Chapter 14 Reviewer - ERP

Wednesday, 7 December 2016

10:40 PM

What is ERP?
ERP is an enterprise-wide information system that integrates all the
information from many functions needed for planning and controlling
operations activities. This integration around a common database allows for
transparency.
It often requires very considerable investment in the software itself, as well
as its implementation. More significantly, it often requires a company's
processes to be changed to bring them in line with the assumptions built into
the ERP software

How did ERP develop?

ERP is the latest and the most significant development of the original
Materials Requirements Planning (MRP)

MRP (Materials Requirements Planning)

o An approach to calculating how many parts or materials of particular
types are required and what times they are required.
o Father of MRP = Joseph Orlicky

Main Inputs to MRP

1 Bill of Materials
Provides information on what parts are required for each product
2 Master Production Schedule
Shows how many finished items need to be completed and
available in each week to satisfy demand
3 Inventory Records

Chase or Level Master Production Schedules

1 Chasing Demand
Production increases as demand increases and aims to keep
available inventory at 0
2 Level Scheduling
Averaging the amount required to be completed to smooth out
peaks and troughs

Available to Promise (ATP)

Information on what can be promised to customers and when
delivery can be promised
ATP = MPS - Sales Orders

Bill of Materials (BOM)

Provides information on what parts are required for each product
 Back Scheduling
Using lead time information, the program is worked backwards to
determine the tasks that have to be performed and the purchase
orders that have to be placed.

MRP Capacity Checks

Feedback loop to check whether a plan was achievable and whether
it has actually been achieved.

3 Planning Routines to Check Production Plans Against the

Operation's Resources:
1 Resource Requirements Plans (RRPs)
Looking forward in the long term to predict the
requirements for large structural parts of the operation
Ex. Numbers, locations, and sizes of new plants
2 Rough-cut Capacity Plans (RCCPs)
Used in the medium to short term to check the Master
Production Schedules against known capacity bottlenecks
3 Capacity Requirements Plans (CRPs)
The day-to-day effect of the work orders issued from the
MRP on the loading individual process stages

TheBenefits of ERP
o Absolute visibility of what is happening in all parts of the business.
o The discipline of forcing business-process based changes
o There is a better sense of control
o Enables more sophisticated communication with customers, suppliers, and
other business partners
o Capable of integrating whole supply chains

Cons
o Difficult to achieve and may not be appropriate to all parts of the system
o Expensive

ERP changes the way companies do business

o It is extremely important to make sure that the organization's current way
of doing business will fit a standard ERP package.
o If not, they can:
1. Change their processes to fit the ERP package
2. Modify the ERP software package to fit their existing processes

Why did companies invest in ERP?

o Prospect of organizational efficiency is attractive to some managers
o Sometimes investments were justified they need to implement ERP
because they will be in a disadbantage if their competitors do so.

Web Integrated ERP

 o Web integrated ERP systems are often more complex and require more
periodic maintenance

Supply Chain ERP

o Integrating ERP systems all the ERP and similar system across the supply
chain

Benefits:
Costs of communicating between supply chain partners can
dramatically be reduced

Cons:
It can also transmit systems failure. If an ERP system in one operation
within a supply chain fails, it may block the effective of the effective
operation of the whole integrated information system throughout the
supply chain.

Implementation of ERP Systems

o ERPs are designed to address problems of information fragmentation.
Thus, any ERP system will be complex and difficult to get right
Involves crossing organizational boundaries and integrating internal
processes which cover most, if not all, functional areas of a business.
Needs of multiple stakeholders need to be put into consideration
People are resistant to change

o Critical Success Factors (CSFs)

Things that the organization must get right in order for the ERP system
to work effectively

o Common Problems in ERP Implementation (CROBTTTS)

The need for Change Management is not likely to be recognized until
it is too late
Resourcing from Business and IT is likely higher than anticipated
(number of people)
Level of outside expertise required will be more than anticipated
Changes required to Business Processes will be greater than
expected
Total cost is likely to be underestimated
Time and Effort to implement is likely to be underestimated
There will never be enough Training
Controlling the Scope of the Project will be more difficult than
expected