IS3102 Project Specification (Part 2B) – Academic Year 2011/12 Semester 1 v1.2 Property of School of Computing, National University of Singapore 1 1 IS3102 Enterprise Systems Development Project 2 Academic Year 2011/12 Semester 1 3 Project Specification (Part 2B – Manufacturing Track) 4 5 PREAMBLE 6 1. This document is an academic project specification written for the module IS3102. It is 7 intended to be used exclusively by students taking IS3102 in Academic Year 2011/12 8 Semester 1. 9 2. Any publication, reference or distribution of this project specification is explicitly 10 prohibited without the written permission of the course instructor. Any third parties using 11 this project specification for any other purposes shall assume full responsibility and risk 12 for its usage. 13 3. This project specification is embargoed until Monday, 8 August 2011, 9:00 AM . Any 14 unauthorized and unreported possession of this projection specification before this date 15 and time shall be deemed as an act of academic dishonesty. 16 4. Any references made to real world entities and events are solely for academic purposes in 17 order to increase the realism of the project specification. These references may be factual 18 or fictitious in nature. Regardless, they do not represent the official position of the 19 University and are merely used by the course instructor for pedagogical reasons. 20 Whenever appropriate and possible, citations and references are made to authoritative 21 sources. 22 5. The University takes a serious view of plagiarism or any other forms of academic 23 dishonesty. This includes seeking assistance from third parties outside your project 24 team and IS3102 teaching staffs (e.g. from your friends or industry practitioners). 25 Students caught cheating, copying works done by someone else or engaging third 26 parties to participate in any aspects of the project will be severely dealt with. You 27 can be certain that you will be given a FAIL grade for this module. Please take this 28 warning seriously as there had been teams and/or individuals who were penalized 29 for plagiarism and cheating in previous semesters. 30 6. To report an act of academic dishonesty, please contact the course instructor Mr. Tan 31 Wee Kek at (65) 6516 6731 or [email protected]. 32
1. This document is an academic project specification written for the module IS3102. It is 7 intended to be used exclusively by students taking IS3102 in Academic Year 2011/12 8 Semester 1. 9
2. Any publication, reference or distribution of this project specification is explicitly 10 prohibited without the written permission of the course instructor. Any third parties using 11 this project specification for any other purposes shall assume full responsibility and risk 12 for its usage. 13
3. This project specification is embargoed until Monday, 8 August 2011, 9:00 AM. Any 14 unauthorized and unreported possession of this projection specification before this date 15 and time shall be deemed as an act of academic dishonesty. 16
4. Any references made to real world entities and events are solely for academic purposes in 17 order to increase the realism of the project specification. These references may be factual 18 or fictitious in nature. Regardless, they do not represent the official position of the 19 University and are merely used by the course instructor for pedagogical reasons. 20 Whenever appropriate and possible, citations and references are made to authoritative 21 sources. 22
5. The University takes a serious view of plagiarism or any other forms of academic 23 dishonesty. This includes seeking assistance from third parties outside your project 24 team and IS3102 teaching staffs (e.g. from your friends or industry practitioners). 25 Students caught cheating, copying works done by someone else or engaging third 26 parties to participate in any aspects of the project will be severely dealt with. You 27 can be certain that you will be given a FAIL grade for this module. Please take this 28 warning seriously as there had been teams and/or individuals who were penalized 29 for plagiarism and cheating in previous semesters. 30
6. To report an act of academic dishonesty, please contact the course instructor Mr. Tan 31 Wee Kek at (65) 6516 6731 or [email protected]. 32
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A. DETAILED OPENING NARRATIVE 1
Merlion Food Limited (Merlion) is the world’s leading nutrition, health and wellness 2 company. Merlion’s mission of "Healthy Food, Healthy Life" is to provide consumers with 3 the best tasting, most nutritious choices in a wide range of food and beverage (F&B) 4 categories and eating occasions, from morning to night. Merlion is a multinational Fortune 5 Global 500 company headquartered in Singapore but with research and development (R&D), 6 manufacturing, and marketing and sales facilities in more than 80 countries. It is listed on the 7 Mainboard of Singapore Exchange with an annual revenue well in excess of SGD $2 billion. 8
Merlion has recently established a new division in its Singapore’s headquarter to manufacture 9 health and wellness (H&W) snack bars. Recognizing busy professionals’ desire for healthy 10 snacks that could double up as a quick and wholesome meal, Merlion believes that its new 11 H&W snack bars division will produce the winning formula to capture a slice of this lucrative 12 market. Already, Merlion has secured a 10 years long-term contract to supply its H&W snack 13 bars to the Singapore Armed Forces as part of the combat rations issued to soldiers. 14
Merlion has recently completed the research and development works for two H&W snack bar 15 product lines, namely the Classic Nutri Bar and the Premium Power Bar. It is in the process 16 of building a SGD $10 million state-of-the-arts factory in the Tuas Bay Walk food industry 17 estate managed by the Jurong Town Corporation. 18
19 Figure A.1 - Merlion's H&W product images. 20
As part of the startup effort, the management of the H&W snack bars division has decided to 21 develop a customized Enterprise Resource Planning (ERP) system to automate marketing and 22 sales as well as supply chain management. An open tender exercise for the first phase of the 23 ERP system was conducted earlier in July and the SGD $1 million turnkey contract was 24 awarded to Kent Ridge Technology (KRT). 25
Your KRT project team has been assigned to this challenging yet exciting project. 26
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B. PROJECT TRACK DOMAINS 1
2
B.1. Business Domain 3
Manufacturing is a secondary industrial activity that continues to form a key pillar of 4 Singapore’s economy. In 2010, manufacturing contributed 20.9% of Singapore’s Gross 5 Domestic Product (GDP) amounting to more than SGD $63 billion (SGD $54 billion in 6 2009) 1. Specifically, F&B manufacturing contributed a significant chunk of this amount 7 (almost $6 billion in 2009 although this figure includes tobacco)2
In late 2009, Merlion’s senior management commenced feasibility study into the H&W snack 12 bars sector. A firm decision was made in early 2010 to introduce them into its already 13 diversified portfolio of F&B products. The key catalyst first came about when senior 14 management noticed that the global sales for H&W snack bars in 2007 hit USD $5.3 billion, 15 which accounted for 71% of the total snack bars market
. Some of the leading F&B 8 companies in Singapore include Super Coffee Corporation Pte Ltd, YHS (Singapore) Pte Ltd 9 and Nestlé Singapore (Pte) Ltd. Merlion Food Limited tops the table with its comprehensive 10 full suite of F&B products. 11
3
But some market researchers have observed that consumers’ preference has shifted towards 19 naturally healthy bars
.The two most popular H&W 16 categories were fortified/functional products and naturally healthy products, which together 17 represented almost 80% of global H&W sales. 18
4. Other market sources have also indicated that sales of H&W snack 20 bars might have peaked since 2007 5 . Most recently, market intelligence leader Mintel 21 International also suggested that while H&W snack bars sales in 2010 had recovered, 2011 22 could be a challenging year6
1 Department of Statistics Singapore – GDP at Current Market Prices (
. Despite this rather gloomy forecast, the same report predicted 23 that H&W snack bars would continue to be popular among health-conscious consumers. 24 Against this backdrop, Merlion has decided to venture into the H&W snack bars sector by 25 introducing the Classic Nutri Bar and Premium Power Bar product lines. Each product line 26 has one fortified/functional bar and another naturally healthy bar. 27
http://www.singstat.gov.sg/stats/themes/economy/ess/essa11.pdf). 2 Department of Statistics Singapore – Yearbook of Statistics Singapore 2010 – Manufacturing (http://www.singstat.gov.sg/pubn/reference/yos10/statsT-manufacturing.pdf). 3BSIMagazine.com – Naturally Functional, 2 August 2007 (http://www.bsimagazine.com/Features/Ingredient%20Features/2007/8/Naturally%20Functional.aspx?LoggedIn=true&[email protected]). 4 Scientist Live – Soaring Growth of Healthy and Nutritional Bars (http://www.scientistlive.com/European-Food-Scientist/Ingredients/Soaring_growth_of_healthy_and_nutritional_bars/24209). 5 Specialityfood.com – The Cereal and Snack Bar Market (http://www.specialtyfood.com/news-trends/featured-articles/market-trends/cereal-and-snack-bar-market). 6 Convenience Store Decisions – Forecasting Snack Bar Sales (http://www.csdecisions.com/2011/05/27/forecasting-snack-bar-sales).
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As H&W snack bars must be manufactured fresh without the use of preservative, their shelf 1 life is severely limited. As such, sales and manufacturing processes must be tightly integrated 2 to minimize wastage yet at the same time maximize sales opportunities, e.g., catering for 3 sudden demand surge. Merlion has thus decided to develop a customized ERP system that 4 will fit its exact business and operation requirements. The ultimate objective is to ensure that 5 the entire sale and manufacturing process can be made most effective and efficient. 6
B.2. System Domain 7
B.2.1. Enterprise Resource Planning System 8 Enterprise Resource Planning (ERP) system is a large-scale information system that is used 9 to coordinate the information generated and used in every functional department of an 10 organization and at the same time to manage and automate organization-wide business 11 processes. A business process is a collection of activities that takes in some input and creates 12 an output. At the micro level, business processes lead to the creation of document artifacts 13 such as orders or reports. These are typically used by internal employees. At the macro level, 14 business processes lead to the creation of products and services for the organization’s 15 external customers, i.e., the organization’s value chain. In a typical organization, these 16 products and services generate revenue and, hopefully, profit. Most modern organizations 17 adopt a matrix organizational structure in which business processes cutting vertically across 18 hierarchical levels and horizontally across functional departments are the norm. This results 19 in highly complex information processing requirements that can be address with the 20 implementation of a suitable ERP system. 21
A typical ERP system consists of five major sub-systems: 22
1. Customer relationship management – For sales and marketing, and customer related 23 functions. 24
2. Finance resource management – For finance and accounting functions, including 25 billings. 26
27 Figure B.1 - Diagrammatic overview of ERP system. 28
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3. Supply chain management – For logistic and raw materials purchasing functions. 1
4. Manufacturing resource planning – For manufacturing planning and operation 2 functions. 3
5. Human resource management – For employee, payroll and training functions. 4
Since an ERP system must cater to almost every single business functions in an organization, 5 it is a very complex and costly system to implement. But when successfully implemented, it 6 can derive numerous benefits for the organization such as productivity improvement, 7 inventory reduction, order management improvement and revenue/profit increase. More 8 importantly, ERP allows an organization to tightly integrate electronic commerce with its 9 internal sales and marketing, and manufacturing processes. 10
B.2.2. Process View of Business Organization 11 In a typical business organization, once products and/or services are sold to a customer, a 12 credit check will be performed before the order is confirmed. Thereafter, an availability check 13 is conducted to verify whether the customer’s order can be fulfilled. If the order can be filled 14 by available inventory; the required picking, packing and shipping orders will be generated 15 for processing. Otherwise, a back order will need to be created and production run scheduled 16 to fill the back order. The customer will also need to be billed for the order. Production tasks 17 will require raw material or intermediate parts as input. If there is insufficient input, it will be 18 necessary to purchase the shortfall amount and pay the suppliers accordingly. This generic 19 process is depicted in Figure B.2. 20
21 Figure B.2 - Generic process view of a typical business organization. 22
An ERP system helps to integrate and automate all these functions ensuring that they are 23 performed with maximum efficiency and effectiveness. For instance, it is often difficult to 24 forecast future sales and thus production scheduling can be a headache. This problem also 25 implicates the stocking of raw materials. An ERP system can improve sales forecast by 26 channeling historical sales information into the forecast function and also enabling incoming 27 sales order to be updated in production scheduling, demand management and material 28 purchasing. These improvements maximize production efficiency and minimize material 29 wastage. 30
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B.2.3. Customer Relationship, Finance Resource and Outbound 1 Supply Chain Management in Enterprise Resource Planning 2 The entire sales order process typically involves customer relationship, finance resource and 3 outbound supply chain management tightly integrated in an ERP system. A high-level view 4 of the process is depicted in Figure B.3. 5
6 Figure B.3 - High-level view of a typical sales order process in an ERP system. 7
Pre-sales activities involve either sales inquiry or price quotation. A sales inquiry provides 8 the customer with a price list for the requested items without any guarantee. A price quotation 9 guarantees that the buyer will be able to purchase the requested items at the quoted price 10 within a specified period of time. The quotation usually does not guarantee availability until 11 the customer has issued a purchase order to convert the quotation into an actual sales order. 12 However, it is possible to provide an indicative lead time for the customer’s consideration. 13
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Sales order processing involve confirming the requested items and the associated quantities. 1 It is possible to provide further price discount at this stage. For instance, if the customer has 2 ordered a larger quantity of a specific item, a higher volume discount might be given such 3 that the actual price is lower than the original quoted price. The credit control department will 4 also check customer’s currently available credit and take the appropriate action. For instance, 5 if the customer does not have sufficient available credit, the customer might be asked to 1) 6 pay off existing invoices first; 2) reduce new order amount; or 3) pay partial/full amount in 7 advance for the new order. 8
Inventory sourcing typically involves an available-to-promise (ATP) check. Inventory 9 balance currently in the warehouse that has not been reserved is always used to fulfill a new 10 order first. If there is any shortfall, it will be necessary to determine whether planned 11 production schedule is able to meet the demand. Alternatively, it might be necessary to 12 increase planned production subject to availability of all required raw materials and 13 manpower. When current inventory balance is insufficient to fulfill a new order but planned 14 production is able to meet the shortfall, a backorder will be created and customer will be 15 advised of the confirmed lead time. In the event that current inventory balance is insufficient 16 and planned production is not expected to meet the demand in a timely fashion, customer 17 should be allowed to amend or cancel the order without penalty. If a backorder is indeed 18 created, current inventory balance that have been used to partially fulfill a new order must be 19 held in reserve and cannot be used to fulfill other new orders. If it is necessary to divert these 20 reserved inventory balance to fulfill urgent new orders, the organization must ensure that 21 planned production are still able to meet the confirmed lead time provided to customer. 22
Delivery involves the generation and release of the picking order, packing order and shipping 23 order so that the relevant outbound logistic tasks may be performed. Sometime, a new order 24 involving backorder might be shipped separately. In this case, those items available in current 25 inventory balance will be shipped to the customer immediately. Those backorder items will 26 be shipped separately after production. It is also possible to pack and ship items from the 27 same order separately and differently. Sometime a customer might place a large order to be 28 shipped to different destinations. 29
Once the items have been physically shipped, i.e., the relevant shipping documentation has 30 been obtained, the accounts receivable department will create an invoice and send it to the 31 customer. This is the billing process. The credit term will typically provide a certain percent 32 of discount if customer settles the invoice within a specified duration. For instance, a credit 33 term of 2-10/net-30 means customer will receive 2% discount if they pay within 10 days or 34 thereafter must pay the full amount within 30 days of the invoice date. 35
Payment involves recording the receipt of actual payments made by customers. If a customer 36 fails to make payment within the credit term, the account receivable department should 37 commence dunning action and inform the credit control department to reject new orders from 38 the customer. 39
It is clear that the entire sales order process involves the entire organization from the 40 salesperson in the front office all the way to the store man and production worker in the 41 warehouse and factory floor. Without an ERP system, timely and accurate communication of 42 the various sales order information would be almost impossible. 43
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B.2.4. Manufacturing Resource Planning and Inbound Supply Chain 1 Management in Enterprise Resource Planning 2 Closely related to the sales order process is the manufacturing resource planning and inbound 3 supply chain management process. This is an elaborate set of business processes that ensures 4 the optimal use of the organization’s production capacity. A high-level view is depicted in 5 Figure B.4. 6
7
8
9
Figure B.4 - High-level view of a typical production planning process in an ERP system. 10
A fictitious H&W snack bars manufacturer known as HBar will be used to illustrate each step 11 of the process in an ERP system. HBar produces only two types of H&W snack bars namely 12 Alpha and Beta. HBar has a factory with only one production line working on a single shift of 13 8 hours in 5 days work weeks excluding public holidays. The production and packing 14 parameters of HBar products are listed in Table B.1. 15
Parameter Alpha Beta Weight (per bar) 50 g Capacity (per minute) 200 bars Capacity (per hour) 600 kg or 12000 bars Packing • 24 bars per display box
• 10 display boxes per shipping case • 240 bars per case
Capacity (per hour in shipping case) 50 cases Production Line Changeover 30 minutes
Table B.1 - Production and packing parameters of HBar products. 16
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The bill of material (BOM) for each 200 kg batch of snack bars is listed in Table B.2. This 1 BOM will be used to illustrate the materials requirements planning process. 2
Table B.2 – Bill of material for each 200 kg batch of HBar products. 3
A simple and commonly used sales forecasting technique is to use a prior period’s sales 4 figures as the baseline and then adjust these baseline figures for current market condition. For 5 instance, if we are forecasting the sales from July to December 2011, we will use the 6 corresponding sales figure from July to December 2010 as a baseline. Sometime, it is 7 desirable to take into consideration the prevailing sales trend by looking at the moving 8 average sales figures for quarterly (short term), half yearly (medium term) and yearly (long 9 term). A short term moving average more closely reflects demand changes but might be 10 sensitive to sudden or one-off demand surge or plunge. A longer term moving average can 11 help to smoothen out these surges and plunges. A sample sales forecast for HBar is shown in 12 Table B.3. Note that all sales figures are in number of shipping cases. 13
Sales Forecasting July August September October November December Previous Year 7000 7300 7000 6900 6500 7500 Promotion Sales 500 500 Previous Year Base 7000 7300 7000 6900 6000 7000 YoY Growth 3% 210 219 210 207 180 210 Base Projection 7210 7519 7210 7107 6180 7210 Promotion 600 Sales Forecast 7210 7519 7210 7107 6180 7810
Table B.3 – HBar sales forecast for July to December 2011. 14
Whenever there are promotion sales in the previous year, the additional sales figures will be 15 deducted from the overall sales figures to derive the base figures for the previous year. We 16 use these figures to derive the base project. Thereafter, we will add in any planned promotion 17 figures to derive the final sales forecast figures. 18
Once the sales figures have been forecasted, we can proceed to use these figures for sales 19 and operations planning. The output of this step is a production plan designed to balance 20 market demand with production capacity. That is, how the factory floor can efficiently 21 produce enough bars to meet the forecasted sales. A sample sales and operation plan is shown 22 in Table B.4. This plan assumes that HBar has a daily production capacity of 400 cases per 23 working day. Note that all sales figures are in number of shipping cases. 24
Table B.4 – HBar sales and operation plan for July to December 2011. 1
At the beginning of July 2011, the projected beginning inventory level is 100 cases. The sales 2 forecast figures are taken from Table B.3. The production plan is typically entered by the 3 planner base on his or her experience, observing the effect of different production figures on 4 the inventory level and capacity utilization. The general goal is to develop a production plan 5 that meets demand without exceeding capacity and maintaining a reasonable inventory level. 6 The inventory level at the end of each month is calculated as the difference between the sales 7 forecast figure and the production plan figures (including the beginning inventory level). In 8 this example, the planner has maintained a month end inventory level of 100 cases from July 9 to October as the safety stock to meet demand surge without altering the production plan. In 10 November, the safety stock is increased to 500 in anticipation of a year-end demand surge in 11 December. 12
The capacity utilization for a particular month can be calculated by dividing the production 13 plan by the available capacity. In general, capacity utilization is kept below 100% to cater for 14 production losses in case of product changeover, equipment breakdown or other unexpected 15 problems. Finally, the sales and operation plan needs to be disaggregated into plans for 16 individual products base on the breakdown percent specified by the planner. In this case, the 17 breakdown for Alpha and Beta is 70%/30%. 18
The sales and operation plan will then be used as input to the demand management step, 19 which involves detailed scheduling and materials requirements planning processes. The 20 output of demand management is the master production schedule (MPS) for all finished 21 goods. This schedule is actually derived from the monthly production planning figures in 22 Table B.4 by splitting them into finer time periods by week and by day. A sample production 23 plan by week for August 2011 is shown in Table B.5. 24
Working Days in Week 5 4 5 5 2 2 Working Days in Month 21 21 21 21 21 22 MPS Weekly Demand
Alpha 1254 1003 1254 1254 502 459 Beta 537 430 537 537 215 197 Table B.5 – HBar weekly production plan for August 2011. 25
The monthly demand input is taken from the production plan figures in Table B.4. The MPS 26 weekly demand for individual products is calculated by dividing the respective monthly 27
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demand figures by the number of working days in the month. This intermediate figure is then 1 multiplied by the number of working days in the week. 2
Once we have derived the MPS weekly demand, we can split the figures further by week. 3 This will provide the MPS daily demand. A sample production plan by day for Week 1 of 4 August 2011 is shown in Table B.6. 5
Demand Management Aug 1 Aug 2 Aug 3 Aug 4 Aug 5 Monthly Demand Alpha 5263 5263 5263 5263 5263
Beta 2255 2255 2255 2255 2255 Working Days in Month 21 21 21 21 21 MPS Daily Demand
Table B.6 – HBar daily production plan for Week 1 of August 2011. 6
The MPS daily demand for individual products is calculated by dividing the respective 7 monthly demand figures by the number of working days in the month. Note that due to 8 rounding errors when performing arithmetic divisions, the MPS weekly and daily demand 9 figures may not always sum up correctly when compared against each other and the monthly 10 demand figures. This is typically not a major concern since the excess cases can be kept as 11 inventory balance. Otherwise, manual adjustment can be made to the MPS demand figures. If 12 a manual adjustment is necessary, the easier approach is to make a one-time adjustment on 13 the last working day of the month. For instance, in Table B.5, we would adjust the MPS 14 weekly demand for Alpha in Week 5 (29/8-31/8) from 502 to 498. We would also adjust the 15 MPS daily demand for Alpha in the last working day of August 2011, i.e., 31 August, from 16 251 to 243. After these adjustments, the MPS weekly demand figures and MPS daily demand 17 figures would all sum up properly to 5263. 18
Now that we have the MPS monthly demand figures, we can proceed to perform materials 19 requirements planning (MRP). This process determines the required quantity and timing of 20 the purchase of raw materials needed to support the MPS. In order to prepare the MRP record, 21 we need to know the lead time and lot size for each type of raw materials. Lead time is the 22 cumulative time required from the point the purchase order is received by the supplier until 23 the point the raw materials have been moved into the manufacturer’s warehouse ready for 24 production use. Lot size is the unit bulk quantity in which the manufacturer must purchase the 25 raw materials from the supplier. In other words, the purchase order for raw materials must be 26 in broad lot size. For instance, the lead time for oats is 2 weeks and the lot size is 8000 kg. 27 The manufacturer must order oats in multiple broad lot size of 8000 kg and the oats will be 28 ready for use in 2 week time after the supplier has received the purchase order. 29
Each shipping case of HBar bars weights 12 kg and the given BOM is for 200 kg batch (see 30 Table B.1 and B.2 respectively). A sample MPR record for oats to produce Alpha and Beta 31 bars in August 2011 is shown in Table B.7. The MPS (cases) figures are taken from the 32 weekly production plan in Table B.5. We need to convert these figures into the MPS (kg 33 batches) by taking the cases figure and multiplying it by 12 kg and then dividing the 34 intermediate figure by 200 kg. Since the oats requirement is the same for both Alpha and 35 Beta, i.e., 100 kg of oats for every 200 kg batch of bars, calculating the gross requirements 36 (kg) figures is easy. To derive the gross requirements (kg) figures, we simply sum the MPS 37 (kg batches) for both Alpha and Beta and then multiply this intermediate figure by 100 kg. 38
Table B.7 – HBar MPR record for oats for August 2011. 1
The scheduled receipts (kg) figures show the amount of oats that have already been ordered 2 previously and the expected arrival dates. Since the lead time for oats is 2 weeks, the 3 scheduled receipts of oats in Week 1 and Week 2 of August would have been ordered in 4 Week 3 and Week 4 of July respectively. The planned receipts (kg) figures show the amount 5 of oats that have been planned for ordering in August, i.e., the orders have NOT been placed 6 yet. Since the lead time for oats is always 2 weeks, the planned receipts for Week 3, Week 4 7 and Week 5 of August would have to be ordered in Week 1, Week 2 and Week 3 of August, 8 respectively, on plan. 9
The on hand (kg) figures show the amount of oats that is available at the start of the next 10 working week. The first number 3700 kg in this row means that at the start of Week 1, there 11 are 3700 kg of oats available for production. To determine the amount of oats that is available 12 at the start of Week 2, we will add the amount of oats available at the start of Week 1 to the 13 amount of oats that are in receipt in Week 1. The gross requirements (kg) figure for Week 1 14 is then subtracted from the total amount of oats giving 1000 kg. Thus, the amount of oats 15 available at the end of Week 1 or correspondingly at the start of Week 2 is 1000 kg. 16
The planned orders (kg) figures are recommended by the MPR calculation and are the output 17 from the entire MPR process. These figures tell the planner what to order to produce the MPS 18 planned output and when to order it. The planner may make manual adjustments to ensure 19 that there are sufficient raw materials on hand in case of delayed deliveries. 20
An ERP system can also automate the scheduling of the production lines based on the MPS, 21 scheduling of the required manpower for the production lines, accounting of the production 22 cost and much more. But these are not required for the first phase of Merlion’s ERP system. 23
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C. REQUIREMENTS SPECIFICATION 1
2
C.1. General Requirements 3
The management of Merlion’s H&W snack bars division had earlier asked its information 4 technology (IT) department to draft a preliminary requirements specification for the ERP 5 system, which are narrated in the remaining of this section (sub-sections C.2 to C.9). 6 Sketches of the major business processes are also briefly outlined in the requirement 7 specifications. Your KRT project team has just taken over the specification document. Your 8 team is required to make reference to this requirement specification and work closely with the 9 other stakeholders in Merlion to analyze the business and system requirements. It is expected 10 that your team may need to propose some changes to the business processes initially designed 11 by Merlion in order to achieve better efficiency and effectiveness. 12
Your team has been asked to put forth a detailed system proposal to the management of 13 Merlion’s H&W snack bars division in 5 weeks time. In addition, your team is to 14 concurrently work on the system design and development tasks. The management’s intention 15 is to have a prototype of the system to be ready for testing by the end of the year. 16
The high-level architecture of the proposed ERP system is shown in Figure C.1. However, 17 your team is free to re-architect them as appropriate. The organizational structure of 18 Merlion’s H&W snack bars division is shown in Figure C.2. 19
20
21 Customer Relationship Management
• Sales Lead and Customer Module • Sales Order Processing Module
Common Infrastructure
Finance Resource Management
• Credit Control Module • Billing and Payment Module
Manufacturing Resource Planning
• Production Planning Module
Supply Chain Management
• Inventory Control Module • Raw Material Purchasing Module
Figure C.1 - High-level architecture of the proposed ERP system.
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C.2. Common Infrastructure 1
C.2.1. Overall System Security 2 The entire system will be used by internal users only. It is nonetheless important to provide a 3 high level of security to protect the confidentiality and integrity of all data handled by the 4 system. Security is required at both the transport and application layers. 5
For transport layer security, the systems should provide Secure Socket Layer (SSL) to 6 encrypt any sensitive data sent between the user’s web browser and the application server. 7 For instance, SSL should be used for login credential and electronic payment information. 8
For application layer security, the systems should provide multiple overlapping layers of 9 security measures including but not limited to the followings: 10
a. Login protection such as account activation, initial password change, account lock out, 11 secure password reset and Captcha mechanism. 12
b. A robust role-based and need-based access control mechanism for controlling user’s 13 access to various resources in the ERP system. Security mechanism should model the 14 organizational structure or at least allow access rights inheritance. Additionally, each 15 user could have multiple user roles. A basic grant/deny policy is acceptable although 16 more sophisticated access rights policy might be needed for some resources. 17
c. Automatic session inactivity logout to prevent account hijacking on the ERP system. 18
d. Appropriate use of cryptographic techniques such as encryption and hashing to 19 protect sensitive information. 20
e. Logging to ensure user accountability and traceability for financially material 21 transactions or sensitive user actions. 22
C.2.2. System User Workspace 23 The ERP system should adopt a user-centered design principle as much as possible. System 24 users who login with a specific role should have easy access to system functionalities 25 supporting their job tasks. The systems should also provide some basic tools to help system 26 users to manage their workspace efficiently and effectively. 27
System users should have access to some form of internal communication system 28 independent of the normal electronic mail system. Additionally, integration between the 29 former and the latter is important. 30
C.2.3. System User Account Management 31 The Technical Support Department personnel should be able to create system user accounts 32 for different individuals and also to configure the necessary access rights based on the 33 security policy outlined in sub-section C.2.1. 34
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C.3. Customer Relationship Management – Sales Lead 1 and Customer Module 2
This module should allow the two sales departments to create and manage sales leads in the 3 ERP system. It should be possible to convert a sales lead into a customer or directly create a 4 customer record. A new customer should be assigned to a dedicated customer executive from 5 the appropriate sales department. 6
Wholesales customers are mostly downstream distribution partners of Merlion. They can be 7 either distributors, wholesalers or retailers. Major distributors could be given sole 8 distributorship in a particular geographical regions and help Merlion to undertake local 9 marketing campaigns. Direct sales customers are mostly end consumers of Merlion’s 10 products such as caterers, outdoor training centers, gyms, etc. Direct sales customers typically 11 place orders that are of smaller quantities compared to wholesales customers. Merlion 12 currently does not have any plan to sell its H&W snack bars directly to retail consumers as it 13 is not cost effective. 14
The module should be able to support two types of pre-sales activities for both sales leads and 17 full customers. First, the system should be able to create a sales inquiry that lists the required 18 products, quantities and the indicative prices. Second, the system should be able to create a 19 formal quotation that lists the guaranteed prices within the quotation validity period. An 20 indicative lead time must also be provided in the quotation. The system should be able to 21 convert a sales inquiry into a quotation or to create a quotation directly. Purchase orders 22 received from customers must always be matched to a valid quotation. Otherwise, they 23 should be rejected. If a quotation is issued to a sales lead, the sales lead should be converted 24 to a full customer upon receipt of a purchase order. Valid purchase orders are then used to 25 create sales orders in the ERP system and tracked until payment has been completed. 26
All sales orders must first undergo a credit check. Sales orders that fail credit check must be 27 handled as exceptional cases and appropriate actions taken. Sales orders whose payment 28 viability has been ascertained will then move on to inventory sourcing, in particularly the 29 ATP check. If the sales order cannot be fulfilled by current inventory balance, a confirmed 30 lead time must be obtained from the production planning department and then forward to the 31 customer for approval. If the confirmed lead time is much longer than the indicative lead time 32 stated in the quotation, the customer should be allowed to cancel the sales order without 33 penalty. 34
Once inventory sourcing is completed, including lead time approval from customer if 35 applicable: 36
1. The sales order will be forwarded to the warehouse department for picking and 37 packing if necessary. 38
2. A back order will be created and forwarded to the production planning department to 39 adjust the MPS to fulfill the original sales order if necessary. 40
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3. Forwarded to the accounts receivable department to prepare for billing. 1
C.5. Finance Resource Management – Credit Control 2 Module 3
This module should allow Merlion to manage the credit of its customers. New customers are 4 assessed for their credit worthiness and given a credit limit and default credit term. The 5 system should also allow the accounts receivable department to monitor the credit limit, 6 current balance and available credit for the customers. 7
When cash-in-advance payments are received from customers, the system must track them 8 carefully and update the respective customer’s current balance accordingly. Cash-in-advance 9 payment should be recognized as actual payment only after the sales order has been delivered. 10 If the sales order is cancelled, the cash-in-advancement payment should be refunded through 11 the accounts payable department. 12
This module should allow the account receivable department to create the invoice for billing 15 the customers after the sales order has been delivered. The system should also be able to 16 support partial billing. For instance, a sales order might be fulfilled partially by current 17 inventory balance and shipped to the customer first, while the outstanding quantities are 18 being scheduled for production and to be shipped separately. In this case, the customer should 19 be billed for the goods in the initial shipment. 20
The system should also allow the account receivable department to record payments received 21 from customers and to issue the receipts accordingly upon final clearance from the financial 22 institutions. 23
If an invoice has not been fully paid after the credit period, the system should inform the 24 account receivable department and commence dunning actions. 25
C.7. Manufacturing Resource Planning – Production 26 Planning Module 27
This is a very complex module that should allow the production planning department to 28 perform the entire production planning process depicted in Figure B.4. This module should 29 be tightly integrated with the sales order processing module. For instance, the sales 30 forecasting should be performed using historical sales figures obtained from the sales order 31 processing module. In addition, demand management must also take into consideration any 32 back orders created in the sales order processing module. The ATP check should also be well 33 integrated with the sales order processing module. 34
Merlion’s H&W snack bars division has a total of two production lines in its factory floor. 35 The two production lines are capable of producing any types of snack bars. However, there is 36
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a 30 minutes changeover time to switch from producing one type of snack bars to another. 1 The factory operates on two shifts: 2
• Daily normal shift is 9 hours 30 minutes with 1 hour lunch break and a 30 minutes 3 end-of-shift clean up from 8:00 AM to 5:30 PM. 4 5
o Each production line operates for 8 hours during the normal shift. 6 7
• Optional overtime shift is 4 hours 30 minutes with a 30 minutes end-of-shift clean up 8 from 6:00 pm to 10:30 pm. 9 10
o Each production line operates for 4 hours during the normal shift. 11
If the production line changeover is done at the end of each shift, there will not be any loss in 12 capacity. This is because the 30 minutes clean up time allocated at the end of each shift can 13 be used to perform changeover. Merlion’s factory will operate on a 5 working days week 14 starting on Monday. All official public holidays are considered as non-working days. 15
The production and packing parameters of Merlion’s snack bars are listed in Table C.1. 16
Parameter Classic Nutri Bar Premium Power Bar Nuts Fruits Chocolate
Nuts Redcurrant
Fruits Weight (per bar) 50 g 66.6 g Capacity (per minute) 200 bars 150 bars Capacity (per hour) 600 kg or 12000 bars 600 kg or 9000 bars Packing • 24 bars per display box
• 10 display boxes per shipping case
• 240 bars per case
• 20 bars per display box • 10 display boxes per shipping
case • 200 bars per case
Capacity (per hour in shipping case)
50 cases 45 cases
Production Line Changeover
30 minutes
Table C.1 - Production and packing parameters of Merlion’s snack bars. 17
Merlion’s snack bars have a maximum shelf life of 12 months from the manufacturing date: 18
• It has a display until date that is 10 months from the manufacturing date. Retailers are 19 required to remove any unsold snack bars after the display until date. 20
• It has an expiry date that is 11 months from the manufacturing date. The 1 month of 21 shelf life between the display until date and the expiry date allows consumers 22 sufficient time to consume the snack bars fresh. The final 1 months of shelf life after 23 the expiry date provides a buffer for consumers to consume the snack bars safely. 24
To ensure that its downstream supply chain partners have sufficient time to distributes its 25 snack bars and display them on shop shelves, Merlion ensures that all manufactured snack 26 bars are kept in its warehouse for not more than 4 months. This policy gives its downstream 27 supply chain partners a distribution and sales period of at least 6 months before the display 28 until date is reached. 29
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The BOM for each 200 kg batch of snack bars is listed in Table C.2. The lead time (in weeks), 1 shelf life (in months) and lot size (in respective unit) of the raw materials are listed in Table 2 C.3. 3
Ingredient Classic Nutri Bar Premium Power Bar Nuts Fruits Chocolate Nuts Redcurrant Fruits
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C.8. Supply Chain Management – Inventory Control 1 Module 2
This module should allow the warehouse department to record inbound and outbound 3 movements of completed goods and raw materials. Movement of raw materials from the 4 warehouse to the production lines must also be properly accounted for. At any point in time, 5 the warehouse department should be able to obtain real-time inventory information. This 6 module needs to be tightly integrated with the sales order processing module to facilitate 7 inventory sourcing and ATP check. 8
The system should also allow the warehouse department to generate the required picking 9 order, packing order and shipping order based on the sales order prepared by the sales 10 departments. The shipping order will be used by the shipping department but arrangement of 11 actual shipping may be assumed to be done offline. 12
C.9. Supply Chain Management – Raw Material 13 Purchasing Module 14
This module should be tightly integrated with the materials requirements planning process in 15 the production planning module. The purchasing department should be able to retrieve the 16 required MPR records and then generate the corresponding purchase orders. For the purpose 17 of creating the purchase orders, this module should allow the purchasing department to 18 maintain a list of raw materials suppliers. 19
D. ATOMIC ASSESSMENT UNITS LIST 20
The list of AAUs and the credits assigned to each AAU are listed in table D.1 below. AAUs, 21 whose numerical identifier (ID) is asterisked, are basic requirements that must be attempted. 22
AAU ID AAU Name AAU Credits 1* Common Infrastructure 4 Customer Relationship Management 10 2* Sales Lead and Customer Module 4 3* Sales Order Processing Module 6 Finance Resource Management 10 4* Credit Control Module 4 5* Billing and Payment Module 6 Manufacturing Resource Planning 12 6 Production Planning Module 12 Supply Chain Management 10 7* Inventory Control Module 6 8 Raw Material Purchasing Module 4 Grand Total 46
