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A history of enterprise wide integration. From acronym to acronym EOQ / BOMP / MRP / MRP II / ERP / ERM / ERPII. Time frame and key milestones. 1950s. EOQ. Safety Stock. BOMP. Work Orders. 1965. MRP. Theoretical / conceptual Improvements in management techniques. MRPII. 1975. ERP.

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a history of enterprise wide integration

A history of enterprise wide integration

From acronym to acronym

EOQ / BOMP / MRP / MRP II / ERP / ERM / ERPII

time frame and key milestones
Time frame and key milestones

1950s

EOQ

Safety Stock

BOMP

Work Orders

1965

MRP

Theoretical / conceptual

Improvements in management

techniques

MRPII

1975

ERP

1990

ERM / ERPII

2000

time frame and key milestones1
Time frame and key milestones

1950s

EOQ

Safety Stock

BOMP

Work Orders

1965

MRP

Computing power enables completely integrated manufacturing solution

MRPII

1975

ERP

1990

ERM / ERPII

2000

time frame and key milestones2
Time frame and key milestones

1950s

EOQ

Safety Stock

BOMP

Work Orders

1965

MRP

More functions become

Integrated in the process

MRPII

1975

ERP

1990

ERM / ERPII

2000

time frame and key milestones3
Time frame and key milestones

1950s

EOQ

Safety Stock

BOMP

Work Orders

1965

MRP

MRPII

1975

More functions become

Integrated in the process + technology improvements

ERP

1990

ERM / ERPII

2000

time frame and key milestones4
Time frame and key milestones

1950s

EOQ

Safety Stock

BOMP

Work Orders

1965

MRP

MRPII

1975

More functions become

Integrated in the process to add up to complete business solution

ERP

1990

ERM / ERPII

2000

material requirement planning
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
principles of mrp
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
bom recipe or formula
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)
example bill of material for desk
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

slide11

Solution

Desk

Top (1)

Adjustable legs (4)

Screw Kit (1)

Frame (1)

3 way junctions (4)

Painted tubing (4)

Painted metal legs (4)

Leg Tubes (4)

Paint (0.6 dl)

Long Tubes (2)

Short Tubes (2)

Paint (1 dl)

how mrp works
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

slide13

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???

slide14

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???

benefits of mrp
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
slide16

Without MRP

Safety Stock

Demand variations

slide17

With MRP

Safety Stock

Demand variations

integration of design and manufacturing
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
the rise of mrp
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
slide20

Master Production Schedule

Planned production

Sales orders

Open Purchase Orders

Open Shop 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?

extension to erp functionalities
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
erp capabilities
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
erp capabilities 2
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
erp stories
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……………
buying software
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
slide26

Business

Blueprint

Realisation

FinalPreparation

Go-Live

Support

ProjectPreparation

  • Provide initial planning, scoping, and preparation for SAP transformation projects.
  • Conceptualise and document the final SAP and non-SAP operational environment based on new information and business process designed requirements.
  • Implement the information, business process and technical requirements based on the Business Blueprint developed during the previous phase.
  • Complete testing, end-user training, system management and cutover activities.
  • Take client from a pre-productionenvironment to a live production operation and to design and implement a long-term end users support organisation.

AcceleratedSAP - The Tool for Successful Implementations

decision making process
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

slide28

Change Management

Top Issues Organisations Face During Enterprise Resource Planning

Internal Staff Adequacy

Training

15%

8%

Project Team

7%

Prioritisation/Resource Allocation

6%

Consultants

5%

Ownership (of benefits to others)

PEOPLE 57%

5%

Top Management Support

Program Management

5%

4%

Process Reengineering

Benefit Realisation

Issues/Obstacles Until Now

PROCESS 20%

10%

Stage/Transition

5%

Software Functionality

2%

Application Portfolio Management

TECHNOLOGY 7%

3%

Enhancements/Upgrades

3%

Data

3%

KNOWLEDGE ASSETS 3%

Reporting

1%

1%

1%

Percentage of Total Mentions(Multiple answers per respondent)

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

intelligence phase requirements analysis
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
analysing fit
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)
slide31

PackageEnabled Approach

ReviewAs-Is Process

Best

Practice?

No

Yes

ERP Enabled Reengineering

Does ERPFit?

DoesERP Fit?

Yes

Yes

Implement ERPBase Package

No

BusinessImpact?

No

No

Yes

DevelopWorkaround

team creation
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