1. No category

14.1
Chapter 14
Enterprise resource planning
(ERP)
Pearson Education Ltd. Devon Obugenga Shaw
14.1
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.2
Enterprise resource planning (ERP)
Operations
strategy
Design
Enterprise resource
planning (ERP)
Improvement
Planning and
control
The market requires…
specified time, quantity
and quality of products
and services
The operation supplies…
the informational ability to
deliver products and
services
14.2
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.3
Key operations questions
In Chapter 14 – Enterprise resource planning
(ERP) – Slack et al. identify the following key
questions:
• What is ERP?
• How did ERP develop?
• How should ERP systems be implemented?
14.3
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
The development of ERP
Increasing impact on the whole supply
network
14.4
Web-integrated enterprise resource
planning (collaborative commerce,
c-commerce)
Enterprise resource
planning (ERP)
Manufacturing resource
planning (MRPII)
Material
requirements
planning (MRP)
Increasing integration of information systems
14.4
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.5
The process of MRP1
Explode the master production schedule.
Identify what parts and assemblies are required.
Check whether the required parts and assemblies are available.
For every part or assembly that is required, but not available, identify
when work needs to be started for it to be made available by its due
date.
Generate the appropriate works and purchase orders.
Repeat the process for the next level of the bill of materials.
14.5
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.6
Component structure for a product
Product
Part A (2)
LT=1
Part E (2)
LT= 2
Part I (2)
LT= 2
Part B (2)
LT= 2
Part F (1)
LT= 2
Part J (1)
LT=1
Part C (1)
LT=1
Part D (1)
LT=1
Part G (1)
LT=2
Part H (4)
LT=1
(X) = quantity
Part
On hand
inventory
A
B
C
D
E
F
G
H
I
J
0
30
60
0
100
20
0
50
100
60
Order
quantities
600
600
500
600
600
500
500
500
600
600
LT = lead time
14.6
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.7
Product structure for a simple board game
Board
game
Level 0
00289
Level 1
Box lid
10077
Box base
assembly
10089
‘Quest’
cards
10023
Character
set
10045
Dice
10045
TV label
10062
Game
board
10033
Rules
10056
Level 2
Box
base
20427
14.7
Inner
tray
23988
TV label
10062
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.8
Product structures
A-shape
product
structure
14.8
T-shape
product
structure
V-shape
product
structure
X-shape
product
structure
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.9
Materials requirements planning (MRP) schematic
Customer
orders
Master
production
schedule
Forecast
demand
Bill of materials
Material
requirements
planning
Inventory
records
Materials plans
Works orders
Purchase
orders
14.9
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.10
Master production schedule (MPS)
Known
orders
Forecast
demand
Sister plant
demand
R&D
demand
Master
production
schedule
Promotion
requirements
etc.
14.10
Key
capacity
constraints
Inventory
levels
Spares
demand
Safety stock
requirements
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.11
Example of a master production schedule
Week number
1
2
3
4
5
6
7
8
9
Demand
10
10
10
10
15
15
15
20
20
Available
20
10
0
0
0
0
0
0
0
0
0
10
10
15
15
15
20
20
MPS
On hand
14.11
30
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.12
Example of a ‘level’ master production schedule
Week number
1
2
3
4
5
6
7
8
9
Demand
10
10
10
10
15
15
15
20
20
Available
31
32
33
34
30
26
22
13
4
MPS
11
11
11
11
11
11
11
11
11
On hand
14.12
30
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.13
Example of a level master production schedule including
available to promise
Week number
1
2
3
4
5
6
7
8
9
Demand
10
10
10
10
15
15
15
20
20
Sales
orders
10
10
10
8
4
Available
31
32
33
34
30
26
22
13
4
ATP
31
1
1
3
7
11
11
11
11
MPS
11
11
11
11
11
11
11
11
11
On hand
14.13
30
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.14
The MRP netting calculations for the simple board game
Master production schedule
10 Board games (00289) required
Works order for level 0 parts
Level 0
Inventory file
3 Board games (00289) in
stock
Assemble 20 Board games (00289)
Bill of materials
Require 20 box base
assemblies (10089)
Level 1
Inventory file
Works and purchase
orders for level 1 parts
10 box base assemblies
(10089) in stock
Assemble 50 box base
assemblies (10089)
Bill of materials
Inventory file
Require 50 box bases (20467),
50 inner trays (23988) and 50
TV labels (10062)
15 box bases, 4 inner
trays and 65 TV labels in
stock
Level 2
14.14
Works and purchase orders
for level 2 parts
Purchase 40 box bases
(20467) and 60 inner trays
(23988)
= re-order quantity
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.15
Closed-loop MRP
Materials plans
We wish to make
300 units per
month
Production
plan
We wish to make
7 units for day 35
Master
production
schedule
Therefore we will
need to make 5
box assemblies
for week 35
Materials
plan
14.15
Capacity plans
realistic?
Resource
requirement
plan
realistic?
Rough-cut
capacity
plan
Can we make 7
units for day 35?
realistic?
Capacity
requirements
plan
Can we make 5
box assemblies
for week 35?
Can we make
300 units per
month?
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.16
The concept of MRP II
Marketing
Finance
Central
database
Design
14.16
Operations
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.17
The benefits of ERP
• Because software communicates across all functions, there
is absolute visibility of what is happening in all parts of the
business.
• The discipline of forcing business-process-based changes is
an effective mechanism for making all parts of the business
more efficient.
• There is a better ‘sense of control’ of operations that will
form the basis for continuous improvement.
• It enables far more sophisticated communication with
customers, suppliers and other business partners.
• It is capable of integrating whole supply chains including
suppliers’ suppliers and customers’ customers.
14.17
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010
14.18
ERP integrates several systems
Senior management and stakeholders
Integrated
database
Operations
applications
Purchasing and
supply
applications
Sales and
marketing
applications
Delivery and
logistics
applications
Customers
Back-office staff
Suppliers
Financial
applications
Front-office staff
Strategic
reporting
applications
Service
applications
HRM applications
Employees
14.18
Employees
Slack, Chambers and Johnston, Operations Management, 6th Edition,
© Nigel Slack, Stuart Chambers, and Robert Johnston 2010