Case Study 3: Operate a Manufacturing Company (Introduction) EIN 6133 Logistics Engineering Summer B, 2015

Objective The objective of this manufacturing case study is to provide a hands-on experience of an integrated business process in the simulated environment, which integrates basic operation functions of planning, sales, production, procurement, marketing, and financial accounting for learning how to run a manufacturing operation and make business decisions.

The Virtual Business Environment Simulation of a market Automation of administrative tasks Simulation of the passing of time

Corporate Roles Designation CEO (Team Leader) ◦Review financial statement ◦Coordinate operating activities ◦Review price market report ◦Review summary sales report ◦Monitor sales and market data ◦Review inventory Report Sales & Marketing Manager ◦Change sales prices ◦Plan marketing expense ◦Provide advices to material manager for forecasting ◦Review sales and market data ◦Check summary sales report ◦Review price market report 4

Corporate Roles Designation Production Planning Manager ◦Create planned independent requirements ◦Run MRP to create: 1) purchase requisitions (PRs) for raw and packing materials, and 2) planned orders for finished products. ◦Convert purchase requisitions to Purchase orders ◦Track purchase orders ◦Analyze product cost Material Manager ◦Review planned orders for each product ◦Control and release production orders if required raw materials are available ◦Monitor production schedule ◦Track purchase orders ◦Check inventory report 5

Operations activities

Organizational elements

Organizational Elements

for Extended Mfg

Organizational Elements $$ $$ $$ for Extended Mfg $$

Master Data Used in this study

Definition of Master Data (1/2)

Definition of Master Data (2/2)

List of Master Data 2

Muesli Manufacturing Association Label Regulation

Muesli Cereals Raisins Oats Strawberries Wheat Blueberries Nuts

Your 6 products 40% wheat 40% oat 20% nut 1 box 1 bag 35% wheat 35% oat 10% raisin 10% nut 5% strawberry 5% blueberry 1 box 1 bag 50% wheat 50% oat 1 box 1 bag 40% wheat 40% oat 20% raisin 1 box 1 bag 40% wheat 40% oat 20% strawberry 1 box 1 bag 40% wheat 40% oat 20% blueberry 1 box 1 bag

Product Design and German Market

Data Model of product $$-F06 $$ $$-F06 $$-P01 $$-P02 $$-R01 $$-R02 $$-R03 $$-R05 $$-R04 $$-R06

German market North DC10: 2 retailers DC12: 19 retailers South DC10: 7 retailers DC12: 23 retailers West DC10: 3 retailers DC12: 17 retailers

Input Cost at Low Seasonal Price

Number of Stores by Geographical Area

DC10: Hypermarkets Buy only large boxes (1 kg) Payment delay of 20 steps More sensitive to price Less sensitive to advertising Will have a stronger preference for 3 particular products during the simulation

DC12: Grocery Chains Buy large boxes (1 kg) and small boxes (0.5 kg, only for Mfg Extended case) Payment delay of 10 to 15 steps Will have a stronger preference for 4 particular products during the simulation

Number of Retailers Per Locations

Risk Premium on Credit Ratings

Major Operation Rules You don’t change the recipe of a product in this mfg introduction game Customers’ preferences do not change throughout the game; you may like to learn from their past behavior The company displaying the highest shareholder’s equity at the end of the simulation wins the game You must behave ethically at all times The end of game inventory will be value at cost price in the final balance sheet. Therefore, you shouldn’t sell under cost at any time during the game.

Operations tips Develop your team’s operations strategy Monitor and modify the strategy, when necessary Use the ERP system efficiently Do not run out of stock Be aware of delays and production capacity constraints Team organization and communication are important.

Game Layout 30 steps 15 min 30 steps 15 min 30 steps 15 min

Game Rules Each round will be of 30 steps (approx 0.5 min per step) End-of-round inventory is carried over to the next round You can sell a product only if you have it in stock You compete against the other teams and importers Your objective is to maximize profit

Participant’s job Aid

Let’s Get Started! Create your team : 3 – 4 persons Up to 26 company : A to Z Develop your team’s operations strategy Log in using user name and password given by the instructor

Login Information Client 445 Login : $ # $ = Team, Pilot run: A, B, C, D Real run: E, F, G, H # = User 1 to User 4 Password: ERPSIM

SAP Menu & Navigation

Introductory Game: Round 1 30 steps 15 min

Cost, Inventory & Initial Pricing Material$$-F01$$-F02$$-F03$$-F04$$-F05$$-F06 Name Nut Muesli 1.0 kg. Blueberry Muesli 1.0 kg. Strawberry Muesli 1.0 kg. Raisin Muesli 1.0 kg. Original Muesli 1.0 kg. Mixed Fruit Muesli 1.0 kg. Raw material Cost€ 1.53€ 1.97 € 1.38€ 1.36€ 1.76 Standard cost€ 2.48€ 3.09 € 2.50€ 2.65€ 2.89 Initial price € 4.24 € 4.49 € 5.18 € 5.43 € 5.18 € 5.43 € 3.92 € 4.17 € 3.87 € 4.12 € 4.75 € 5.00 Initial stock100,000

Initial Inventory in Round 1

Initial Financial Statement in Round 1

The Introductory Game: Round 1 (30 Steps- Days) You have initial inventory for each finished product (100,000 for each finished product) You will sell your available products in Q1. You can’t buy any raw materials in Q1. You can’t make plan, can’t run MRP, and can’t produce any finished goods in Q1.. You need to know how to : Maintain price list and make plan for marketing investment Watch available stock Monitor sales orders Monitor your profit !

Participant’s Job Aid & Menu

Maintain Prices for DC 10 & DC 12

Marketing Expense

Check product costing

Stock in Material Overview

Check Sales Summary Report in Your Company Code

Check Sales Order Report in Your Company Code

Check Market Report for All Company Codes

Check Financial Statements in Your Company Code

The Introductory Game: Round 1 (30 steps – 30 days) We start the simulator for 30 steps

Introductory Game: Round 2 30 steps 15 min

The Introductory Game: Round 2 (30 Steps- Days) You finished goods will be carried over to the round 2 if your still have inventory at the end of the round 1. You have initial raw materials which are enough to make 100,000 of your each product. You can’t buy any raw materials in Q2. Planned orders for all six finished products have been created by ERPsim. You can produce your products in Q2 by converting planned orders to production orders. You can’t change the planned orders, and can’t run MRP You continue to maintain your prices and make investment in market.

Game Parameters

Participant’s Job Aid & Menu

Release Production Order

Release Production Orders (CO41) 1.Select planned orders to be converted to production orders, and 2.Click on the button “Convert” to release.

Check Production Schedule

The Introductory Game: Round 2 (30 Steps - Days) We start the simulator for 30 steps

Introductory Game: Round 3 30 steps 15 min

The Introductory Game: Round 3 (30 Steps- Days) You finished goods and raw materials will be carried over to the round 3 if your still have inventory at the end of the round 2. You can buy any raw materials in Q3. You can produce your products in Q3. You need to 1)create independent requirement plan for your products, 2)run MRP to create purchase requisitions and planned orders, 3)convert purchase requisitions to purchase orders, and 4)release planned orders to production orders. You continue to maintain 1)Prices for finished products, and 2)make investment in market.

Participant’s Job Aid & Menu

Create Planned Independent Requirement for 6 Finished Products (MD61) AA-F

Forecasting Sales

Execute MRP

After the MRP Run

Convert to Purchase Orders from Purchase Requisitions (ME59)

Convert Purchase Requisitions to Purchase Orders

Track Purchase Orders

Purchase Order Tracking(ZME2N)

Raw Material Cost Per PO

Collective Conversion of Planned Order (CO41)

Release Production Order

Release Production Orders (CO41)

Check Production Schedule

The Introductory Game: Round 3 (30 Steps – 30 Days) We start the simulator for the last 30 steps