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Production Logistics and ERP. Chapter 6. Production Logistics. Increased competitive pressures on production processes due to: Shorter product development times Focus on product quality Shorter product life cycles Production Logistics is SAP approach to production planning and control

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production logistics
Production Logistics
  • Increased competitive pressures on production processes due to:
    • Shorter product development times
    • Focus on product quality
    • Shorter product life cycles
  • Production Logistics is SAP approach to production planning and control
    • Integrated with other Value chains in R/3 such as procurement and warehousing and SD.
production logistics cont
Production Logistics (cont.)
  • Builds upon the integration of MRP II
    • Provides specific support for TQM and Kanban material management processes
    • More customer centric than MRP II with integration of sales information
production logistics cont4
R/3 Org. Elements

Plant

Storage Location

Work center

MRP area

R/3 Business Objects

Material master

Production order

BOM

Sales & Operations plan

Master recipe

Production Logistics (cont)
production logistics scenarios
Production Logistics Scenarios
  • Sales-order related production
  • Production by lot size
  • Sales-order related repetitive manufacturing
  • Project-oriented make-to-order production
  • Production replenishment
production logistics vc
Production Logistics VC

Production

Order Prelim

Costing

Production

Order

Execution

Quality

Inspection

After production

Production

Order

Creation

Inspection

Check by

lot

Capacity

Planning

Defects

Recording

Inspection

Point

Related to process

Material

Staging

Sales

Support

Capacity

Planning

Information

System

QM cost

input

production by lot size scenario
Processing of Sales Plan

Determining quantities and dates

Purchase requisitions created

Single Item MPS

Creation, release and execution of production order

5. Goods issue

6. Completions of PO confirmation

7. Goods receipt

8. Settlement of PO

Production by Lot Size Scenario
production by lot size plan processing

V

V

Production By Lot Size: Plan Processing

Profitability

Analysis w/static

Standard cost

Sales quantity

Copied from

CO-PA

Processing of

Sales and operation

planning

Demand

Program is to

Be created

Production

Plan is

created

Sales plan

Is created

Demand

Management

Demand

Program

edited

production by lot size demand management

^

V

Production By Lot Size: Demand Management

Single

Item MPS

Purchase

Requisition

created

Planned

Orders

created

Planned

Order

conversion

Processing

Stock

Material

Requests for

quotation sent

to vendors

Management

Of consignment

stocks

Internal procurement

With stock support

Order

arrived

production by lot size creating production order

V

Production By Lot Size: Creating Production Order

Con. Of plan

Order to prod.

Order is started

Creation of

Production

order

Production

Order is

created

Release of

Production

order

Quality

Management

In production

Trans. Req.

generated

Prod. Order

Is released

Inspection lot

Created for

Prod order

production by lot size execute production order

^

V

Production By Lot Size: Execute Production Order

Execution of

Production order

Material is

produced

Material issue for

Production order

Is to be posted

Production order to

Be confirmed

Goods receipt

To be posted

Goods issue

For production

orders

Completion

Confirmation of

Prod. order

Goods receipt

processing

Prod. Order

Is completely

confirmed

Prod. Order

Status is

Fully delivered

Actual costs

Updated in

Prod. order

Goods issue is

Posted for

Prod. order

Time management

processing

Settlement of

Production

order

other production scenarios
Repetitive manufacturing

Make-to-order production

Process manufacturing

Project-related “Engineer to order”

Quality management for goods receipt from production

Other Production Scenarios
autodesk inc case
Autodesk Inc. Case
  • $400M Company, growing at 20%/year
  • Ten sales offices in US and 5 development centers in US and Switzerland with 1900 people
  • Sells famous CAD and MM software
  • Goal was to maintain growth rate and ship products within 1 hour of receiving customer order
    • existing system was stretched by global growth and couldn’t handle multiple order codes; operating info was not available to executives for decision making
    • Used R/3 to redesign business model and 25 major business processes, including 240 subprocesses
    • Re-engineered order process for automatic pricing; reduced number of order codes
    • Can track sales in real time along with new product evaluation copies and manufacturing costs around the world
    • Future plans were to extend the software to Europe and Asia regions, remote access, allow for product downloading
a normal company s systems
A Normal Company’s Systems
  • Fitter Snacker, Inc.
    • Founded in the ’50s
    • A small manufacturer of healthy snack bars
      • NRG-A and NRB-B bars
    • Two divisions; Wholesale and Direct Sales
problems with fitter snacker s systems
Problems with Fitter Snacker’s Systems:
  • Sources:
    • Three unintegrated systems
      • Sales Order System
      • Warehouse System
      • Accounting System
    • Manual handling of transactions
    • Information not available in “real time”
fitter snacker s systems

Warehouse

Sales

Order

Pick,

Pack and

Ship

Quote

Sales

Fitter Snacker’s

Sales Process

Receiving

Returns

Invoice

Accounting

Payment

Fitter Snacker’s Systems
production and materials management at fitter snacker
Production and Materials Management at Fitter Snacker
  • Must answer the following questions:
    • How much of each bar should be produced?
    • What quantities of raw materials should be ordered?
    • When should raw materials be ordered
general approaches to production
General Approaches to Production
  • Make-to-stock: Items produced in anticipation of orders
  • Make-to-order: Items produced to meet specific customer orders
  • Assemble to order: Final product assembled from make-to-stock items
fitter snacker manufacturing process

Mixer

Snack Bar Line

Mixer

Form

Bake

Pack

Raw Material Warehouse

Finished Goods Warehouse

Mixer

Mixer

Fitter Snacker Manufacturing Process
fitter snacker production problems
Fitter Snacker Production Problems
  • Communications
    • Marketing does not share data with production (sales promotions and large, unexpected orders)
  • Inventory
    • True inventory status not known
    • No real-time data on actual sales
  • Accounting and Purchasing
    • Difficulty forecasting raw material and labor costs
    • Adjusting accounts for actual vs. standard costs time consuming and done infrequently
production planning process
Production Planning Process
  • Work from sales forecast to create aggregate production plan
  • Break down aggregate plan into more specific plans
  • Use production plan to determine raw material requirements
sap r 3 approach to production planning

Sales Forecasting

Sales and Operations Planning

Demand Management

MRP

Detailed

Scheduling

Production

Purchasing

SAP R/3 Approach to Production Planning
demand management30
Demand Management
  • Calculation for Week 5

4,134 cases in Jan. x 3 days in week 5 ÷ 22 working days in Jan.

= 563.7 cases

4,1984 cases in Feb. x 3 days in week 5 ÷ 20 working days in Feb.

= 419.8 cases

Total = 983.5 cases

slide31
MRP
  • Bill of Material
slide32
MRP
  • MRP Record
detailed production scheduling
Detailed Production Scheduling
  • Snack bar production line is bottleneck
  • Scheduling of production line is key to determining detailed production schedule
detailed production scheduling36
Detailed Production Scheduling
  • Length of production runs
    • Longer runs reduces cost of setups
    • Longer runs increase capacity utilization
    • Shorter runs reduces cost of inventory
providing production data to accounting
Providing Production Data to Accounting
  • Production data does not get entered into an ERP system directly
    • Many methods of gathering shop floor data are available
    • ERP allows shop floor data to be collected once for production and accounting purposes, and data is consistent in both areas
erp in supply chain management
ERP in Supply Chain Management

$

$

$

$

$

Goods

Goods

Goods

Goods

Goods

Raw Materials

Customer

Supplier

Manufacturer

Wholesaler

Retailer

Information

Information

Information

Information

Information

supply chain management and erp
Supply Chain Management and ERP
  • ERP not required for Supply Chain Management (SCM)
  • ERP can facilitate sharing information in real time
  • Use of internet can reduce communication costs
supply chain metrics
Supply Chain Metrics
  • Total Supply Chain
    • Cash-to-cash cycle time: Time from paying for raw materials to the time when cash is collected from the customer
    • Total supply chain costs
supply chain metrics41
Supply Chain Metrics
  • Buyer-Supplier
    • Initial fill rate
    • Initial-order lead-time
    • On-time performance
summary
Summary
  • An ERP system can improve the efficiency of the production and purchasing processes. Efficiency begins with Marketing sharing sales forecasts with Production, which shares its production plans with Purchasing
summary continued
Summary continued
  • Production planning can be done without an ERP system, but and ERP system allows production to be linked to Purchasing and Accounting. This data sharing increases a company’s overall efficiency
summary continued44
Summary continued
  • Companies are building on their ERP systems to practice supply chain management. In doing this, the company looks at itself as part of a large process that includes customers and suppliers. Using information more efficiently along the supply chain can significantly reduce costs.