases

82
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

83
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 deleivery dates

84
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)

85
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 center
• The logic used for Rough cut Capacity Planning
  varies in its complexity and in the accuracy of
  the capacity requirements forecasts generated

86
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

87
Capacity considerations Rough cut Capacity
Planning (RCCP)

• Goldratts logic is translated into the following
  step
• Identity the systems constraints ( the
  bottlenecks)-this step can be based on rough
  estimates of the load on each resource compared
  to its available capacity
• Develop a detailed schedule for the
  bottlenecks-using simple techniques such as Gantt
  Chart
• Derive the schedule for all non-bottleneck
  resources from the schedule developed for the
  bottlenecks. Since the non-constrained resources
  have excess capacity the assumption is that it is
  possible to schedule these resources to support
  the schedule of the bottlenecks
• Repeat the process-Since bottlenecks may change
  over time as the product mix changes or due to
  changes in resources capacity, it is necessary to
  identify the systems constraints repetitively
  every and to watch the actual utilisation of the
  bottleneck to avoid idle time

88
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

89
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

90
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

91
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)

92
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
93
Managing the Integrated Order Fulfilment Process
Using ERPSetting goals, Establishing
performance, Measures developing policies and
Taking actions
94
The role of management in the integrated order
fulfilment process

• Organization structures establish clear
  relationships and communication lines between
  managers and subordinates, within these
  structures the lines of authority and
  responsibility are easy to define and maintain
• The traditional functional organizational
  structure may not provide adequate support for
  the management of the order fulfilment process
  due t the following problems

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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

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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

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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

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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

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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 may be to supply a customers
  order ahead of its promised due date when a
  preferred customers order ahead of its
  promised due date
• a long term goal is to become a leader in the
  market and to capture a market share of fifty
  percent or more within two years

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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

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• 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

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

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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 estems 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

108
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

109

• 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

110

• 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

112

• 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
114
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.

115

• 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

116

• 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

118
Learning curve model
Direct Production time
Unit Number
30
119

• 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

120
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

122

• 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

123

• 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

124

• 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

125
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

126

• 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

127

• 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.

128
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

129

• 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

130
ERP/ERM
Dale KutnickContributing Analyst, Executive
DirectionsCEO Co-Research Director,
OfficersChairman, Board of Directors

• Barry Wilderman
• Vice President, Application Delivery Strategies

131
THANK YOU FORLISTENING
Seppo
Anicet
Maria