14
CHAPTER 2
LITERATURE REVIEW
2.1
EVOLUTION OF ADVANCED PRODUCTION PLANNING SYSTEM
The evolution of advanced production planning (APS) system has been
studied by several authors (Choudhary 2000, Donald waters 1996 and Green 1987).
The main objective of Advanced Planning Systems (APS) is to provide global
visibility and rapid planning cycles (Norman Gaither 1999). Figure 2. 1 shows the
Evolution of Manufacturing system from 1970 to 2000.
1970
1980
1990
2000
Figure 2.1 Evolution of Advanced Planning Systems
2.2
MANUFACTURING INFORMATION SYSTEM ARCHITECTURE
In manufacturing industry the amount of information available to
manufacturers and their suppliers for decision-making has become an important factor
in improving manufacturing productivity. While the importance of the information has
been noted by number of authors (Federgruen 1993, Cachon and Fisher 1996 and Fites
1996) and further works need to be done on what information is useful (Earl 1996 and
Lacity et al 1996) and the value of the information.
Roger Philips et al (1995) developed information architecture for footwear
manufacturing sector. The manufacturing information system was designed,
15
according to the order that basic inputs and goals are specified, as a hierarchy of
intercommunicating decision levels. Figure 2.2 shows the Manufacturing Information
System Architecture. These levels are given below.
LI: Executive level
L2: Production Planning level
L3: Stochastic Analysis and Performance Evaluation level
L4: Scheduling level
L5: Operational level
Figure 2.2. Manufacturing Information System Architecture
(Roger Philips et al 1995)
16
2.3
OVERVIEW OF MANUFACTURING RESOURCE PLANNING
(MRP-II)
Deshmukh (1999) provided the general framework of MRP-II system.
Master Production Schedule (MPS) Drives the MRP system. It gives a listing of what
end products are to be produced and when they are to be made available for shipment.
This schedule must be based on accurate estimate of demand. Most of the research
reports in MRP-II deal with case studies and conceptual framework (Bradford 1992,
Datta 2001 and Khalid Sheikh 2001). They have also discussed the need for MRP-II
information system in product manufacturing sector. A variety of MRP-II software
packages have been developed; many of them are not suitable for footwear
manufacturing sector.
2.3.1
Material Requirements Planning (MRP)
MRP is a formal, computerized information system that integrates the
scheduling and control of materials. MRP plays major role in Manufacturing Resource
Planning (MRP - II). The basic inputs to this module are from other modules like
MPS, Bill of Material (BOM) and inventory. MPS drives the entire MRP system.
Inventory modules supply the information of product structure, material on hand, on
order, costs and lead times. The major outputs of the systems are planned order
schedule and changes in planned orders. It also provides exception reports, and
performance reports (Deshmukh 1995).
2.3.2
Bill of Material
Bill of Materials (BOM) plays a major role in MRP processing as inputs
for the product structure. It contains information on the relationships of components
and assemblies, which are essential for the computation of gross and net requirements.
(Deshmukh 1995)
17
2.3.3
Inventory Control System
Inventory information contains details about item type (manufactured or
purchased), on hand status, lead times, cost details, etc. Planned orders are calculated
on the basis of the inventory status and cost details (Deshmukh 1995). At present
effective inventory control is impossible without the application of modem computer
techniques. Gustav Tomek (1985) stressed that without the application of computers in
this field, we cannot speak about rational and systematic management. Computer
techniques applied in this field represent a qualitative increase in the level of
management, especially from the following points of view.
•
Enables information processing in a multi-optional way, i.e.
information stored, summarized and grouped according to various
criteria and views
•
It produce ABC analysis for effective control of issues and
procurement
•
Highlights pending orders for which scheduled delivery dates have
exceeded
•
Helps detection of unusual consumption trends by consumption
analysis
2.3.4
Functions of MRP System
According to Chase and Aquilano (1999), MRP computer systems serve
the organization by providing the functions below.
•
Determine the number of parts, components, and materials needed to
produce each end item.
•
Determine the right part, right quantity, & right time to order parts.
Provide time schedules for ordering materials & parts.
18
•
Maintain a bill of materials sequencing the assembly parts of the final
product (product tree structure)
Theme of MRP (Chase and Aquilano 1999)
“Getting the right materials to the right place at the right time.”
Many firms claimed as much as 40 percent reductions in inventory
investment due to implementation of MRP systems (Chase and Aquilano 1999).
Although there are over 300 MRP-II software systems in the market. (Spencer 1995).
To the great surprise of many, manufacturing resource planning (MRP-II) is still the
dominant application software for today’s manufacturing management (Turbide 1995).
According to Norman Gaither and Greg Frazier (1999), A successful MRP
system requires accurate stock records, accurate Bills of Materials and effective
Capacity Planning to ensure that plans are achievable. MRP and CRP together provide
the basis for an integrated system covering all aspects of business control, from sales
order processing to shop floor scheduling and purchasing. The effective
implementation of MRP combined with CRP can dramatically improve customer
service, simultaneously reducing stock levels and improving manufacturing
productivity.
2.3.5
MRP System Information Architecture
The William J. Stevenson (2002) has developed the information
architecture for MRP system. The Material Requirements planning (MRP) system
requires information about Master Production Schedule (MPS), Bill of Materials and
inventory records. The MPS is a detailed production schedule for finished goods or
end items that provides the major input to the material requirements planning process.
Inventory status data for each product or component such as stock-on-hand, stock-onorder, etc are provided by the inventory records, which also contain planning factors
like lead-time, safety stock, re-order level, and so on. Production of a full shoe takes
time and requires a variety of expensive machines and skilled workers/ labours. The
19
common manufacturing methods are make-to-order and make-to-stock. Most of the
footwear manufacturing companies use make-to-order method to satisfy the foreign
customers (Elwood 1984).
Software developers are being forced to move from a client / server to
browser / server architecture to Web-enable their software and thus, deliver selfservice and Electronic commerce capabilities (Michael J. Shaw 2000)
2.4
MRP-II SOFTWARE PACKAGES
As per Sarah (1991) survey, Currently 70 percent to 80 percent of discrete
manufacturing companies use MRP-II packages, whereas in the continuous and batchprocess industries, the installed base of MRP-II is only 15 percent.
Andy kovari (1995) reviewed the MRP-II Software package. In general,
MRP-II software consists of a single integrated system that handles materials
inventory, production scheduling and control, and financial record keeping. It provides
major advantages over the traditional method of inventory control because, instead of
simply looking at past consumption of an item, it estimates future materials
requirements based upon both firm and expected orders. By integrating inventory with
production scheduling, MRP-II reduces inventory by allowing materials to be stocked
precisely when they are needed. This reduces the costs of holding excess materials as
well as floor space requirements. The integration of all three major areas of record
keeping typically eliminates a considerable amount of redundant data entry.
Martin slofstr (1991) designed decision support system to speed up MRP- II
activities. Computer-Assisted Resource Planning (CARP), consists of two parts — a
database manager and a hardware engine. The CARP system takes an extracted set of
data from the host MRP-II database and downloads it into a file. Once the data has
been downloaded, the CARP system explodes the MRP/Capacity Requirement Plans
20
in seconds, enabling production planners to immediately analyse the material and
labor impact resulting from changes to the production plan.
June Attman (1988) studied the cost factor associated with MRP-II system.
While many manufacturers struggle with costly mainframe, so minicomputer
manufacturing resource planning (MRP-II) software designed to improve their
profitability. A number of manufacturers said they have found a better way as
compared with mainframe based systems.
Lawrence Gould (1987) given the benefits of MRP-II software package.
MRP-H software is designed to accumulate and organise manufacturing information
so executives can enhance their decision-making capabilities for resource-planning
applications. Manufacturers can use MRP-II software to increase sales, cut inventory,
enhance customer relations, and reduce labor expenses. More and more MRP-II
packages are incorporating fourth-generation languages to simplify software
development, modification, and maintenance.
2.4.1
Evolutions of MRP-II Software Package
George Plossel (1995) and Green (1992) reviewed the evolution of MRP-II
software packages from 1960 to 2000. Material requirements planning (MRP), is the
part of manufacturing resource planning, developed in the 1960s as a system for
planning the availability and procurement of materials. MRP mission was to calculate
the need for material against available inventory and then to chart material
requirements along a time line. Using MRP, material planners could "time phase" their
purchase orders to help meet production schedules. In the early 1970s, MRP planning
and control capabilities were expanded to include machine and labor capacity and
production scheduling. The resulting second-generation package, designed to close the
loop between planning and manufacturing execution, was known as MRP-II. When
financial monitoring was added, total closed-loop MRP-II was bom. MRP-II systems
consist of modules. Although the number and types of modules vary from system to
21
system. In the early 2000s, MRP-II systems perform three primary functions such as
planning, executing and financial control. Now there is need for MRP-II system in
web environment because it supports multi-site manufacturing.
Researchers typically categorize MRP-II hardware platforms as mainframe,
minicomputer or microcomputer. The fourth generation languages (4GL) allow them
to create their own custom reports and screens, eliminating minor program
modification requests and unburdening professional data processing departments.
Report generation and on-line screen functions are usually standard in MRP-II
systems. But they don't enable users to make major modifications in the MRP-II logic,
such as in the way inventory allocations are made. Manufacturers using MRP-II have
gained access to information that has helped them manage their operations more
intelligently (George Plossel 1995).
Bums (1991) reviewed the key feature of the MRP-II software package.
Many companies have considered using manufacturing resource planning (MRP-II)
systems to solve their manufacturing problems and to keep up with increasing
competition. MRP-II offers the manufacturer the ability to control and monitor costs,
track inventory and produce an improved product at a lower cost.
Due to the
increasing competitive nature of manufacturing in India, many companies have looked
to manufacturing resource planning (MRP-II) systems to solve their manufacturing
problems. As a managing tool, MRP-II provides the manufacturer with the ability to
monitor and control costs, track inventory and produce a better product at a lower cost.
2.4.2
MRP-II software Installation Procedure
Installation of MRP-II software packages often requires changes to
company procedures, extensive training, customization of software, and a change in
the corporate culture (White et al 1982). Nearly every MRP-II expert will
acknowledge that a successful MRP-II implementation requires a total commitment on
the part of the manufacturing company. As a result, education and consulting support
22
are considered key features of any good MRP package (Fawcett et al 2001). The
MRP-H software market is expected to evolve considerably over the next five years as
more manufacturers implement MRP-II. The ability to integrate other manufacturing
technologies such as just-in-time, total quality control, statistical process control,
engineering design, management decision-making, process characteristics, etc., is
becoming more important (Ormsby et al 1990) Hardware compatibility will become
an issue, as manufacturers demand the ability to migrate to smaller platforms or to
interface to other systems already in house (Pan 1998).
2.5
MRP-II
SOFTWARE
PACKAGE
ACQUISITION
AND
IMPLEMENTATION
Ling et al (2001) examined the issues associated with the acquisition and
implementation of Manufacturing Resource Planning (MRP-II) systems in Chinese
manufacturing companies. In recent years a number of computerised manufacturing
systems, such as material requirements planning (MRP), Just-in-Time, and
manufacturing resource planning/enterprise resources planning (MRP-II/ERP), have
been developed and implemented in the manufacturing facilities of industrialized
nations. MRP-II is an integrated manufacturing planning and control system that
includes financial management, materials management, and capacity management
mechanisms. The ultimate goal of implementing MRP-13 is to reduce inventory,
improve customer service level, and raise productivity. (Wight 1993)
The first step in adopting an MRP-II system is to acquire the software. By
1997 between four hundred and five hundred Chinese manufacturing companies had
acquired the MRP-II system (Yao 1998).
Software vendors such as SSA, QAD,
Oracle, Symix, and SAP are the major providers of MRP-II systems (Holland et al
1999).
23
According to Oliver Wight (1993), MRP-II implementing characteristics
can be grouped into four classes. Users in the Class A category are able to effectively
use the planning and control process of the MRP-II system from top to bottom of the
company and generate significant improvements in customer service, productivity,
inventory, and costs. Class B category users have a dependable closed-loop material
requirement planning system and stable manufacturing control, but they do not use
MRP-H as a mechanism to master the overall operation of the company. For C class
companies, MRP 13 provides a better method for material procurement and inventory
management. Many of them apply the MRP-II system to a single functional area, such
as procurement or sales orders. Information on sales, production, material flow, cash
flow, and the like is not shared by the entire company. The Sharing of information is
the essence of an MRP-II system Wang et al (1998). In the process of implementing
MRP- II, World manufacturers have found that subassembly, numerically controlled
system, and repetitive production are the three environments that are favorable for
implementing the MRP module of the MRP-13 system Pan. Two major problems have
been encountered in the process of implementing MRP-13 system. They are (1) the
disconnect between the MRP-II system and business management and (2) inadequate
strategic planning and preparation for implementing a new computerised system.
Nick Chambers (1996) have compared MRP-II system with Advanced
Planning System (APS). The new APS systems are not intended to replace MRP-H
completely but to add value and improve system performance. In every other sizeable
manufacturing or processing organization, the planning and simulation capabilities of
MRP-II are rarely adequate. To overcome this problem, an increasing number of
companies are turning to the advanced planning system (APS) as an adjunct to their
MRP-n systems. The essence of APS is its speed of operation. Using sales and
inventory data from an MRP-n system, it can produce a production plan in seconds or
a few minutes. APS can be used for both materials and capacity requirements
planning, and master production scheduling, functions which are common to all MRP-
24
II systems. Either APS can validate the plans generated by the MRP-0 system or it can
carry out the planning, eliminating the need for these modules in an MRP-II system.
2.6
BENEFITS OF MRP-II SYSTEMS
According to (Chase & Aquilano 1999), the information provided by
MRP-II systems allows firms to realize the following benefits.
Reduce sales price
Reduce inventory
Better customer service
Better response to market demands
Ability to change the master schedule
Reduce setup and tear-down costs
Reduced idle time
2.7
INTERNET BASED REMOTE MANUFACTURING
2.7.1
Remote Manufacturing
Currently web-based applications are relatively simple and limited to
information -sharing applications, such as providing content and on-line catalog
transactions (Michael 2000). For instance, many companies develop web-based
systems to offer customer support services over the Internet. Web-based applications
over the Internet result in new challenges, such as interoperability, security, data
integrity and seamless access to multiple data sources (Chengen Wang 2001). The
accelerating change is shaping all aspects of today’s manufacturing industries. Over
25
the last decades, manufacturing shifted from traditional mass production towards
customer responsive production.
Information processing is an important challenge in an internet-based
manufacturing environment, and must facilitate distribution, heterogeneity, autonomy
and cooperation.
In the field of manufacturing, a number of concepts such as the “
agile manufacturing enterprise”, “ virtual enterprise”, “ extended enterprise”, and socalled next generation manufacturing enterprise have emerged.
Virtual enterprise is
considered as the most advanced and efficient form of modem networked enterprise
organisation, and is supported by extensive use of information and communication
technologies. This is essentially Internet - based manufacturing and its main
characteristics are the exploitation of distributed information, integration of process,
and remote manufacturing. The Internet, incorporating multimedia and distributed
information processing technology, has provided tremendous potential for remote
integration and cooperation in global manufacturing applications because it has
become the worldwide information platform for the sharing of all kinds of
information.
At the height of dot com fever, the letter e preceded nearly everything. It
can be e-business, e-commerce, e-tailing, e-fulfillment, and e-finance. Virtual
enterprise can easily gain and integrate more resources through internal integration
and cooperation with other enterprises to provide quick response to customer
expectations within rapidly changing business environment. An internet-based service
is greatly shaping manufacturing industries. Web developments offer sophisticated
communication and information transfer services supporting market exploration, ecommerce
and collaborative manufacturing
organisations.
among geographically dispersed
26
2.7.4
e-Manufacturing
Collaborative manufacturing or e-manufacturing creates a window onto the
shop floor. The e-manufacturer is integrated with the rest of the in supply chain. In
traditional Manufacturing orders enter one end and finished goods exit the other, but
the activities on the shop floor are not visible in real time to trading partners. With
e-manufacturing, shop floor activities are now visible to trading partners. Sharing
accurate real-time data is at the heart of e -manufacturing, and e-manufacturing is the
essence of business-to-business e-commerce. The Internet presents both threats and
opportunities for manufacturers in today’s economy (Chengen Wang 2001). Figure 2.3
shows different types of participants in e-manufacturing environment. (Patricia 2002)
Virtual company
Figure 2.3. Different types of participants in e-manufacturing
environment (Chengen Wang 2001)
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2.8
WORK MEASUREMENT
Work measurement is the application of techniques designed to establish
the time for a qualified worker to carry out specific job at a defined level of
performance (ILO 1985).
2.8.1
Standard Time Calculation
Basic time is the time required to perform a task by a normal operator
working at a standard pace with no allowance for personal delays, unavoidable delays
or fatigue (Banga 1998). Standard time may be defined as the amount of time required
to complete a unit of work calculated as follows
Basic Time
=
(O.T. x R / S)
Standard Time
=
(O.T. x R / S) x % A
O.T
-
Observed time
R
-
Rating (performance level of the worker)
%A
-
Percentage of total allowance
S
-
Standard performance level expected (100%)
2.9
ISSUES AND CHALLENGES OF IMPLEMENTING AN ERP
SYSTEM
The challenges of implementing an ERP system has been studied by
Meneses (2001). Enterprise Resource Planning (ERP) systems are computer-based
systems that are implemented to integrate the mission critical- processes in an
organisation. ERP system cover such processes as production planning, purchasing,
inventory control, material requirements planning, sales order tracking, finance, and
human resources. Implementing ERP systems is a complicated, tedious and expensive
process. The ERP implementation to succeed, the sponsor organisation must focus its
attention to the project delivery process.