Resource Planning Chapter 14

Step Stool Assembly

Step Stool Assembly (2)

The Role of the Aggregate Plan

Input/Output - MRP Process

Aggregate Production Plan and Master Production Schedule (MPS)

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Accurate bill-of-material file Accurate inventory status Stable lead times Strict control of physical inventory Transaction processing system © T/Maker Co. MRP Requirements

Transparency Masters to accompany Operations Management, 5E (Heizer & Render) © 1998 by Prentice Hall, Inc. A Simon & Schuster Company Upper Saddle River, N.J Increased customer satisfaction due to meeting delivery schedules Faster response to market changes Better production planning & scheduling Improved labor & equipment utilization Reduced inventory levels Reduced costs MRP Benefits

Enterprise Resource Planning What Is ERP? Software designed for organizing and managing business processes Modules share information across all business functions Can share customer sales data with the supply chain to help with global replenishment All applications (modules) use a common database Some applications are PC-based

Integration of ERP II

Evolution of ERP II First generation ERP Managed all internal business activities Second Generation ERP (ERP II) Late 1990’s software integrated supply chains Systems focused on decision-making SCM modules include LP and simulation support SCI capability allows collection of intelligence along the entire supply chain ASP suppliers set-up and run systems for others

ERP II Modules Finance and accounting Investment, cost, asset, capital, and debt management Budgets, profitability analysis, and performance reports Sales and marketing Handles pricing, availability, orders, shipments, & billing Production and materials management Process planning, BOM, product costing, MRP, scheduling, purchase orders, & inventory status Human resources Workforce planning, payroll & benefits, organization charts

Integrating ERP and E-Commerce Many companies with ERP use e-commerce E-commerce can take orders from customers and transmit order information to the ERP database E-commerce can also take purchasing requirements from the ERP database and place orders with suppliers E-commerce can give product information, delivery dates and technical support information to customers

Benefits of ERP Implementation Increases information flow through the organization and the supply chain (suppliers and customers) Increases ability to incorporate better management control, speedier decision making, and cost reductions One ERP or ERP II system can replace many smaller systems e.g. ExxonMobile used ERP to replace 300 different systems A study of ERP implementations reports that benefits typically start 8 months after implementation with median annual savings of $1.6 million

ERP II Cost and Implementation Issues Major suppliers are SAP, Peoplesoft, Oracle, and Baan. Also smaller PC based suppliers. Costs for larger ERP systems range from hundreds of thousands to several million dollars. More ERP II packages are becoming available for small businesses Select the package that fits your firm's budget and business needs Limited flexibility for customization Outside consultants are usually involved in selection and implementation.

ERP II Cost and Implementation Issues (2) Consultant costs can run up to 3 times the cost of the system itself according to a Gartner Group study. Added costs also include additional people, new computer hardware, and the cost to develop a new, integrated database Successful implementation requires leadership and top management commitment to a vision for the business