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Transcript of chapter 14 operation management
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.1
Chapter 14
Enterprise resource
planning (ERP)
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.2
Direct
Design Develop
Deliver
Operations management
Enterprise resource planning (ERP)
Enterprise resource
planning (ERP)
The operation supplies... the informational ability to
deliver products and services
The market requires specified time, quantity and
quality of products and services
Figure 14.1 This chapter covers enterprise resource planning (ERP)
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.3
What is ERP?
How did ERP develop?
How should ERP systems be implemented?
Key operations questions
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.4
Enterprise Resource Planning (ERP) systems are
integrated software solutions that automate a
company's administrative and core business
processes and have decision support capabilities.
What ERP covers...1. A sales order is made and recorded (Sales)
2. Parts are reserved or purchased and delivered (Purchasing
& Supply)
3. Labour is scheduled and charged (Human Resources)
4. The cost of parts is taken from general ledger inventory
accounts, and the revenue is booked and billed when the
order is completed (Finance)
5. The required goods are manufactured or assembled
(Production)
6. The completed order is shipped to the customer
(Distribution).
What is ERP?
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.5
Integrated
database
ERP integrates several systems
Purchasing and
supply
applications
Operations
applications
Financial
applications
Strategic
reporting
applications Sales and
marketing
applications
Delivery and
logistics
applications
Service
applications
HRM applications
Senior management and stakeholders
Employees
Su
pp
liers
Cu
sto
mers
Fro
nt-
offic
e s
taff
Back-o
ffic
e s
taff
Employees
Figure 14.3 ERP integrates information from all parts of the organization
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.6
Case Discussion
Read the case: SAP at Rolls Royce (Page 447)
Question:
1. What decisions did Rolls Royce take in adopting its ERP
system?
2. Which standard system to buy?
3. How to manage the implementation?
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.7
Web-integrated enterprise resource planning (collaborative commerce,
c-commerce)
Enterprise resource
planning (ERP)
Manufacturing resource
planning (MRP II)
Increasing integration of information systems
Incre
asin
g im
pa
ct o
n th
e w
ho
le s
up
ply
ne
two
rk
The development of ERP
Material
requirements
planning (MRP)
Figure 14.2 The development of ERP
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.8
Because software communicates across all functions, there is absolute visibility of what is happening in all parts of the business.
The benefits of ERP
The discipline of forcing business process-based changes is an effective mechanism for making all parts of the business more efficient.
There is a better sense of control of operations that will form the basis for continuous improvement.
It enables far more sophisticated communication with customers, suppliers and other business partners.
It is capable of integrating whole supply chains including suppliers suppliers and customers customers.
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.9
Strategic critical success factors
Top-management commitment and support strong and committed leadership at the top-
management level is essential to the success of an ERP implementation.
Visioning and planning articulating a business vision to the organization, identifying clear
goals and objectives and providing a clear link between business goals and systems
strategy.
Project champion the individual should possess strong leadership skills as well as
business, technical and personal managerial competencies.
Implementation strategy and timeframe implement the ERP under a time-phased
approach.
Project management the ongoing management of the implementation plan.
Change management this concept refers to the need for the implementation team to
formally prepare a change management program and be conscious of the need to consider
the implications of such a project. One key task is to build user acceptance of the project
and a positive employee attitude. This might be accomplished through education about the
benefits and need for an ERP system. Part of this building of user acceptance should also
involve securing the support of opinion leaders throughout the organization. There is also a
need for the team leader to effectively negotiate between various political turfs. Some
authorities also stress that in planning the ERP project, it must be looked upon as a change
management initiative not an IT initiative.
Strategic ERP implementation success factors
Table 14.2 Strategic and tactical critical success factors (CSF) related to successful ERP implementation
Based on Sherry Finney and Martin Corbett (2007) ERP implementation: a compilation and analysis of critical success factors, Business Process
Management Journal, vol. 13, no. 3, 2007, 329347.
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.10
Tactical critical success factors
Balanced team the need for an implementation team that spans the organization, as well as one that
possesses a balance of business and IT skills.
Project team there is a critical need to put in place a solid, core implementation team that is comprised of
the organizations best and brightest individuals. These individuals should have a proven reputation and
there should be a commitment to release these individuals to the project on a full-time basis.
Communication plan planned communication among various functions and organizational levels
(specifically between business and IT personnel) is important to ensure that open communication occurs
within the entire organization, as well as with suppliers and customers.
Project cost planning and management it is important to know up front exactly what the implementation
costs will be and dedicate the necessary budget.
IT infrastructure it is critical to assess the IT readiness of the organization, including the architecture and
skills. If necessary, infrastructure might need to be upgraded or revamped.
Selection of ERP the selection of an appropriate ERP package that matches the businesses processes.
Consultant selection and relationship some authorities advocate the need to include an ERP consultant as
part of the implementation team.
Training and job redesign training is a critical aspect of an implementation. It is also necessary to consider
the impact of the change on the nature of work and the specific job descriptions.
Troubleshooting/crises management it is important to be flexible in ERP implementations and to learn from
unforeseen circumstances, as well as be prepared to handle unexpected crises situations. The need for
troubleshooting skills will be an ongoing requirement of the implementation process .
Tactical ERP implementation success factors
Table 14.2 Strategic and tactical critical success factors (CSF) related to successful ERP implementation
(Continued)
Based on Sherry Finney and Martin Corbett (2007) ERP implementation: a compilation and analysis of critical success factors, Business Process
Management Journal, vol. 13, no. 3, 2007, 329347.
-
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.11
Case Discussion
Read the case: What a waste! (Page 449)
Question:
Why did things go wrong with the relationship
between SAP and Waste Management?
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.12
Material requirements planning (MRP) is a computer-
based information system that is designed to answer
three questions:
1. What is needed?
2. How much is needed?
3. When is it needed?
MRP is the common technique for dependent
demand, where the demand for one item is related to
the demand for another item
ERP is originated from MRP
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.13
Material
Requirements
Planning
1. Master
production
schedule
Customer
orders
Forecast
demand
2. Bill of
materials
3. Inventory
records
Purchase
ordersMaterials plans Works orders
Overview of MRP
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.14
The process of MRP
Explode the master production schedule.
Identify what parts and assemblies are required.
Check whether the required parts and assemblies are available.
For every part or assembly that is required, but not available, identify
when work needs to be started for it to be made available by its due
date.
Generate the appropriate works and purchase orders.
Repeat the process for the next level of the bill of materials.
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.15
Months January February
Aggregate Production Plan 1,500 1,200(shows the total quantity of amplifiers)
Weeks 1 2 3 4 5 6 7 8
Master Production Schedule(shows the specific type andquantity of amplifier to beproduced
240 watt amplifier 100 100 100 100
150 watt amplifier 500 500 450 450
75 watt amplifier 300 100
1. Master production schedule
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.16
B(2) Std. 12 Speaker kit C(3)Std. 12 Speaker kit w/ amp-booster1
E(2)E(2) F(2)
Packing box and installation kit of wire,
bolts, and screws
Std. 12 Speaker booster assembly
2
D(2)
12 Speaker
D(2)
12 Speaker
G(1)
Amp-booster
3
Product structure for Type (A) Amplifier
A
Level
0
2. THE BILL OF MATERIALS
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.17
Product structure for a simple board game
Box lid10077
Box base assembly
10089
Quest cards10023
Character set
10045
Dice10045
TV label10062
Game board10033
Rules10056
Inner tray
23988
TV label10062
Box base
20427
Board game
00289
Level 2
Level 1
Level 0
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.18
Gross requirements Total expected demand
Scheduled receipts Open orders scheduled to arrive
Projected Available Expected inventory on hand at the
beginning of each time period
Week Number 1 2 3 4 5 6
Gross Requirements
Scheduled Receipts
Projected on hand
Net requirements
Planned-order-receipt
Planned-order release
Net requirements Actual amount needed in each time period
Planned-order receipts Quantity expected to received at the beginning
of the period offset by lead time
Planned-order releases Planned amount to order in each time period
3. MRP Record
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.19
Toy
Frames (2)Wood
sections (4)
Example of MRP
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.20 Week Number Beg. Inv 1 2 3 4 5 6 7 8
Quantity needed 100 150
Shutters | LT = 1 Week
Gross Requirements 100 150
Scheduled Receipts
Projected on hand
Net requirements 100 150
Planned-order-receipt 100 150
Planned-order release 100 150
Week Number Beg. Inv 1 2 3 4 5 6 7 8
Quantity needed 200 300
Frames | LT = 2 Week
Gross Requirements 200 300
Scheduled Receipts
Projected on hand
Net requirements 200 300
Planned-order-receipt 200 300
Planned-order release 200 300
Week Number Beg. Inv 1 2 3 4 5 6 7 8
Quantity needed 400 600
Wood Sec | LT = 1 Week
Gross Requirements 400 600
Scheduled Receipts 70
Projected on hand 70 70 70
Net requirements 330 600
Planned-order-receipt 330 600
Planned-order release 330 600
x 2 x 2
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.21
Exercise
Consider the bill of material for Product J and the data given in
the following table. The gross requirements for J are 200 units
in week 6 and 250 units in week 8. Develop the MRP tables
for each item for an 8-week planning period. Use the lot-for-lot
lot-sizing rule.
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.22
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.23
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Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
Slide 14.24
Psycho Sports Ltd
Next week case
Source: Shutterstock.com/Chen WS