To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Resource Planning Chapter 14

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Why Resource Planning is Important To ensure that customer needs are met in the most cost-effective manner, with the required quality To take advantages of opportunities for increasing profit through increased sales and more cost-effective operations

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Lecture Outline Why resource planning is important Material requirement planning (MRP) –Why EOQ does not work for dependent demand –When to use MRP –How MRP works Capacity requirement planning

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Lecture Outline (2) Enterprise Resource Planning –What it is and why it is needed Who benefits most –Customer relationship management, supply chain management, and collaborative product commerce –Implementation, trends, and ERP systems for small firms

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Demand Characteristics Week – – – – No. of tables Continuous demand M T W Th F M T W Th F – – – – No. of tables Discrete demand Independent demand 100 tables Dependent demand 100 x 1 = 100 tabletops 100 x 4 = 400 table legs Figure 12.4

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Material Requirement Planning (MRP) Why MRP is Needed Using EOQ for dependent demand resulted in parts shortages, higher overtime costs, and late deliveries to customers MRP determines when parts and materials are needed to meet a production schedule

Material Requirements Planning Material requirements planning Planned order releases Work orders Purchase orders Rescheduling notices Item master file Product structure file Master production schedule

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Master Production Schedule (MPS) and Rough Cut Capacity Plan Master Production Schedule (MPS): shows planned production by item, by day or week, for 2 – 6 months –Is revised as sales forecast changes Rough Cut Capacity Plan: a calculation to ensure that there is enough capacity to make the items in the Master Production Schedule

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Databases Used in MRP Calculation Bill of material file: list of parts, raw materials, and subassemblies for each finished good –Quantity required for each item Inventory records file: amount of each finished good, part, raw material, and subassembly in inventory, plus amounts already ordered and expected dates of receipt

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Production and Purchase Planning A planned order specifies how much of an item is needed, when it is needed, and when it must be ordered to be available when needed. Includes –Purchase orders to outside suppliers –Work orders for items made internally Planned orders are the key output from an MRP system.

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. When to Use MRP Dependent demand Most useful for complex products –Job shop production –Assemble to order

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Material Requirement Planning Based on a Master Production Schedule Schedules raw material and component part delivery when they are needed to meet a production schedule Designed to reduce inventory costs and improve delivery reliability to customers Estimates available to promise (ATP) – amount scheduled for production but not yet committed to a booked order

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Capacity Requirement Planning A check on the feasibility of the Capacity Requirement Plan Identifies work centers with insufficient capacity or insufficient work –Production schedule and MRP should be revised

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Capacity Requirement Planning (CRP) Workload Graph for Work Center 101 Used to Evaluate the Feasibility of the Master Production Schedule

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Why Enterprise Resource Planning (ERP) was Needed MRP is not flexible enough for rapid order fulfillment Marketing, Operations, Accounting and Finance, and Human Resources Management need to share a common database Companies need to –communicate rapidly with suppliers and customers –share selected data with suppliers and customers

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Enterprise Resource Planning (ERP) Organizes and manages a company’s business processes by sharing information across functional areasOrganizes and manages a company’s business processes by sharing information across functional areas Connects with supply-chain and customer management applicationsConnects with supply-chain and customer management applications Facilitates transactions in foreign currenciesFacilitates transactions in foreign currencies Can assist firms with different legal requirements in different countriesCan assist firms with different legal requirements in different countries

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. ERP Modules

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Inter-Organizational Data Flows Source: Adapted from Joseph Brady, Ellen Monk, and Bret Wagner, Concepts in Enterprise Resource Planning (Boston: Course Technology, 2001), pp. 7–12

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Connecting with Customers & Suppliers Customer relationship management Supply chain management Collaborative product commerce

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Customer Relationship Management (CRM) Software that supports –Marketing planning and execution –Personalized marketing –Customer service

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Supply Chain Management (SCM) Software that plans and executes business processes related to supply chains Includes –Supply chain planning –Supply chain execution –Supplier relationships and information sharing

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Collaborative Product Commerce (CPC) Software that –Incorporates new product design and development and product life cycle management –Integrates customers and suppliers in the design process though the entire product life cycle

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Collaborative Product Commerce (CPC) Customer Relationship Management (CRM) Enterprise Resource Planning (ERP) Collaborative Product Commerce (CPC) Supply Chain Management (SCM) Time to Market Time to Customer Customers Product Design Suppliers Collaborative Design Manufacture & Delivery Collaborative Manufacture DFMA Figure 12.3

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Who Benefits Most from ERP? Firms that regularly share information with suppliers and customers Firms that engage in international business (sales, purchasing, manufacturing, or services)

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. ERP Implementation Strategy Which business processes have the biggest impact on customer relations? Which business processes would benefit the most from: –Internal integration –Integration with suppliers or customers? Which processes should be standardized? Which system functions do you need?

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. ERP Implementation Details Which vendor? Which modules? Internal server or external portal? Implementation schedule – fit with business needs Data accuracy

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. Trends in ERP Systems (ERP II) Modular systems – firms can choose the applications they need Industry solutions – database & reports tailored to a particular industry Open source code – firms can modify ERP application software

To Accompany Russell and Taylor, Operations Management, 4th Edition,  2003 Prentice-Hall, Inc. All rights reserved. ERP II for Small and Mid-sized Firms Packages tailored for small firms –Smaller, simpler, less expensive than large- scale ERP systems –Lack some features On-demand ERP computing through Internet portals –Provided by ERP software companies or “third- party” vendors