Table 5-14: MRP schedules for the base of the stapler
Item: Base Lead time: 1 week
Week
1 2 3 4 5 6 7 8 9 10
Gross requirements 300
Scheduled receipts 0
Projected on-hand inventory 0
Net requirements 300
Planned order receipts 300
Planned order releases 300
Minty says that ‘MRP II does not replace MRP, and also it is not an improved version of MRP. Rather, it represents an effort to expand the scope of production resource planning and to involve other functional areas of the firm in the planning process,’ such as marketing, finance, engineering, purchasing and human resources. MRP II differs from MRP in that all of these functional areas have input into the master production schedule. From that point, MRP is used to generate material requirements and helps production managers plan the capacity. MRP II systems often include simulation capabilities, so managers can evaluate various options.
MRP II integrates many areas of the manufacturing enterprise into a single entity for planning and control purposes, from board level to operative and from five-year plan to individual shop- floor operation. It builds on closed-loop MRP by adopting the feedback principle, but extending it to additional areas of the enterprise, primarily manufacturing-related.
MRP II is defined by the American Production and Inventory Control Society (APICS) as a method for the effective planning of all the resources of a manufacturing company (Higgins, LeRoy and Tierney 1996). It is a new generation of the MRP system, which is a set of techniques that uses bills of material, inventory, data and a master production schedule to calculate the requirements for materials in a manufacturing company.
5.3.1 characteristics of MrP II
The characteristics of MRP II can be summarized as follows (Higgins, LeRoy and Tierney 1996):
1. The operation and financial system are the same.
2. It has simulation capabilities that enable predictions to be made beforehand.
3. It involves every facet of the business from planning to execution.
4. MRP II offers a systematic method for planning and procuring materials to support production.
5. MRP II is not a proprietary software system and can thus take many forms.
6. It is almost impossible to visualize an MRP II system that does not use a computer, but an MRP II system can be based on either purchased / licensed or in-house software.
7. Almost every MRP II system is modular in construction.
8. Characteristic basic modules in an MRP II system are master production scheduling (MPS), item master data, bill of materials (BOM), production resources data, inventories and orders, purchasing management, MRP, shop-floor control (SFC), capacity planning or CRP, standard costing, cost reporting/management, distribution resource planning (DRP).
9. Some ancillary systems in MRP II are business planning, lot traceability, contract management, tool management, engineering change control, configuration management, shop-floor data collection, sales analysis and forecasting, Finite Capacity Scheduling (FCS), general ledger, accounts payable (purchase ledger), accounts receivable (sales ledger), sales order management, Distribution Requirements Planning (DRP), warehouse management, project management, technical records, estimating, Computer- Aided Design/Computer-Aided Manufacturing (CAD/CAM), Computer-Aided Process Planning (CAPP).
5.3.2 advantages of using MrP II
The following are advantages of MRP II:
1. Better control of inventories 2. Improved scheduling
3. Productive relationships with suppliers 4. Improved design control
5. Better quality and quality control 6. Reduced working capital for inventory 7. Improved cash flow through quicker deliveries 8. Accurate inventory records
9. Timely and valid cost and profitability information
5.4 enterPrIse resource PlannIng
ERP is a management tool used for planning and monitoring all of the resources of a manufacturing company, including the functions of manufacturing, marketing, finance and engineering (Wight 1993). ERP represents the application of the latest IT to the MRP II system. This is recognized as being an effective management system (Ormsby et al. 1990) that has an excellent planning and scheduling capability offering significant gains in productivity, dramatic increases in customer service, much higher inventory turns and greater reduction in material costs.
ERP systems as comprehensive package software solutions that seek to integrate the complete range of business processes and functions in order to present a holistic view of the business from a single information and IT architecture (Gable 1998). Thus, ERP is seen as ‘an integrated, multi-dimensional system for all functions, based on a business model for planning, control, and global (resource) optimization of the entire supply chain, by using state if the art Information Systems/Information Technology (IS/IT) that supplies value added services to all internal and external parties’ (Slooten and Yap 1999). The main ERP Critical Success Factors (CSFs) fall under one of four main categories, namely, commitment from top management (Devenport 1998), Business Process Reengineering (BPR), the IT infrastructure (Summer 1999), and deploying change management.
Top management commitment: Management must be a part of ERP implementation and it has been clearly demonstrated that for IT projects to succeed, top management support is critical.
Business process re-engineering: The concept of BPR was first introduced by Hammer in 1990.
BPR has been defined as a fundamental redesign of business processes to achieve dramatic improvements in critical areas such as cost, quality, service and speed (Hammer 1990). BPR began as a technique to help the organizations fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world-class competitors. It has become a popular management tool for dealing with rapid technological and business change in today’s competitive environment (Hamid 2004). With the rise of e-commerce, enterprise systems, customer relationship management and other technology-enabled new business practices, businesses now face major changes in much shorter time periods. The
challenges of the new Internet economy may offer an opportunity to apply the lessons learned from a decade of BPR efforts, which likewise sought ways to manage major change (Alan et al.
2003). Implementing an ERP system involves reengineering the existing business processes to the best business process standard (Gibson et al. 1999).
IT Infrastructure: Adequate hardware and networking infrastructure are required for ERP application. An ERP system relies on its operation on sophisticated information technology infrastructure. In addition to this infrastructure, clearly, the software configuration has a critical influence on the implementation process and outcome (Holland and Light 1999).
Change management: One of the main obstacles facing ERP implementation is resistance to change. ‘About half of ERP projects fail to achieve results because managers underestimate the efforts involved in managing change’ (Pawlowski et al. 1999). To successfully implement ERP, the way organizations do business will need to change and the ways people do their jobs will need to change too (Koch et al. 1999). Thus, change management is essential for preparing a company for the introduction of an ERP system, and its successful implementation.
5.4.1 Features of erP
ERP has the following features:
1. It provides multi-platform, multi-facility, multi-mode manufacturing, multi-currency, multi-lingual facilities.
2. It supports strategic, tactical and operational planning and execution activities.
3. It covers all functional areas like manufacturing, selling and distribution, payables, receivables, inventory, accounts, human resources, purchases, etc.
4. It performs core activities and increases customer service, thereby improving the corporate image.
5. It bridges the information gap across organizations.
6. It provides complete integration of systems across the departments and companies under the same management.
7. It allows the automatic introduction of the latest technologies like Electronic Fund Transfer (EFT), Electronic Data Interchange (EDI), Internet, Video conferencing, E-commerce, etc.
8. It eliminates the problems like material shortages, productivity enhancements, customer service, cash management, inventory problems, quality problems, on time delivery, etc.
9. It provides intelligent business tools like decision support system, executive information system, data mining, etc.
5.4.2 Benefits of erP
The areawise benefits of ERP are shown below as:
Operational benefits: Cost reduction, cycle time reduction, productivity improvement, quality improvement, customer service improvement, etc.
Managerial benefits: Better resource management, improved decision-making and planning, and performance improvement.
Strategic benefits: Support for business growth, support for business alliance, building business innovations, building cost leadership, generating product differentiation, building external linkages, enabling e-governance, sustaining competitiveness, etc.
IT infrastructure benefits: Building business flexibility for current and future changes, IT cost reduction, increased IT infrastructure capability, etc.
Organizational benefits: Changing work patterns, facilitating organizational learning, empowerment, building a common vision, shifting work focus, increased employee morale and satisfaction.