1. ERP (21-550) Sharif University of Technology Session #13
Advanced Manufacturing Laboratory
Department of Industrial Engineering
Sharif University of Technology
Session #13

2. Course Description Instructor Class time Course evaluation
Omid Fatahi Valilai, Ph.D. Industrial Engineering Department, Sharif University of Technology
, Tel:
Website: Sharif.edu/~fvalilai
Class time
Sunday-Tuesday 16:30-18:30
Wednesday 09:00-12:00
Course evaluation
Mid-term (30%)
Final exam (40%)
Quiz (5%)
Exercise (10%)
ERP Lab (15%)
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 2

3. Course Description (Continued …)
Mid-term session:
Sunday : 8th Azar 1394, 16:30 ~ 18:00
Final Exam:
Sunday: 27th Dey 1394, 09:00 ~ 10:30
Reference:
Shtub, A., “Enterprise Resource Planning (ERP)- The dynamics of operations management”, 2002, Kluwer Academic Publishers
Ptak, Carol A., “ERP Tools, Techniques, and Applications for Integrating the Supply Chain”, 2004, The CRC Press
Fui, F., Nah, H., “Enterprise Resource Planning”, 2002, IRM Press
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 3

4. Course Description (Continued …)
Mid-term session:
Sunday : 8th Azar 1394, 16:30 ~ 18:00
Final Exam:
Sunday: 27th Dey 1394, 09:00 ~ 10:30
Reference:
Daniel E. O’leary, “Enterprise Resource Planning Systems Systems, Life Cycle, Electronic Commerce, and Risk”, 2000, Cambridge University Press
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 4

5. Course Description (Continued..)
Contents:
Enterprise Management
Operations Management
The Evolution of ERP Systems: A Historical
Organizations and organizational structures
Scheduling
Purchasing and inventory management
Marketing considerations
ERP selection and implementation
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 6

6. Course Description (Continued..)
Contents:
Enterprise Management
History of Enterprise Resource Planning
The Theory of Constraints and ERP
Sales and Operations Planning
Buffer Resource Strategy
Enterprise Resource Management
Integrating the Supply Chain to Reap the Rewards
Strategic Sourcing and Procurement
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 7

7. Enterprise Management
Contents:
Strategic Sourcing and Procurement
During the 1940s and 1950s, the largest component of the cost of goods sold was labor.
In some companies this cost was around 50%.
This led to the Taylor labor movement and the focus on labor productivity.
The labor focus gave rise to our cost accounting methods where overhead is typically spread based on the production labor hours.
For almost 50 years, management has focused on the shop floor and how labor efficiencies can be improved.
North American managers continue to search for inexpensive offshore labor even though labor is now less than 10% of the current cost of goods sold.
Asian and European managers have begun to develop strategic sourcing agreements that move production closer to the market.
During the 1940s and 1950s, the largest component of the cost of goods sold was labor.
In some companies this cost was around 50%. This led to the Taylor labor movement and
the focus on labor productivity. The labor focus gave rise to our cost accounting methods
where overhead is typically spread based on the production labor hours. For almost 50
years, management has focused on the shop floor and how labor efficiencies can be
improved. North American managers continue to search for inexpensive offshore labor
even though labor is now less than 10% of the current cost of goods sold. Asian and
European managers have begun to develop strategic sourcing agreements that move
production closer to the market. One only needs to look as far as the automotive and
consumer electronic industries to discover a large number of foreign-owned plants in
North America.
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 8

8. Enterprise Management
Contents:
Strategic Sourcing and Procurement
In the 1990s, the cost landscape changed drastically.
For most companies labor is an increasingly small part of costs.
On average the cost of material for an enterprise comprises about 60 to 80% of total cost.
Hal Mather at the World Symposium in 1997 claimed that the cost of logistics had exceeded the cost of labor for most manufacturing companies worldwide.
In the 1990s, the cost landscape changed drastically. For most companies labor is an
increasingly small part of costs. On average the cost of material for an enterprise
comprises about 60 to 80% of total cost. Hal Mather at the World Symposium in 1997
claimed that the cost of logistics had exceeded the cost of labor for most manufacturing
companies worldwide. Not surprisingly the focus has shifted to managing these costs and
the market for Enterprise Resource Planning (ERP) and Supply Chain Management tools
is expected to continue to grow well into the next decade.
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 9

9. Enterprise Management
Contents:
Strategic Sourcing and Procurement
In the 1990s, the cost landscape changed drastically. For most companies labor is an
increasingly small part of costs. On average the cost of material for an enterprise
comprises about 60 to 80% of total cost. Hal Mather at the World Symposium in 1997
claimed that the cost of logistics had exceeded the cost of labor for most manufacturing
companies worldwide. Not surprisingly the focus has shifted to managing these costs and
the market for Enterprise Resource Planning (ERP) and Supply Chain Management tools
is expected to continue to grow well into the next decade.
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 10

10. Enterprise Management
Contents:
Strategic Sourcing and Procurement
Supplier partnership characteristics
As the company moves to effective Supply Chain Management, supplier partnerships are formed to provide a win-win relationship between customer and supplier.
Supplier partnerships are characterized by:
Longer contracts
More exclusivity in agreements
Fewer (but better) suppliers
Higher volume between buyer and supplier
Lower prices
Quality at the (supplier) source
SUPPLIER PARTNERSHIP CHARACTERISTICS
The typical view of the supplier is a black box. Order goes in and voilà—parts come out
like magic, on time and built correctly. Rarely does this actually work. As the company
moves to effective Supply Chain Management, supplier partnerships are formed to
provide a win-win relationship between customer and supplier. Supplier partnerships are
characterized by:
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 11

11. Enterprise Management
Contents:
Strategic Sourcing and Procurement
Supplier partnership characteristics
As the company moves to effective Supply Chain Management, supplier partnerships are formed to provide a win-win relationship between customer and supplier.
Supplier partnerships are characterized by:
Supplier centered design
Frequent delivery of small lots
Less burdensome order conveyance.
Delivery to point of consumption
Mutual openness
The same paperwork level cannot exist as the
lot sizes decline and the frequency of shipment increases. This setup cost is a driving
force behind product lot size. The order conveyance process can be simplified through
the utilization of technology such as electronic data interchange (EDI) or E-commerce.
EDI is a point-to-point solution where a single trading partner is identified and a
protocol developed to transmit data.
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 12

12. Enterprise Management
Contents:
Strategic Sourcing and Procurement
A big key to successful supplier partnerships is mutual trust and openness.
Successful strategic sourcing is dependent on a number of different factors. These include:
Financial stability
Management commitment to excellence
Design and technology strength
Quality capabilities
Cost leadership
Service and flexibility
Manufacturing skills
Just in Time (JIT) development
Employee Participation
supplier partnerships. A big key to successful supplier partnerships is mutual trust and
openness. We have to advance trust before we earn it.
Successful strategic sourcing is dependent on a number of different factors. These
include:
1. Financial stability—A successful partnership will not last long if one of the partners
goes out of business.
2. Management commitment to excellence
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 13

13. Enterprise Management
Contents:
Strategic Sourcing and Procurement
Supplier Relationship Management
Enabling supplier relationship management has been one of the hottest growth areas in technology.
The big issues in supplier relations management are:
Lack of visibility and control over all categories of spending
Silo supply solutions and processes
Inefficient communication with suppliers
Manual, labor-intensive processes
Not leveraging complete supply base
No single integrated insight into activity, performance, or spend
silo
ˈsʌɪləʊ/
noun
noun: silo; plural noun: silos 1.
a tall tower or pit on a farm used to store grain.
a pit or other airtight structure in which green crops are compressed and stored as silage. 2.
an underground chamber in which a guided missile is kept ready for firing. 3.
a system, process, department, etc. that operates in isolation from others.
"it's vital that team members step out of their silos and start working together"
verb
verb: silo; 3rd person present: siloes; past tense: siloed; past participle: siloed; gerund or present participle: siloing
isolate (one system, process, department, etc.) from others.
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 14

14. Enterprise Management
Contents:
Strategic Sourcing and Procurement
Supplier Relationship Management
Enabling supplier relationship management has been one of the hottest growth areas in
technology. This is because every enterprise—not just manufacturing companies—have
suppliers of products and services to manage. With the extreme pressure for continued
bottom-line returns, every company is looking to reduce its spending. The big issues in
supplier relations management are:
1. Lack of visibility and control over all categories of spending
2. Silo supply solutions and processes
3. Inefficient communication with suppliers
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 15

15. Enterprise Management
Contents:
Strategic Sourcing and Procurement
Supplier Relationship Management
Enabling supplier relationship management has been one of the hottest growth areas in
technology. This is because every enterprise—not just manufacturing companies—have
suppliers of products and services to manage. With the extreme pressure for continued
bottom-line returns, every company is looking to reduce its spending. The big issues in
supplier relations management are:
1. Lack of visibility and control over all categories of spending
2. Silo supply solutions and processes
3. Inefficient communication with suppliers
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 16

16. Enterprise Management
Contents:
Strategic Sourcing and Procurement
Supplier partnership cautions
Be careful not to overload one supplier.
Ensure a philosophic fit.
Complete contingency planning.
Be careful not to overload one supplier. We have a tendency to overload suppliers
similar to how we overload employees. A good supplier will be given more and more
work until the point arises where it is no longer performing well. The supplier is then
replaced with another supplier and the cycle continues. Rarely is it found that a
supplier will turn away business. The supplier may be concerned that if it declines
offered business, it may lose other current business as well. The customer may have to
exercise restraint when loading a supplier. The customer should clearly understand the
supplier’s capacity.
2. Ensure a philosophic fit. An organization that is committed to agile delivery of a
mass customized product will not fit well with a supplier that is committed to long
runs of a uniformed product. The commitment to quality and continuous improvement
should also be shared between the two partners. The two organizations should be
philosophically aligned before they become strategically aligned.
3. Complete contingency planning. Life happens. Some people believe that Murphy
was an optimist. Having a strategic sourcing agreement does not mean that the buyer
should neglect its duty for planning contingency
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 17

17. Enterprise Management
Contents:
Strategic Sourcing and Procurement
Be careful not to overload one supplier. We have a tendency to overload suppliers
similar to how we overload employees. A good supplier will be given more and more
work until the point arises where it is no longer performing well. The supplier is then
replaced with another supplier and the cycle continues. Rarely is it found that a
supplier will turn away business. The supplier may be concerned that if it declines
offered business, it may lose other current business as well. The customer may have to
exercise restraint when loading a supplier. The customer should clearly understand the
supplier’s capacity.
2. Ensure a philosophic fit. An organization that is committed to agile delivery of a
mass customized product will not fit well with a supplier that is committed to long
runs of a uniformed product. The commitment to quality and continuous improvement
should also be shared between the two partners. The two organizations should be
philosophically aligned before they become strategically aligned.
3. Complete contingency planning. Life happens. Some people believe that Murphy
was an optimist. Having a strategic sourcing agreement does not mean that the buyer
should neglect its duty for planning contingency
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 18

18. Course Description (Continued..)
Contents:
Operations Management
Operations Planning (Material and Capacity Requirements Planning)
Product Life Cycle Management
Manufacturing Execution System
Distribution
Advanced Manufacturing Laboratory, Department of Industrial Engineering, Sharif University of Technology
ERP (21-550), Session #13 19