1. Enterprise Resource Planning (ERP) Presented by: Rick Bekanich Pete Brenkosh AmandeepKaur Dee Walski

2. Overview What is ERP? Evolution of ERP Components of ERP Advantages/Disadvantages Success/Failures Summary

3. Definitions Enterprise Organization designed to provide goods and/or services to consumers Resource Any physical or virtual entity of limited availability, or anything used to help one earn a living (e.g. employees, materials, etc.) Planning The organizational process of creating and maintaining a plan.

5. Predicts and balances demand and supply. It is an enterprise-wide set of forecasting, planning and scheduling tools .

6. Links customers and suppliers into a complete supply chainSales and Operations Planning 2 Master Production Scheduling 3 Capacity Requirements Planning 4 Material Requirements Planning 5 Production Executionand Control 6

8. Coordinates sales, marketing, operations, logistics, purchasing, finance, product development, and human resources.Sales and Operations Planning 2 Master Production Scheduling 3 Capacity Requirements Planning 4 Material Requirements Planning 5 Production Executionand Control 6

10. It does this by developing valid plans and schedules so that the right resources – manpower, materials, machinery, and money – are available in the right amount when needed.Sales and Operations Planning 2 Master Production Scheduling 3 Capacity Requirements Planning 4 Material Requirements Planning 5 Production Executionand Control 6

12. Provides a real time integration of sales, operating, and financial data

13. Connects resource planning approaches to the extended supply chain of customers and suppliers.Sales and Operations Planning 2 Master Production Scheduling 3 Capacity Requirements Planning 4 Material Requirements Planning 5 Production Executionand Control 6

14. What is ERP? Enterprise Resource Planning ERP is a real time system ERP is an integrated information system for identifying and planning the enterprise-wide resources needed to take, make, ship, and account for customer orders ERP is an extension of MRP. Where MRP focused mainly on manufacturing, ERP includes all of the processes required to operate a business 8

15. ERP Common Definition and Evolution Moving from the Informal to the Formal System (Valid Schedules) is the key to ERP Business Benefits Realization 9

16. 10 Closed Loop MRP (70’s) MRP (Late 60’s) MRP II (80’s) ERP (90’s) ERP Common Definition and Evolution MRP / ERP Evolution Source: ERP Making It Happen, Thomas F. Wallace and Michael H. Kremzar

17. 11 Closed Loop MRP ERP Common Definition and Evolution

18. MRP, MRPII and ERP 12 Material Requirements Planning MRP is a process that uses the bill of material, inventory data, and planned receipts to calculate requirements and recommend the release and/or reschedule of materials (Original concept of scheduling the quantity and timing of production and related purchase orders for raw materials) MRP 70’s MRP Manufacturing Resource Planning Shop Floor Control Sales & Operations Planning Demand Management Business Planning MRP Supplier Scheduling MRP II 80’s Feedback MRPII Enterprise Resource Planning Customer & Product Information Customer Service Logistics & Materials Management MRP II Integrated Financial Functions/ Processes ERP 90’s ERP Feedback/ Real Time Access to Information The concept of ERP has evolved over time. The acronyms are used in three different but related contexts.

20. Data can now be entered “on-time”.

21. People no longer heavily rely on hot lists, shortage lists or who yells the loudest.

22. There are fewer inaccuracies in inventory causing fewer production problems.

27. Stated in terms of dollarsChange is inevitable

28. Master Production Scheduling 19 Capacity Requirements Planning 4 Material Requirements Planning 5 Master Production Scheduling 3 Production Executionand Control 6 Key Components of ERP

30. It supports all production strategies including make-to-stock, assemble-to-order, engineer-to-order, and make-to-order

31. A realistic Monthly and Weekly Schedule determined by looking at capacity and resources

33. 22 Master Production Scheduling 3 Material Requirements Planning 5 Capacity Requirements Planning 4 Production Executionand Control 6 Capacity Requirements Planning (CRP) Key Components of ERP

36. Required Capacity – How much machine time and labor will be needed from that shop to complete their work relating to an asset or assets.

37. Load – What was Planned and what was released to the shops.

39. Shop Calendar

40. Shifts per day

41. Shift durations

42. Breaks / Non-productive time

43. Number of individuals/machines available per shift

44. Utilization

47. Plant and Equipment

48. Skill level/Work effort required

51. Analyze requested delivery schedules.

52. Review Capacity

54. Material Requirements Planning (MRP) MRP is a process that uses the: Bill Of Material (BOM, components lists) Material Master Route data or Production Order after creation (this is used to create the MPS schedule) Inventory data 31

57. Is the person responsible for a material or group of materials in MRP

58. Material Requirements Planning (MRP)

62. BOM Allocation 37 Materials can be assigned to a specific routing operation, especially when total cycle times are long, to distribute shop floor deliveries and minimize work in process inventories. Without this assignment, ERP systems must assume the material is needed at the start of the first operation of the order.

64. In the Right Quantities

65. At the Right TimeMY PARTS

66. 39 The Basic Logic of MRP Have Enough? Yes No Ordered Enough? Done No Yes Due On Time? Place Order Yes No *Reschedule Order Done Done After determining what will be made (MPS) and what it will take (BOM), the MRP logic works through a series of questions. Determine the material needed to meet the MPS. What to Order How Much to Order When to Order When to Schedule Deliveries Keep Priorities Current Only Reschedule as last resort

68. Some Assets take longer to repair than others so there is more time involved

69. MATERIAL

70. Some Materials have longer lead times than others so more time is involved

71. QUANTITY

73. 42 MRP MRP uses Backwards Scheduling Production Order Finish Date (Delivery Date) Production Order Start Date Production Order 08 Dec 30 Dec OP10 1 day OP20 3 days OP30 5 days OP40 1 day OP50 2 days OP60 10 days 20 Dec 18 Dec 17 Dec 12 Dec 09 Dec 08 Dec Production Order Material Allocated to OP 10 Purchase Order Exception Message Generated “05” Planned Delivery time CRA to Stock Material Stored in Inventory Opening Period 10 days Lead (Ship) time from Vendor (Varies) Goods Receipt Processing Time 5 Days Contracting Local Proc 23 days 07 Dec Opening Date Release Date MRP Date

74. 43 Master Production Scheduling 3 Capacity Requirements Planning 4 Material Requirements Planning 5 Production Executionand Control 6 Production Execution and Control Key Components of ERP

76. Operational dispatching to satisfy production requirements

77. Execution:

78. Physically execute the production schedules

79. Reporting and Monitoring:

81. Advantages of ERP Managing interdependencies of complex bill of materials Tracking the 3-way match between purchase orders (what was ordered), inventory receipts (what arrived) , and costing ( what the vendor invoiced) Order tracking allows the company to get detailed information on customers

82. Advantages of ERP The accounting for all of these tasks, tracking the revenue, cost and profit on a granular level. Use of a dating structure which can allow the company to be informed when the product should be updated ERP security , protect a company against crimes such as embezzlement or industrial espionage Allow product to be produced of higher quality

83. Disadvantages of erp Cost: Average cost to implement: SAP: $16.8 million Oracle: $12.6 million Microsoft: $2.6 million Tier 2: $3.46 million Time: Average time to implement: SAP: 20 months Oracle: 18.6 months Microsoft: 18 months Tier 2: 17.8 months Source: 2008 ERP Report Part II: Comparing Leading Tier 1 and Tier 2 ERP Solutions

84. Disadvantages of ERP Continually trained on how to use it Success is fully dependent on how the workers utilize it Biggest problem is it is hard to customize very few companies can use it ‘right out of the box” Modifications are expensive and tedious Even after changes still limited in certain areas

85. Disadvantages of ERP Making the necessary changes may make the company less competitive in the market place License fees Technical support from ERP departments has been questioned Security, corporate representatives must give sensitive information to tech support department

86. ERP success Business benefits realized: SAP: 72.2% Oracle: 58% Microsoft: 68% Tier 2: 68.6% Source: 2008 ERP Report Part II: Comparing Leading Tier 1 and Tier 2 ERP Solutions

87. ERP Success Airbus Overall cost savings of €4 million since the project began in March 2005 • Increased user friendliness, with solution fully integrated into the Airbus employee portal • Reimbursement cycle significantly reduced from over 15 days to less than 10 days • Single reporting tool with increased transparency for travel management, procurement, controlling, and line management • Increased productivity and satisfaction of Airbus employees Canadian national Railway Canadian National Railway Company realized significant financial benefits, including the following: Over CAD 400 million in hard benefits on a CAD 200 million investment CAD 84 million in one-time inventory and financial savings Over CAD 100 million savings per year in asset, procurement, labor, and technology

88. ERP Success Nestle Gained ability to track products through the complete production and delivery cycle • Complied with requirements for tracing foodstuff products • Retained internal identification codes while supporting multiple external business partner needs • Accelerated time to market for new products by capturing process and product Hewlett Packard Increased response to forecasting accuracy • Achieved service levels of 94% to 97% • Improved accuracy of inventory targeting based on variation analysis • Implemented a better mix of inventory at individual locations • Gained the ability to track inventory at the location, SKU-item, and time-frame level • Provided on-time information for decision making • Tightly integrated planning and execution

89. ERP Failures Hershey Foods - lead to massive distribution failures loss of 27 % of market Foxmyer Drug – system implementation failure lead to collapse of company IRS- Took 10 yrs to complete and cost $50 Billion Oregon Dept of Motor Vehicles- took eight years and public out cry killed project

90. ERP Failures State of Florida welfare system- plagued with numerous computational errors and $260 million in overpayment GreyHound Bus – trip reservations and bus dispatch system lost $6 million Norfolk Southern Rail Road lost $113 Million

91. Reasons for ERP Failures When the management is not controlling the scope of the project especially when you expect the consultant to provide a magic bullet, is a recipe for failure.· Changing the sails in midstream, by certain deliverables expected within a third of the documented times and volumes is a recipe for failure.· By engaging in other corporate projects competing for the meager finances midway, is a recipe for failure· By not having proper change management policies and procedures, is a recipe for failure· By going for consultants without prior experience or ERP solutions in which you are the only company within your industry, could be a recipe for failure· If you do not have a knowledge transfer inscribed in the consulting contract, is a recipe for failure· If the vendor does not understand your business, is a recipe for failure· If the project has no clear phases, deliverables and quality control components, is a recipe for failure· If you have not re-engineered your business processes to be compatible with the capabilities of the technology, is a recipe for failure· Having multiple vendors within the one project, is a recipe for failure· Not having an external project audit committee, is a recipe for failure· Not having a clear end-user training program to transfer skills to employees, is a recipe for failure· Having the project run as a "one-man show", is a recipe for failure· Having the management over- committed (excessively ambitious, prompting unrealistic deadlines), is recipe for failure · Team member not being accountable for actions, is recipe for failure· Low morale within team, is recipe for failure· Unclear statement of requirement, is a recipe for failure· In no standard implementation methodology use, is a recipe for failure· Inadequate requirements definition (current processes are not adequatelyaddressed), is a recipe for failure· Poor ERP package selection (the package does not address the basicbusiness functions of the client), is a recipe for failure· Inadequate resources employed by the client, is a recipe for failure· Internal resistance to changing the 'old' processes, is a recipe for failure· A poor fit between the software and users procedures, is a recipe for failure· A bottom up approach is employed (the process is not viewed as a topmanagement priority), is a recipe for failure· The client does not properly address and plan for the expenses involved, is a recipe for failure· If any functional gaps have not been identified (GAP analysis), is a recipe for failure· If the implementation does not take into account future technological convergence, is a recipe for failure

92. ERP in a nutshell ERP attempts to integrate all departments and functions across a company onto a single computer system that can serve all those different departments, particular needs. ERP automates the tasks involved in performing a business process

93. ERP in a nutshell

94. ERP in A Nutshell

95. Example of ERP at work

96. Summary ERP is a business wide common system Can integrate all of the business units Very expensive and time intensive Proper implementation can help the business function better Poor implementation can hurt the business immensely Training

97. References ERP Making It Happen, Thomas F. Wallace and Michael H. Kremzar 2008 ERP Report Part II: Comparing Leading Tier 1 and Tier 2 ERP Solutions

98. Questions??