0 erp best practices
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ERP Best Practices
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Session Objectives
Assess the performance of your ERP system
implementation
Learn how to improve the integration of your system
into the business
Examine how the application of ERP best practicescan improve the operation of your business
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ERP Implementation Objective
Implement system to capture
organizational knowledge,
processes and transactions anddisseminate that information
for the purpose of supporting
operations and value-added
activities throughout theextended enterprise.
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ERP Performance Outcomes
Quickened information response time
Increased interaction across the enterprise
Improved order management / order cycle
Decreased financial close cycle
Improved interaction with customers
Improved on-time delivery
Improved interaction with suppliers Lowered inventory levels
Improved cash management
Reduced direct operating costs
Source: ERP Survey of U.S. Manufacturing Firms; Mabert et al., PIM Journal, 2nd quarter 2000.
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ERP Implementation Reality
Average implementation time 17 to 26 months
Average total cost of ownership $15 million
2.5 years from project initiation to achievequantifiable benefits
Average median savings -$1.6 million
Source: Meta Group, 1999.
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Technology- Hardware- Software
- Network
Skills- Managerial
- Process Knowledge
- Technical Matter
Organization- Management Hierarchy
- Business Process Design
- Feedback & Control Mechanisms
- Communication Systems
System Integration Factors
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Agenda
Assessing ERP Performance
Ensuring Data Integrity Managing Variability
Protecting the Critical Path
Powering Decision-Making
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ERP Best Practices Chart
Pr
ocess
Innovation
Process Control
Level I
Level II
Level III
Level IV
Feedback and
control mechanisms
in place to ensure
data integrity
System detects
performance issues to
protect the critical path
and facilitate workflow
throughout the enterprise
Transforming data into
information to power
decision-making across
the extended enterprise
Capabilities established
to manage and control
sources of variability
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Agenda
Assessing ERP Performance
Ensuring Data Integrity Managing Variability
Protecting the Critical Path
Powering Decision-Making
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Monitor Transaction Reporting
Transaction Types
inventory receipts, issues, transfers, and adjustments
labor entries for operation reporting
invoice and payment processing
Includes inaccurate, late and missing transactions
negative inventory balance locations
labor variances
production receipt and material issue variances
Requires feedback and control mechanisms to notonly correct the errors, but also prevent them from
reoccurring
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Maintain Schedule Validity
Verify material and capacity availability before
releasing orders into production
Update shop order date and quantity fields to reflect
variances from plan based on actual production
Establish policy and procedures to control schedule
changes within the planning horizon
Establish policy and procedures for the acceptance ofnew customer orders into the schedule
Update available capacity by maintaining work
center calendars and utilization
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Verify Foundation Data
Foundation Data Sources Item Master
BOM / Route Master
Work Center Master Customer Master
Vendor Master
Knowledge repositories used as the basis for orders
and as a reference for communication throughout theextended enterprise
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Agenda
Assessing ERP Performance
Ensuring Data IntegrityManaging Variability
Protecting the Critical Path
Powering Decision-Making
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ERP Benefit Busters
Material Usage Variability
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Change Management Practices
Establish the who, what, when, where, and how on:
Capturing engineering changes and errors andupdating the bill of material and routing on a timely
basis
Adjusting the schedule to reflect production quantityand lead time variances
Updating standard machine capacities as capabilities
and product mix change Revising the shop calendar with planned downtime,
overtime, and / or extra shifts
Revising the production schedule for new orders or
changes to existing orders
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Responsiveness
Responsive companies have the ability to quicklyand efficiently respond to unexpected changes andvariability
Responsiveness can be improved by developing: Flexible processes
Supply chain relationships
Contingency plans alternate plans or business rules to handle common
situations
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Control Process Variance
Identify process planning / scheduling, shop floor execution, inventory,
shipping, accounts receivable, etc.
Determine out-of-control limits days past due for customer orders, shop orders, and
invoices, issue or receipt variances, inventory variances
Set goals, objectives, and priorities
Establish measurement system to detect out-of-control events
Apply continuous improvement techniques toidentify root cause effects and implement
corrective actions
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Closing the Loop
Feedback and control closes the loop betweenthe plan and everything that prevents
execution of the plan__
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Agenda
Assessing ERP Performance
Ensuring Data Integrity Managing Variability
Protecting the Critical Path
Powering Decision-Making
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Theory of Constraints Lessons
Solving local optima through process control willnot necessarily generate more throughput, i.e.money for the company
Business processes involved to complete a customerorder consist of a series of dependent steps referredto as the critical path
The critical path determines the rate of throughput
for the company
Protecting the critical path from delays will increasethe throughput of the company
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Business Process Flow
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Manage System Constraints
Identify bottleneck Physical constraint or policy constraint
Exploit it Improve capacity utilization Schedule the sequence of work Remove resource contentions Reengineer policies and procedures
Subordinate all other resources to it
Match non-bottleneck output to bottleneck Ensure support activities enhance rather than detract
from bottleneck productivity
Elevate it Add capacity
Go back
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Strengthen Linkages
Strengthen the linkages between steps inthe critical path
Facilitate workflow along the steps Analyze workflow
Design and evaluate solutions to improvethroughput and lower costs
Rules-based routing
Event-based notification
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Supply Chain Facts
Youre only as strong as your weakest link. Tight linkages with suppliers and customers are
just as important as tightly integrated internal
operations Information delays, inconsistent and infrequent
ordering, and poor communication in thesupply chain results in higher inventory andlower customer service levels
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Supply Chain Best Practices
Include supply chain partners in decision-makingprocess
Establish data exchange systems with supply chain
partners to ensure rapid dissemination of information Streamline procurement process using online suppliers,
trading communities, exchanges, and auction sites
Integrate business systems of supply chain partners
using XML or other data format BizTalk - WebPlan
Extend workflow analysis, rules-based routing, andevent-based notification throughout the supply chain
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Agenda
Assessing ERP Performance
Ensuring Data Integrity Managing Variability
Protecting the Critical Path
Powering Decision-Making
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Facilitate Communication
Breakdown barriers to access to information
Install LAN / WAN backbone
Provide data query and reporting tools
Use software collaboration tools
email, video conferencing, FTP, workgroup tools
Integrate front-office and back-office systems
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Improve Data Mining
The ERP database serves as a transactionbackbone--a repository of data that can beaccessed and manipulated to:
evaluate strategic marketing or financialopportunities
support process control and continuous
improvement efforts adjust tactical plan based on unplanned
events
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Enhance Analysis Tools
Data becomes a valuable resource onlywhen knowledge workers can deriveinformation from it to support businessdecisions.
Rapidly fading are the days where theelectronic spreadsheet will suffice as thestand-alone analysis tool for the business
manager More advanced tools are needed to
manage the complexity and scale ofthe current business environment
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ERP Best Practices Matrix
Level I:
Ensure Data Integrity Formalize Change Process
Improve Responsiveness
Control Process Variance
Process Control
P
rocessInnova
tion
Level II:
Manage Variability
Facilitate Communication
Improve Data Mining Enhance Analysis Tools
Level IV:
Power Decision-Making
Manage Constraints
Strengthen Linkages Integrate Supply Chain
Level III:
Protect Critical Path
Monitor Transactions
Maintain Schedule Validity
Verify Foundation Data
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