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Title: Anicet Yalaho, dept. of GT


1
Presented by
  • Anicet Yalaho, dept. of GT
  • Maria-J. Echeverria, dept. of GT
  • Seppo Selkala, dept. of GT

2
A Book Review
  • ERP- The dynamics of Operations Management,
    Avraham Shtub (1999)
  • Main BPR concepts
  • Relationships BPR / ERP
  • An Objective Review of the book
  • Conclusion

3
What is Business Process Re-engineering?
4
Redesigning Enterprise Processes for
e-Business, Omar A. El Sawy
  • BPR
  • a performance improvement philosophy that aims
    to achieve quantum improvements by primarily
    rethinking and redesigning the way businesses are
    carried out
  • Business Processes a set of activities that
    transform a set of inputs into a set of outputs

5
Enterprise Processes
Inputs
Outputs
Your process
Supplier
Customer
Feedback
  • A clear objective being competitive in todays
    market
  • Continuous improvement model- an effective
    approach to obtain gradual, incremental
    improvement
  • Several factors accelerating the need to improve
    BP- Technology

6
The 5 Five Typical Phase of BPR in the Big
Triggering Executive Visioning
BPR Project Mobilization
  • Process Redesign
  • Scoping
  • Modeling, Analysis Redesign
  • Integration

Monitoring Maintenance
Implementation Organisational Transformation
7
A dynamic environment
  • The Leavitt Diamond a conceptual framework for
    balancing IT-enabled transformation

IT use
Business Processes
Organisational Form
Requisite People Skills
8
BPR ERPWhat is ERPRelationship with BPR
9
Enterprise Resource Planning
  • ERP is a software solution, with all the
    organisations records managed from one large
    database. An integrated IS.
  • It takes the process view of an organisation to
    meet the organisational goals tightly integrating
    all functions of an enterprise.
  • (more about ERP history to come)

10
Relationship BPR - ERP
  • A BPR study
  • brings out deficiencies of the existing system
  • attempts to maximize productivity through
  • re-structuring and
  • re-organising the human resources as well as the
    divisions and departments in the organisation
  • BPR will initially question the value-add of the
    particular process
  • Then it will go on to put some systems and
    procedures in place -gt ERP is a key enabler in
    any BPR effort

11
Relationship BPR ERP (2)
  • You can
  • do BPR without buying an ERP solution,
  • unusual
  • buy an ERP solution without doing any BPR
  • wasteful investment...
  • The question is not whether ERP functions or not
    without BPR
  • Key question whether every company that
    implements ERP has to reengineer its processes

12
ERP
  • ERP doesnt blindy automate- it takes into
    account
  • companys internal issues,
  • but also factors in the external imperatives in
    terms of competition, time-to-market,...

13
ERP (2)
  • ERP is the planning of the 4Ms of the enterprise
    resources Man, Money, Materials, Machines.
  • ERP helps in addressing needs like reduced cycle
    time, customer focus, sharing information
    seamlessly across the enterprise and JIT
    management

14
ERP- Dynamics of OM
  • Scope of the book
  • to help and support the development of teams to
    implement the Integrated Production and Order
    Management (OM) approach
  • The Four cornerstones for success flexibility,
    time, quality and cost
  • Four main functional activities Marketing,
    Purchasing, Production, Finance

15
ERP- Dynamics of OM (2)
  • A book delivered with a software
  • the Operations Trainer
  • a dynamic-integrated environment for students
    and executives to experiment with IPOM and to
    learn the ERP concepts

16
Review of a bookERP-Dynamics of Operations
Management, Avraham Shtub
17
Operations Management
  • Several approaches to Operations Management
  • operations research oriented
  • case studies oriented
  • A new approach proposed by Hammer and Champy the
    reengineering of business processes to inflect
    changes on organisations

18
IPOM approach
  • New managerial approaches
  • Concurrent Engineering
  • an integrated, dynamic approach to new product
    development. New product development teams
    composed of experts from different functions.
    Share the same goals.
  • Group Technology
  • focused cells specialising in a small number of
    similar products.

19
IPOM approach (2)
  • Development of IS
  • MRP- Material Requirement Planning
  • not good enough on its own...
  • Integration of modern DBMS, DSS and MIS
  • -gt the new generation of ERP systems was borned
  • An essential process- The order fulfilment
  • -gt Integrated Production and Order Management

20
IPOM approach (3)
  • Process-based
  • Process order fulfilment- from the reception of
    a customer order to the supply of the right goods
    on time, the required quantities and at a
    competitive cost
  • ERP supported
  • 3 types of IS support Order fulfilment process
  • Transaction Processing System (any transaction
    can be ordered/analysed via the software)
  • MIS (a unique database)
  • DSS (decisions consequences can be analysed, ...)

21
IPOM (4)
  • An Integrated IS
  • finance, marketing, production, purchasing
  • that supports order fulfilment process
  • Transaction processing systems / MIS / DSS
  • A single DB
  • A model base (for well-structured/routine
    processes, for non-structured/-routine problems,
    or for process control)

22
Marketing Considerations
23
Production and order policies
  • Process triggered by customer orders
  • Written form, long term contract, order issued by
    marketing based on a demand forecast
  • Orders entered into Master Production Schedule
  • Competition in order fulfillment process
  • time, cost, flexibility, and quality

24
Production and order policies (2)
  • Inventories of finished goods are used to buffer
    against uncertainty (in forecasting)
  • Several alternatives to initiate purchasing
    orders and production orders
  • based on firm customer orders
  • based on demand forecasts (raw mat. inv.)
  • based on firm customer orders current inv.
    level of raw materials and parts

25
Production and order policies (3)
  • Importance of lead-time
  • time from order to delivery
  • Supermarket approach
  • if acceptable lead-time gt actual lead-time
    no inventory
  • reduce setup times and batch sizes
  • if acceptable lead-time lt actual lead-time
    keep enough inventory to cover for the
    difference

26
Three types of order policies
  • Make to stock
  • new production triggered by forecasts
  • Minimizes the promised lead-time at the cost of
    carrying inventories
  • Make to order
  • No stocks carried
  • Only customer order triggers production
  • Assemble to order
  • Raw materials and parts stocked but final
    assembly triggered by customer order

27
Master Production Schedule (MPS)
  • Statement of planned future, gross requirements
    of end products
  • MPS triggered by the market demand
  • combination of orders and forecasts
  • If order fulfillment process not well integrated
    conflict highly likely
  • marketing, production/purchasing
  • different measures of performance

28
Master Production Schedule
  • To avoid conflict
  • common set of goals
  • Appropriate performance measures
  • Management of MPS
  • introduction of new requirements
  • updating existing requirements
  • monitoring and control of actual performance
    compared to goals

29
Lead-time and time based competition
  • Importance of time in order fulfillment
  • shorter lead-time
  • competitiveness and ability to get new business
  • delivery on right time
  • promised vs. actual lead-time
  • Lead-time
  • data processing, decision making, production
  • Each operation affects lead-time
  • should be studied and optimized

30
Optimization of operations
  • Elimination of unnecessary operations
  • Minimization of the duration of necessary
    operations
  • Minimization of delays before, after, and during
    the operations
  • batch production --gt reduce setup times
  • get rid of bottlenecks (DBR)
  • information sequentially - hierarchy levels
  • control points --gt data sharing

31
Quality and its management - quality based
competition
  • Success dependent on customer satisfaction
  • Eight dimensions in quality based competition
  • performance, features, reliability,conformance,
    durability, serviceability, aesthetics, and
    perceived quality
  • Order fulfillment process
  • DDP Due Date Performance

32
Cost considerations -cost based competition
  • Profit selling - buying price
  • Higher profit reduce the cost of products
  • Problem of measuring costs of a unit
  • direct, indirect costs
  • fixed, variable costs
  • Solution
  • Look at the throughput

33
Summary of Chapter 4
  • Add text here later

34
Purchasing and Inventory Management
35
The Need for Outsourcing
  • Outsourcing purchase some materials, parts, and
    services from outside services
  • increase effective capacity without capital
  • enhance the organizations competitive edge
  • Points to be carefully evaluated
  • Make or buy decision
  • supplier management
  • inventory management

36
OutsourcingMake or Buy Decisions
  • Factors to be taken into consideration
  • Capacity, Know-how, Cost-Volume, Demand pattern,
    Time, Quality, Control and Feasibility
  • Decision making levels
  • Strategic level
  • what part of production kept in house
  • Operational level
  • capacity considerations

37
OutsourcingSupplier management
  • Importance of order fulfillment process
  • purchases constitute 30-50 of sales
  • Sub-activities
  • specifications of requirements
  • selection of suppliers
  • contract management

38
Specifications of Requirements
  • Definition of the required product or service
    including functional, physical and technical
    specifications
  • Definition of the order fulfillment process
    requirements, including required lead time, size
    and number of shipments, shipping arrangements
    and frequency of deliveries
  • Definition of quality system the supplier should
    employ and quality requirements applied to the
    product or service

39
Selection of Suppliers
  • Different approaches single vs. Multiple
  • Supplier evaluation considerations
  • Process capability
  • Can supplier produce in specific quality level?
  • Quality assurance
  • Are quality control procedures adequate?
  • Financial capability
  • the risk associated with doing business with
    supplier
  • Cost structure
  • Suppliers costs (mat., labor, OH.) and profits

40
Selection of Suppliers
  • Value analysis effort
  • Ability to perform value analysis (past success)
  • Production scheduling
  • Abilities of production planning and control
    system
  • Contract performance
  • Performance measures to evaluate suppliers
  • Can also rely on standard specifications
  • e.g. ISO 9000 series

41
Contract management
  • The ongoing relationship with supplier
  • Three categories of relationships
  • Inspection
  • focusing on product inspection to eliminate
    defects
  • Prevention
  • purchaser helps to build quality into the product
    and process
  • Partnership
  • long term relationship
  • e.g. Joint design, delivery directly to the point
    of use
  • JIT-approach

42
Inventory ManagementBenefit and cost
considerations
  • Inventory management
  • policies, decisions, actions and the monitoring
    and control of stock
  • Stock types
  • Raw materials, parts and components, work in
    process, finished goods, supplies

43
Inventory ManagementBenefit and cost
considerations (2)
  • The benefits of using stocks
  • Time based competition
  • reduce lead time)
  • Coping with uncertainty
  • buffer inventories)
  • De-coupling activities in the order fulfillment
    process
  • Cost based competition
  • order in large quantities)
  • Technological considerations
  • some processes are designed for a batch of a
    given size

44
Inventory ManagementBenefit and cost
considerations (3)
  • Many benefits, but still inventories are
    expensive and create waste
  • search for trade off btw. benefits and costs
  • Inventory costs
  • capital costs
  • operating costs
  • risk related costs
  • JIT -gt inventory wasteproblems

45
Inventory ManagementBenefit and cost
considerations (4)
  • ABC or Pareto Analysis
  • type A 20 of items, count for 80 of costs
  • type B 30 of items, count for 15 of costs
  • type C 50 of items, count for 5 of costs

Add here scanned picture from page 70!
46
Inventory ManagementModels and their assumptions
  • Help when to place order and what quantity to
    order
  • the economic order quantity (EOQ) model
  • Problems
  • assumes demand constant
  • stable inventory costs
  • lead time constant
  • no interactions between different items
  • constant parameters

Add here scanned picture from page 72!
47
Inventory ManagementModels and their
assumptions (2)
  • (s,S) Model
  • whenever the current inventory level drops below
    predetermined value (s), and order is placed to
    bring the inventory level to the higher
    predetermined value (S)
  • Advantage not based on simplifying assumptions
    like EOQ model

48
Summary of Chapter 5
  • Add text here later

49
Scheduling
50
Job ShopImplementing Priority Rules
  • Scheduling is concerned with allocation of
    limited resources to tasks over time
  • the driver Master Production Schedule (MPS)
  • Variety of scheduling models have been developed
    and implemented
  • based on assumptions technology, layout,
    objectives and constraints of organization,
    environment

51
Job ShopImplementing Priority Rules (2)
  • Machines performing the same function grouped
  • Scheduling objectives
  • on time completion of each part according to MPS
  • the completion of all jobs as early as possible
  • minimization of the time that parts spend in the
    shop (min. process inventory)
  • maximization of the utilization of resources by
    minimizing their idle time
  • minimization of costs by using less expensive
    materials

52
Job ShopImplementing Priority Rules (3)
  • When setup time is significant and machine
    capacity limited --gt batch processing
  • Several models exist to provide optimum
  • only for very small problems
  • based local view of a larger situation
  • How to assign priority (simple methods)
  • FIFO (First In First Out)
  • EDD (Early Due Date)
  • Current job (to save setup time)
  • SPT (Shortest Processing Time)

53
Job ShopImplementing Priority Rules (4)
  • How to assign priority (complex methods)
  • Critical ratio (CR)
  • difference between due date and current date
    divided by time required to complete the
    remaining work.
  • Slack Time Remaining (STR)
  • difference between the time remaining before the
    due date and the time required for processing the
    remaining jobs.
  • Slack Time Remaining per Operation (STR/OP)
  • average slack time per remaining operation.
  • Smaller values have higher priority (for the 3
    methods)

54
Job ShopImplementing Priority Rules (5)
  • By monitoring the situation on the shop floor and
    selecting the right priority rules for the
    situation, the management can improve
    performances on the delivery schedule
  • Also scheduling manually is possible when job is
    late

55
Job ShopImplementing Priority Rules (6)
  • The selection of most appropriate priority rule
    as well as decision to expedite a job, is based
    on the Shop floor control system
  • current information on the jobs waiting for
    processing in front of each machine
  • Priority rules based on single machine
  • starvation --gt monitor continuously inventory
    levels in front of each machine
  • control by input-output analysis
  • identify bottlenecks

56
Flow ShopScheduling
  • In the flow job all product types are processed
    in the same order
  • problems starvation and blocking
  • especially when product units are large and
    in-process inventory is limited (JIT)
  • Flexible flow job
  • many similar machines operate in parallel

57
Flow ShopScheduling (2)
  • Johnsons rule
  • for simple cases (2 types of machines)
  • objective to minimize make span
  • Insert here POSSIBLE EXAMPLE!
  • Based on simplifying assumptions
  • --gt direct implementation of their results may
    lead to poor performance of the order fulfillment
    process

58
The Just In Time (JIT) Approach
  • Founder Dr. Ohno of Toyota, Japan
  • Profit revenue - costs
  • to increase profit
  • increase revenue
  • reduce costs
  • Focus on cost (waste) reduction

59
JIT Approach (2)
  • Potential forms of waste according to JIT
  • Quality related waste
  • Inventory related waste
  • Waste of space
  • Material handling waste
  • Distinction between value-added and non
    value-added operations
  • eliminate (if not possible minimize) non
    value-added operations, such as material handling

60
JIT Approach (3)
  • Impacts of JIT in scheduling
  • minimize process inventories
  • use small batch size (ideal batch size 1)
  • promote faster setups
  • use of scheduling systems
  • limit space available for inventories in process
  • preventive maintenance efforts
  • quality at the source
  • long term, close relationships with suppliers to
    ensure quality and delivery when needed

61
JIT Approach (4)
  • To succeed in the elimination of waste while
    keeping the competitive edge in time based
    competition, the order fulfillment process in the
    JIT system is synchronized and controlled by a
    special system
  • KANBAN cards
  • Contains information production order, purchase
    order, inventory control device
  • Integrated (all work centers are connected)
  • Dynamic (inventories limited by of Kanbans)

62
JIT Approach (5)
  • Just in time is a form of synchronous production
  • a system in which entire order fulfillment
    process is synchronized (i.e. works in harmony)
    to achieve its multidimensional goals (time,
    cost, flexibility, and quality)
  • The synchronizing device - the Kanban card
    provides tight connection between the work centers

63
The Dynamic ShopExpediting and Changing
Priorities
  • Demand fluctuates over time, solutions
  • manufacturing to stock
  • buffer inventories
  • freeze MPS (master production schedule)
  • stabilize demand over the freeze period
  • monitor each job as it moves
  • ERP systems analyze data and support decision
    making
  • focus on problematic work centers
  • derive the schedule according to bottlenecks

64
The Drum, Buffer, Rope (DBR)Approach
  • In this scheduling technique the schedule of all
    work centers is driven by the schedule of
    critical work centers (insufficient capacity)
  • Three performance measures
  • MAX Throughput (T) Sales - Expenses
  • MIN Inventory (I)
  • MIN Operating expenses (OE)
  • avoid production to stock

65
The Drum, Buffer, Rope (DBR) Approach (2)
  • Focus should be on the constraint as it is the
    weakest link in the chain of the order
    fulfillment process

Add here scanned picture from page 93!
66
Summary of Chapter 6
  • Add text here later

67
Material Requirement Planning
68
Material Requirement Planning (MRP)
  • Is an early attempt to develop an integrated MIS
    for the order fulfilment process
  • By combining information on the demand for
    products purchased by the customers with
    information on the structure of these
    products,the required quantities of dependent
    demand item do not have to be forecasted-they can
    be calculated.Uncertainty associated with
    forecasting is reduced
  • By integrating the inventory management
    information into the system the requirements for
    dependent demand items as well as those for
    independent demand item can be placed against
    existing inventories and pipeline inventories so
    that only the net required can be ordered

69
MRP (2)
  • By introducing lead time information for
    purchased items and for manufactured items
    manufacturing and purchasing orders can be time
    phased to ensure delivery exactly when needed
  • The original MRP System (MRP I ) combined
  • Marketing information in the Master Production
  • Technological information about the structure of
    each product and its manufacturing process
  • New capabilities were added to these systems
    including
  • Planning module that reveal capacity shortage
  • Shop floor control modules that utilise limited
    capacity efficiently
  • MRP II (Manufacturing resource Planning).Systems
    that deal with resource capacities were born

70
MRP (3)
  • MRP II Systems deal with resource
  • recent development in this area produced ERP (
    Enterprise Resource Planning) Systems designed to
    support the order fulfilment process of an
    enterprise operating several factories warehouses
    and integrated logistic system a complex known as
    the supply chain

71
The typical data file the Master Production
Schedule(MPS), the Bill of Material(BOM)
inventory data
Basic MRP System
Firm Customers Orders
Demand Forecasts
Master Production Schedule (MPS)
Bill of Material BOM
Inventory Records
Material Requirements Planning (MRP)
Report
Purchase Orders
Work Orders
72
The typical data file (2)
  • Many MRP installations did not fulfil the
    expectations improve the order fulfilment
    process. There are several reasons for the
    failure of MRP System
  • Quality of input data
  • Team mutual understanding on how to use MRP
  • The early MRP System dedicated files were used to
    store the data, as database technology were not
    available.

73
The typical data file (3)
  • The important data files in the early MRP
    applications were the following
  • The Master Production Schedule (MPS)- The MPS is
    the anticipated build schedule for selected
    (independent demand) items by quantity per
    planning period
  • Marketing information on actual customer orders
    and forecasts of future demand.
  • Manufacturing information on the current load on
    the shop floor and the ability to supply
    additional customers orders during each period in
    the planning horizon

74
The typical data file (4)
  • Purchasing information on suppliers lead-time
    and the availability of purchased parts and
    materials in inventory and in the pipelines
  • Cost information on the cost of manufacturing
    each independent demand item.
  • Master Production Scheduling is an excellent
    example for the need to integrate the different
    aspects of the order fulfilment process

75
The typical data file (5)
  • The time frame used for the MPS is important.The
    minimum planning time period known as time
    buckets specifies the accuracy of the planning
    process, a time bucket of one week is typical
  • The minimum length of the planning horizon should
    be equal to the total time required to purchase
    raw materials and component parts, to manufacture
    and assemble the independent demand item with the
    longest lead time, to provide enough time for the
    order fufilment process to supply this item when
    needed

76
The typical data file (6)
  • Change management is an important part of the
    order fulfilment process
  • Change in the MPS create changes in the
    production and purchasing plans that results in
    nerveousness of the system and in low
    efficiencies, excess inventories and an unstable
    order fulfilment process
  • The MPSis updated continuously
  • When current time is over, the next period
    becomes the current one and a new period enters
    the planning horizon

77
The typical data file (7)
  • Key issues to consider are who should mange the
    MPS and How
  • The Bill of Material-The Bill of Material or BOM
    is the source of information about the structure
    of each independent demand item. Through the BOM
    it is possible to coordinate the requirements for
    subassemblies, components and raw materials
  • The Inventory Record-To function properly, the
    MRP system compares the gross requirements for
    each part number to its current inventory.Only if
    the gross requirements exceed the current
    inventory an order for that part number should be
    issued

78
Gross to net and time phasing The MRP logic
  • MRP systems are designed to support the material
    management function in the order fulfilment
    process
  • The Basic idea is that the same logic can be
    used for ordering purchased materials or parts,
    manufactured components and assembled products
  • The MPS is the source of information on gross
    requirements for independent demand items
  • Basic MRP logic makes use of this information as
    input and translates it into time phased net
    requirements

79
Gross to net and time phasing The MRP logic
The Basic MRP record for product A
Week 0 1 2 3 4 5 6 7 8 9
Gross Requirement 3 7 10 8 6
Scheduled receipts
Projected available balance
Planned order release
80
Gross to net and time phasing The MRP logic
Projected available balance (t1) Projected
available balance Scheduled receipt
(t1) -Gross requirement (t1)
  • Based on the calculed projected available balance
    a decision to issue work orders or purchase
    orders is made
  • A simple decision rule known as LOT FOR LOT
    (LFL)

81
Modification of The MRP logic
  • MPS is used as the resource of Gross
    requirements for independent demand items.
  • Basic MRP logic is modified to accomodate special
    situations. a common modification is in the lot
    sizing policy
  • The Economic Order quantity (EOQ) logic discussed
    early, is frequently used to calculate this
    minimum size. The same logic applíes parts when
    economy to scale is available
  • Ex The cost per unit decrease as the order size
    increases

82
Modification of The MRP logic
  • Other modifications in the lot sizing policy are
    based on the idea that each order should cover a
    minimum period of demand
  • That is know as the Periodic Order quantity
  • Unlike LFL logic both EOQ and POQ generate
    inventories
  • Another modification of the MRP logic is to
    buffer against uncertainty

83
Modification of The MRP logic
  • Two types of buffers
  • Buffer stock- in this case the minimum inventory
    level target is set.
  • Buffer lead time-this method is designed to
    protect the system from fluctuations in supply
    lead-time. It is based on increasing the lead
    time of part number by a predetermined amount to
    protect the system against uncertainty in the
    actual deleivery dates

84
Capacity considerations
  • MRP logic of gross to Net and Time Phasing
    derives the requirements for material from the
    MPS
  • Early applications of MRP logic focused on
    material requirements
  • To coordinate resource availability with resource
    requirements, capacity considerations had to be
    added to the basic MRP system
  • One way of doing that is known as Rough cut
    Capacity Planning (RCCP)
  • Another approach is known as Capacity Requirement
    Planning (CRP)

85
Capacity considerations Rough cut Capacity
Planning (RCCP)
  • Rough cut Capacity Planning (RCCP) is performed
    at the MPS level. Its major inputs are the MPS
    and Information about the processing time per
    unit product on each machine or work center
  • The logic used for Rough cut Capacity Planning
    varies in its complexity and in the accuracy of
    the capacity requirements forecasts generated

86
Capacity considerations Rough cut Capacity
Planning (RCCP)
  • Rough cut Capacity Planning is an important tool
    for the management of the MPS
  • Rough cut Capacity Planning is also the basis for
    setting priorities in monitoring and controlling
    the shop floor
  • This is logic is the basis of the work of
    Goldratt and Fox (1986) which an effort to
    identify the few resources that are short of
    capacity and to schedule the whole operation in
    such a way that these resources will be used
    efficiently and effectively

87
Capacity considerations Rough cut Capacity
Planning (RCCP)
  • Goldratts logic is translated into the following
    step
  • Identity the systems constraints ( the
    bottlenecks)-this step can be based on rough
    estimates of the load on each resource compared
    to its available capacity
  • Develop a detailed schedule for the
    bottlenecks-using simple techniques such as Gantt
    Chart
  • Derive the schedule for all non-bottleneck
    resources from the schedule developed for the
    bottlenecks. Since the non-constrained resources
    have excess capacity the assumption is that it is
    possible to schedule these resources to support
    the schedule of the bottlenecks
  • Repeat the process-Since bottlenecks may change
    over time as the product mix changes or due to
    changes in resources capacity, it is necessary to
    identify the systems constraints repetitively
    every and to watch the actual utilisation of the
    bottleneck to avoid idle time

88
Capacity considerations Rough cut Capacity
Planning (RCCP)
  • The use of the MPS as a basis for rough cut
    capacity planning may lead to substantial errors
    in estimating the resource requirements
  • To overcome these difficulties a more detailed
    approach for capacity planning is used

89
Capacity considerations Capacity Requirement
Planning (CRP)
  • Capacity Requirement Planning (CRP) is based on
    an effort to treat the requirements for resources
    by logic similar to the logic used for material
    planning
  • Logic based on the output of the MRP-work orders
    generated by the gross to Net and the Time
    Phasing logic
  • Based on the orders released by MRP logic, the
    required periodical capacity of each resource is
    calculated
  • The MRP logic that generates work orders takes
    existing in process inventories into account in
    its gross to net analysis the capacity
    requirements are more accurate

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Capacity considerations CRP Vs. RCCP
  • Both CRP and RCCP are tools for testing the
    feasibility of the plans developed by the MIS
  • The RCCP test the feasibility of the MPS while
    the CRP tests the feasibility of the MRP plans
  • Both tools are based on estimates of available
    capacity and forecasts of expected loads and
    therefore do not provide perfect accuracy
  • A module called shop Floor Control is added to
    support the order fulfilment team in its resource
    management tasks

91
Capacity considerationsShop Floor Control (SFC)
  • The module implement logic known as Input-Output
    analysis
  • The logic is based on monitoring the actual
    queue of work orders in front of each work centre
  • The name Input Output analysis comes from the
    analogy between the queue in front of a work
    centre and reservoir
  • The complete MRP II system consist of the basic
    MRP I module plus the RCCP,CRP and SFC modules
    (see Schema next)

92
Capacity considerations
The Modules of MRP II System
FIRM CUSTOMERS ORDERS
DEMAND FORECASTS
MPS
RCCP
BOM
INVENTORY RECORDS
MRP
CRP
PURCHASE ORDERS AND SUPPLIERS MANAGEMENT
REPORT
WORK ORDERS AND SHOP FOOR CONTROL
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Managing the Integrated Order Fulfilment Process
Using ERPSetting goals, Establishing
performance, Measures developing policies and
Taking actions
94
The role of management in the integrated order
fulfilment process
  • Organization structures establish clear
    relationships and communication lines between
    managers and subordinates, within these
    structures the lines of authority and
    responsibility are easy to define and maintain
  • The traditional functional organizational
    structure may not provide adequate support for
    the management of the order fulfilment process
    due t the following problems

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The role of management in the integrated order
fulfilment process (1)
  • Problems
  • Each functional organizational unit tends to
    focus on its local goals and objectives
  • In a functional organization the order fulfilment
    does not have a clear owner responsible for its
    performances from start-getting a customer order,
    to finish-supplying the order efficiency and on
    time

96
The role of management in the integrated order
fulfilment process (2)
  • Concurrent Engineering-is based on a team of
    experts in the areas of product development,
    manufacturing and logistics support
  • Application of this new approach improved the
    communication between the participants in the
    development process and resulted in a shorted
    development cycle
  • Team building is a challenging managerial task
    and it is a process of organizing, staffing,
    motivating and leading people

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The role of management in the integrated order
fulfilment process (3)
  • Responsibility of the order fulfilment team to
    plan, direct and control the activities of the
    resources used to perform the order fulfilment
    process
  • Information acquired by marketing, purchasing and
    operations management represents the common
    Knowledge that should be shared by all the
    members of the order fulfilment team
  • This common knowledge provides the ability to
    communicate, to set common goals and to develop
    an integrated plan that can be controlled and
    directed efficiently by the team

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The role of management in the integrated order
fulfilment process (4)
  • The common knowledge and the understanding that
    the whole team shares the responsibility for the
    entire order fulfilment process is the
    cornerstone of a successful ERP implementation
  • Planning starts with the definition of the goals
    for the whole order fulfilment process and the
    agreement on the frame to reach the goals

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The role of management in the integrated order
fulfilment process (5)
  • A combination of long term and short-term gaols
    is needed
  • A short term goal may be to supply a customers
    order ahead of its promised due date when a
    preferred customers order ahead of its
    promised due date
  • a long term goal is to become a leader in the
    market and to capture a market share of fifty
    percent or more within two years

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The role of management in the integrated order
fulfilment process (6)
  • The plan provides each team member with exact
    information on what he is supposed to do and when
  • The plan integrates and coordinates the efforts
    of individuals involved in the process and
    facilitate teamwork.It serves like
  • A note (in an orchestra)
  • A Compass
  • Deviations from the original plan are likely due
    to
  • Uncertainty
  • Late delivery

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  • Special action as opposed to long lasting
    policies are needed when deviations are detected
  • The ERP concept of a single information system
    that supports all the processes in the
    organisation by providing an integrated data base
    and a comprehensive model base is therefore
    essential for successful implementation
  • Learning how to use the ERP, how to work in a
    team, and how to lead in a dynamic, integrate
    environment is equally important

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The Hierarchy of Goals
Alice in Wonderland
Should with turn right or left?
He does not matter!
In that case you can go either way
Where do you want to go?
Alice
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  • This global goal is translated into several lower
    level goals such as
  • Time related Goal
  • Deliver in a short lead-time
  • Deliver on time to the customers
  • Cost related goals
  • Deliver at the minimum cost possible
  • Minimize the operating cost of the process
  • Minimize inventories to minimize the
    inventory-related costs

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Developing a plan-The road map to the goal
  • A plan that coordinates the efforts of the team
    members
  • Coordination is easier in a repetitive
    environment where the same hierarchy of goals is
    valid over a long period of time and the same
    plan may be applied rapidly to reach these goals
  • As long as the goal does not change, the MRP
    logic is implemented correctly and uncertainty
    does not intervene, the automatic planning
    process should yield the desired results

105
Establishing Control-Identifying Problem
  • To reduce the effect of uncertainty, management
    tries to establish estems that identify problems
    in implementing its plans as early as possible
  • Control systems are common in many engineering
    and organizational applications
  • ExThe control of the rooms temperature
  • The control of the order fulfilment process is
    based on the same principles, but more human
    decision making is required when the process is
    not repetitive

106
  • First approach, Monitoring the value of the
    performance measures is one way to go
  • Ex If due date performance is an important
    measure it is preferable to detect problems on
    the shop floor that might cause delay in a
    customer order or to detect late deliveries from
    suppliers and fix these problems before due date
    performance level is affected
  • The Three aspects of the order fulfilment should
    be monitored continuously
  • The interface with customers
  • The interface with suppliers
  • The performance of the shop floor
  • The second approach, fits generative MRP systems
    where translations are collected and processed as
    a batch to update the mater files of the MRP
    systems

107
  • A combination of continuous and periodic control
    is essential for a successful, flexible order
    fulfilment process
  • the design of the control system is an important
    part of any ERP implementation

108
Taking Action-Solving Problem
  • To analyse the source of problems and decide
    whether there is a need to change the current
    policy in order to avoid the occurrence of
    similar problems in the future
  • Problem solving is tricky due to the integrate,
    dynamic nature of the process and the uncertain
    environment
  • System behaviours can be difficult to grasp and
    even more difficult to predict

109
  • First step in solving problems is to recognize
    that there is a problem and to define it clearly
  • Next step, is to define it in clear terms. The
    performance measures used to evaluate the process
    are the basis for problem definition
  • Then-problem analysis
  • The third step-is to generate alternative
    solutions to the problem. Two types of solution
    are needed
  • Ad-hoc solution
  • Long term solution
  • the alternatives expected to yield the best
    results are selected and implemented in the
    process

110
  • Problem solving approach can be summarized as
    follows
  • Identify the problem
  • Define the problem in term of the process
    performance measures
  • Analyse the problem to find its roots
  • Generate alternative long and short range
    solutions
  • Evaluate the solutions with respect to their
    effect on the performance measures
  • Select the best solutions
  • Implement the selected solutions

111
Policies Control Systems and Actions in the
Operations
  • The integrated dynamic management concept is
    based on managements ability to
  • Understand the whole order fulfilment process and
    the interactions between its different aspects
  • Establish goals and performance measures
  • Develop adequate policies based on the
    understanding of the whole process, its goals,
    its performance measures, its different aspects
    and the dynamic interactions among these aspects
  • Design a monitoring system and use its signals to
    control the whole process
  • Develop problem-solving skills as individuals and
    as a group
  • Implement the policies, controls and solutions to
    problems

112
  • The selection of policies
  • Marketing policies
  • Make-to-stock
  • Make-to-order
  • Production policies
  • Dispatching policy
  • Purchasing action

113
Teaching and Training Integrated Production and
Order Management
114
Individual Learning and Organisational Learning
  • The essence of Integrated Production order order
    Management is teamwork. A process based
    organization is responsible for each process.
  • In the functional organization people are grouped
    according to the function they perform and are
    trained to focus on their part of the order
    fulfilment process.

115
  • IPOM is based on an integrated approach to the
    order fulfilment process (integration as the
    opposite of de coupling).
  • IPOM environment each member of the team have to
    understand the whole process including the role
    of every other team member. all team members
    participate in the decision making process
  • The teaching of IPOM at the individual level
    starts with the basic concepts of information and
    its use

116
  • Building the team and training it to play
    together as a team is very important. Each player
    has to understand his role and to excel in it.
    Coordination between the players is also an
    important part of training a basketball or a
    football team
  • The high degree of dependency among the players
    and the dynamic, stochastic environment requires
    team building and team learning

117
Individual Learning Curve
  • if each individual is an expert in his task the
    integration of individual expertise by well
    planned organizational structure provides the
    organization's competitive edge
  • Individual learning can take many forms including
    the learning of verbal knowledge, intellectual
    skills,cognitive strategies and attitude
  • Learning by imitation
  • Learning by repetition

118
Learning curve model
Direct Production time
Unit Number
30
119
  • Group learning in its simplest form is an
    aggregation of individual learning
  • Three problems with the extension of individual
    learning curve to group learning
  • First, the learning coefficients of individuals
    in a group are not necessary the same
  • Second, Absenteeism turnover and job rotation
    makes the organizational learning curve difficult
    to predict ...
  • Third, problem related to synergy in team

120
Teambuilding and the Team Performance Curve
  • Katzenbach and smith (1993) relates the types of
    group and its performance

Performance impact
High-performing team
In this model five types of groups are defined
Real team
Working group
Potential team
Team effectiveness
Pseudo team
121
  • The Katzentbach and smith (1993) model explains
    how important it is to combine individual
    learning with team building in order to succeed
    in implementing integrated Production and Order
    Management
  • There are several barriers that a new team must
    overcome (Thamhain and Wilemon (1979))
  • Unclear objectives
  • Differing outlook
  • Role conflicts
  • Personnel selection

122
  • Katzenbach and smith (1993) list several hints
    that can help in the process of team building
  • Establish urgency and direction-All team members
    need to believe the team has urgent and
    worthwhile purposes
  • Select members based on skill and their
    potential. not personalities
  • Pay particular attention to first meetings and
    actions. Initial impressions always mean a great
    deal.
  • Set some clear rules of behaviour. Rules
    regarding attendance, discussion confidentiality
    and contributions are very important and help the
    team perform its tasks in the early stages

123
  • 5 . Set and seize upon a few immediate
    performance. By establishing a few challenging
    yet achievable goals members of the team can
    start working together right a way a process that
    forge them together.
  • 6 . Challenge the group regularly with fresh
    facts and information. New information helps the
    team shape a common purpose and set clearer
    goals.
  • 7 . Spend lots of time together. Creative
    insights as well as personal bonding are created
    early on if the team members spend time together.
  • 8.Exploit the power of positive feedback,
    recognition and reward. Positive or
    reinforcing feedback helps the process of team
    building and accelerates it

124
  • The Operations Trainer is designed to Support
    team building
  • Promoting and nurturing individual learning, team
    building and organizational learning are key
    elements in the implementation of IPOM

125
Organizational Learning in the IPOM environment
  • Individual learning and team building are
    necessary steps in the implementation of IPOM
  • The players must learn how to coordinate effort
    in an uncertain environment were "division of
    labour" is important but the process is far from
    being completely repeatable, players are
    dependent on each other as the situation changes
    rapidly in an unpredictable way
  • Individual leaning is the basis. but it is not
    sufficient in a highly competitive, dynamic,
    uncertainty environment were the coordinated
    effort of many individuals is required

126
  • Tasks are not independent and the process is not
    completely repeatable
  • Organizational or group learning is the process
    of developing the ability of a group of
    individuals to improve its performances working
    as a team to achieve a common goal
  • Argyris and Schon (1978) define two levels of
    organization learning
  • Organization learning involves the detection and
    correction
  • Double loop learning

127
  • Successful implementation of IPOM depends on the
    ability of the organization to create an
    environment that encourages single loop and
    double loop learning
  • Group learning is based on several mechanism one
    of which is repetition
  • Other mechanisms are
  • 1. The ability to collect and share knowledge so
    that members of the group can learn from each
    other's experience.
  • 2. The ability to learn from the experience of
    other groups or organizations
  • 3. The development of an efficient group
    decisions making process
  • 4. The ability to share and use information real
    time.

128
Teaching IPOM - the Operations Trainer
  • The Operations Trainer is designed to provide the
    teaching environment for IPOM.To achieve this
    goalthe trainer is an integration of tree
    different systems
  • A simulation system that can simulate a variety
    of scenarios in great detail.
  • An information system that handles the
    traditional tasks of transactions processing,
    management information and DSS
  • An ERP like system composed of an integrated
    database and a model base

129
  • The operation trainer supports individual and
    organization learning in tree ways
  • As a tool for teaching individuals the concepts
    of information and it use
  • As a tool for practicing traditional Operations
    Management by assigning a group of students or
    managers to manage the simulated plan
  • As tool for teaching IPOM and ERP concept by
    assigning a group of manager or students to
    manage a simulated plant were the whole group
    serve as a team responsible for the integrated
    process and sharing information

130
ERP/ERM
Dale KutnickContributing Analyst, Executive
DirectionsCEO Co-Research Director,
OfficersChairman, Board of Directors
  • Barry Wilderman
  • Vice President, Application Delivery Strategies

131
THANK YOU FORLISTENING
Seppo
Anicet
Maria
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