Transcript O`Brien MIS, 6th Ed.

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Informatics in Logistics
Management
Lecture 5. Enterprise Resource
Planning Systems
Lecturer:
Prof. Anatoly Sachenko
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Lecture Overview
Main
Definitions and Approaches
MRP Concept
CIM and CALS
Enterprise Resource Planning
KANBAN System
Optimized Production Technology
Lean 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:
 Industrial
 Purchasing
 Commercial
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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 strategies
 Whether 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 specialization
Production delocalization
Postponement
cross docking
 «worldwide» OEM
localization
Reduction of products life
cycle
Promotions
Cross docking
E-commerce et « last mile »
Global trading
Logistics & Marketing
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Main Definitions and Approaches
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Consumption and production are more and more
geographically separated (delocalization)
Regions are specialized in the commodities they
can produce more efficiently (specialization)
Logistics activities provide the bridge between
production and market locations
Permanent changing business logistics practices
due to:
Growing internationalization and globalization
Shifting toward more service-oriented economies
Computer software available to assist in solving
practical-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
Master
production
schedule
Product
structure
file
Material
requirements
planning
Item
master
file
Planned
order
releases
Work
orders
Purchase
orders
Rescheduling
notices
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Manufacturing Resource Planning Algorithm
Customer orders
Aggregate production
plan
Forecast
No
Feasible?
Yes
Master production schedule
Material requirements planning
Capacity requirements planning
No
Feasible?
Feedback
Yes
Purchase orders
Work orders
Inventory
Shop floor control
Manufacture
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Manufacturing Resource Planning Algorithm
No
Aggregate
production
plan
Forecast
Customer
orders
Aggregate
production
plan
Forecast
Feasible?
Customer
orders
Yes
Master production
schedule
Material requirements
planning
No
Capacity requirements
planning
Feasible?
No
Feasible?
Feedback
Yes
Master
production
schedule
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
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Manufacturing Resource Planning Algorithm
Master production
schedule
Customer
orders
Aggregate
production
plan
Forecast
No
Feasible?
Yes
Master production
schedule
Material requirements
planning
Material requirements
planning
Capacity requirements
planning
Capacity requirements
planning
No
Feasible?
Feedback
Yes
No
Feasible?
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
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Manufacturing Resource Planning Algorithm
Customer
orders
Aggregate
productio
n plan
Forecast
No
Feasible?
Yes
Purchase
orders
Master
production
schedule
Work
orders
Material requirements
planning
Capacity
requirements
planning
Shop floor
control
Inventory
No
Feasible?
Feedback
Yes
Purchase
orders
Work
orders
Inventory
Shop floor
control
Manufacture
Manufacture
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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
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
 Computer
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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-SCM
Advanced Planning and Scheduling - APS
Sale Force Automation – SFA
Stand Alone Configuration Engine – SACE
Finite Resource Planning – EFP
OLAP Technologies
E-Commerce
Product Data Management - PDM
Decision 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 Planning
Organizes
and manages a company’s business
processes by sharing information across
functional areas, and
Giving 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
ERP Data
Repository
Human
Resources
Production &
Materials
Management
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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 way
 There 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 migrated
 Determining the timing of data migration
 Generating the data templates
 Freezing the tools for data migration
 Deciding on migration related setups
 Deciding 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 - Definition
Kanban
(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 system
Rather, 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 - History
 The
term kanban describes an embellished wooden or
metal sign often representing a trademark or seal
 Kanban became an important part of the Japanese
mercantile scene in the 17th century
 In 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
costs
 Just-in-time production method is also called the
Toyota Production System
 1972-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 demand
 Therefore, the supply or production is determined
according to the actual demand of the customers
 In contexts where supply time is lengthy and demand is
difficult to forecast, the best one can do is to respond
quickly to observed demand
 This 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 System
A
simple example of the kanban system
implementation might be a "three-bin system"
for the supplied parts (where there is no inhouse manufacturing):
one bin on the factory floor (demand point),
one bin in the factory store, and
one 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 systems
 Many
manufacturers have implemented electronic
kanban systems or E-Kanban systems
 E-Kanban systems help to eliminate common
problems such as manual entry errors and lost cards
 E-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 “supplymanufacturing-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‐making
 It 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 - Data
Models
in the OPT system have two major
components: dynamic and static data
The dynamic data include orders, inventories, and
open purchase orders
The static data include the bill of materials,
routings, and resource listings
All 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 Concept
 Lean
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.
Lean Strategy and Steps to Achieve Lean
Systems
 The
strategic elements of Lean
 Lean 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 systems
 Design a simple manufacturing system
 Recognize that there is always room for improvement
 Continuously 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 time
less inventory
increased productivity
increased capital equipment utilization
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Chronology of ERP’s Concepts