Chapter 14 Resource Planning Enterprise Resource Planning ERP

Chapter 14 Resource Planning

Enterprise Resource Planning (ERP) ü Organizes and manages a company’s business processes by sharing information across functional areas ü Connects with supply-chain and customer management applications ü Largest ERP provider SAP

ERP Implementation ü First step is to analyze business processes ü Which processes have the biggest impact on customer relations? ü Which process would benefit the most from integration? ü Which processes should be standardized?

Customer Relationship Management (CRM) ü Plans and executes business processes that involve customer interaction ü Changes focus from managing products to managing customers ü Point-of-sale data is analyzed for patterns used to predict future behavior

Supply Chain Management ü Supply chain planning ü Supply chain execution ü Supplier relationships ü Distinctions between ERP and SCM are becoming increasingly blurred

ERP and MRP ü MRP (material requirements planning) was the precursor to ERP ü Primarily a production planning and control system ü MRP evolved to MRP II (manufacturing resource planning) ü ERP and ERP II continue to extend the links through all business processes

Material Requirements Planning ü Computerized inventory control & production planning system ü Schedules component items when they are needed - no earlier and no later

When to Use MRP ü Dependent and discrete items ü Complex products ü Job shop production ü Assemble-to-order environments

Material Requirements Planning Product structure file Master production schedule Material requirements planning Item master file Planned order releases Work orders Purchase orders Rescheduling notices

Master Production Schedule ü Drives MRP process with a schedule of finished products ü Quantities represent production not demand ü Quantities may consist of a combination of customer orders & demand forecasts ü Quantities represent what needs to be produced, not what can be produced

Basic MRP Processes 1. Exploding the bill of material 2. Netting out inventory 3. Lot sizing 4. Time-phasing requirements

MRP Outputs ü Planned orders ü Work orders ü Purchase orders ü Changes to previous plans or existing schedules ü Action notices ü Rescheduling notices

Capacity Requirements Planning (CRP) ü Computerized system that projects load from material plan ü Creates load profile ü Identifies underloads and overloads

Capacity Terms ü Load profile üCompares released and planned orders with work center capacity ü Capacity üProductive capability; includes utilization and efficiency ü Utilization ü% of available working time spent working

More Capacity Terms ü Efficiency – how well the machine or worker performs compared to a standard output ü Load üThe standard hours of work assigned to a facility ü Load percent üThe ratio of load to capacity Load % = (load/capacity)x 100%

Capacity Requirements Planning MRP planned order releases Routing file Capacity requirements planning Load profile for each machine center Open orders file

Hours of capacity Initial Load Profile 120 – 110 – 100 – 90 – 80 – 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0– Normal capacity 1 2 3 4 Time (weeks) 5 6

Remedies for Underloads 1. Acquire more work 2. Pull work ahead that is scheduled for later time periods 3. Reduce normal capacity

Remedies for Overloads 1. 2. 3. 4. 5. 6. 7. 8. Eliminate unnecessary requirements Reroute jobs to alternative machines or work centers Split lots between two or more machines Increase normal capacity Subcontract Increase the efficiency of the operation Push work back to later time periods Revise master schedule

Hours of capacity Adjusted Load Profile 120 – 110 – 100 – 90 – 80 – 70 – 60 – 50 – 40 – 30 – 20 – 10 – 0– Pull ahead Overtime 1 2 Work an extra shift Push back 3 4 Push back Time (weeks) Normal capacity 5 6

Chapter 16 Scheduling

Scheduling ü Specifies when labor, equipment, facilities are needed to produce a product or provide a service ü Last stage of planning before production occurs

Scheduling by Process Type ü Process Industry ü Linear programming ü EOQ with noninstantaneous replenishment ü Mass Production ü Assembly line balancing ü Project -scheduling techniques (PERT, CPM)

Objectives in Scheduling ü Meet customer due dates ü Minimize job lateness ü Minimize response time ü Minimize completion time ü Minimize time in the system ü Minimize overtime ü Maximize machine or labor utilization ü Minimize idle time ü Minimize work-in-process inventory ü Efficiency

Shop Floor Control Scheduling and monitoring day to day production of a job 1. Loading - Check availability of material, machines & labor 2. Sequencing - Release work orders to shop & issue dispatch lists for individual machines 3. Monitoring - Maintain progress reports on each job until it is complete

Loading ü Allocate work to machines (resources) ü Perform work on most efficient resources ü Use assignment method of linear programming to determine allocation

Sequencing ü Prioritize jobs assigned to a resource ü If no order specified use first-come first-served (FCFS) ü Many other sequencing rules exist ü Each attempts to achieve to an objective

Sequencing Rules ü FCFS - first-come, first-served ü LCFS - last come, first served ü DDATE - earliest due date ü CUSTPR - highest customer priority ü SETUP - similar required setups ü SLACK - smallest slack ü CR - critical ratio ü SPT - shortest processing time ü LPT - longest processing time

Critical Ratio Rule CR considers both time and work remaining CR = time remaining work remaining = due date - today’s date remaining processing time If CR > 1, job ahead of schedule If CR < 1, job behind schedule If CR = 1, job on schedule Ties scheduling to Gantt Chart or PERT/CPM and project crashing

Sequencing Jobs Through Many Machines/Processes ü Facility is dynamic, new jobs added ü Develop global sequencing rules ü First-in-system, first-served (FISFS) ü Work-in-next-queue (WINQ) ü Fewest # remaining operations (NOPN) ü Slack per remaining operation (S/OPN) ü Remaining work (RWK) ü Study system via simulation

Monitoring ü Gantt Chart ü Shows both planned and completed activities against a time scale ü Input / Output Control ü Monitors the input and output from each work center

Advanced Planning and Scheduling Systems ü Infinite - assumes infinite capacity ü Loads without regard to capacity ü Then levels the load and sequences jobs ü Finite - assumes finite (limited) capacity ü Sequences jobs as part of the loading decision ü Resources are never loaded beyond capacity

Advanced Planning and Scheduling Systems ü Advanced planning and scheduling (APS) ü Add-ins to ERP systems ü Constraint-based programming (CBP) identifies a solution space and evaluates alternatives ü Genetic algorithms based on natural selection properties of genetics ü Manufacturing execution system (MES) monitors status, usage, availability, quality

Theory of Constraints ü Not all resources are used evenly ü Concentrate on the “bottleneck” resource ü Synchronize flow through the bottleneck ü Use process and transfer batch sizes to move product through facility

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

Quality Management Quality is a measure of goodness that is inherent to a product or service. Bottom line: perspective has to be from the Customer – fitness for use

What Is Quality? ü “The degree of excellence of a thing” (Webster’s Dictionary) ü “The totality of features and characteristics that satisfy needs” (ASQ) ü Fitness for use ü Quality of design

Quality • Quality Management – not owned by any functional area – cross functional • Measure of goodness that is inherent to a product or service

Fed. Ex and Quality • Digitally Assisted Dispatch System – communicate with 30 K 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 10 X cost 100 – if mistake is caught by the customer = as much as 100 X to fix

Product Quality Dimensions • 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) 1. Performance ü Basic operating characteristics 2. Features ü “Extra” items added to basic features 3. Reliability ü Probability product will operate over time

Dimensions of Quality (Garvin) 4. Conformance ü Meeting pre-established standards 5. Durability ü Life span before replacement 6. Serviceability ü Ease of getting repairs, speed & competence of repairs

Dimensions of Quality (Garvin) 7. Aesthetics ü Look, feel, sound, smell or taste 8. Safety ü Freedom from injury or harm 9. Other perceptions ü Subjective perceptions based on brand name, advertising, etc

Service Quality 1. Time & Timeliness ü Customer waiting time, completed on time 2. Completeness ü Customer gets all they asked for 3. Courtesy ü Treatment by employees

Service Quality 4. Consistency ü Same level of service for all customers 5. Accessibility & Convenience ü Ease of obtaining service 6. Accuracy ü Performed right every time 7. Responsiveness ü Reactions to unusual situations

Quality of Conformance ü Ensuring product or service produced according to design ü Depends on ü Design of production process ü Performance of machinery ü Materials ü Training

Quality Philosophers ü Walter Shewhart – Statistical Process Control ü W. Edwards Deming ü Joseph Juran – strategic and planning based ü Armand Fiegenbaum – total quality control “entire business must be involved in quality improvement”

Deming’s 14 Points 1. 2. 3. 4. 5. 6. Create constancy of purpose Adopt philosophy of prevention Cease mass inspection Select a few suppliers based on quality Constantly improve system and workers Institute worker training

Deming’s 14 Points 7. Instill leadership among supervisors 8. Eliminate fear among employees 9. Eliminate barriers between departments 10. Eliminate slogans 11. Remove numerical quotas

Deming’s 14 Points 12. Enhance worker pride 13. Institute vigorous training and education programs 14. Develop a commitment from top management to implement these 13 points

The Deming Wheel (or PDCA Cycle) 4. Act Institutionalize improvement; continue the cycle. 1. Plan Identify the problem and develop the plan for improvement. 3. Study/Check 2. Do Assess the plan; is it working? Implement the plan on a test basis. Also known as the Shewart Cycle

Six 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 Sigma Started By Motorola • • • Define Measure Analyze Improve Control Made Famous by General Electric 40% of GE executives’ bonuses tied to 6 sigma implementation

Malcolm Baldrige 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 Management 1. 2. 3. 4. 5. 6. 7. 8. Customer defined quality Top management leadership Quality as a strategic issue All employees responsible for quality Continuous improvement Shared problem solving Statistical quality control Training & education for all employees

Strategic Implications of TQM ü Quality is key to effective strategy ü Clear strategic goal, vision, mission ü High quality goals ü Operational plans & policies ü Feedback mechanism ü Strong leadership

TQM in Service Companies ü Inputs similar to manufacturing ü Processes & outputs are different ü Services tend to be labor intensive ü Quality measurement is harder ü Timeliness is important measure ü TQM principles apply to services

Cost of Quality ü Cost of achieving good quality üPrevention ü Planning, Product design, Process, Training, Information üAppraisal ü Inspection and testing, Test equipment, Operator

Cost of Quality ü Cost of poor quality üInternal failure costs ü Scrap, Rework, Process failure, Process downtime, Pricedowngrading üExternal failure costs ü Customer complaints, Product return, Warranty, Product liability, Lost sales

Employees and Quality Improvement ü Employee involvement ü Quality circles ü Process improvement teams ü Employee suggestions

Cause-and-Effect Diagram Measurement Faulty testing equipment Lack of concentration Improper methods Inadequate training Environment Tooling problems Old / worn Quality Problem Defective from vendor Not to specifications Dust and Dirt Machines Out of adjustment Poor supervision Incorrect specifications Inaccurate temperature control Human Materialhandling problems Materials Poor process design Ineffective quality management Deficiencies in product design Process Also known as Ishikawa Diagram or Fish Bone

Hot House Quality Lots of Hoopla and no follow through

ISO 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 9000 ü Truly international in scope ü Certification required by many foreign firms ü U. S. firms export more than $150 billion annually to Europe ü Adopted by U. S. Navy, Du. Pont, 3 M, AT&T, and others

ISO Accreditation ü European registration ü 3 rd party registrar assesses quality program ü European Conformity (CE) mark authorized ü United States 3 rd party registrars ü American National Standards Institute (ANSI) ü American Society for Quality (ASQ) ü Registrar Accreditation Board (RAB)

Upcoming • Final Exam • Harley Paper