Slide 14.
Chapter 14
Enterprise resource
planning (ERP)
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
Enterprise resource planning (ERP)
Direct
Design
Enterprise resource
planning (ERP)
Operations
management
Develop
Deliver
The market requires
specified time, quantity and
quality of products and
services
The operation supplies...
the informational ability to
deliver products and
services
Figure 14.1 This chapter covers enterprise resource planning (ERP)
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
Key operations questions
What is ERP?
How did ERP develop?
How should ERP systems be implemented?
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
What is ERP?
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).
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
ERP integrates several systems
Senior management and stakeholders
Delivery and
logistics
applications
Integrated
database
Purchasing and
supply
applications
Customers
Operations
applications
Sales and
marketing
applications
Front-office staff
Back-office staff
Suppliers
Financial
applications
Strategic
reporting
applications
Service
applications
HRM applications
Employees
Employees
Figure 14.3 ERP integrates information from all parts of the organization
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?
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
Increasing impact on the whole supply
network
The development of ERP
Web-integrated enterprise resource
planning (collaborative commerce,
c-commerce)
Enterprise resource
planning (ERP)
Manufacturing resource
planning (MRP II)
Material
requirements
planning (MRP)
Increasing integration of information systems
Figure 14.2 The development of ERP
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
The benefits of ERP
Because software communicates across all functions, there
is absolute visibility of what is happening in all parts of the
business.
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.
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 ERP implementation success factors
Strategic critical success factors
Top-management commitment and support strong and committed leadership at the topmanagement 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.
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.
Table 14.2 Strategic and tactical critical success factors (CSF) related to successful ERP implementation
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 ERP implementation success factors
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 .
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.
Table 14.2 Strategic and tactical critical success factors (CSF) related to successful ERP implementation
(Continued)
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?
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
ERP is originated from MRP
Material requirements planning (MRP) is a computerbased 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
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
Overview of MRP
Customer
orders
2. Bill of
materials
Forecast
demand
1. Master
production
schedule
3. Inventory
records
Material
Requirements
Planning
Purchase
orders
Materials plans
Works orders
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.
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
1. Master production schedule
Months
Aggregate Production Plan
(shows the total
quantity of amplifiers)
Weeks
Master Production Schedule
(shows the specific type and
quantity of amplifier to be
produced
240 watt amplifier
150 watt amplifier
75 watt amplifier
January
1,500
100
February
1,200
100
500
100
500
300
100
450
450
100
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
2. THE BILL OF MATERIALS
Level
Product structure for Type (A) Amplifier
E(2)
12 Speaker kit w/
C(3) Std.
amp-booster
B(2) Std. 12 Speaker kit
Packing box and
installation kit of wire,
bolts, and screws
D(2)
F(2) Std. 12 Speaker
E(2)
booster assembly
G(1)
D(2)
Amp-booster
12 Speaker
12 Speaker
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
Board
game
Level 0
00289
Level 1
Box lid
10077
Box base
assembly
10089
Quest
cards
10023
Character
set
10045
Dice
10045
TV label
10062
Game
board
10033
Rules
10056
Level 2
Box
base
20427
Inner
tray
23988
TV label
10062
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
3. MRP Record
Week Number
Gross Requirements
Scheduled Receipts
Projected on hand
Net requirements
Planned-order-receipt
Planned-order release
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
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
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
Example of MRP
Toy
Frames (2)
Wood
sections (4)
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
4
100
Quantity needed
Shutters | LT = 1 Week
Gross Requirements
Scheduled Receipts
Projected on hand
Net requirements
Planned-order-receipt
Planned-order release
150
100
100
150
150
100
Beg. Inv
Quantity needed
Frames | LT = 2 Week
Gross Requirements
Scheduled Receipts
Projected on hand
Net requirements
Planned-order-receipt
Planned-order release
Week Number
3
200
150
x2
Quantity needed
Wood Sec | LT = 1 Week
th
7
300
300
200
200
300
300
300
2
Gross Requirements
Scheduled Receipts
70
Projected on hand
70
Net requirements
Planned-order-receipt
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7
Planned-order release
200
200
Beg. Inv
8
150
100
x2
Week Number
70
3
400
7
600
400
600
70
330
330
600
600
edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
330
600
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.
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
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
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
Next week case
Psycho Sports Ltd
Source: Shutterstock.com/Chen WS
Slack, Brandon-Jones and Johnston, Operations Management PowerPoints on the Web, 7th edition Nigel Slack, Alistair Brandon-Jones and Robert Johnston 2014
