Transcript Procurement Logistics

Production Logistics and ERP
Chapter 6
Production Logistics
• Increased competitive pressures on production
processes due to:
– Shorter product development times
– Focus on product quality
– Shorter product life cycles
• Production Logistics is SAP approach to
production planning and control
– Integrated with other Value chains in R/3 such as
procurement and warehousing and SD.
Production Logistics (cont.)
• Builds upon the integration of MRP II
– Provides specific support for TQM and Kanban
material management processes
– More customer centric than MRP II with
integration of sales information
Production Logistics (cont)
• R/3 Org. Elements
–
–
–
–
Plant
Storage Location
Work center
MRP area
• R/3 Business Objects
–
–
–
–
Material master
Production order
BOM
Sales & Operations
plan
– Master recipe
Production Logistics Scenarios
•
•
•
•
•
Sales-order related production
Production by lot size
Sales-order related repetitive manufacturing
Project-oriented make-to-order production
Production replenishment
Production Logistics VC
Capacity
Planning
Production
Order
Creation
Production
Order Prelim
Costing
Material
Staging
Production
Order
Execution
Inspection
Check by
lot
Quality
Inspection
After production
Defects
Recording
Inspection
Sales
Point
Support
Related to process
Capacity
Planning
QM cost
input
Information
System
Production by Lot Size Scenario
1. Processing of Sales Plan
2. Determining quantities
and dates
a. Purchase requisitions
created
3. Single Item MPS
4. Creation, release and
execution of production
order
5. Goods issue
6. Completions of PO
confirmation
7. Goods receipt
8. Settlement of PO
Production By Lot Size: Plan Processing
Profitability
Analysis w/static
Standard cost
Sales quantity
Copied from
CO-PA
Processing of
Sales and operation
planning
Demand
Program is to
Be created
Sales plan
Is created
V
V
Demand
Management
Demand
Program
edited
Production
Plan is
created
Production By Lot Size: Demand Management
Single
Item MPS
V
Purchase
Requisition
created
Planned
Orders
created
^
Processing
Order
Stock
arrived
Material
Requests
Management
for
quotation
Of consignment
sent
tostocks
vendors
Planned
Order
conversion
Internal
procurement
With stock
support
Production By Lot Size: Creating Production Order
Con. Of plan
Order to prod.
Order is started
Creation of
Production
order
Production
Order is
created
Release of
Production
order
V
Trans. Req.
generated
Prod. Order
Is released
Inspection lot
Created for
Prod order
Quality
Management
In production
Production By Lot Size: Execute Production Order
Execution of
Production order
^
Material is
produced
Material issue for
Production order
Is to be posted
Production order to
Be confirmed
Goods issue
For production
orders
Completion
Confirmation of
Prod. order
Prod. Order
Is completely
confirmed
V
Goods issue is
Posted for
Prod. order
Actual costs
Updated in
Prod. order
Time management
processing
Goods receipt
To be posted
Goods receipt
processing
Prod. Order
Status is
Fully delivered
Settlement of
Production
order
Other Production Scenarios
• Repetitive
manufacturing
• Make-to-order
production
• Process manufacturing
• Project-related
“Engineer to order”
• Quality management
for goods receipt from
production
Autodesk Inc. Case
• $400M Company, growing at 20%/year
• Ten sales offices in US and 5 development centers in US and
Switzerland with 1900 people
• Sells famous CAD and MM software
• Goal was to maintain growth rate and ship products within 1
hour of receiving customer order
– existing system was stretched by global growth and couldn’t
handle multiple order codes; operating info was not available
to executives for decision making
– Used R/3 to redesign business model and 25 major business
processes, including 240 subprocesses
– Re-engineered order process for automatic pricing; reduced
number of order codes
– Can track sales in real time along with new product
evaluation copies and manufacturing costs around the world
– Future plans were to extend the software to Europe and Asia
regions, remote access, allow for product downloading
A Normal Company’s Systems
• Fitter Snacker, Inc.
– Founded in the ’50s
– A small manufacturer of healthy snack bars
• NRG-A and NRB-B bars
– Two divisions; Wholesale and Direct Sales
Problems with Fitter Snacker’s
Systems:
• Sources:
– Three unintegrated systems
• Sales Order System
• Warehouse System
• Accounting System
– Manual handling of transactions
– Information not available in “real time”
Fitter Snacker’s Systems
Sales
Order
Quote
Warehouse
Pick,
Pack and
Ship
Sales
Fitter Snacker’s
Sales Process
Receiving
Returns
Accounting
Payment
Invoice
Production and Materials
Management at Fitter Snacker
• Must answer the following questions:
– How much of each bar should be produced?
– What quantities of raw materials should be
ordered?
– When should raw materials be ordered
General Approaches to
Production
• Make-to-stock: Items produced in
anticipation of orders
• Make-to-order: Items produced to meet
specific customer orders
• Assemble to order: Final product assembled
from make-to-stock items
Mixer
Mixer
Snack Bar Line
Form
Mixer
Mixer
Bake
Pack
Finished Goods Warehouse
Raw Material Warehouse
Fitter Snacker Manufacturing
Process
Fitter Snacker Production
Problems
• Communications
– Marketing does not share data with production (sales
promotions and large, unexpected orders)
• Inventory
– True inventory status not known
– No real-time data on actual sales
• Accounting and Purchasing
– Difficulty forecasting raw material and labor costs
– Adjusting accounts for actual vs. standard costs time
consuming and done infrequently
Production Planning Process
• Work from sales forecast to create aggregate
production plan
• Break down aggregate plan into more
specific plans
• Use production plan to determine raw
material requirements
SAP R/3 Approach to Production
Planning
Sales Forecasting
Sales and Operations Planning
Demand Management
Detailed
Scheduling
MRP
Production
Purchasing
Sales Forecasting
Sales Forecasting
Previous Year (cases)
Growth:
3.0%
Base Projection (cases)
Promotion (cases)
Sales Forecast (cases)
Jan.
5734
172
5906
Feb.
5823
175
5998
March
5884
177
6061
April
6134
184
6318
May
6287
189
6476
5906
5998
6061
6318
6476
June
6435
193
6628
500
7128
Sales and Operations Planning
Sales and Operations Planning
1) Sales Forecast
2) Production Plan
3) Stock Level
4) Working Days
5) Capacity (Shipping Cases)
6) Utilization
7) NRG-A (cases)
70.0%
8) NRG-B (cases)
30.0%
Jan.
5906
5906
0
22
7333
81%
4134
1772
Feb.
5998
5998
0
20
6667
90%
4199
1799
March
6061
6061
0
22
7333
83%
4243
1818
April
6318
6318
0
21
7000
90%
4423
1895
May
6476
6900
424
23
7667
90%
4830
2070
June
7128
6700
-4
21
7000
96%
4690
2010
Sales and Operations Planning
Sales and Operations Planning
Sales and Operations Planning
Sales and Operations Planning
Demand Management
Demand Management
Monthly Demand NRG-A
NRG-B
Working Days in Week
Working Days in Month
MPS
NRG-A
Weekly Demand NRG-B
Demand Management
Monthly Demand NRG-A
NRG-B
Working Days in Month
MPS
NRG-A
Daily Demand
NRG-B
Week 1 Week 2 Week 3 Week 4
Week 5
1/2 - 1/5 1/8 - 1/12 1/15 - 1/19 1/22 - 1/26 1/29 - 1/31 2/1 - 2/2
4134
4134
4134
4134
4134
4198
1772
1772
1772
1772
1772
1799
4
5
5
5
3
2
22
22
22
22
22
20
752
940
940
940
984
322
403
403
403
422
Jan 2
4134
1772
22
188
81
Jan 3
4134
1772
22
188
81
Jan 4
4134
1772
22
188
81
Jan 5
4134
1772
22
188
81
Jan 6
4134
1772
22
188
81
Demand Management
• Calculation for Week 5
4,134 cases in Jan. x 3 days in week 5 ÷ 22 working days in Jan.
= 563.7 cases
4,1984 cases in Feb. x 3 days in week 5 ÷ 20 working days in Feb.
= 419.8 cases
Total = 983.5 cases
MRP
• Bill of Material
Ingredient
Oats (lb)
Wheat germ (lb)
Cinnamon (lb)
Nutmeg (lb)
Cloves (lb)
Honey (gal)
Canola Oil (gal)
Vit./Min. Powder (lb)
Carob Chips (lb)
Raisins (lb)
Protein Powder (lb)
Hazelnuts (lb)
Dates (lb)
Quantity
NRG-A
NRG-B
300
250
50
50
5
5
2
2
1
1
10
10
7
7
5
5
50
50
50
30
70
MRP
• MRP Record
Oats Lead Time = 2 weeks
MPS
NRG-A
(cases)
NRG-B
MPS
NRG-A
(500 lb. batches)
NRG-B
Gross Requirements (lb)
Scheduled Receipts
Planned Receipts
On Hand
11,650
Planned Orders
Week 1
752
322
108
46
44,070
44,000
11,580
88,000
Week 2
940
403
135
58
55,087
44,000
493
44,000
Week 3
940
403
135
58
55,087
Week 4
940
403
135
58
55,087
Week 5
984
422
142
61
57,667
88,000
33,406
44,000
44,000
22,319
44,000
8,652
MRP List in SAP R/3
Stock Requirements List in SAP
R/3
Detailed Production Scheduling
• Snack bar production line is bottleneck
• Scheduling of production line is key to
determining detailed production
schedule
Detailed Production Scheduling
• Length of production runs
– Longer runs reduces cost of setups
– Longer runs increase capacity utilization
– Shorter runs reduces cost of inventory
Providing Production Data to
Accounting
• Production data does not get entered into an
ERP system directly
– Many methods of gathering shop floor data are
available
– ERP allows shop floor data to be collected once
for production and accounting purposes, and
data is consistent in both areas
ERP in Supply Chain
Management
Goods
Supplier
Information
$
$
$
Goods
Goods
Goods
Manufacturer
Information
Wholesaler
Information
$
Goods
Retailer
Information
Customer
Raw Materials
$
Information
Supply Chain Management and
ERP
• ERP not required for Supply Chain
Management (SCM)
• ERP can facilitate sharing information in
real time
• Use of internet can reduce communication
costs
Supply Chain Metrics
• Total Supply Chain
– Cash-to-cash cycle time: Time from paying for
raw materials to the time when cash is collected
from the customer
– Total supply chain costs
Supply Chain Metrics
• Buyer-Supplier
– Initial fill rate
– Initial-order lead-time
– On-time performance
Summary
• An ERP system can improve the efficiency
of the production and purchasing processes.
Efficiency begins with Marketing sharing
sales forecasts with Production, which
shares its production plans with Purchasing
Summary continued
• Production planning can be done without an
ERP system, but and ERP system allows
production to be linked to Purchasing and
Accounting. This data sharing increases a
company’s overall efficiency
Summary continued
• Companies are building on their ERP
systems to practice supply chain
management. In doing this, the company
looks at itself as part of a large process that
includes customers and suppliers. Using
information more efficiently along the
supply chain can significantly reduce costs.