ASSIGNMENT 1 ERP

SUBMITTED TO Prof Suhail Anwar. NIFT , DELHI.

SUBMITTED BY Debasis Bhowmik Vineet Kaushik M.FTECH-3

What is ERP?
ERP means Enterprise Resource Planning ERP is a real time system ERP is an integrated information system for identifying and planning the enterprise-wide resources needed to take, make, ship, and account for customer orders ERP is an extension of MRP. Where MRP focused mainly on manufacturing, ERP includes all of the processes required to operate a business Enterprise Organization designed to provide goods and/or services to consumers Resource Any physical or virtual entity of limited availability, or anything used to help one earn a living (e.g. employees, materials, etc.) Planning The organizational process of creating and maintaining a plan.

Enterprise Resource Planning (ERP)

Is a method for the effective planning of all resources of a manufacturing and repair facility Predicts and balances demand and supply. It is an enterprise-wide set of forecasting, planning and scheduling tools Links customers and suppliers into a complete supply chain Employs proven processes for decision-making Coordinates sales, marketing, operations, logistics, purchasing, finance, product development, and human resources. Its goals include high levels of customer service, productivity, cost reduction, and inventory turnover, and it produces the foundation for effective supply chain management and e-business. It does this by developing valid plans and schedules so that the right resources manpower, materials, machinery, and money are available in the right amount when needed. Applies a single set of resource planning tools across the entire enterprise Provides a real time integration of sales, operating, and financial data Connects resource planning approaches to the extended supply chain of customers and suppliers.

ERP Evolution

MRP, MRPII, and ERP are part of an evolution in manufacturing planning systems that started in the 1960s and continues to evolve today. In the 1960s MRP started as the concept of scheduling the quantity and timing of production and related purchase orders for raw materials. In the 1980s MRP evolved into MRP II. MRP II builds on the concept of MRP by adding the business planning, sales and operations planning, and capacity requirements planning functions. In the 1990s MRP II evolved into ERP. ERP includes all the functions associated with MRP II and adds the logistics and materials management, customer service, and customer and product information functions. ERP also includes the important integration with financial, Human Resources, and other processes and functions.

Evolution of Enterprise Software

ERP Evolution

Material requirements planning (MRP1)

Material requirements planning (MRP) is a production planning and inventory control system used to manage manufacturing processes. Most MRP systems are software-based, while it is possible to conduct MRP by hand as well. An MRP system is intended to simultaneously meet three objectives:

Ensure materials are available for production and products are available for delivery to customers. Maintain the lowest possible material and product levels in store Plan manufacturing activities, delivery schedules and purchasing activities.

History of MRP1

Prior to MRP, and before computers dominated industry, reorder-point/reorderquantity (ROP/ROQ) type methods like EOQ (Economic Order Quantity) had been used in manufacturing and inventory management. In 1964, Joseph Orlicky as a response to the TOYOTA Manufacturing Program, developed Material Requirements Planning (MRP). First company to use MRP was Black & Decker in 1964 MRP was implemented in 150 companies. This number had grown to about 8,000 by 1981. In the 1980s, MRP evolved into Manufacturing Resource Planning (MRP II) which brings master scheduling, rough-cut capacity planning, capacity requirements planning, S&OP in 1983 and other concepts to classical MRP.

Nature of functioning and applications of MRP1

MRP1 can be applied both to items that are purchased from outside suppliers and to subassemblies, produced internally, that are components of more complex items. The data that must be considered include:

The end item (or items) being created. This is sometimes called Independent Demand or Level 0 on BOM (Bill of materials). How much is required at a time. When the quantities are required to meet demand. Shelf life of stored materials. Inventory status records. Records of net materials available for use already in stock (on hand) and materials on order from suppliers. Bills of materials. Details of the materials, components and sub-assemblies required to make each product. Planning Data. This includes all the restraints and directions to produce the end items. This includes such items as: Routings, Labor and Machine Standards, Quality and Testing Standards, Pull/Work Cell and Push commands, Lot sizing techniques (i.e. Fixed Lot Size, Lot-For-Lot, and Economic Order Quantity), Scrap Percentages, and other inputs.

Outputs of MRP1
There are two outputs and a variety of messages/reports:

Output 1 is the "Recommended Production Schedule" which lays out a detailed schedule of the required minimum start and completion dates, with quantities, for each step of the Routing and Bill Of Material required to satisfy the demand from the Master Production Schedule (MPS). Output 2 is the "Recommended Purchasing Schedule". This lays out both the dates that the purchased items should be received into the facility AND the dates that the Purchase orders, or Blanket Order Release should occur to match the production schedules.

Problems with MRP systems

The major problem with MRP systems is the integrity of the data. If there are any errors in the inventory data, the bill of materials (commonly referred to as 'BOM') data, or the master production schedule, then the output data will also be incorrect ("GIGO": Garbage In, Garbage Out). Data integrity is also affected by inaccurate cycle count adjustments, mistakes in receiving input and shipping output, scrap not reported, waste, damage, box count errors, supplier container count errors, production reporting errors, and system issues. Another major problem with MRP systems is the requirement, that the user specify how long it will take for a factory to make a product from its component parts (assuming they are all available). Additionally, the system design also assumes that this "lead time" in manufacturing will be the same each time the item is made, without regard to quantity being made, or other items being made simultaneously in the factory. The other major drawback of MRP is that takes no account of capacity in its calculations. This means it will give results that are impossible to implement due to manpower or machine or supplier capacity constraints

MRP II
Manufacturing resource planning (MRP II) is defined as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP. This is not exclusively a software function, but a marriage of people skills, dedication to data base accuracy, and computer resources. It is a total company management concept for using human resources more productively

Key elements and hot points

MRP II is not a proprietary software system and can thus take many forms. It is almost impossible to visualize an MRP II system that does not use a computer, but an MRP II system can be based on either purchasedlicensed or in-house software.

Almost every MRP II system is modular in construction. Characteristic basic modules in an MRP II system are:

Master production schedule (MPS) Item master data (technical data) Bill of materials (BOM) (technical data) Production resources data (manufacturing technical data) Inventories and orders (inventory control) Purchasing management Material requirements planning (MRP) Shop floor control (SFC) Capacity planning or capacity requirements planning (CRP) Standard costing (cost control) Cost reporting / management (cost control)

Together with auxiliary systems such as:

Business planning Lot traceability Contract management Tool management. Engineering change control Configuration management Shop floor data collection Sales analysis and forecasting Finite capacity scheduling (FCS)

And related systems such as:

General ledger Accounts payable (purchase ledger) Accounts receivable (sales ledger) Sales order management (Distribution requirements planning) (DRP) Automated warehouse management Project management Technical records Estimating Computer-aided design/computer-aided manufacturing (CAD/CAM) CAPP

The MRP II system integrates these modules together so that they use common data and freely exchange information, in a model of how a manufacturing enterprise should and can operate. The MRP II approach is therefore very different from the point solution approach, where individual systems are deployed to help a company plan, control or manage a specific activity. MRP II is by definition fully integrated or at least fully interfaced.

From MRP to ERP

ERP is an outcome of 40 years of trial and error. It has evolved as a strategic tool because of continuous improvement in the available techniques to manage business and the fast growth of information technology

Timeline 1960s

System Inventory Management & Control

Description Combination of information technology and business processes of maintaining the appropriate level of stock in a warehouse.

1970s

Material Requirement Planning (MRP)

MRP generates schedules for the operations and raw material purchases based on the production requirements of finished goods, the structure of the production system, the current inventories levels and the lot sizing procedure for each operation. MRP utilizes software applications for coordinating manufacturing processes, from product planning, parts purchasing, inventory control to product distribution.

1980s

Manufacturing Requirements Planning (MRP II)

2000s

Enterprise Resource Planning (ERP)

ERP systems often integrate business activities across functional departments, from product planning, parts purchasing, inventory control, product distribution, fulfillment, to order tracking. ERP software systems may include application modules for supporting marketing, finance, accounting and human resources

What does an ERP System do?

Integrates information across all departments Facilitates the flow of information among the different functions and processes of an enterprise - functions: manufacturing, finance, HR - processes: order entry Tracks a wide range of events in the enterprise in an integrated fashion Plans future activities based on these events Supports analysis of trends in these events, to improve the performance of the enterprise. Allows users to - input data in one location, that can be processed with other data and accessed as informational reports in a real-time environment - share common data and practices across the entire enterprise - reengineer the majority of its processes

MAINTENANACE MANAGEMENT

STRATEGIC & OPERATION PLANNING FINANCE

MANUFACTURING ERP SYSTEM

HUMAN RESOURCE

MATERIALS MANAGEMENT

LOGISTICS MANAGEMENT

QUALITY MANAGEMENT SALES & DISTRIBUTION

Benefits of ERP

Integrates processes so a company can perform more efficiently Design Engineering , the process used to create it is just as important as end result (how to make the best product) The revenue cycle from invoice through cash receipts Managing interdependencies of complex bill of materials Tracking the 3-way match between purchase orders (what was ordered), inventory receipts (what arrived) , and costing ( what the vendor invoiced) Order tracking allows the company to get detailed information on customers The accounting for all of these tasks, tracking the revenue, cost and profit on a granular level. Use of a dating structure which can allow the company to be informed when the product should be updated ERP security , protect a company against crimes such as embezzlement or industrial espionage Allow product to be produced of higher quality

Disadvantages of ERP
Cost:
Average cost to implement: SAP: $16.8 million Oracle: $12.6 million Microsoft: $2.6 million Tier 2: $3.46 million

Time:
Average time to implement: SAP: 20 months Oracle: 18.6 months Microsoft: 18 months Tier 2: 17.8 months Continually trained on how to use it Success is fully dependent on how the workers utilize it Biggest problem is it is hard to customize very few companies can use it right out of the box Modifications are expensive and tedious Even a Making the necessary changes may make the company less competitive in the market place License fees Technical support from ERP departments has been questioned Security, corporate representatives must give sensitive information to tech support department after changes still limited in certain areas

The Present and Future of the ERP & ERP Evolution on Future Demands
The ERP market experienced a hype based on the Y2K problem, but after Y2K the ERP market soured. It was doubted that traditional ERP could meet the e-business challenge. New vendors of the bolt-on systems, for example, i2 Technology with SCM and Siebel with CRM emerged on the scene and Application Integration (EAI) became a critical issue. New delivery and pricing methods such as ASP (Application Service Provider) and ERP rentals were conceived and the traditional ERP vendors were challenged. The ERP II concept is a vision original conceived by Gartner Group in 2000. Gartner Group, who also put the name on the ERP concept, defines ERP II as, a business strategy and a set of industry-domain-specific applications that build customer and shareholder value by enabling and optimizing enterprise and inter-enterprise, collaborative-operational and financial processes. ERP II builds on ERP and thus the concept excludes the bolt-on vendors like i2 or Siebel from this vision. AMR Research does not restrict their competing vision on Enterprise Commerce Management (ECM) to the ERP vendors and define ECM as, a blueprint that enables clients to plan, manage, and maximize the critical applications, business processes and technologies they need to support employees, customers, and suppliers. Gartner Group has later resigned on this requirement and today ERP II is a framework which includes enterprise systems based on Best of Breed systems and EAI as well as Single Vendor solutions. ERP II includes six elements that touch business, application and technology strategy: (i) the role of ERP II, (ii) its business domain, (iii) the functions addressed within that domain, (iv) the kinds of processes required by those functions, (v) the system architectures that can support those processes, and (vi) the way in which data is handled within those architectures. With the exception of architecture, these ERP II elements represent an expansion of traditional ERP. ERP II is essentially componentized ERP, e-business and collaboration in the supply chain.