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216-781 216-576 Enterprise Planning in Supply Chain

216-781 216-576 Enterprise Planning in Supply Chain. Samar Mukhopadhyay Spring 2017. Chapter 1. Definition.

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216-781 216-576 Enterprise Planning in Supply Chain

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  1. 216-781216-576 Enterprise Planning inSupply Chain Samar Mukhopadhyay Spring 2017

  2. Chapter 1

  3. Definition An Enterprise Planning and Control system provides information and support enabling managers to efficiently direct the flow of material, manage the utilization of people and equipment, and respond to customer requirements by utilizing the capacity of suppliers, internal facilities, and, in some cases, customers.

  4. Manufacturing Planning and Control • MPC System is a part of the Enterprise planning and control system. • Consists of • Front End: Activities and systems for overall direction setting • Engine: Systems for detailed material and capacity planning • Back End: MPC execution systems

  5. Resource planning Sales and operations planning Demand management Enterprise Resource Planning (ERP) System Master production scheduling Front End Detailed capacity planning Detailed material planning Engine Material and capacity plans Shop-floor systems Supplier systems Back End Manufacturing Planning and Control System

  6. Short Term Support Activities There is a need for detailed scheduling of resources to meet production requirements. • Key Point - People working on the right things • The MPC system must track the use of resources, monitor execution results, and provide information to managers, customers, and suppliers

  7. Intermediate Term Support Activities

  8. Long Term Support Activities The system is responsible for providing information to determine: • The appropriate amount of capacity (including supplier capacity) to meet the market demands of the future. • Provide the appropriate mix of human resource capabilities, technology, and geographic locations.

  9. Matching MPC System with the Firm needs

  10. MPC Classification Schema Project Number of subparts MRP Just-in-time Repetitive Flow Seconds Minutes Days Weeks Months Time between successive units

  11. MPC Classification Schema • Flow (continuous production–chemical plants, food, etc.) • Repetitive (longer production cycles–automobiles) • Just-in-Time (shorter production cycles–TVs, personal computers) • MRP (management of complicated parts product–airplanes) • Project (unique, long duration–ships).

  12. Principles • The framework for the MPC is general, and all 3 phases must be performed, but specific applications must reflect particular firm conditions and objectives. • In supply chain environments, the MPC must coordinate the planning and control efforts. • MPC systems should support the strategy and tactics pursued by the company. • Different Manufacturing processes dictate the need for different MPC designs.

  13. Principles • The MPC should evolve to meet changing requirements in the market, technology, products, and processes. • The MPC should be comprehensive in supporting the management of all manufacturing resources. • An effective MPC can contribute to competitive performance by lowering costs and providing greater responsiveness to the market. • In firms that have an integrated ERP system and database, the MPC system should integrate with and support cross-functional planning through the ERP system.

  14. Chapter 1aEnterprise Resource Planning

  15. What is ERP? • A comprehensive software approach to support decisions concurrent with planning and controlling the business. • ERP software is • Multifunctional • Integrated • Modular • Able to facilitate MPC activities

  16. Evolution of ERP ERP MRP II Closed Loop MRP MRP

  17. Characteristics of Legacy Systems • Nonintegrated business processes and systems • Efficient performance within an area • Lack of discipline • Noncompetitive costs • Poor internal/external communications • Poor data integrity • Unhappy customers • Reactive management

  18. Need for Enterprise Systems • Inadequacy of the legacy systems • Functional area coordination • Globalization • Increasing growth and complexity of outsourcing • Need for supply chain integration

  19. Multifunctional • The ability to track financial performance in monetary terms • Can track purchasing activity in material units (pounds, kilos, tons) • Follows sales in terms of products or services • Reports manufacturing activity in terms of products, resources or people

  20. ERP Scope Enterprise resource planning Manufacturing and logistics Human resource management Enterprise planning models Manufacturing planning and control Sales and operations planning (front end) Material and capacity planning (engine) Material and vendor management (back end) Enterprise performance measures Finance Data warehousing Report generation Sales and marketing Transaction processing

  21. Integrated

  22. Modular • Functional units (finance, sales, manufacturing, etc.) are narrowly focused • Functional units can be combined to create a single system • Software from other sources can be connected as well

  23. Major ERP Modules include MPS/MRP Outbound Logistics Production Scheduling Inventory Management Forecasting Sales/Customer Service Manufacturing/Logistics Financial Management Human Resources Financial Management Customer Order Management HR/Payroll Product Definition Inbound Logistics Procurement

  24. A Graphical View of ERP • Production scheduling • Inventory planning • Distribution scheduling Network rationalization Activity-based costing Flexible manufacturing strategies Quick response Cross-docking Vendors Manufacturing Warehousing Customer Inbound Logistics Delivery Transportation Order Management, Manufacturing, Logistics & Financial Systems Forecasting EDI Palletization Barcoding Customer service Process redesign Supply chain systems selection and implementation Net landed cost Vendor-managed inventory Continuous replenishment

  25. Process Standardization • Without standard terminology, integration is impossible • What is demand? • What is inventory? • How are exchange rates determined? • What transfer costs apply (for internal transactions)? • What labor rates are applied?

  26. Decision Support • Helping users make decisions about running the business • People make the decisions, software provides them with better tools and information

  27. Transaction Processing • An ERP system is designed to process business transactions in real time, working from a single database • Data warehouse software may be added to facilitate queries not built into the ERP system

  28. Performance Metrics

  29. SOURCE MAKE DELIVER SELL Enterprise functional silos with conflicting goals Purchasing Manufacturing Distribution Customer Service/ Sales Low pur-chase price Multiple vendors Few change- overs Stable schedules Long run lengths High inventories High service levels Regional stocks Low invent-ories Low trans-portation

  30. Integrated Supply Chain Metrics • Developed by the Supply Chain Council • Designed to measure the impact of decisions on the entire supply chain • Avoids development of functional silos by developing metrics that reflect the entire supply chain

  31. Supply Chain Metrics Source: Supply Chain Council

  32. Elements of costs in implementing ERP 1.      Cost of software and hardware 2.      Cost of implementation and consulting 3.      Training 4.      Integration and testing 5.      Data conversion 6.      Data analysis 7.      New hire 8. Implementation teams

  33. University of Wisconsin-Milwaukee Samar Mukhopadhyay

  34. Cash-to-Cash Cycle Time • Integrates the finance function with purchasing, manufacturing, and sales/distribution Cash-to-cash cycle time = Inventory days of supply + Days of sales outstanding – Average payment period for material Procurement cycle Sales and distribution cycle Manufacturing cycle • Purchase cost of material • Accounts payable • Raw materials inventory • Work-in-process • Finished goods inventory • Distribution inventory • Accounts receivable

  35. ERP View of Cash-to-Cash Time ERP database Accounts payable Purchasing Inventory Cash-to-cash cycle time Manufacturing Cost of sales Sales Sales and distribution Accounts receivable

  36. Chapter 2Demand Management

  37. Demand Management The Demand Management (DM) process determines how a firm integrates information from customers (both internal and external) into the MPC system. Activities include demand determination, converting customer orders into delivery promises, and balancing supply with demand.

  38. Demand Management in MPC

  39. Demand Management in the MPC System Marketplace (customers and other demand sources Sales and operations planning Resource Planning Demand management MPC Boundary Master production scheduling FRONT END

  40. Planning and Control • Demand management coordinates demand quantities and timing with the planning and control activities of the company • Planning occurs mainly in the SOP module • Control determines how capacity will be converted into products

  41. Execution • The company executes the plan as actual demand information becomes available • The control function determines how the plans will be modified to accommodate forecast errors and other changes in assumptions • Most control functions are located in the MPS module

  42. Independent versus Dependent Demand • The source of demand determines its type • Independent – Customer demand that is not directly influenced by the actions of the firm (e.g. customer orders) • Dependent – Demand that is driven by the plans and activities of the firm (e.g. components, warehouse demand)

  43. Demand Management and MPC Environment • DM must conform to the strategy of the firm, capabilities of manufacturing, and needs of customers • These define the MPC environment • MPC environment is defined by customer order decoupling point • The point where demand changes from independent to dependent • Alternatively, order penetration point

  44. Make-to-Stock • Customer demand is filled from finished goods inventory (cosmetics, grocery items) • Key focus of demand management is maintenance of finished goods inventories • Physical distribution is a key concern

  45. Assemble-to-Order • Customer requirements are met by a combination of standard options (personal computers, fast food) • Primary task of demand management is to define the customer’s order in terms of components and options (configuration management)

  46. Make-to-Order • Items built to customer specifications, starting with raw materials (airplanes) • Primary task of demand management is gathering information about customer needs and coordinating with manufacturing

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