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ERP by Mary Sumner

ERP by Mary Sumner. Chapter 1 Table 1 -1 Historical Evolution of ERP Systems. Independent Demand (Demand for the final end-product or demand not related to other items)  use forecasting). Dependent Demand (Derived demand items for component parts, subassemblies,

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ERP by Mary Sumner

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  1. ERP by Mary Sumner Chapter 1 Table 1 -1 Historical Evolution of ERP Systems

  2. Independent Demand (Demand for the final end-product or demand not related to other items)  use forecasting) Dependent Demand (Derived demand items for component parts, subassemblies, raw materials, etc) => use MRP Independent vs. Dependent Demand Finished product E(1) Component parts

  3. 4. The cycle then repeats. 1. You receive an order quantity Q. Number of units on hand Q Q Q R L L 2. Your start using them up over time. 3. When you reach down to a level of inventory of R, you place your next Q sized order. Time R = Reorder point Q = Economic order quantity L = Lead time Basic Fixed-Order Quantity Model and Reorder Point Behavior

  4. Material Requirements Planning • Materials requirements planning (MRP) is a means for determining the number of parts, components, and materials needed to produce a product • MRP provides time scheduling information specifying when each of the materials, parts, and components should be ordered or produced • Dependent demand drives MRP • MRP is a software system • More information about MRP can be found in “Chapter 6 Handout – ERP System: Production and Materials Management”

  5. 5 Firm orders from known customers Forecasts of demand from random customers Aggregate product plan Engineering design changes Inventory transactions Master production Schedule (MPS) Material planning (MRP computer program) Bill of material file Inventory record file Secondary reports Primary reports Exception reports Planning reports Reports for performance control Planned order schedule for inventory and production control • The McGraw-Hill Companies, Inc., 2004

  6. No Realistic? Feedback Feedback Yes Execute: Capacity Plans Material Plans Closed Loop MRP Production Planning Master Production Scheduling Material Requirements Planning Capacity Requirements Planning

  7. Manufacturing Resource Planning (MRP II) • Goal: Plan and monitor all resources of a manufacturing firm (closed loop): • manufacturing • marketing • finance • engineering • Simulate the manufacturing system

  8. ERP by Mary Sumner Chapter 2 Table 2 -1 and 2- 2 Value Chain by Dr. Michael Porter (Harvard). We also use value chain in the SCM textbook by Chopra

  9. INFORMATION SYSTEMS AND BUSINESS STRATEGY • Value Chain Model: • Highlights the primary or support activities that add business value • A good tool for understanding strategy at the business firm level • Primary Activities: • Directly related to the production and distribution of a firm’s products or services

  10. INFORMATION SYSTEMS AND BUSINESS STRATEGY • Support Activities: • Make the delivery of primary activities possible • Consist of the organization’s infrastructure, human resources, technology, and procurement

  11. What is the relationship between value chain and information technology? Strategic question: • How can IT be used at each point in the value chain to lower costs, differentiate products, and change the scope of competition? • Example: Next slide

  12. Figure 3-11 INFORMATION SYSTEMS AND BUSINESS STRATEGY The Firm Value Chain and the Industry Value Chain

  13. ERP by Mary Sumner Just-in-Time/Lean Manufacturing/Toyota Production System Pages 91, 96, 137 Also required in the SCM textbook by Chopra

  14. House of Toyota

  15. Toyota Production System (TPS):Related Terms • Ohno System • MAN (Material as Needed) - Harley Davidson • MIPS (Minimum Inventory Production Systems) - Westinghouse • Stockless production - Hewlett Packard • Zero inventory production system • Lean Manufacturing/Production - MIT

  16. Push versus Pull • Push system: material is pushed into downstream workstations regardless of whether resources are available • Pull system: material is pulled to a workstation just as it is needed

  17. Traditional U.S. Manufacturing Firm:Push (“old style” MRP / Material Requirements Planning System) • The production of items at times required by a given schedule planned in advance Work Station 1 WS 2 WS 3 Material Information (Production Schedule)

  18. Pull (JIT) System The production of items only as demanded for use or to replace those taken for use. Work Station 1 WS 2 WS 3 Material Information (via Kanban/Card)

  19. Kanban • Japanese word for card • Pronounced ‘kahn-bahn’ (not ‘can-ban’) • Authorizes production from downstream operations • ‘Pulls’ material through plant • May be a card, flag, verbal signal etc. • Used often with fixed-size containers • Add or remove containers to change production rate

  20. Part # Part Description Location Date Triggered Lot Size Trigger (Reorder) Point Tool # Machine # Triangular Kanban

  21. Kanban

  22. Figure S12.5

  23. 4. The cycle then repeats. 1. You receive an order quantity Q. Number of units on hand Q Q Q R L L 2. Your start using them up over time. 3. When you reach down to a level of inventory of R, you place your next Q sized order. Time R = Reorder point Q = Economic order quantity L = Lead time Basic Fixed-Order Quantity Model and Reorder Point Behavior

  24. Kanban The function of Kanban ≈ The function of Inventory Reorder Point (ROP)

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