Enterprise Business Processes and Applications ( IS 6006 )

1. Enterprise Business Processes and Applications(IS 6006) Masters in Business Information Systems 4th Nov 2008 Fergal Carton Business Information Systems

2. Last week • MRP principles • BOM crystallises connection between supply and demand • Build process takes account of space, yield, time, cost, labour, equipment … • Outsource or not for sub-components, influence on BOM • Lead time for customer and commit time for production • MRP reduces buffer stocks • Look up examples of Bills of Materials • What is so difficult about connecting supply and demand? • Why can’t actual demand be forecasted? • Dell, Aer Lingus, Glaxo SmithKline • Fiat car design : 18 months because of sub-contracting parts • Work orders / process orders allow inventory to be consumed • Mirror image of the sales order • Drives customer demand through to batches in the production process • Additional Reading • Look at paper titles for relevance to this course (eg. Supply Chain) • We focus on reality of using integrated systems and issues arising

3. This week • BOM example iPhone • Process orders / work orders • ERP modules (Sales, Finance, Logistics, Procurement, Manufacturing) • ERP is single instance • Production planning: assignment practice

4. What is a Bill of Materials? • Links demand and supply • Sales require a customer oriented language to describe functionality • See example for iPhone • Manufacturing need a supplier oriented language to describe Bill of Materials

5. Model names (sales)

6. Model numbers (manufacturing)

7. Other BOM examples? • ?

8. Work order / Process order • ?

9. Production planning • Planning approaches (build to plan) • Top down quarterly plan drives both Production (units) and Sales (€) targets • Takes into account sales forecast, historical performance and market expectations • Production plan must then be broken down into units, configurations, geograpahies • Local production planners then turn this into: • an MRP plan to drive purchasing • and a Master production schedule to drive manufacturing

10. Manufacturing modes and lead times • Difference between process and discrete manufacturing • Process manufacturing consumes inventory at a steady rate, but yield of finished goods may vary • Discrete manufacturing consumes a predefined amount of inventory per article of finished goods • Lead times: • key to replenishment policy: what’s my buffer stock? • Fiat Idea : re-uses previous model components to reduce cost & lead time

11. ERP is often single instance • Single point of data entry (PO’s, SO’s, …) • Inventory control • Opportunity to re-design processes • Single technical platform (support) • Common language, common pool of data Sales Production Shipping Collect cash Customer information (ship-to, bill-to, install-at, …)

12. Costing Human General Resource Ledger Real-Time Mgmt Sales\Order Transportation Decision Entry Mgmt Support Accounts Asset Network Finance Specification/ Mgmt Payable Customer Warehouse Infrastructure Configuration Demand Mgmt Mgmt Real-Time Mgmt Accounts Receivable Logistics Sales Decision Price & Sales Support Promotion Distribution Trade Force Mgmt Planning Mgmt Mgmt Client Information Inventory Systems Mgmt Value Real-Time Real-Time Sale Fulfillment Customer Decision Decision Support Support Vendors Customers Engineering Manufacturing Release Mgmt Quality Mgmt Vendor Product Test Planning & Maintenance Performance Definition Mgmt Scheduling Mgmt Real-Time Mgmt Real-Time Quote/ Financial Contract Interfaces Mgmt Real-Time Decision Decision Support Specification Process Process Revision Product Support Resource Monitoring Definition Mgmt Mgmt & Control Purchase Product Decision Production Product Purchase Support Development Performance Mgmt Order Mgmt Mgmt Receiving Mgmt Procurement

13. Manufacturing - Core functionality • Planning & Scheduling • Basic APICS standard planning (MS, RCCP, MRP, SFC) - requirements netted against on-hand inventories, lead times, etc. • Multilevel master scheduling • Multiplant MRP and DRP • Basic shop floor control utilizing workorders, backflush and repetitive options • Actual orders consume forecast • Quality Management. • Basic quality reporting and issue tracking • Maintenance Management • Ability to integrate maintenance work orders and inventory in system • Robust integration with fixed assets • Good tracking of maintenance costs Quality Mgmt Planning & Scheduling Maintenance Mgmt Product Process Monitoring & Control Resource Mgmt • Resource Management • Capacity requirements based on standards; machine time, labor time, etc. • Rough cut capacity planning • Process Monitoring & Control • Not covered in “core” ERP functionality Production Mgmt • Production Management • Support for variety of production strategies; kanban, etc. for JIT, production planning process • Track WIP inventory • Record detailed costs • Integration to quality management

14. Procurement - Core functionality • Vendor Performance Management • Good granularity of data and control over receiving date • Basic vendor ratings/qualifications mgmt. • Basic quality and delivery tracking • Financial Interfaces • Fully integrated w/AP for 2-way or 3-way matching • Fully integrated with costing for variance analysis • automatic voucher generation • Quote/Contract Management • Limited RFQ & quote tracking • Blanket orders • Basic contract management Vendor Performance Mgmt Quote/ Contract Mgmt Financial Interfaces Purchase Purchase Order Mgmt Product Performance Mgmt • Purchase Order Management • Orders automatically generated for items through MRP, Min/Max, or manual requisitions • Integrated receiving inspection and quality tracking • Product Performance Management • Good granularity of data • Basic quality and defect tracking Receiving Mgmt • Receiving Management • Integrated receiving inspection and quality tracking • Items non-nettable until approved • Receiving routings, matched with PO at dock

15. Logistics - Core functionality • Transportation Management. • Supports basic transportation processing, shipping documents, and organization of shipments • Network Infrastructure • Hierarchical system of branch/plants can include suppliers and virtual warehouses • Warehouse Management • Basic inventory location tracking • RF capable • Limited advanced capabilities (pick/put away strategies, cross-docking) Transportation Mgmt Network Infrastructure Warehouse Mgmt Fulfillment Distribution Planning Trade Mgmt • Distribution Planning • Distribution requirements planning with multiple replenishment strategies and inventory stocking strategies • Trade Management • Landed costs, multinational taxation and currency Inventory Mgmt • Inventory Management • Visibility across organization • Serial and lot control

16. Sales - Core functionality • Sales/Order Entry. • Order templates, blanket orders and interbranch orders • UCC 128 compliance • Automatic credit check, order validity check • Customer Demand Management • Forecasts generated from sales history or other algorithms • Specification / Configuration Management • Feature and option-based system with simple if/then rule checking • Robust integration with fixed assets • Good tracking of maintenance costs Sales\Order Entry Specification/ Configuration Mgmt Customer Demand Mgmt Sale Sales Force Mgmt Price & Promotion Mgmt • Sales Force Management • Some support for configured quotes and quote tracking • Automatic generation of orders from quotes Client Information Systems • Price & Promotion Management • Multiple pricing methods (by item, family, customer) • Basic promotions management (effectivity dates, volume or value discounts) • Limited complex promotions and pricing management • Client Information Systems • Customer hierarchies • Multiple ship-to, bill-to addresses and contacts • Very limited customer information

17. http://www.sap.com/solutions/business-suite/crm/featuresfunctions/sales.epxhttp://www.sap.com/solutions/business-suite/crm/featuresfunctions/sales.epx

18. http://www.sap.com/solutions/manufacturing/featuresfunctions/index.epxhttp://www.sap.com/solutions/manufacturing/featuresfunctions/index.epx

19. Apple iPod manufacturing process • Sales forecast • Build plan for quarter • Procurement schedule for raw materials • Starts plan by week (Master production Schedule – MPS) • Work-in-progress / process control • Test, quality control and material purge • Adjust build plan / starts plan for actual demand • Deliver goods to finished goods area • Handover to distribution

20. iPhone Production planning • Read narrative • Draw a process map of the proudction planning process • What are the strengths / weaknesses of the process mapping exercise?

21. Strengths of process mapping • Separates physical from virtual flows • Flexible • Intuitive • Fast • Facilitates sharing of ideas • Helps define roles and responsibilities • Highlights potential for automation • Bottlenecks, delays, errors, redundancy, …

22. Weaknesses of process mapping • Biased representation? • Difficult to meet all people involved • Dependent on accuracy of information given by participants • Holes in understanding -> poor process • Doesn’t take into account new processes • Interpreted differently • Consistency in analysis when using multiple analysts • Only maps repetitive processes? • What about manual work? • Find right level of abstraction • Only theoretical? • Complexity / overcomplication

23. How will you use the process map? • Spot problems • Optimise process • Tool to explain / educate • Map alternatives • Draw “how we would like the process to work”