Enterprise Business Processes and Applications

(IS 6006)

Masters in Business Information Systems

4th Nov 2008

Fergal CartonBusiness Information Systems

Last week• MRP principles

– BOM crystallises connection between supply and demand– Build process takes account of space, yield, time, cost, labour, equipment …– Outsource or not for sub-components, influence on BOM– Lead time for customer and commit time for production– MRP reduces buffer stocks

• Look up examples of Bills of Materials• What is so difficult about connecting supply and demand?

– Why can’t actual demand be forecasted?– Dell, Aer Lingus, Glaxo SmithKline– Fiat car design : 18 months because of sub-contracting parts

• Work orders / process orders allow inventory to be consumed– Mirror image of the sales order– Drives customer demand through to batches in the production process

• Additional Reading– Look at paper titles for relevance to this course (eg. Supply Chain)– We focus on reality of using integrated systems and issues arising

This week

• BOM example iPhone

• Process orders / work orders

• ERP modules (Sales, Finance, Logistics, Procurement, Manufacturing)

• ERP is single instance

• Production planning: assignment practice

What is a Bill of Materials?

• Links demand and supply• Sales require a customer oriented

language to describe functionality– See example for iPhone

• Manufacturing need a supplier oriented language to describe Bill of Materials

Model names (sales)Model Year-Month Scrolling device Capacity VeriPod touch (8 GB or 16 GB) 2007-09 multi-touch display 8 GB or 16 GB 1.1.1

iPod classic (80 GB or 160 GB) 2007-09 Click Wheel 80 GB or 160 GB 1.0.2

iPod nano (3rd generation) 2007-09 Click Wheel 4 GB or 8 GB 1.0.2

iPod shuffle (2nd generation) (1 GB) 2006-09 n/a 1 GB 1.0.3

iPod (5th generation late 2006) (30 GB or 80 GB) 2006-09 Click Wheel 30 GB or 80 GB 1.2.1

iPod nano (Second Generation) (2 GB, 4 GB, or 8 GB) 2006-09 Click Wheel 2 GB, 4 GB, or 8 GB 1.1.3

iPod nano (1 GB) 2006-02 Click Wheel 1 GB 1.3.1

iPod (5th generation) 2005-10 Click Wheel 60 GB 1.2.1

iPod (5th generation ) 2005-10 Click Wheel 30 GB 1.2.1

iPod nano (4 GB) 2005-09 Click Wheel 4 GB 1.3.1

iPod nano (2 GB) 2005-09 Click Wheel 2 GB 1.3.1

iPod with color display (60 GB) 2005-06 Click Wheel 60 GB 1.2.1

iPod with color display (20 GB) 2005-06 Click Wheel 20 GB 1.2.1

iPod photo (30 GB) 2005-02 Click Wheel 30 GB 1.2.1

iPod mini (4 GB Second Generation) 2005-02 Click Wheel 4 GB 1.4.1

iPod mini (6 GB Second Generation) 2005-02 Click Wheel 6 GB 1.4.1

iPod shuffle (512 MB) 2005-01 n/a 512 MB 1.1.5

iPod shuffle (1 GB) 2005-01 n/a 1 GB 1.1.5

iPod photo (40 GB) 2004-10 Click Wheel 40 GB 1.2.1

iPod photo (60 GB) 2004-10 Click Wheel 60 GB 1.2.1

iPod (20 GB Click Wheel) 2004-07 Click Wheel 20 GB 3.1.1

iPod (40 GB Click Wheel) 2004-07 Click Wheel 40 GB 3.1.1

iPod mini 2004-01 Click Wheel 4 GB 1.4.1

Model Model # Model # Model #10GB M8709LL/A M8737LL/A M8740LL//A

10GB M8976LL/A

15GB M8946LL/A M9460LL/A

1GB Black MA352

1GB White MA350

1st Generation iPod mini Models M9160LL/A M9436LL/A M9435LL/A

20GB M8738LL/A M8741LL/A

20GB MA079LL/A

20GB M9244LL/A

20GB M9282LL/A M9282CH/A M9282FE/A

2GB Black MA099

2GB Silver MA477

2GB White MA004

2nd Generation iPod mini Models M9801LL/A M9803LL/A M9805LL/A

30GB M9829LL/A

30GB M8948LL/A

30GB Black MA146LL/A

30GB U2 iPod MA452LL/A

30GB White MA002LL/A MA002B/A

40GB M9585LL/A

40GB M9245LL/A

40GB M9268LL/A M9268CH/A M9268KH/A

Model numbers (manufacturing)

Other BOM examples?

• ?

Work order / Process order

• ?

Production planning• Planning approaches (build to plan)

– Top down quarterly plan drives both Production (units) and Sales (€) targets

– Takes into account sales forecast, historical performance and market expectations

– Production plan must then be broken down into units, configurations, geograpahies

– Local production planners then turn this into:• an MRP plan to drive purchasing

• and a Master production schedule to drive manufacturing

Manufacturing modes and lead times

• Difference between process and discrete manufacturing

– Process manufacturing consumes inventory at a steady rate, but yield of finished goods may vary

– Discrete manufacturing consumes a predefined amount of inventory per article of finished goods

• Lead times:

– key to replenishment policy: what’s my buffer stock?

– Fiat Idea : re-uses previous model components to reduce cost & lead time

ERP is often single instance

• Single point of data entry (PO’s, SO’s, …)

• Inventory control

• Opportunity to re-design processes

• Single technical platform (support)

• Common language, common pool of data

Sales Shipping Collect cashProduction

Customer information (ship-to, bill-to, install-at, …)

Finance

Value

Real-Time

DecisionSupport

Costing

HumanResource

Mgmt

AssetMgmt

AccountsReceivable

AccountsPayable

GeneralLedger

Sales

Real-Time

DecisionSupport

Sale

CustomerDemand

Mgmt

Specification/Configuration

Mgmt

SalesForceMgmt

ClientInformation

Systems

Price &Promotion

Mgmt

Sales\OrderEntry

Engineering

Specification

Real-Time

DecisionSupport

ReleaseMgmt

TestMgmt

RevisionMgmt

ProductDevelopment

ProcessDefinition

ProductDefinition

Procurement

Purchase

Real-Time

DecisionSupport

VendorPerformance

Mgmt

FinancialInterfaces

ProductPerformance

Mgmt

ReceivingMgmt

PurchaseOrderMgmt

Quote/Contract

Mgmt

Manufacturing

Product

Real-Time

DecisionSupport

QualityMgmt

MaintenanceMgmt

ProcessMonitoring& Control

ProductionMgmt

ResourceMgmt

Planning &Scheduling

Real-Time

DecisionSupport

Customer

Logistics

Fulfillment

Real-Time

DecisionSupport

TransportationMgmt

WarehouseMgmt

TradeMgmt

InventoryMgmt

DistributionPlanning

NetworkInfrastructure

Vendors Customers

Process Monitoring & Control• Not covered in “core” ERP functionality

Resource Management• Capacity requirements based on standards;

machine time, labor time, etc.• Rough cut capacity planning

Maintenance Management• Ability to integrate maintenance work orders

and inventory in system• Robust integration with fixed assets• Good tracking of maintenance costs

Planning & Scheduling• Basic APICS standard planning (MS, RCCP,

MRP, SFC) - requirements netted against on-hand inventories, lead times, etc.

• Multilevel master scheduling• Multiplant MRP and DRP• Basic shop floor control utilizing workorders,

backflush and repetitive options• Actual orders consume forecast

Product

QualityMgmt

MaintenanceMgmt

ProcessMonitoring &

ControlProduction

Mgmt

ResourceMgmt

Planning &Scheduling

Manufacturing - Core functionality

Production Management• Support for variety of production strategies;

kanban, etc. for JIT, production planning process

• Track WIP inventory• Record detailed costs• Integration to quality management

Quality Management.• Basic quality reporting and issue tracking

Product Performance Management• Good granularity of data• Basic quality and defect tracking

Receiving Management• Integrated receiving inspection and quality

tracking• Items non-nettable until approved• Receiving routings, matched with PO at

dock

Purchase Order Management• Orders automatically generated for items

through MRP, Min/Max, or manual requisitions

• Integrated receiving inspection and quality tracking

Vendor Performance Management• Good granularity of data and control over

receiving date• Basic vendor ratings/qualifications mgmt.• Basic quality and delivery tracking

Quote/Contract Management• Limited RFQ & quote tracking• Blanket orders• Basic contract management

Procurement - Core functionality

Purchase

VendorPerformance

Mgmt FinancialInterfaces

ProductPerformance

MgmtReceivingMgmt

PurchaseOrderMgmt

Quote/Contract

Mgmt

Financial Interfaces• Fully integrated w/AP for 2-way or 3-way

matching• Fully integrated with costing for variance

analysis• automatic voucher generation

Trade Management• Landed costs, multinational taxation and

currency

Network Infrastructure• Hierarchical system of branch/plants can

include suppliers and virtual warehouses

Logistics - Core functionality

Fulfillment

TransportationMgmt

NetworkInfrastructure

Distribution Planning• Distribution requirements planning with

multiple replenishment strategies and inventory stocking strategies

Warehouse Management• Basic inventory location tracking• RF capable• Limited advanced capabilities (pick/put

away strategies, cross-docking)

Inventory Management• Visibility across organization• Serial and lot control

Transportation Management.• Supports basic transportation processing,

shipping documents, and organization of shipments

InventoryMgmt

TradeMgmt

DistributionPlanning

WarehouseMgmt

Sales Force Management• Some support for configured quotes and

quote tracking• Automatic generation of orders from quotes

Price & Promotion Management• Multiple pricing methods (by item, family,

customer)• Basic promotions management (effectivity

dates, volume or value discounts)• Limited complex promotions and pricing

management

Customer Demand Management• Forecasts generated from sales history or other

algorithms

Sales - Core functionality

Sale

CustomerDemand

Mgmt

SalesForceMgmtClient

InformationSystems

Price &Promotion

Mgmt

Sales\OrderEntry

Specification / Configuration Management• Feature and option-based system with simple

if/then rule checking• Robust integration with fixed assets• Good tracking of maintenance costs

Client Information Systems• Customer hierarchies• Multiple ship-to, bill-to addresses and

contacts• Very limited customer information

Sales/Order Entry.• Order templates, blanket orders and

interbranch orders• UCC 128 compliance • Automatic credit check, order validity check

Specification/Configuration

Mgmt

http://www.sap.com/solutions/business-suite/crm/featuresfunctions/sales.epx

http://www.sap.com/solutions/manufacturing/featuresfunctions/

index.epx

Apple iPod manufacturing process

• Sales forecast• Build plan for quarter• Procurement schedule for raw materials• Starts plan by week (Master production

Schedule – MPS)• Work-in-progress / process control• Test, quality control and material purge• Adjust build plan / starts plan for actual demand• Deliver goods to finished goods area• Handover to distribution

iPhone Production planning– Read narrative– Draw a process map of the proudction

planning process– What are the strengths / weaknesses of

the process mapping exercise?

Strengths of process mapping

• Separates physical from virtual flows• Flexible• Intuitive• Fast• Facilitates sharing of ideas• Helps define roles and responsibilities• Highlights potential for automation

– Bottlenecks, delays, errors, redundancy, …

Weaknesses of process mapping

• Biased representation?– Difficult to meet all people involved– Dependent on accuracy of information given by participants– Holes in understanding -> poor process– Doesn’t take into account new processes– Interpreted differently– Consistency in analysis when using multiple analysts – Only maps repetitive processes?– What about manual work?

• Find right level of abstraction• Only theoretical?• Complexity / overcomplication

How will you use the process map?

• Spot problems

• Optimise process

• Tool to explain / educate

• Map alternatives

• Draw “how we would like the process to work”