0 ERP Best Practices

7/29/2019 0 ERP Best Practices

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ERP Best Practices


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Session Objectives

Assess the performance of your ERP system

implementation

Learn how to improve the integration of your system

into the business

Examine how the application of ERP best practicescan improve the operation of your business


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ERP Implementation Objective

Implement system to capture

organizational knowledge,

processes and transactions anddisseminate that information

for the purpose of supporting

operations and value-added

activities throughout theextended enterprise.


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ERP Performance Outcomes

Quickened information response time

Increased interaction across the enterprise

Improved order management / order cycle

Decreased financial close cycle

Improved interaction with customers

Improved on-time delivery

Improved interaction with suppliers Lowered inventory levels

Improved cash management

Reduced direct operating costs

Source: ERP Survey of U.S. Manufacturing Firms; Mabert et al., PIM Journal, 2nd quarter 2000.


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ERP Implementation Reality

Average implementation time 17 to 26 months

Average total cost of ownership $15 million

2.5 years from project initiation to achievequantifiable benefits

Average median savings -$1.6 million

Source: Meta Group, 1999.


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Technology- Hardware- Software

- Network

Skills- Managerial

- Process Knowledge

- Technical Matter

Organization- Management Hierarchy

- Business Process Design

- Feedback & Control Mechanisms

- Communication Systems

System Integration Factors


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Agenda

Assessing ERP Performance

Ensuring Data Integrity Managing Variability

Protecting the Critical Path

Powering Decision-Making


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ERP Best Practices Chart

Pr

ocess

Innovation

Process Control

Level I

Level II

Level III

Level IV

Feedback and

control mechanisms

in place to ensure

data integrity

System detects

performance issues to

protect the critical path

and facilitate workflow

throughout the enterprise

Transforming data into

information to power

decision-making across

the extended enterprise

Capabilities established

to manage and control

sources of variability


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Agenda






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Monitor Transaction Reporting

Transaction Types

inventory receipts, issues, transfers, and adjustments

labor entries for operation reporting

invoice and payment processing

Includes inaccurate, late and missing transactions

negative inventory balance locations

labor variances

production receipt and material issue variances

Requires feedback and control mechanisms to notonly correct the errors, but also prevent them from

reoccurring


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Maintain Schedule Validity

Verify material and capacity availability before

releasing orders into production

Update shop order date and quantity fields to reflect

variances from plan based on actual production

Establish policy and procedures to control schedule

changes within the planning horizon

Establish policy and procedures for the acceptance ofnew customer orders into the schedule

Update available capacity by maintaining work

center calendars and utilization


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Verify Foundation Data

Foundation Data Sources Item Master

BOM / Route Master

Work Center Master Customer Master

Vendor Master

Knowledge repositories used as the basis for orders

and as a reference for communication throughout theextended enterprise


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Agenda


Ensuring Data IntegrityManaging Variability




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ERP Benefit Busters

Material Usage Variability


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Change Management Practices

Establish the who, what, when, where, and how on:

Capturing engineering changes and errors andupdating the bill of material and routing on a timely

basis

Adjusting the schedule to reflect production quantityand lead time variances

Updating standard machine capacities as capabilities

and product mix change Revising the shop calendar with planned downtime,

overtime, and / or extra shifts

Revising the production schedule for new orders or

changes to existing orders


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Responsiveness

Responsive companies have the ability to quicklyand efficiently respond to unexpected changes andvariability

Responsiveness can be improved by developing: Flexible processes

Supply chain relationships

Contingency plans alternate plans or business rules to handle common

situations


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Control Process Variance

Identify process planning / scheduling, shop floor execution, inventory,

shipping, accounts receivable, etc.

Determine out-of-control limits days past due for customer orders, shop orders, and

invoices, issue or receipt variances, inventory variances

Set goals, objectives, and priorities

Establish measurement system to detect out-of-control events

Apply continuous improvement techniques toidentify root cause effects and implement

corrective actions


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Closing the Loop

Feedback and control closes the loop betweenthe plan and everything that prevents

execution of the plan__


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Agenda






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Theory of Constraints Lessons

Solving local optima through process control willnot necessarily generate more throughput, i.e.money for the company

Business processes involved to complete a customerorder consist of a series of dependent steps referredto as the critical path

The critical path determines the rate of throughput

for the company

Protecting the critical path from delays will increasethe throughput of the company


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Business Process Flow


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Manage System Constraints

Identify bottleneck Physical constraint or policy constraint

Exploit it Improve capacity utilization Schedule the sequence of work Remove resource contentions Reengineer policies and procedures

Subordinate all other resources to it

Match non-bottleneck output to bottleneck Ensure support activities enhance rather than detract

from bottleneck productivity

Elevate it Add capacity

Go back


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Strengthen Linkages

Strengthen the linkages between steps inthe critical path

Facilitate workflow along the steps Analyze workflow

Design and evaluate solutions to improvethroughput and lower costs

Rules-based routing

Event-based notification


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Supply Chain Facts

Youre only as strong as your weakest link. Tight linkages with suppliers and customers are

just as important as tightly integrated internal

operations Information delays, inconsistent and infrequent

ordering, and poor communication in thesupply chain results in higher inventory andlower customer service levels


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Supply Chain Best Practices

Include supply chain partners in decision-makingprocess

Establish data exchange systems with supply chain

partners to ensure rapid dissemination of information Streamline procurement process using online suppliers,

trading communities, exchanges, and auction sites

Integrate business systems of supply chain partners

using XML or other data format BizTalk - WebPlan

Extend workflow analysis, rules-based routing, andevent-based notification throughout the supply chain


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Agenda






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Facilitate Communication

Breakdown barriers to access to information

Install LAN / WAN backbone

Provide data query and reporting tools

Use software collaboration tools

email, video conferencing, FTP, workgroup tools

Integrate front-office and back-office systems


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Improve Data Mining

The ERP database serves as a transactionbackbone--a repository of data that can beaccessed and manipulated to:

evaluate strategic marketing or financialopportunities

support process control and continuous

improvement efforts adjust tactical plan based on unplanned

events


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Enhance Analysis Tools

Data becomes a valuable resource onlywhen knowledge workers can deriveinformation from it to support businessdecisions.

Rapidly fading are the days where theelectronic spreadsheet will suffice as thestand-alone analysis tool for the business

manager More advanced tools are needed to

manage the complexity and scale ofthe current business environment


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ERP Best Practices Matrix

Level I:

Ensure Data Integrity Formalize Change Process

Improve Responsiveness

Control Process Variance

Process Control

P

rocessInnova

tion

Level II:

Manage Variability

Facilitate Communication

Improve Data Mining Enhance Analysis Tools

Level IV:

Power Decision-Making

Manage Constraints

Strengthen Linkages Integrate Supply Chain

Level III:

Protect Critical Path

Monitor Transactions

Maintain Schedule Validity

Verify Foundation Data


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