lecture 5. enterprise resource planning systems
DESCRIPTION
Lecture 5. Enterprise Resource Planning Systems. Informatics in Logistics Management. Lecturer: Prof. Anatoly Sachenko. Lecture Overview. Main Definitions and Approaches MRP Concept CIM and CALS Enterprise Resource Planning KANBAN System Optimized Production Technology - PowerPoint PPT PresentationTRANSCRIPT
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Lecture 5. Enterprise Resource Planning Systems
Lecturer:
Prof. Anatoly Sachenko
Informatics in Logistics Management
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Lecture OverviewMain Definitions and ApproachesMRP ConceptCIM and CALSEnterprise Resource PlanningKANBAN SystemOptimized Production TechnologyLean Production Concept
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Main Definitions and Approaches
Logistics, for a long time, was confined to the execution of tasks such as :
transport, storage, handling, conditioning, have moved upstairs over the last twenty years and now represents
a strategic function. Logistics & strategic feasibility:
IndustrialPurchasingCommercial
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Main Definitions and Approaches
De facto, no current corporate strategy must be undertaken without having consulted Logistics:whether upstream with industrial strategies or
purchasing strategiesWhether downstream with distribution strategies
which are now, under the impulsion of the OMC, one a global scale.
These new strategies indeed require logistics at a more complex level in terms of customer techniques and transport.
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Main Definitions and Approaches
Logistics in constant rebuilding
Upstream logistics rebuilding downstream logistics rebuilding
Production unit specializationProduction delocalization Postponement cross docking «worldwide» OEM localization
Reduction of products life cycle PromotionsCross dockingE-commerce et « last mile »Global tradingLogistics & Marketing
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Main Definitions and Approaches
Consumption and production are more and more Consumption and production are more and more geographically separated (delocalization)geographically separated (delocalization)
Regions are specialized in the commodities they Regions are specialized in the commodities they can produce more efficiently (specialization)can produce more efficiently (specialization)
Logistics activities provide the bridge between Logistics activities provide the bridge between production and market locationsproduction and market locations
Permanent changing business logistics practices Permanent changing business logistics practices due to:due to:
Growing internationalization and globalizationGrowing internationalization and globalization Shifting toward more service-oriented economiesShifting toward more service-oriented economies Computer software available to assist in solving Computer software available to assist in solving
practical-size problemspractical-size problems
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Manufacturing Resource Planning Definition and Goal
Manufacturing Resource Planning (MRP II) is defined by APICS (American Production and Inventory Control Society) as a method for the effective planning of all resources of a manufacturing company
It is a total company management concept for using human resources more productively
The goal of MRPII is to provide consistent data to all players in the manufacturing process as the product moves through the production line
This is not exclusively a SW function, but a marriage of people skills, dedication to data base accuracy, and computer resources
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Manufacturing Resource Planning – 16 Group Functions
Sales and Operation Planning Demand Management Master Productiol1 Scheduling Material Requirement Planning and Вill of Materials Inventory Transaction Subsystem Scheduled Receipts Subsystem Shop Flow Control Capacity Requirement Planning Input/output control Purchasing Distribution Resource Planning Tooling P1anning and Control Financial Planning Simulation Performance Measurement
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Manufacturing Resource Planning – Traits
MRP II systems have been implemented in most manufacturing industries
Some industries need specialized functions e.g. lot traceability in regulated manufacturing such as pharmaceutics or food
Other industries can afford to disregard facilities required by others
Capacity planning is the key to success in this as in many industries, and
it is in those that MRP II is less appropriate.
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MRP and MRPII: History & Comparison
MRPII systems begin with MRP, Material Requirements Planning – the end of 1960’s
Manufacturing Resource Planning (MRPII) – the end of 70’s-begin of 80’s and MRP are both incremental info integration business process strategies
that are implemented using HW and modular SW applications linked to a central database that stores and delivers business data and information
MRP is dealing primarily with manufacturing materials purchasing,
while MRPII is concerned with the coordination of the entire manufacturing production, including materials, finance, and human relations
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MRP and MRPII
MRP allows for the input of sales forecasts from sales and marketing
MRP and MRPII systems draw on a Master Production Schedule, the break down of specific plans for each product on a line
An MRPII output is a final labor and machine schedule
Data about the cost of production, machine time, labor time and materials used, as well as final production numbers, is provided from the MRPII system to accounting and finance
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Manufacturing Resource Planning Frame
Materialrequirements
planning
Planned order
releases
Work orders
Purchase orders
Rescheduling notices
Itemmaster
file
Productstructure
file
Master production schedule
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Manufacturing Resource Planning Algorithm
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
NoNo
YesYes
FeedbackFeedback
NoNo
YesYes
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Manufacturing Resource Planning Algorithm
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
NoNo
YesYes
FeedbackFeedback
NoNo
YesYesForecast Aggregate
production plan
Customer orders
Feasible?
Master production schedule
NoNo
YesYes
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Manufacturing Resource Planning Algorithm
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
NoNo
YesYes
FeedbackFeedback
NoNo
YesYes
Master production schedule
Material requirements planning
Capacity requirements planning
Feasible?
YesYes
NoNo
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Manufacturing Resource Planning Algorithm
Forecast Aggregate productio
n plan
Customer orders
Feasible?
Master production schedule
Material requirements planning
Capacity requirements
planning
Feasible?
Purchase orders
Work orders
Inventory Shop floor control
Manufacture
NoNo
YesYesFeedbackFeedback
NoNo
YesYes
Inventory Shop floor control
Manufacture
Purchase orders
Work orders
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Manufacturing Resource Planning -Benefit
MRP II systems can provide: Better control of inventories Improved scheduling Productive relationships with suppliers
For Design / Engineering: Improved design control Better quality and quality control
For Financial and Costing: Reduced working capital for inventory Improved cash flow through quicker deliveries Accurate inventory records
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Manufacturing Resource Planning – Criticism
Some authors argue that MRP and MRP II are actually sets of heuristics
Better production plans could be obtained by optimization over more powerful mathematical SW models, usually integer programming models
While they acknowledge that the use of heuristics, like those prescribed by MRP and MRP II,were necessary in the past due to lack of
computational power to solve complex optimization models, this is no longer true
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CIM
Computer Integrated Manufacturing – CIM appeared in the beginning of 1980’s
CIM is the manufacturing approach of using computers to control the entire production process
This integration allows individual processes to exchange info with each other and initiate actions
Through the integration of computers, manufacturing can be faster and less error-prone, although the main advantage is the ability to create automated manufacturing processes
Typically CIM relies on closed-loop control processes, based on real-time input from sensors
It is also known as flexible design and manufacturing
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CALS
CALS - Continuous Acquisition and Life-cycle Support is a DOD initiative for electronically capturing military documentation and linking related info
The initiative has developed a number of standards for the exchange of e-data with commercial suppliers
It was often referred to as simply "CALS” which have been adopted by several other allied nations
CALS includes standards for electronic data interchange, electronic technical documentation, and guidelines for process improvement
CALS was known formerly as Computer-aided Acquisition and Logistic Support
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Enterprise Resource Planning - Definitions Enterprise Resource Planning (ERP) is an integrated
computer-based system used to manage internal and external resources, including tangible assets, financial resources, materials, and human resources
Its purpose is to facilitate the flow of information between all business processes and functions inside the organization and provide its optimization in sense of time and resources
Built on a centralized database and normally utilizing a common computing platform, ERP systems consolidate all business operations into a uniform and enterprise-wide system environment
An ERP system can either reside on a centralized server or be distributed across modular HW & SW units that provide "services" and communicate on a local area network
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Enterprise Resource Planning – Evolution The initialize ERP was first employed by research and analysis
firm Gartner Group in 1990 as an extension of MRP (Material Requirements Planning-later Manufacturing Resource Planning and CIM (Computer Integrated Manufacturing)
While not supplanting these terms, it has come to represent a larger whole
It came into use as makers of MRP software started to develop software applications beyond the manufacturing arena
ERP systems now attempt to cover all core functions of an enterprise, regardless of the organization's business or charter
These systems can now be found in non-manufacturing businesses, non-profit organizations and governments
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Enterprise Management System within ERP Concept – Processes
Supply Chain Management-SCMAdvanced Planning and Scheduling - APSSale Force Automation – SFAStand Alone Configuration Engine – SACEFinite Resource Planning – EFPOLAP TechnologiesE-CommerceProduct Data Management - PDMDecision Support System
Main Task-to provide an optimization of those processes above
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ERP System - Software Package To be considered an ERP system, a software package
should have the following traits: Should be integrated and operate in real time with
no periodic batch updates. All applications should access one database to
prevent redundant data and multiple data definitions.
All modules should have the same look and feel. Users should be able to access any information in
the system without needing integration work on the part of the IS department.
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Enterprise Resource PlanningOrganizes and manages a company’s business
processes by sharing information across functional areas, andGiving the company an integrated real-time
view of its core processes, such as production, order processing, and inventory management
Connects with supply-chain and customer management applications
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ERP System Functional Structure
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ERP General Structure
Finance & Accounting
Sales & Marketing
Human Resources
Production & Materials
ManagementERP Data
Repository
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Enterprise Resource Planning - Implementation
Businesses have a wide scope of applications and processes throughout their functional units;
Producing ERP software systems that are typically complex and usually impose significant changes on staff work practices
Implementing ERP software is typically too complex for "in-house" skill, so it is desirable and highly advised to hire outside consultants who are professionally trained to implement these systems
This is typically the most cost effective wayThere are three types of services that may be
employed for - Consulting, Customization, Support
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Enterprise Resource Planning - Data Migration
Data migration is one of the most important activities in determining the success of an ERP implementation
The following are steps of a data migration strategy that can help with the success of an ERP implementation:Identifying the data to be migratedDetermining the timing of data migrationGenerating the data templatesFreezing the tools for data migrationDeciding on migration related setupsDeciding on data archiving
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Enterprise Resource Planning – ERP Systems Benefits
Centralize the data in one place Eliminates the problem of synchronizing changes between
multiple systems - consolidation of finance, marketing and sales, human resource, and manufacturing applications
Permits control of business processes that cross functional boundaries
Provides top-down view of the enterprise, real time information is available to management
anywhere, anytime to make proper decisions Reduces the risk of loss of sensitive data by consolidating
multiple permissions and security models into a single structure
Shorten production lead-time and delivery time Facilitating business learning, empowering, and building
common visions
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Enterprise Resource Planning - Disadvantages Customization of the ERP software is limited Re-engineering of business processes to fit the "industry
standard" prescribed by the ERP system may lead to a loss of competitive advantage.
ERP systems can be very expensive ERPs are often seen as too rigid and too difficult to adapt to
the specific workflow and business process of some companies. Many of the integrated links need high accuracy in other
applications to work effectively. Once a system is established, switching costs are very high for
any one of the partners. Resistance in sharing sensitive internal information between
departments can reduce the effectiveness of the software.
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ERP - in Market
ERP Systems: SAP (BPS, CRM, ERP, APS etc) Oracle (CRM, ERP, DBMS, SCM etc) Microsoft Dynamics (Nav и Ax) IFS Application JD Edwards Enterprise One BAAN Epicor/Scala
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KANBAN System - DefinitionKanban (or kamban in Hepburn Romanization -
kanji 看板 , katakana カンバン , meaning "signboard" or "billboard") is a concept related to Lean and Just-in-Time (JIT) production
According to Taiichi Ohno, the man credited with developing JIT, kanban is one means through which JIT is achieved
Kanban is not an inventory control systemRather, it is a scheduling system that tells you
what to produce, when to produce it, and how much to produce
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KANBAN and JIT - HistoryThe term kanban describes an embellished wooden or
metal sign often representing a trademark or sealKanban became an important part of the Japanese
mercantile scene in the 17th centuryIn the late 1940s, Toyota began studying supermarkets
with a view to applying store and shelf-stocking techniques to the factory floor
In 1950s the JIT-Just in time -is a production strategy that strives to improve a business return on investment by reducing in-process inventory and associated carrying costsJust-in-time production method is also called the
Toyota Production System1972-Kanban was firstly applied by corporation Toyota
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KANBAN System – Traits An important determinant of the success of production
scheduling based on "pushing" the demand is the quality of the demand forecast that can receive such "push"
Kanban, by contrast, is part of an approach of receiving the "pull" from the demandTherefore, the supply or production is determined
according to the actual demand of the customersIn contexts where supply time is lengthy and demand is
difficult to forecast, the best one can do is to respond quickly to observed demandThis is exactly what a kanban system can help with: It
is used as a demand signal that immediately propagates through the supply chain
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KANBAN System – Toyota’s Six Rules Do not send defective products to the
subsequent process The subsequent process comes to withdraw
only what is needed Produce only the exact quantity withdrawn
by the subsequent process Equalize production Kanban is a means to fine tuning Stabilize and rationalize the process
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KANBAN System – Three-bin SystemA simple example of the kanban system
implementation might be a "three-bin system" for the supplied parts (where there is no in-house manufacturing):one bin on the factory floor (demand point),one bin in the factory store, andone bin at the suppliers' store
The bins usually have a removable card that contains the product details and other relevant information — the kanban card
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KANBAN System
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KANBAN – E-kanban systemsMany manufacturers have implemented electronic
kanban systems or E-Kanban systemsE-Kanban systems help to eliminate common
problems such as manual entry errors and lost cardsE-Kanban systems can be integrated into ERPsystems
It allows for real-time demand signaling across the supply chain and improved visibility
There is implemented a TQM –Total Quality Management
Data pulled from E-Kanban systems can be used to optimize inventory levels Inventories cost per one produced car in 2000:
Toyota-$77, U.S. companies-about $500
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Optimized Production Technology - Definitions
Optimized production technology (OPT) is a planning and scheduling software It was developed by U.S. and Israel together, and
it’s known also as Israeli KANBAN The OPT philosophy and SW aim to achieve the stated goal of
manufacturing, which is to make money now and in the future Some expert consider the OPT as a computerized Kanban
which prevents bottlenecks in a chain “supply-manufacturing-sale”, and
in contrast Kanban itself allows to delete the existing already bottlenecks
The philosophy of OPT was first expounded by Dr Eliyahu Goldratt in his book The Goal (1984) Goldratt introduced three new measures that he claimed
are needed to assist in decision‐making at the operational level in a manufacturing company
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OPT Technology - Three Measures The three measures are in a form that can be used as a
guide to operational decision‐makingIt is reasonable to ask a foreman to consider whether
running overtime, which will certainly increase operating expenses, will also increase throughput
These three measures can be shown to have direct impacts on the traditional measures of business performance, namely, profit, return on investment, and cash flow
Ideal situation would therefore be to schedule a factory in such a way that throughput is increased while, simultaneously, operating expenses and inventory are reduced
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OPT Technology - DataModels in the OPT system have two major
components: dynamic and static dataThe dynamic data include orders, inventories, and
open purchase ordersThe static data include the bill of materials,
routings, and resource listingsAll these data are usually to be found on the
database of a manufacturing resources planning (MRPII) system
The OPT modeling language is flexible enough to permit quite complicated operations to be represented
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Lean Production ConceptLean manufacturing, lean enterprise, or lean production,
often simply, "Lean," is a production practice that considers the expenditure of resources for any goal other than the creation of value for the end customer to be wasteful
Working from the perspective of the customer who consumes a product or service, "value" is defined as any action that a customer would be willing to pay for
Essentially, Lean is centered on preserving value with less work
Lean manufacturing is a management philosophy derived mostly from the Toyota - Toyota Production System (TPS) identified as "Lean" only in the 1990s
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Lean Goals Improve quality: To stay competitive in today's marketplace, a
company must understand its customers' wants and needs and design processes to meet their expectations and requirements
Eliminate waste: Waste is any activity that consumes time, resources, or space but does not add any value to the product or service
Reduce time: Reducing the time it takes to finish an activity from start to finish is one of the most effective ways to eliminate waste and lower costs
Reduce total costs: To minimize cost, a company must produce only to customer demand Overproduction increases a company’s inventory costs
because of storage needs.
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The strategic elements of LeanLean as a fixed state or goal (Being Lean)Lean as a continuous change process (Becoming Lean)Lean as a set of tools or methods (Doing Lean/Toolbox
Lean)Lean as a philosophy (Lean thinking)
The following steps to achieve lean systemsDesign a simple manufacturing systemRecognize that there is always room for improvementContinuously improve the lean manufacturing system
design
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Design a Simple Manufacturing System
A fundamental principle of lean manufacturing is demand-based flow manufacturing
In this type of production setting, inventory is only pulled through each production center when it is needed to meet a customer's order
The benefits of this goal include:decreased cycle timeless inventoryincreased productivityincreased capital equipment utilization
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Chronology of ERP’s Concepts