Resource Planning Class 7. Enterprise Resource Planning (ERP) Organizes and manages a company’s...

Resource Resource PlanningPlanning

Class 7Class 7

Enterprise Resource Enterprise Resource Planning (ERP)Planning (ERP)

Organizes and manages a Organizes and manages a company’s business processes by company’s business processes by sharing information across sharing information across functional areasfunctional areas

Connects with supply-chain and Connects with supply-chain and customer management customer management applicationsapplications

Largest ERP provider SAPLargest ERP provider SAP

ERP’s Central DatabaseERP’s Central DatabaseFinance &

Accounting

Sales &

Marketing

Human Resources

Production & Materials

ManagementERP Data

Repository

ERP ImplementationERP Implementation First step is to analyze business First step is to analyze business

processesprocesses Which processes have the biggest Which processes have the biggest

impact on customer relations?impact on customer relations? Which process would benefit the Which process would benefit the

most from integration?most from integration? Which processes should be Which processes should be

standardized?standardized?

Customer Relationship Customer Relationship Management (CRM)Management (CRM)

Plans and executes business Plans and executes business processes that involve customer processes that involve customer interactioninteraction

Changes focus from managing Changes focus from managing products to managing customersproducts to managing customers

Point-of-sale data is analyzed for Point-of-sale data is analyzed for patterns used to predict future patterns used to predict future behaviorbehavior

Supply Chain ManagementSupply Chain Management

Supply chain planningSupply chain planningSupply chain executionSupply chain executionSupplier relationshipsSupplier relationshipsDistinctions between ERP and Distinctions between ERP and

SCM are becoming increasingly SCM are becoming increasingly blurredblurred

ERP and MRPERP and MRP MRP (material requirements planning) MRP (material requirements planning)

was the precursor to ERPwas the precursor to ERP Primarily a production planning and Primarily a production planning and

control systemcontrol system MRP evolved to MRP II (manufacturing MRP evolved to MRP II (manufacturing

resource planning)resource planning) ERP and ERP II continue to extend the ERP and ERP II continue to extend the

links through all business processeslinks through all business processes

Material Requirements Material Requirements PlanningPlanning

Computerized inventory control & Computerized inventory control & production planning systemproduction planning system

Schedules component items when Schedules component items when they are needed - no earlier and no they are needed - no earlier and no laterlater

When to Use MRPWhen to Use MRPDependent and discrete itemsDependent and discrete itemsComplex productsComplex productsJob shop productionJob shop productionAssemble-to-order environmentsAssemble-to-order environments

Material Material Requirements Requirements PlanningPlanning

Materialrequirements

planning

Planned order

releases

Work orders

Purchase orders

Rescheduling notices

Itemmaster

file

Productstructure

file

Master production schedule

Master Production Master Production ScheduleSchedule

Drives MRP process with a schedule of Drives MRP process with a schedule of finished productsfinished products

Quantities represent production not Quantities represent production not demanddemand

Quantities may consist of a combination of Quantities may consist of a combination of customer orders & demand forecastscustomer orders & demand forecasts

Quantities represent what needs to be Quantities represent what needs to be produced, not what can be producedproduced, not what can be produced

Basic MRP Basic MRP ProcessesProcesses

1.1. Exploding the bill of materialExploding the bill of material2.2. Netting out inventoryNetting out inventory3.3. Lot sizingLot sizing4.4. Time-phasing requirementsTime-phasing requirements

MRP OutputsMRP OutputsPlanned ordersPlanned orders

Work ordersWork ordersPurchase ordersPurchase orders

Changes to previous plans or Changes to previous plans or existing schedulesexisting schedules

Action noticesAction noticesRescheduling noticesRescheduling notices

Capacity Requirements Capacity Requirements Planning (CRP)Planning (CRP)

Computerized system that projects Computerized system that projects load from material planload from material plan

Creates load profileCreates load profile Identifies underloads and overloadsIdentifies underloads and overloads

Capacity TermsCapacity TermsLoad profileLoad profile

Compares released and planned Compares released and planned orders with work center capacity orders with work center capacity

CapacityCapacityProductive capability; includes Productive capability; includes

utilization and efficiencyutilization and efficiencyUtilizationUtilization

% of available working time spent % of available working time spent workingworking

More Capacity TermsMore Capacity TermsEfficiency – how well the Efficiency – how well the

machine or worker performs machine or worker performs compared to a standard outputcompared to a standard output

LoadLoadThe standard hours of work The standard hours of work

assigned to a facilityassigned to a facilityLoad percentLoad percent

The ratio of load to capacityThe ratio of load to capacityLoad % = Load % = ((load/capacityload/capacity)x100%)x100%

SchedulingScheduling

SchedulingSchedulingSpecifies when labor, Specifies when labor,

equipment, facilities are needed equipment, facilities are needed to produce a product or provide to produce a product or provide a servicea service

Last stage of planning before Last stage of planning before production occursproduction occurs

Objectives in SchedulingObjectives in Scheduling Meet customer due datesMeet customer due dates Minimize job latenessMinimize job lateness Minimize response timeMinimize response time Minimize completion timeMinimize completion time Minimize time in the systemMinimize time in the system Minimize overtimeMinimize overtime Maximize machine or labor utilizationMaximize machine or labor utilization Minimize idle timeMinimize idle time Minimize work-in-process inventoryMinimize work-in-process inventory EfficiencyEfficiency

Shop Floor ControlShop Floor Control

1.1. Loading - Check availability of Loading - Check availability of material, machines & labormaterial, machines & labor

2.2. Sequencing - Release work orders Sequencing - Release work orders to shop & issue dispatch lists for to shop & issue dispatch lists for individual machinesindividual machines

3.3. Monitoring - Maintain progress Monitoring - Maintain progress reports on each job until it is reports on each job until it is completecomplete

Scheduling and monitoring day to day production of a jobScheduling and monitoring day to day production of a job

LoadingLoadingAllocate work to machines Allocate work to machines

(resources)(resources)Perform work on most efficient Perform work on most efficient

resourcesresourcesUse assignment method of linear Use assignment method of linear

programming to determine programming to determine allocationallocation

SequencingSequencingPrioritize jobs assigned to a Prioritize jobs assigned to a

resourceresource If no order specified use first-come If no order specified use first-come

first-served (FCFS)first-served (FCFS)Many other sequencing rules existMany other sequencing rules existEach attempts to achieve to an Each attempts to achieve to an

objectiveobjective

Sequencing RulesSequencing Rules FCFS - first-come, first-servedFCFS - first-come, first-served LCFS - last come, first servedLCFS - last come, first served DDATE - earliest due dateDDATE - earliest due date CUSTPR - highest customer priorityCUSTPR - highest customer priority SETUP - similar required setupsSETUP - similar required setups SLACK - smallest slackSLACK - smallest slack CR - critical ratioCR - critical ratio SPT - shortest processing timeSPT - shortest processing time LPT - longest processing timeLPT - longest processing time

Theory of ConstraintsTheory of ConstraintsNot all resources are used evenlyNot all resources are used evenlyConcentrate on the” bottleneck” Concentrate on the” bottleneck”

resourceresourceSynchronize flow through the Synchronize flow through the

bottleneckbottleneckUse process and transfer batch sizes Use process and transfer batch sizes

to move product through facilityto move product through facility

Theory of ConstraintsTheory of Constraints• What to Change• What to Change to• How to cause the change

Chapter 4Chapter 4

Quality Quality ManagementManagement

Quality is a measure of goodness that is inherent to a product or service.

Bottom line: perspective has to be from theCustomer – fitness for use

““The degree of excellence of a The degree of excellence of a thing” (Webster’s Dictionary)thing” (Webster’s Dictionary)

““The totality of features and The totality of features and characteristics that satisfy needs” characteristics that satisfy needs” (ASQ)(ASQ)

Fitness for useFitness for useQuality of designQuality of design

What Is Quality?What Is Quality?

QualityQuality• Quality Management – not owned by

any functional area – cross functional

• Measure of goodness that is inherent to a product or service

FedEx and QualityFedEx and Quality• Digitally Assisted Dispatch System –

communicate with 30K couriers • 1-10-100 rule

1 – if caught and fixed as soon as it occurs, it costs a certain amount of time and money to fix

10 – if caught later in different department or location = as much as 10X cost

100 – if mistake is caught by the customer = as much as 100X to fix

Product Quality Product Quality DimensionsDimensions

• Product Based – found in the product attributes

• User Based – if customer satisfied• Manufacturing Based – conform to

specs• Value Based – perceived as

providing good value for the price

Dimensions of Quality (Garvin)Dimensions of Quality (Garvin)

1.1. Performance Performance Basic operating characteristicsBasic operating characteristics

2.2. Features Features ““Extra” items added to basic featuresExtra” items added to basic features

3.3. Reliability Reliability Probability product will operate over Probability product will operate over

timetime

Dimensions of Quality (Garvin)Dimensions of Quality (Garvin)

4.4. Conformance Conformance Meeting pre-established standardsMeeting pre-established standards

5.5. Durability Durability Life span before replacement Life span before replacement

6.6. Serviceability Serviceability Ease of getting repairs, speed & Ease of getting repairs, speed &

competence of repairscompetence of repairs

Dimensions of Quality (Garvin)Dimensions of Quality (Garvin)

7.7. AestheticsAesthetics Look, feel, sound, smell or tasteLook, feel, sound, smell or taste

8.8. SafetySafety Freedom from injury or harmFreedom from injury or harm

9.9. Other perceptionsOther perceptions Subjective perceptions based on Subjective perceptions based on

brand name, advertising, etcbrand name, advertising, etc

1.1. Time & Timeliness Time & Timeliness Customer waiting time, completed Customer waiting time, completed

on timeon time2.2. Completeness Completeness

Customer gets all they asked forCustomer gets all they asked for3.3. CourtesyCourtesy

Treatment by employeesTreatment by employees

Service QualityService Quality

4.4. ConsistencyConsistency Same level of service for all customers Same level of service for all customers

5.5. Accessibility & Convenience Accessibility & Convenience Ease of obtaining serviceEase of obtaining service

6.6. AccuracyAccuracy Performed right every timePerformed right every time

7.7. ResponsivenessResponsiveness Reactions to unusual situationsReactions to unusual situations

Service QualityService Quality

Quality of Quality of ConformanceConformance

Ensuring product or service Ensuring product or service produced according to designproduced according to design

Depends onDepends onDesign of production processDesign of production processPerformance of machineryPerformance of machineryMaterialsMaterialsTrainingTraining

Quality PhilosophersQuality Philosophers Walter Shewhart – Statistical Process Walter Shewhart – Statistical Process

ControlControl W. Edwards DemingW. Edwards Deming Joseph Juran – strategic and planning basedJoseph Juran – strategic and planning based Philip CrosbyPhilip Crosby Armand Fiegenbaum – total quality control Armand Fiegenbaum – total quality control

“entire business must be involved in quality “entire business must be involved in quality improvement”improvement”

Deming’s 14 PointsDeming’s 14 Points1.1. Create constancy of purposeCreate constancy of purpose2.2. Adopt philosophy of preventionAdopt philosophy of prevention3.3. Cease mass inspectionCease mass inspection4.4. Select a few suppliers based on Select a few suppliers based on

qualityquality5.5. Constantly improve system and Constantly improve system and

workersworkers6.6. Institute worker trainingInstitute worker training

Deming’s 14 PointsDeming’s 14 Points7.7. Instill leadership among Instill leadership among

supervisorssupervisors8.8. Eliminate fear among employeesEliminate fear among employees9.9. Eliminate barriers between Eliminate barriers between

departmentsdepartments10.10. Eliminate slogansEliminate slogans11.11. Remove numerical quotasRemove numerical quotas

Deming’s 14 PointsDeming’s 14 Points

12.12. Enhance worker prideEnhance worker pride13.13. Institute vigorous training and Institute vigorous training and

education programseducation programs14.14. Develop a commitment from top Develop a commitment from top

management to implement these management to implement these 13 points13 points

The Deming WheelThe Deming Wheel(or PDCA Cycle)(or PDCA Cycle)

1. PlanIdentify the problem and develop the plan for improvement.

2. DoImplement the plan on a test basis.

3. Study/CheckAssess the plan; is it working?

4. ActInstitutionalize improvement; continue the cycle.

Also known as the Shewart CycleAlso known as the Shewart Cycle

Six SigmaSix Sigma• Quality management program that

measures and improves the operational performance of a company by identifying and correcting defects in the company’s processes and products

Six SigmaSix SigmaStarted By MotorolaStarted By Motorola

• Define• Measure• Analyze• Improve • Control

Made Famous by Made Famous by General ElectricGeneral Electric40% of GE executives’40% of GE executives’bonuses tied to 6 sigmabonuses tied to 6 sigmaimplementation implementation

Malcolm Baldrige Malcolm Baldrige National Quality Award National Quality Award

• Category 3 – determine requirements, expectations, preferences of customers and markets

• Category 4 – what is important to the customer and the company; how does company improve

Total Quality ManagementTotal Quality Management

1.1. Customer defined qualityCustomer defined quality2.2. Top management leadershipTop management leadership3.3. Quality as a strategic issueQuality as a strategic issue4.4. All employees responsible for qualityAll employees responsible for quality5.5. Continuous improvementContinuous improvement6.6. Shared problem solvingShared problem solving7.7. Statistical quality controlStatistical quality control8.8. Training & education for all employeesTraining & education for all employees

Strategic Implications of Strategic Implications of TQMTQM

Quality is key to effective strategyQuality is key to effective strategyClear strategic goal, vision, missionClear strategic goal, vision, missionHigh quality goalsHigh quality goalsOperational plans & policiesOperational plans & policiesFeedback mechanismFeedback mechanismStrong leadershipStrong leadership

TQM in Service CompaniesTQM in Service Companies

Inputs similar to manufacturingInputs similar to manufacturingProcesses & outputs are differentProcesses & outputs are differentServices tend to be labor intensiveServices tend to be labor intensiveQuality measurement is harderQuality measurement is harderTimeliness is important measureTimeliness is important measureTQM principles apply to servicesTQM principles apply to services

Cost of QualityCost of QualityCost of achieving good qualityCost of achieving good quality

PreventionPrevention Planning, Product design, Planning, Product design,

Process, Training, InformationProcess, Training, InformationAppraisalAppraisal

Inspection and testing, Inspection and testing, Test equipment, Test equipment, OperatorOperator

Cost of QualityCost of QualityCost of poor qualityCost of poor quality

Internal failure costsInternal failure costs Scrap, Rework, Process failure, Scrap, Rework, Process failure,

Process downtime, Price-Process downtime, Price-downgradingdowngrading

External failure costsExternal failure costs Customer complaints, Customer complaints,

Product return, Product return, Warranty, Product Warranty, Product liability, Lost salesliability, Lost sales

Employees and Employees and Quality ImprovementQuality ImprovementEmployee involvementEmployee involvementQuality circlesQuality circlesProcess improvement teamsProcess improvement teamsEmployee suggestionsEmployee suggestions

Cause-and-Effect Diagram Cause-and-Effect Diagram

QualityProblem

Out of adjustmentOut of adjustment

Tooling problemsTooling problems

Old / wornOld / worn

MachinesFaultyFaulty testing equipmenttesting equipment

Incorrect specificationsIncorrect specifications

Improper methodsImproper methods

Measurement

Poor supervisionPoor supervision

Lack of concentrationLack of concentration

Inadequate trainingInadequate training

Human

DeficienciesDeficienciesin product designin product design

Ineffective qualityIneffective qualitymanagementmanagement

Poor process designPoor process design

Process

InaccurateInaccuratetemperature temperature controlcontrol

Dust and DirtDust and Dirt

Environment

Defective from vendorDefective from vendor

Not to specificationsNot to specifications

Material-Material-handling problemshandling problems

Materials

Also known as Ishikawa Diagram or Fish BoneAlso known as Ishikawa Diagram or Fish Bone

Hot House QualityHot House QualityLots of Hoopla and no

follow through

ISO 9000:2000ISO 9000:2000• Customer focus• Leadership• Involvement of the people• Process approach• Systems approach to management• Continual process improvement – GAO• Factual approach to decision making• Mutually beneficial supplier relationships

Implications Of ISO 9000Implications Of ISO 9000Truly international in scopeTruly international in scopeCertification required by many foreign Certification required by many foreign

firmsfirmsU.S. firms export more than U.S. firms export more than

$150 billion annually to Europe$150 billion annually to EuropeAdopted by U.S. Navy, Adopted by U.S. Navy,

DuPont, 3M, AT&T, and othersDuPont, 3M, AT&T, and others

ISO AccreditationISO Accreditation European registrationEuropean registration

3rd party registrar assesses quality program3rd party registrar assesses quality program European Conformity (CE) mark authorizedEuropean Conformity (CE) mark authorized

United States 3rd party registrarsUnited States 3rd party registrars American National Standards Institute (ANSI)American National Standards Institute (ANSI) American Society for Quality (ASQ)American Society for Quality (ASQ) Registrar Accreditation Board (RAB)Registrar Accreditation Board (RAB)

Upcoming EventsUpcoming Events• Final Exam by Saturday• Harley paper due by Saturday