M0254 - ERP
(Enterprise Resources Planning)
Session 6
Production and Operation Information System
Ir. Ekananta Manalif, MM, MKom (D2664)
Jurusan Sistem Informasi Universitas Bina Nusantara
Production and Materials
Management



Planning
Need accurate forecasts
from Marketing and
Sales
Compare costs with
Accounting
M0254 Enterprise Resources Planning ©2004
M0254 Enterprise Resources Planning ©2004
Learning Objectives




Describe steps in the production planning process of a
high volume manufacturer like Fitter Snacker
Describe Fitter Snacker’s production and materials
management problems
Describe how a structured process for production and
materials management planning enhances efficiency
and decision making
Describe how production planning data in an ERP
system can be shared with suppliers to increase
supply-chain efficiency
M0254 Enterprise Resources Planning ©2004
Production and Materials
Management at Fitter Snacker

Must answer the following questions:



How much of each bar should be produced?
What quantities of raw materials should be
ordered?
When should raw materials be ordered
M0254 Enterprise Resources Planning ©2004
General Approaches to Production



Make-to-stock: Items produced in anticipation
of orders
Make-to-order: Items produced to meet specific
customer orders
Assemble to order: Final product assembled
from make-to-stock items
M0254 Enterprise Resources Planning ©2004
Mixer
Mixer
Snack Bar Line
Form
Bake
Pack
Mixer
Mixer
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Finished Goods Warehouse
Raw Material Warehouse
Fitter Snacker Manufacturing
Process
Fitter Snacker Production
Problems

Communications


Inventory



Marketing does not share data with production (sales
promotions and large, unexpected orders)
True inventory status not known
No real-time data on actual sales
Accounting and Purchasing


Difficulty forecasting raw material and labor costs
Adjusting accounts for actual vs. standard costs time
consuming and done infrequently
M0254 Enterprise Resources Planning ©2004
Production Planning Process



Work from sales forecast to create aggregate
production plan
Break down aggregate plan into more specific
plans
Use production plan to determine raw material
requirements
M0254 Enterprise Resources Planning ©2004
ERP Approach to Production
Planning
Sales Forecasting
Sales and Operations Planning
Demand Management
Detailed
Scheduling
MRP
Production
Purchasing
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Fitter Snacker’s sales forecast for January through June
Sales Forecasting
Previous Year (cases)
Promotion Sales (cases)
Previous Year base (cases)
Growth:
3.0%
Base Projection (cases)
Promotion (cases)
Sales Forecast (cases)
Jan.
5734
Feb.
5823
March
5884
April
6134
5734
172
5906
5823
175
5998
5884
177
6061
6134
184
6318
May
6587
300
6287
189
6476
5906
5998
6061
6318
6476
M0254 Enterprise Resources Planning ©2004
June
6735
300
6435
193
6628
500
7128
Sales
Forecasting
Starting
Inventory
Sales and Operations Planning
Demand Management
Detailed
Scheduling
MRP
Production
Purchasing
Figure 4.6: Sales and operations planning—the second step of the production planning process
M0254 Enterprise Resources Planning ©2004
Snacker’s sales and operations plan for January through June
Sales and Operations Planning
1) Sales Forecast
2) Production Plan
3) Inventory
4) Working Days
5) Capacity (Shipping Cases)
6) Utilization
7) NRG-A (cases)
70.0%
8) NRG-B (cases)
30.0%
Dec.
100
Jan.
5906
5906
100
22
7333
81%
4134
1772
Feb.
5998
5998
100
20
6667
90%
4199
1799
March
6061
6061
100
22
7333
83%
4243
1818
M0254 Enterprise Resources Planning ©2004
April
6318
6318
100
21
7000
90%
4423
1895
May
6476
6900
524
23
7667
90%
4830
2070
June
7128
6700
96
21
7000
96%
4690
2010
Sales and Operations Planning in ERP
M0254 Enterprise Resources Planning ©2004
Sales and Operations Planning
M0254 Enterprise Resources Planning ©2004
Sales and Operations Planning
M0254 Enterprise Resources Planning ©2004
Sales and Operations Planning
M0254 Enterprise Resources Planning ©2004
Sales
Forecasting
Starting
Inventory
Sales and Operations Planning
Demand Management
Detailed
Scheduling
MRP
Production
Purchasing
Demand Management—the third step of the production planning process
M0254 Enterprise Resources Planning ©2004
Demand Management
Demand Management
Monthly Demand NRG-A
NRG-B
Working Days in Week
Working Days in Month
MPS
NRG-A
Weekly Demand NRG-B
Demand Management
Monthly Demand NRG-A
NRG-B
Working Days in Month
MPS
NRG-A
Daily Demand
NRG-B
Week 1 Week 2 Week 3 Week 4
Week 5
1/2 - 1/5 1/8 - 1/12 1/15 - 1/19 1/22 - 1/26 1/29 - 1/31 2/1 - 2/2
4134
4134
4134
4134
4134
4198
1772
1772
1772
1772
1772
1799
4
5
5
5
3
2
22
22
22
22
22
20
752
940
940
940
984
322
403
403
403
422
Jan 2
4134
1772
22
188
81
Jan 3
4134
1772
22
188
81
Jan 4
4134
1772
22
188
81
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Jan 5
4134
1772
22
188
81
Jan 6
4134
1772
22
188
81
Demand Management

Calculation for Week 5
4,134 cases in Jan. x 3 days in week 5 ÷ 22 working days in Jan.
= 563.7 cases
4,1984 cases in Feb. x 3 days in week 5 ÷ 20 working days in Feb.
= 419.8 cases
Total = 983.5 cases
M0254 Enterprise Resources Planning ©2004
Sales
Forecasting
Starting
Inventory
Sales and Operations Planning
Demand Management
Detailed
Scheduling
MRP
Production
Purchasing
MRP—the Material Planning Process
M0254 Enterprise Resources Planning ©2004
MRP

Bill of Material
Ingredient
Oats (lb)
Wheat germ (lb)
Cinnamon (lb)
Nutmeg (lb)
Cloves (lb)
Honey (gal)
Canola Oil (gal)
Vit./Min. Powder (lb)
Carob Chips (lb)
Raisins (lb)
Protein Powder (lb)
Hazelnuts (lb)
Dates (lb)
Quantity
NRG-A
NRG-B
300
250
50
50
5
5
2
2
1
1
10
10
7
7
5
5
50
50
50
30
70
M0254 Enterprise Resources Planning ©2004
MRP

MRP Record
Oats Lead Time = 2 weeks
MPS
NRG-A
(cases)
NRG-B
MPS
NRG-A
(500 lb. batches)
NRG-B
Gross Requirements (lb)
Scheduled Receipts
Planned Receipts
On Hand
11,650
Planned Orders
Week 1
752
322
108
46
44,070
44,000
11,580
88,000
Week 2
940
403
135
58
55,087
44,000
Week 3
940
403
135
58
55,087
Week 4
940
403
135
58
55,087
Week 5
984
422
142
61
57,667
88,000
33,406
44,000
44,000
22,319
44,000
8,652
493
44,000
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MRP List in ERP
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Stock Requirements List in ERP
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Detailed Production Scheduling
Snack bar production line is bottleneck
 Scheduling of production line is key to
determining detailed production schedule

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Detailed Production Scheduling

Length of production runs



Longer runs reduces cost of setups
Longer runs increase capacity utilization
Shorter runs reduces cost of inventory
M0254 Enterprise Resources Planning ©2004
Providing Production Data to
Accounting

Production data does not get entered into an
ERP system directly


Many methods of gathering shop floor data are
available
ERP allows shop floor data to be collected once for
production and accounting purposes, and data is
consistent in both areas
M0254 Enterprise Resources Planning ©2004
ERP in Supply Chain Management
Goods
Supplier
Information
$
$
$
Goods
Goods
Goods
Manufacturer
Information
Wholesaler
Information
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$
Goods
Retailer
Information
Customer
Raw Materials
$
Information
Supply Chain Management and
ERP



ERP not required for Supply Chain
Management (SCM)
ERP can facilitate sharing information in real
time
Use of internet can reduce communication
costs
M0254 Enterprise Resources Planning ©2004
Supply Chain Metrics

Total Supply Chain


Cash-to-cash cycle time: Time from paying for raw
materials to the time when cash is collected from
the customer
Total supply chain costs
M0254 Enterprise Resources Planning ©2004
Supply Chain Metrics

Buyer-Supplier



Initial fill rate
Initial-order lead-time
On-time performance
M0254 Enterprise Resources Planning ©2004
Chapter Summary

An ERP system can improve the efficiency of
the production and purchasing processes.
Efficiency begins with Marketing sharing sales
forecasts with Production, which shares its
production plans with Purchasing
M0254 Enterprise Resources Planning ©2004
Chapter Summary continued

Production planning can be done without an
ERP system, but and ERP system allows
production to be linked to Purchasing and
Accounting. This data sharing increases a
company’s overall efficiency
M0254 Enterprise Resources Planning ©2004
Chapter Summary continued

Companies are building on their ERP systems
to practice supply chain management. In
doing this, the company looks at itself as part
of a large process that includes customers and
suppliers. Using information more efficiently
along the supply chain can significantly reduce
costs.
M0254 Enterprise Resources Planning ©2004