Description
The objective of an ERP system is to coordinate a firm’s entire business, from supplier evaluation to customer invoicing.
Manufacturers depend on their ERP systems to enhance their organization’s performance and streamline business processes. ERP systems can track information and data as it flows through an organization.
ERP software typically consists of multiple enterprise software modules that are individually purchased, based on what best meets the specific needs and technical capabilities of the organization. Each ERP module is focused on one area of processes in the business.
There are at least 8 basic modules found in an ERP system:
Human Resource
Inventory
Sales & Marketing
Purchase
Finance & Accounting
Customer Relationship Management(CRM)
Engineering/ Production
Supply Chain Management (SCM)
Instructions
For this assignment, you will prepare a 2-page report, not including the cover page and the References page, using APA style. Use appropriate headings for each of the points you cover in your report.
You will research ERP systems, addressing the following points:
Introduction
Define what we mean by an ERP system.
Describe two advantages and two disadvantages of ERP systems.
Choose one module from the list of 8 modules above.
Describe this module in detail.
Explain how this module integrates into the entire ERP system.
Provide an example of a business that could benefit from the use of this module in an ERP system.
Explain how that business benefits from that module.
Conclusion
Describe why ERP is important to any organization or business.
Extra Credit Possibility: In one paragraph, identify and describe one way ERP is used or might be used in your own workplace.
Helpful Hints
APA Style: If you need help with APA style, you should use the Writing Assistance Center here in Canvas. You can also use the ECPI Library APA Style Guide: https://ecpi.libguides.com/APA. This website provides a Sample APA Template and Sample APA Citations. Remember: Your textbook is a resource, just as any other resource, and must be cited.
Unformatted Attachment Preview
Operations Management: Sustainability
and Supply Chain Management
Tenth
Chapter 12
Inventory Management
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Inventory Management
The objective of inventory management is to strike a
balance between inventory investment and customer
service
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Importance of Inventory
• One of the most expensive assets of many companies
representing as much as 50% of total invested capital
• Less inventory lowers costs but increases chances of
running out
• More inventory raises costs but always keeps customers
happy
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Functions of Inventory
1. To provide a selection of goods for anticipated demand
and to separate the firm from fluctuations in demand
2. To decouple or separate various parts of the production
process
3. To take advantage of quantity discounts
4. To hedge against inflation
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Types of Inventory
• Raw material
– Purchased but not processed
• Work-in-process (WIP)
– Undergone some change but not completed
– A function of cycle time for a product
• Maintenance/repair/operating (MRO)
– Necessary to keep machinery and processes productive
• Finished goods
– Completed product awaiting shipment
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Managing Inventory
1. How inventory items can be classified (ABC analysis)
2. How accurate inventory records can be maintained
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
ABC Analysis
• Divides inventory into three classes based on annual
dollar volume
– Class A – high annual dollar volume
– Class B – medium annual dollar volume
– Class C – low annual dollar volume
• Used to establish policies that focus on the few critical
parts and not the many trivial ones
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
ABC Analysis
• Other criteria than annual dollar volume may be used
– High shortage or holding cost
– Anticipated engineering changes
– Delivery problems
– Quality problems
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
ABC Analysis
• Policies employed may include
1. More emphasis on supplier development for A items
2. Tighter physical inventory control for A items
3. More care in forecasting A items
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Cycle Counting
• Items are counted and records updated on a periodic
basis
• Often used with ABC analysis
• Has several advantages
1. Eliminates shutdowns and interruptions
2. Eliminates annual inventory adjustment
3. Trained personnel audit inventory accuracy
4. Allows causes of errors to be identified and corrected
5. Maintains accurate inventory records
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Control of Service Inventories
• Can be a critical component of profitability
• Losses may come from shrinkage or pilferage
• Applicable techniques include
1. Good personnel selection, training, and discipline
2. Tight control of incoming shipments
3. Effective control of all goods leaving facility
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Inventory Models
• Independent demand – the demand for item is
independent of the demand for any other item in
inventory
• Dependent demand – the demand for item is dependent
upon the demand for some other item in the inventory
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Inventory Models
• Holding costs – the costs of holding or “carrying”
inventory over time
• Ordering cost – the costs of placing an order and
receiving goods
• Setup cost – cost to prepare a machine or process for
manufacturing an order
– May be highly correlated with setup time
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Holding Costs
Holding costs vary considerably depending on the
business, location, and interest rates. Generally greater
than 15%, some high tech and fashion items have holding
costs greater than 40%.
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Inventory Models for Independent Demand
Need to determine when and how much to order
1. Basic economic order quantity (EOQ) model
2. Production order quantity model
3. Quantity discount model
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Basic EOQ Model
Important assumptions
1. Demand is known, constant, and independent
2. Lead time is known and constant
3. Receipt of inventory is instantaneous and complete
4. Quantity discounts are not possible
5. Only variable costs are setup (or ordering) and holding
6. Stockouts can be completely avoided
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Minimizing Costs
Objective is to minimize total costs
Figure 12.4 Costs as a Function of Order Quantity: Total costs
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Reorder Points
• EOQ answers the “how much” question
• The reorder point (ROP) tells “when” to order
• Lead time (L) is the time between placing and receiving
an order
Demand Lead time for a new
ROP =
per
day
order
in
days
ROP = d x L
d=
D
Number of working days in a year
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Reorder Point Example
Demand = 8,000 iPhones per year
250 working day year
Lead time for orders is 3 working days, may take 4
D
d=
Number of working days in a year
= 8,000 / 250 = 32 units
ROP = d x L
= 32 units per day × 3 days = 96 units
= 32 units per day × 4 days = 128 units
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Operations Management: Sustainability
and Supply Chain Management
Tenth Edition
Chapter 14
Material Requirements
Planning (MRP) and ERP
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Dependent Demand
• For any product for which a schedule can be
established, dependent demand techniques should be
used
• Dependent demand” means the demand for one item
is related to the demand for another item.
• Given a quantity for the end item, the demand for all
parts and components can be calculated
• In general, used whenever a schedule can be
established for an item
• M R P is the common technique
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Materials Requirement Planning (MRP)
• A dependent demand technique that uses a bill-ofmaterial, inventory, expected receipts, and a master
production schedule to determine material
requirements.
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Benefits of MRP
1) Better response to customer orders
2) Faster response to market changes
3) Improved utilization of facilities and labor
4) Reduced inventory levels
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
MRP Requirements
• Effective use of dependent demand inventory models
requires the following
1. Master production schedule
2. Specifications or bill of material
3. Inventory availability
4. Purchase orders outstanding
5. Lead times
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Master Production Schedule (MPS)
• Specifies what is to be made and when
• Must be in accordance with the aggregate production
plan
• Inputs from financial plans, customer demand,
engineering, labor availability, inventory fluctuations,
supplier performance
• As the process moves from planning to execution, each
step must be tested for feasibility
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Master Production Schedule (MPS)
• MPS is established in terms of specific products, it
disaggregates the aggregate plan
• Schedule must be followed for a reasonable length of
time
• The MPS is quite often fixed or frozen in the near-term
part of the plan
• The MPS is a rolling schedule
• The MPS is a statement of what is to be produced, not a
forecast of demand
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Master Production Schedule (MPS)
Can be expressed in any of the following terms:
1. A customer order in a job shop (make-to-order)
company
2. Modules in a repetitive (assemble-to-order or forecast)
company
3. An end item in a continuous (stock-to-forecast)
company
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Bills of Material
• List of components, ingredients, and materials needed to
make product
• Provides product structure
– Items above given level are called parents
– Items below given level are called components or
children
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Bills of Material
• Modular Bills
– Modules are not final products but components that
can be assembled into multiple end items
– Can significantly simplify planning and scheduling
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Bills of Material
• Planning Bills
– Also called “pseudo” or super bills
– Created to assign an artificial parent to the BOM
1. Used to group subassemblies to reduce the
number of items planned and scheduled
2. Used to create standard “kits” for production
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Bills of Material
• Phantom Bills
– Describe subassemblies that exist only temporarily
– Are part of another assembly and never go into
inventory
• Low-Level Coding
– Item is coded at the lowest level at which it occurs
– BOMs are processed one level at a time
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Accurate Inventory Records
• Accurate inventory records are absolutely required for
MRP (or any dependent demand system) to operate
correctly
• MRP systems require more than 99% accuracy
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Purchase Orders Outstanding
• A by-product of well-managed purchasing and inventory
control department
• Outstanding purchase orders must accurately reflect
quantities and scheduled receipts
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Lead Times for Components
• The time required to purchase, produce, or assemble an
item
– For production – the sum of the move, setup, and
assembly or run times
– For purchased items – the time between the
recognition of a need and when it’s available
for production
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Safety Stock
• BOMs, inventory records, purchase and production
quantities may not be perfect
• Consideration of safety stock may be prudent
• Should be minimized and ultimately eliminated
• Typically built into projected on-hand inventory
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Extensions of MRP
• MRP II
• Closed-Loop MRP
• Capacity Planning
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Material Requirements Planning II
• Requirement data can be
enriched by other resources
• Generally called MRP II or
Material Resource Planning
• Outputs can include scrap,
packaging waste, effluent,
carbon emissions
• Data used by purchasing,
production scheduling, capacity
planning, inventory, warehouse
management
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Distribution Resource Planning (DRP)
Using dependent demand techniques throughout the
supply chain
• Expected demand or sales forecasts become gross
requirements
• All other levels are computed
• DRP pulls inventory through the system
• Small and frequent replenishments
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Enterprise Resource Planning (ERP)
• An extension of the MRP system to tie in customers and
suppliers
1. Allows automation and integration of many business
processes
2. Shares common data bases and business practices
3. Produces information in real time
• Coordinates business from supplier evaluation to
customer invoicing
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Enterprise Resource Planning (ERP)
• ERP modules include
– Basic MRP
– Finance
– Human resources
– Supply-chain management (SCM)
– Customer relationship management (CRM)
– Sustainability
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Enterprise Resource Planning (ERP)
• ERP systems have the potential to
– Reduce transaction costs
– Increase the speed and accuracy of information
• Facilitates a strategic emphasis on JIT systems and
supply chain integration
• Can be expensive and time-consuming to install
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
ERP in the Service Sector
• ERP systems have been developed for health care,
government, retail stores, hotels, and financial services
• Also called efficient consumer response (ECR)
systems in the grocery industry
• Objective is to tie sales to buying, inventory, logistics, and
production
Copyright © 2017, 2014, 2011 Pearson Education, Inc. All Rights Reserved
Purchase answer to see full
attachment
