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Extending ERP

Extending ERP. Has ERP moved on?. Factors of change over medium term. ERP target is a moving target – changing needs In competition with stable system / long term return on investment What is the life cycle of an ERP type investment? Upgrade path of vendor may or may not be what’s required

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Extending ERP

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  1. Extending ERP Has ERP moved on?

  2. Factors of change over medium term • ERP target is a moving target – changing needs • In competition with stable system / long term return on investment • What is the life cycle of an ERP type investment? • Upgrade path of vendor may or may not be what’s required • To what extent is the package used “formative” in terms of what new directions are investigated?

  3. Time pressures • Acceleration in cycle time is sustained in some industries • New product development (design to MKT to Manufacturing) • Order to delivery time • Pressure to reduce OTD time to less than manufacturing time => manufacture to forecast / finish to order • Decoupling manufacturing and demand management • Manufacturing cycle times • Internal lead time • JIT planning backwards • But also optimising process => radical redesign of sites • Purchase planning no longer driven by work orders (too late!) • Distribution channels • Direct deliveries • Web based logistics • Outsourced logistics operations – Banta / Sercom

  4. Presure to reduce Costs • Constant since industries began • Margin for drastic reduction greatly reduced • Correlated with time pressure => do more with less • ERP cannot be left become a constraint • Productivity • Transaction cost / automation • Data collection • Visibility • Cost management / how much does everything cost? • Costing alternatives => outsourcing • ERP must have required features to support such arrangements

  5. Key ideas in Outsourcing • Outsource costly activities • Outsource non-core activities • Outsource labour intensive tasks • Outsource when scarce resource • Simplify capital / cash flow situation • Avoid when strategic dimension at stake

  6. Example:costlylabourintensivebut…

  7. Modern day outsourcing • No shame approach from both sides • Scope of outsourcing extends to virtual organisation => more activities are outsourced than insourced • Existing firm: vision of core activity reduced to minimum • New firm: creation of virtual firm • Provider: only goal is to be best go getter = solve any headache for a fee

  8. Customer service • Increase demand for variety / personalisation • Loss of economies of scale / demand planning problem increased • Problems solved by traditional ERP (repetitive orders )no longer relevant • Products attributes • “old type” ERP => different product code • New style “ERP” => understands notion of product attributes and provide seamless link to: • Materials • Costs • Processes • Support for greater differentiation • No extra cost • Design for maximising revenues (CRM)

  9. Globalisation • 24 / 7 / borderless, MNCs, networks etc… • Companies cannot be insular in their approach • Responsiveness • Changes to business rules and processes • How easy is it to change the ERP? • Managing exceptions • Being flexible in implementing local rules • Seamless coordination across sites (re run orders / schedule work etc…)

  10. Managing Exceptions • Supply exceptions • Raw materials did not arrive / are not up to scratch • How can you go ahead reagrdless? • Operational exceptions • Downtime / sub standard production / shortage of staff • How do you recover? • Demand exceptions • Customer changes / cancels / high prioritise an order at no notice • How can you face up?

  11. Reacting to exceptions • How fast can you identify them? • How thoroughly are they communicated to all who need to know? • What business rules are already in place to handle these exceptions? • Mechanistic decision making • How responsive systems are to application of these rules?

  12. impact • Effectiveness of response determines: • Can it be done? • How much it will cost? • Will you know the cost before you go ahead?

  13. Identifying exceptions • Early warning systems for missed deliveries / QA findings

  14. Communicating about Exceptions • Early warning to customers • Clearer understanding of outsourcing and procurement decisions • Better plant scheduling • Shop floor management – eg: better maintenance (preventive but not wasteful) • Warehouse management • Priorities • Optimisation • Automatic emails, mobile devices using “push” systems • Visibility on normally unconnected activities – HR or maintenance

  15. Business rules • For or against business rules • Looking to the future all the time is fine, but the past contains the answer to many questions => learning organisation • Best / most desirable practices • Incorporate into systems and processes throughout the firm

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