1. Copyright 2009 John Wiley & Sons, Inc. Resource Planning Operations Management - 6 th Edition Chapter 15 Roberta Russell & Bernard W. Taylor, III

2. Copyright 2006 John Wiley & Sons, Inc.14-2 ERP—Enterprise Resource Planning  Starts with slide 80  We will not be covering the material on pages 645-665 of Chapter 14 until after the second exam

3. Copyright 2006 John Wiley & Sons, Inc.14-3 Lecture Outline   Material Requirements Planning (MRP)   Capacity Requirements Planning (CRP)   Enterprise Resource Planning (ERP)   Customer Relationship Management (CRM)   Supply Chain Management (SCM)   Collaborative Product Commerce (CPC)

4. Copyright 2006 John Wiley & Sons, Inc.14-4 Resource Planning for Manufacturing

5. Copyright 2006 John Wiley & Sons, Inc.14-5 Material Requirements Planning (MRP)   Computerized inventory control and production planning system   When to use MRP? Dependent demand items Discrete demand items Complex products Job shop production Assemble-to-order environments

6. Copyright 2006 John Wiley & Sons, Inc.14-6 Demand Characteristics 12345 Week 400 400 – 300 300 – 200 200 – 100 100 – No. of tables Continuous demand M T W Th F M T W Th F 400 400 – 300 300 – 200 200 – 100 100 – No. of tables Discrete demand Independent demand 100 tables Dependent demand 100 x 1 = 100 tabletops 100 x 4 = 400 table legs

7. Copyright 2006 John Wiley & Sons, Inc.14-7 Material Requirements Planning Material requirements planning Planned order releases Work orders Purchase orders Rescheduling notices Item master file Product structure file Master production schedule

8. Copyright 2006 John Wiley & Sons, Inc.14-8 MRP Inputs and Outputs  Inputs Master production schedule Master production schedule Product structure file Product structure file Item master file Item master file  Outputs Planned order releases Planned order releases Work orders Work orders Purchase orders Purchase orders Rescheduling notices Rescheduling notices

9. Copyright 2006 John Wiley & Sons, Inc.14-9 Master Production Schedule  Drives MRP process with a schedule of finished products/end items  Quantities represent production not demand  Quantities may consist of a combination of customer orders and demand forecasts  Quantities represent what needs to be produced, not what can be produced   Quantities represent end items that may or may not be finished products

10. Copyright 2006 John Wiley & Sons, Inc.14-10 Master Production Schedule (cont.) PERIOD MPS ITEM12345 Clipboard8595120100100 Lapdesk0500500 Lapboard75120472017 Pencil Case125125125125125

11. Copyright 2006 John Wiley & Sons, Inc.14-11 Product Structure Top clip (1)Bottom clip (1) Pivot (1)Spring (1) Rivets (2) Finished clipboardPressboard (1) Clipboard

12. Copyright 2006 John Wiley & Sons, Inc.14-12 Product Structure Tree Clipboard Level 0 Level 1 Level 2 Spring (1) Bottom Clip (1) Top Clip (1) Pivot (1) Rivets (2) Clip Ass’y (1) Pressboard (1)

13. Copyright 2006 John Wiley & Sons, Inc.14-13 Indented BOM List 0 - - - -Clipboardea1 - 1 - - -Clip Assemblyea1 - - 2 - -Top Clipea1 - - 2 - -Bottom Clipea1 - - 2 - -Pivotea1 - - 2 - -Springea1 - 1 - - -Rivetea2 - 1 - - -Press Boardea1 LEVELITEMUNIT OF MEASUREQUANTITY

14. Copyright 2006 John Wiley & Sons, Inc.14-14 Not this!! 0 - - - -Clipboardea1 - 1 - - -Clip Assemblyea1 - 1 - - -Rivetea2 - 1 - - -Press Boardea1 - - 2 - -Top Clipea1 - - 2 - -Bottom Clipea 1 - - 2 - - Pivotea1 - - 2 - -Spring eaea1 LEVELITEMUNIT OF MEASUREQUANTITY

15. Copyright 2006 John Wiley & Sons, Inc.14-15 Specialized BOMs  Phantom bills Transient subassemblies Transient subassemblies Never stocked Never stocked Immediately consumed in next stage Immediately consumed in next stage  K-bills Group small, loose parts under pseudo-item number Group small, loose parts under pseudo-item number Reduces paperwork Reduces paperwork

16. Copyright 2006 John Wiley & Sons, Inc.14-16 Specialized BOMs (cont.)  Modular bills Product assembled from major subassemblies and customer options Product assembled from major subassemblies and customer options Modular bill kept for each major subassembly Modular bill kept for each major subassembly Simplifies forecasting and planning Simplifies forecasting and planning X10 automobile example X10 automobile example 3 x 8 x 3 x 8 x 4 = 2,304 configurations 3 x 8 x 3 x 8 x 4 = 2,304 configurations 3 + 8 + 3 + 8 + 4 = 26 modular bills 3 + 8 + 3 + 8 + 4 = 26 modular bills   Time-phased bills an assembly chart shown against a time scale

17. Copyright 2006 John Wiley & Sons, Inc.14-17 4-Cylinder (.40)Bright red (.10)Leather (.20)Grey (.10)Sports coupe (.20) 6-Cylinder (.50)White linen (.10)Tweed (.40)Light blue (.10)Two-door (.20) 8-Cylinder (.10)Sulphur yellow (.10)Plush (.40)Rose (.10)Four-door (.30) Neon orange (.10)Off-white (.20)Station wagon (.30) Metallic blue (.10)Cool green (.10) Emerald green (.10)Black (.20) Jet black (.20)Brown (.10) Champagne (.20)B/W checked (.10) X10 Automobile EnginesExterior colorInteriorInterior colorBody (1 of 3)(1 of 8)(1 of 3)(1 of 8)(1 of 4) Modular BOMs

18. Copyright 2006 John Wiley & Sons, Inc.14-18 Time-phased Bills Forward scheduling: start at today‘s date and schedule forward to determine the earliest date the job can be finished. If each item takes one period to complete, the clipboards can be finished in three periods Backward scheduling: start at the due date and schedule backwards to determine when to begin work. If an order for clipboards is due by period three, we should start production now

19. Copyright 2006 John Wiley & Sons, Inc.14-19 Material Requirements Planning Material requirements planning Planned order releases Work orders Purchase orders Rescheduling notices Item master file Product structure file Master production schedule

20. Copyright 2006 John Wiley & Sons, Inc.14-20 Item Master File DESCRIPTIONINVENTORY POLICY ItemPressboardLead time1 Item no.734Annual demand5000 Item typePurchHolding cost1 Product/sales classCompOrdering/setup cost50 Value classBSafety stock 0 Buyer/plannerRSRReorder point39 Vendor/drawing07142EOQ316 Phantom codeNMinimum order qty100 Unit price/cost1.25Maximum order qty500 PeggingYMultiple order qty LLC1Policy code3

21. Copyright 2006 John Wiley & Sons, Inc.14-21 Item Master File (cont.) PHYSICAL INVENTORYUSAGE/SALES CODES On hand100YTD usage/sales1100 LocationW142MTD usage/sales75 On order100YTD receipts1200 Allocated75MTD receipts0 Cycle3Last receipt8/25 Last count9/5Last issue10/5 Difference-2 Cost acct.00754 Routing00326 Engr07142

22. Copyright 2006 John Wiley & Sons, Inc.14-22 MRP Processes 1.Exploding the bill of material 2.Netting out inventory 3.Lot sizing 4.Time-phasing requirements

23. Copyright 2006 John Wiley & Sons, Inc.14-23 MRP Matrix

24. Copyright 2006 John Wiley & Sons, Inc.14-24 MRP: Example Master Production Schedule 12345 Clipboard8595120100100 Lapdesk0600600 Item Master File CLIPBOARDLAPDESKPRESSBOARD On hand2520150 On order175 (Period 1)00 (sch receipt) (sch receipt) LLC001 Lot sizeL4LMult 50Min 100 Lead time111

25. Copyright 2006 John Wiley & Sons, Inc.14-25 MRP: Example (cont.) Product Structure Record Clipboard Lapdesk Pressboard (2) Trim (3’) Beanbag (1) Glue (4 oz) Level 0 Pressboard (1) Clip Ass’y (1) Rivets (2) Level 1

26. Copyright 2006 John Wiley & Sons, Inc.14-26 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand25 Net Requirements Planned Order Receipts Planned Order Releases MRP: Example (cont.)

27. Copyright 2006 John Wiley & Sons, Inc.14-27 Basic MRP formulas  Net Requirements = Gross Requirements – scheduled receipts – On-hand Inventory (previous period)  Planned Order Receipt = function (Net Requirements, order policy)  Planned Order Release = Planned Order Receipt backed up by the lead time Planned Order Release i-LT = Planned Order Receipt i Planned Order Release i-LT = Planned Order Receipt i

28. Copyright 2006 John Wiley & Sons, Inc.14-28 More formulas  On-hand inventory i = on-hand inventory i-1 + scheduled receipts i + Planned Order Receipt i – Gross Requirements i  Gross Requirements for next level down are determined from the Planned Order Releases at the level above

29. Copyright 2006 John Wiley & Sons, Inc.14-29 On-hand inventory  Is always the amount of on-hand inventory at the end of the period  All other items (gross req., net req., scheduled receipts, planned order receipts) are amounts at the beginning of the period

30. Copyright 2006 John Wiley & Sons, Inc.14-30 MRP: Example (cont.) ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand25115 Net Requirements0 Planned Order Receipts Planned Order Releases (25 + 175) = 200 units available (200 - 85) = 115 on hand at the end of Period 1

31. Copyright 2006 John Wiley & Sons, Inc.14-31 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand2511520 Net Requirements00 Planned Order Receipts Planned Order Releases 115 units available (115 - 95) = 20 on hand at the end of Period 2 MRP: Example (cont.)

32. Copyright 2006 John Wiley & Sons, Inc.14-32 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand25115200 Net Requirements00100 Planned Order Receipts100 Planned Order Releases100 20 units available (20 - 120) = -100 — 100 additional Clipboards are required Order must be placed in Period 2 to be received in Period 3 MRP: Example (cont.)

33. Copyright 2006 John Wiley & Sons, Inc.14-33 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Gross Requirements8595120100100 Scheduled Receipts175 Projected on Hand2511520000 Net Requirements00100100100 Planned Order Receipts100100100 Planned Order Releases100100100 Following the same logic Gross Requirements in Periods 4 and 5 develop Net Requirements, Planned Order Receipts, and Planned Order Releases MRP: Example (cont.)

34. Copyright 2006 John Wiley & Sons, Inc.14-34 ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Gross Requirements0600600 Scheduled Receipts Projected on Hand20 Net Requirements Planned Order Receipts Planned Order Releases MRP: Example (cont.)

35. Copyright 2006 John Wiley & Sons, Inc.14-35 ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Gross Requirements0600600 Scheduled Receipts Projected on Hand2020101000 Net Requirements04050 Planned Order Receipts5050 Planned Order Releases5050 Following the same logic, the Lapdesk MRP matrix is completed as shown MRP: Example (cont.)

36. Copyright 2006 John Wiley & Sons, Inc.14-36 ITEM: PRESSBOARDLLC: 0PERIOD LOT SIZE: MIN 100LT: 112345 Gross Requirements Scheduled Receipts Projected on Hand150 Net Requirements Planned Order Receipts Planned Order Releases ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Planned Order Releases100100100 ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Planned Order Releases5050 MRP: Example (cont.)

37. Copyright 2006 John Wiley & Sons, Inc.14-37 ITEM: PRESSBOARDLLC: 0PERIOD LOT SIZE: MIN 100LT: 112345 Gross Requirements1001002001000 Scheduled Receipts Projected on Hand150 Net Requirements Planned Order Receipts Planned Order Releases ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Planned Order Releases100100100 ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Planned Order Releases5050 x2 x2 x1 x1 x1 MRP: Example (cont.)

38. Copyright 2006 John Wiley & Sons, Inc.14-38 ITEM: PRESSBOARDLLC: 0PERIOD LOT SIZE: MIN 100LT: 112345 Gross Requirements1001002001000 Scheduled Receipts Projected on Hand1505050000 Net Requirements50150100 Planned Order Receipts100150100 Planned Order Releases100150100 ITEM: CLIPBOARDLLC: 0PERIOD LOT SIZE: L4LLT: 112345 Planned Order Releases100100100 ITEM: LAPDESKLLC: 0PERIOD LOT SIZE: MULT 50LT: 112345 Planned Order Releases5050 MRP: Example (cont.)

39. Copyright 2006 John Wiley & Sons, Inc.14-39 Planned Order Report PERIOD ITEM12345 Clipboard100100100 Lapdesk5050 Pressboard100150100 MRP: Example (cont.)

40. Copyright 2006 John Wiley & Sons, Inc.14-40 Lot Sizing in MRP Systems   Lot-for-lot ordering policy   Fixed-size lot ordering policy Minimum order quantities Maximum order quantities Multiple order quantities Economic order quantity Periodic order quantity

41. Copyright 2006 John Wiley & Sons, Inc.14-41 Advanced Lot Sizing Rules: L4L Total cost of L4L = (4 X $60) + (0 X $1) = $240

42. Copyright 2006 John Wiley & Sons, Inc.14-42 Advanced Lot Sizing Rules: EOQ minimum order quantity Total cost of EOQ = (2 X $60) + [(10 + 50 + 40) X $1)] = $220

43. Copyright 2006 John Wiley & Sons, Inc.14-43 Advanced Lot Sizing Rules: POQ periods worth of requirements Total cost of POQ = (2 X $60) + (20 X $1) = $180

44. Copyright 2006 John Wiley & Sons, Inc.14-44 Planned Order Report Item#2740Date9 - 25 - 05 On hand100Lead time2 weeks On order200Lot size200 Allocated50Safety stock50 SCHEDULEDPROJECTED DATEORDER NO.GROSS REQS.RECEIPTSON HANDACTION 50 9-26AL 44162525 9-30AL 4147250 10-01GR 647050- 50 10-08SR 7542200150Expedite SR 10-01 10-10CO 44717575 10-15GR 64715025 10-23GR 6471250 10-27GR 647350- 50Release PO 10-13 Key:AL= allocatedWO= work order CO= customer orderSR= scheduled receipt PO= purchase orderGR= gross requirement

45. Copyright 2006 John Wiley & Sons, Inc.14-45 MRP Action Report Current date 9-25-05 ITEMDATEORDER NO.QTY.ACTION #274010-087542200ExpediteSR10-01 #361610-09Move forwardPO10-07 #241210-10Move forwardPO10-05 #342710-15Move backwardPO10-25 #251610-207648100De-expediteSR10-30 #274010-27200ReleasePO10-13 #366610-3150ReleaseWO10-24

46. Copyright 2006 John Wiley & Sons, Inc.14-46 Capacity Requirements Planning (CRP)   Creates a load profile   Identifies under-loads and over-loads   Inputs Planned order releases Routing file Open orders file

47. Copyright 2006 John Wiley & Sons, Inc.14-47 CRP MRP planned order releases Routing file Capacity requirements planning Open orders file Load profile for each machine center

48. Copyright 2006 John Wiley & Sons, Inc.14-48 Leveling Under-load Conditions 1.Acquire more work 2.Pull work ahead that is scheduled for later time periods 3.Reduce normal capacity

49. Copyright 2006 John Wiley & Sons, Inc.14-49 Determining Loads and Capacities 2 copiers, 2 operators 5 days/wk, 8 hr/day 1/2 hr meals, 1/2 hr maintenance per day Efficiency= 100% Utilization= 7/8 = 87.5% Daily capacity= 2 machines x 2 shifts x 8 hours/shift x 100% efficiency x 87.5% utilization = 28 hours or 1,680 minutes Example 12.2

50. Copyright 2006 John Wiley & Sons, Inc.14-50 Determining Loads and Capacities Example 12.2 JOBNO. OFSETUPRUN TIME NO.COPIESTIME (MIN)(MIN/UNIT) TOTAL TIME 105005.20.085.2 + (500 x 0.08) =45.2 201,00010.60.1010.6 + (1,000 x 0.10) =110.6 305,0003.40.123.4 + (5,000 x 0.12) =603.4 4010,00011.20.1411.2 + (10,000 x 0.14) =1,411.2 502,00015.30.1015.3 + (2,000 x 0.10) =215.3 2385.7 min Load percent = 2,385.7 / 1,680 = 1.42 x 100% = 142% Add another shift: Daily capacity= 2 machines x 3 shifts x 8 hours/shift x 100% efficiency x 87.5% utilization = 42 hours or 2,520 minutes Revised load percent = 2,385.7 / 2,520 = 0.9467 x 100% = 94.67%

51. Copyright 2006 John Wiley & Sons, Inc.14-51 Initial Load Profile Figure 12.9 Hours of capacity 123456123456123456123456 Time (weeks) Normalcapacity 120 120 – 110 110 – 100 100 – 90 90 – 80 80 – 70 70 – 60 60 – 50 50 – 40 40 – 30 30 – 20 20 – 10 10 – 0 0 –

52. Copyright 2006 John Wiley & Sons, Inc.14-52 Remedies for Underloads 1.Acquire more work 2.Pull work ahead that is scheduled for later time periods 3.Reduce normal capacity

53. Copyright 2006 John Wiley & Sons, Inc.14-53 Remedies for Overloads 1.Eliminate unnecessary requirements 2.Reroute jobs to alternative machines or work centers 3.Split lots between two or more machines 4.Increase normal capacity 5.Subcontract 6.Increase the efficiency of the operation 7.Push work back to later time periods 8.Revise master schedule

54. Copyright 2006 John Wiley & Sons, Inc.14-54 Adjusted Load Profile Hours of capacity 123456123456123456123456 Time (weeks) Normalcapacity 120 120 – 110 110 – 100 100 – 90 90 – 80 80 – 70 70 – 60 60 – 50 50 – 40 40 – 30 30 – 20 20 – 10 10 – 0 0 – Pull ahead Push back Overtime Work an extra shift

55. Copyright 2006 John Wiley & Sons, Inc.14-55 Relaxing MRP Assumptions Material is not always the constraining resource Material is not always the constraining resource Lead times can vary Lead times can vary Not every transaction needs to be recorded Not every transaction needs to be recorded JIT can be used with MRP JIT can be used with MRP The shop floor may require a more sophisticated scheduling system The shop floor may require a more sophisticated scheduling system

56. Copyright 2006 John Wiley & Sons, Inc.14-56 Manufacturing Resource Planning (MRP II)

57. Copyright 2006 John Wiley & Sons, Inc.14-57 Manufacturing Resource Planning (MRP II) Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes Figure 12.11

58. Copyright 2006 John Wiley & Sons, Inc.14-58 Manufacturing Resource Planning (MRP II) Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes Figure 12.11 Forecast Aggregate production plan Customer orders Feasible? Master production schedule No Yes

59. Copyright 2006 John Wiley & Sons, Inc.14-59 Manufacturing Resource Planning (MRP II) Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes Figure 12.11 Master production schedule Material requirements planning Capacity requirements planning Feasible? Yes No

60. Copyright 2006 John Wiley & Sons, Inc.14-60 Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes Manufacturing Resource Planning (MRP II) Figure 12.11 Inventory Shop floor control Manufacture Purchase orders Work orders

61. Copyright 2006 John Wiley & Sons, Inc.14-61 Manufacturing Resource Planning (MRP II) Forecast Aggregate production plan Customer orders Feasible? Master production schedule Material requirements planning Capacity requirements planning Feasible? Purchase orders Work orders Inventory Shop floor control Manufacture No Yes Feedback No Yes Figure 12.11

62. Copyright 2006 John Wiley & Sons, Inc.14-62 Reducing Over-load Conditions   Eliminating unnecessary requirements   Rerouting jobs to alternative machines, workers, or work centers   Splitting lots between two or more machines   Increasing normal capacity   Subcontracting   Increasing efficiency of the operation   Pushing work back to later time periods   Revising master schedule

63. Copyright 2006 John Wiley & Sons, Inc.14-63 Initial Load Profile Hours of capacity 123456123456123456123456 Time (weeks) Normalcapacity 120 120 – 110 110 – 100 100 – 90 90 – 80 80 – 70 70 – 60 60 – 50 50 – 40 40 – 30 30 – 20 20 – 10 10 – 0 0 –

64. Copyright 2006 John Wiley & Sons, Inc.14-64 Adjusted Load Profile Hours of capacity 123456123456123456123456 Time (weeks) Normalcapacity 120 120 – 110 110 – 100 100 – 90 90 – 80 80 – 70 70 – 60 60 – 50 50 – 40 40 – 30 30 – 20 20 – 10 10 – 0 0 – Pull ahead Push back Overtime Work an extra shift

65. Copyright 2006 John Wiley & Sons, Inc.14-65 Relaxing MRP Assumptions   Material is not always the most constraining resource   Lead times can vary   Not every transaction needs to be recorded   Shop floor may require a more sophisticated scheduling system   Scheduling in advance may not be appropriate for on-demand production.

66. Copyright 2006 John Wiley & Sons, Inc.14-66 Enterprise Resource Planning (ERP)   Starts on page 665   Software that organizes and manages a company’s business processes by sharing information across functional areas integrating business processes facilitating customer interaction providing benefit to global companies

67. Copyright 2006 John Wiley & Sons, Inc.14-67 ERP and MRP  First came MRP around 1970 Thanks to George Plossl, Oliver Wight, Joseph Orlicki Thanks to George Plossl, Oliver Wight, Joseph Orlicki MRP is Material Requirements Planning MRP is Material Requirements Planning  Then came MRP II around 1980 MRP II is Manufacturing Resource Planning MRP II is Manufacturing Resource Planning  Then came ERP around 1990  Today, its ERP II

68. Copyright 2006 John Wiley & Sons, Inc.14-68 Evolution of ERP II

69. Copyright 2006 John Wiley & Sons, Inc.14-69 A lesson in Information Architecture  First, we need a problem-solving methodology

70. Copyright 2006 John Wiley & Sons, Inc.14-70 Goldratt Methodology (Thinking Process)  What to change??  What to change to??  How to cause the change??

71. Copyright 2006 John Wiley & Sons, Inc.14-71 WHAT TO CHANGE CIRCA 1993: Problems with the Mainframe Architecture  Poor data visibility  Long lead times on maintenance, modifications to legacy software (36 months)  No GUI interfaces

72. Copyright 2006 John Wiley & Sons, Inc.14-72 More problems  New software apps were expensive and time consuming to develop  Mainframes were computational bottlenecks  Desktop PCs sat idle 99% of the time

73. Copyright 2006 John Wiley & Sons, Inc.14-73 Components of any Software Application

74. Copyright 2006 John Wiley & Sons, Inc.14-74 Components in brief

75. Copyright 2006 John Wiley & Sons, Inc.14-75 Mainframe Architecture

76. Copyright 2006 John Wiley & Sons, Inc.14-76 Goldratt: We will build a tree  Called a current reality tree  Begin by identifying the UNDESIRABLE EFFECTS the stakeholders are experiencing  The basic tree relationship:  IF {box a}, then {box b}.

77. Copyright 2006 John Wiley & Sons, Inc.14-77 Only the centralized MIS shop could do maintenance and new development work Mainframes were computational bottlenecks Each application had to reside entirely on the mainframe Many new applications were being built Change requests for existing apps were frequent and increasing Centralized MIS shop backlogs were extending out to 36 months Competitive and customer environments are changing rapidly Budgets for MIS shops were stretched to their limits

78. Copyright 2006 John Wiley & Sons, Inc.14-78 Sales cannot see what is happening in accounts receivable Sales cannot track customer orders through the manufacturing/distribution process Information visibility across the enterprise is impossible Independent data pools are created that cannot be integrated Islands of automation are created End users develop their own independent applications that run on departmental PC’s Centralized MIS shops have lead times of 36 months or longer Centralized mainframes are computing bottlenecks

79. Copyright 2006 John Wiley & Sons, Inc.14-79 WHAT TO CHANGE TO:  An architecture in which the data are totally integrated  An architecture in which most of the processing is not done on mainframes  Decentralization of MIS  What architecture was this???

80. Copyright 2006 John Wiley & Sons, Inc.14-80 HOW TO CAUSE THE CHANGE:  ERP implementation  Solves the problems identified above

81. Copyright 2006 John Wiley & Sons, Inc.14-81 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

82. Copyright 2006 John Wiley & Sons, Inc.14-82 ERP Modules

83. Copyright 2006 John Wiley & Sons, Inc.14-83 Selected Enterprise Software Vendors

84. Copyright 2006 John Wiley & Sons, Inc.14-84 ERP Implementation   Analyze business processes   Choose modules to implement Which processes have the biggest impact on customer relations? Which processes have the biggest impact on customer relations? Which process would benefit the most from integration? Which process would benefit the most from integration? Which processes should be standardized? Which processes should be standardized?   Align level of sophistication   Finalize delivery and access   Link with external partners

85. Copyright 2006 John Wiley & Sons, Inc.14-85 Customer Relationship Management (CRM)   Software that Plans and executes business processes Involves customer interaction Involves customer interaction Changes focus from managing products to managing customers Changes focus from managing products to managing customers Analyzes point-of-sale data for patterns used to predict future behavior Analyzes point-of-sale data for patterns used to predict future behavior

86. Copyright 2006 John Wiley & Sons, Inc.14-86 Supply Chain Management   Software that plans and executes business processes related to supply chains   Includes Supply chain planning Supply chain planning Supply chain execution Supply chain execution Supplier relationships Supplier relationships  Distinctions between ERP and SCM are becoming increasingly blurred

87. Copyright 2006 John Wiley & Sons, Inc.14-87 Collaborative Product Commerce (CPC)   Software that Incorporates new product design and development and product life cycle management 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 Integrates customers and suppliers in the design process though the entire product life cycle

88. Copyright 2006 John Wiley & Sons, Inc.14-88 ERP and Software Systems 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 Source: Adapted from George Shaw, “Building the Lean Enterprise: Reducing Time to Market.” Industry Week (Webcast, June 14, 2001), http://www.industryweek.com/Events/TimeToMarket/ pent0614.html

89. Copyright 2006 John Wiley & Sons, Inc.14-89 Connectivity   Application programming interfaces (APIs) give other programs well-defined ways of speaking to them  Enterprise Application Integration (EAI) solutions  EDI is being replaced by XML

90. Copyright 2006 John Wiley & Sons, Inc.14-90 Copyright 2006 John Wiley & Sons, Inc. All rights reserved. Reproduction or translation of this work beyond that permitted in section 117 of the 1976 United States Copyright Act without express permission of the copyright owner is unlawful. Request for further information should be addressed to the Permission Department, John Wiley & Sons, Inc. The purchaser may make back-up copies for his/her own use only and not for distribution or resale. The Publisher assumes no responsibility for errors, omissions, or damages caused by the use of these programs or from the use of the information herein.