Operations Management

Enterprise Resource Planning

The Enterprise Resource Planning systems are now commonly used by large companies to support supply and demand planning and control.

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In most companies, ERP, provides the information backbone needed to manage day-to-day execution.

What is ERP?

A computer system that integrates application programs in accounting, and the other functions in a firm.

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The integration is accomplished through a database shared by all the application programs.

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ERP systems allows for integrated planning across the functional areas in a firm.

Enterprise Resource Planning

Here we describe how the ERP software programs are designed and then provide points to consider in choosing and ERP system.

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• Consistent Numbers

ERP requires a company to have consistent definitions across functional areas

Enterprise Resource Planning

• Software imperatives. There are four aspects of ERP software that determine the quality of an ERP system:

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1. The software should be multifunctional in scope with the ability to track financial results in monetary terms of product units and services, and manufacturing or conversion processes in units of resources of people.

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• The software should be integrated.

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Enterprise Resource Planning

3. The software needs to be modular in structure so it can be combined into a single expansive system, narrowly focused on a single function, or connected with software from another source / application.

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• The software must facilitate basic planning and control activities, including forecasting, production planning, and inventory management.

Enterprise Resource Planning

Major ERP Vendors

Enterprise Resource Planning

Routine Decision Making

It is important to make a distinction between the transaction processing capability and the decision support capability of an ERP system:

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Transaction processing.

This is the posting and tracking of the detailed activities of a business.

Decision support.

Relates to how well the system helps the user make intelligent judgments about how to run the business.

Enterprise Resource Planning

The principal priority when managing information for decision making:

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• Accurate.
• Reliable.
• Timely.

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How ERP connects the functional units

How ERP connects the functional units

Finance

As a company grows through acquisition, and as business units make more of their own decisions, many companies find themselves with incompatible and sometimes conflicting financial data.

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Manufacturing and Logistics

• Sales and operations planning coordinates the various planning efforts, including marketing planning, financial planning, operations planning and human resource planning.

How ERP connects the functional units

• Materials management covers tasks within the supply chain, including purchasing, vendor evaluation and invoice management.
• Plant maintenance supports the activities associated with planning and performing repairs and preventative maintenance.
• Quality management software implements procedures for quality control and assurance.
• Production planning and control supports both discrete and process manufacturing.
• Project management systems facilitate the setup management, and evaluation of large, complex project.

How ERP connects the functional units

How ERP connects the functional units

Sales and Marketing

This group of system components supports activities such as

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Human Resources

This set of applications supports the capabilities needed to manage, schedule, pay, hire, and train the people who make an organization run.

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• Customer management.
• Sales order management.
• Forecasting.
• Order management.
• Credit checking.
• Configuration management.

• Distribution.
• Exports controls
• Shipping.
• Transportation management.
• Billing.
• Invoices
• Rebate processing.

How ERP connects the functional units

Customized Software

Many companies utilize special add-on modules that link to the standard modules, thus tailoring applications to specific needs.

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Data Integration

The software modules form the core of an ERP system.

• Transactions are processed in real time, meaning that as soon as the transaction is entered into the system.
• Data warehouse is commonly employed. Is a special program that is designed to automatically archive and process data for uses that are outside the basic ERP system applications.

How supply chain planning and control fits with ERP

How supply chain planning and control fits within ERP.

ERP is concerned with all aspects of a supply chain, including:

• Managing materials.
• Scheduling machines and people.
• Coordinating suppliers and key customers.

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The coordination required for success runs across

all functional units in the firm.

Performance metrics to evaluate integrated system effectiveness.

Three major functional areas that make up the internal supply chain of a manufacturing enterprise:

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1. Purchasing.
2. Manufacturing.
3. Sales and distribution.

The “Functional Silo”

Approach

Performance metrics to evaluate integrated system effectiveness.

Integrated Supply Chain Metrics

Performance metrics to evaluate integrated system effectiveness.

Integrated Supply Chain Metrics