ERP Systems in Production Management
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ERP Systems in Production Management

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Questions and Answers

What is the primary benefit of integrating activity-based costing with ERP systems?

  • To increase the availability and reliability of cost driver information (correct)
  • To eliminate the use of overhead costs
  • To reduce the need for nonfinancial data
  • To simplify production planning processes

    • Which of these is NOT a characteristic of traditional production systems?

  • Lack of integration within the organization
  • Limited material resource planning
  • Coordination with manufacturing operations (correct)
  • Poor communication along the supply chain

    • What does activity-based budgeting help organizations achieve?

  • Eliminate the need for direct materials
  • Control all nonfinancial measures
  • Standardize all overhead costs
  • Estimate practical capacities and anticipate demand (correct)

    • How does the SAP R/3 system enhance the link between production planning and materials management?

    <p>By allowing calculation of direct costs based on specific activities</p> Signup and view all the answers

    What is a common challenge with nonfinancial measures in accounting systems?

    <p>They lack process controls and reliability.</p> Signup and view all the answers

    Which of the following activities is identified as an activity cost driver in the context of materials management?

    <p>Number of pallet moves</p> Signup and view all the answers

    What is the significance of built-in controls in activity-based systems?

    <p>To ensure the accuracy and reliability of data collected.</p> Signup and view all the answers

    In what way do ERP systems contribute to e-Business opportunities?

    <p>By facilitating enhanced communication along the supply chain.</p> Signup and view all the answers

    What is a drawback of activity-based costing systems mentioned in the context?

    <p>They often rely on unreliable, informal information sources.</p> Signup and view all the answers

    What aspect of production planning often suffers under traditional systems?

    <p>Coordination with manufacturing operations at the operational level</p> Signup and view all the answers

    What is the primary goal of the Just-in-Time (JIT) production system?

    <p>To maintain only necessary inventory levels and reduce excess</p> Signup and view all the answers

    Which of the following is NOT a key process of Material Resource Planning (MRP)?

    <p>Manage quality control of finished products</p> Signup and view all the answers

    What does the production planning system aim to achieve?

    <p>Acquire raw materials and schedule resources effectively</p> Signup and view all the answers

    What significant advantage do ERP systems provide in materials management?

    <p>Integrates multiple databases and eliminates paperwork</p> Signup and view all the answers

    Which of the following problems is associated with traditional production systems?

    <p>Excess inventories impacting cash flow and profitability</p> Signup and view all the answers

    What is one primary function of Manufacturing Execution Systems (MES)?

    <p>To provide real-time feedback on factory floor operations</p> Signup and view all the answers

    What does capacity planning evaluate in a production environment?

    <p>Production capacity against established goals</p> Signup and view all the answers

    Which of the following best describes the role of the Master Production Schedule (MPS)?

    <p>To establish quantities and dates for finished products</p> Signup and view all the answers

    Which factor is a common cause of inconsistent levels of raw materials and finished products?

    <p>Inadequate information from other divisions</p> Signup and view all the answers

    What is a major benefit of using eBusiness strategies in supply chain management?

    <p>Facilitating communication and improving purchasing power</p> Signup and view all the answers

    Activity-based costing systems rely primarily on numerical data from financial accounting for accurate cost drivers.

    <p>False</p> Signup and view all the answers

    The SAP R/3 system enhances the relationship between production planning and materials management by allowing direct calculation of costs instead of using overhead.

    <p>True</p> Signup and view all the answers

    ERP systems do not integrate multiple internal processes, thus increasing the complexity of organizational operations.

    <p>False</p> Signup and view all the answers

    Activity-based budgeting is primarily concerned with retrospective assessment rather than anticipating future demand.

    <p>False</p> Signup and view all the answers

    Built-in controls in activity-based costing systems are implemented to enhance the reliability and integrity of data collection.

    <p>True</p> Signup and view all the answers

    The traditional production systems are characteristically well-integrated within the organization and enable effective resource management.

    <p>False</p> Signup and view all the answers

    Material resource planning systems are irrelevant to the efficiency of the supply chain in modern organizations.

    <p>False</p> Signup and view all the answers

    Activity cost drivers are unrelated to specific processes within production planning.

    <p>False</p> Signup and view all the answers

    Collecting nonfinancial measures through an organized process can lead to the formalization and reliability of activity-based costing.

    <p>True</p> Signup and view all the answers

    Just-in-Time (JIT) systems are designed to create an overflow of inventory to avoid production stoppages.

    <p>False</p> Signup and view all the answers

    Just-in-Time systems aim to maintain excess inventory levels to ensure production continuity.

    <p>False</p> Signup and view all the answers

    The lack of integration between divisions in an organization can lead to accurate production forecasts.

    <p>False</p> Signup and view all the answers

    Material Requirement Planning (MRP) uses sales forecasts to determine stock needed for production.

    <p>True</p> Signup and view all the answers

    Manufacturing Execution Systems (MES) provide real-time data regarding factory floor operations.

    <p>True</p> Signup and view all the answers

    Excess inventories can negatively impact both cash flow and profitability in accounting.

    <p>True</p> Signup and view all the answers

    Operational-level processes include activities such as marketing and sales forecasting.

    <p>False</p> Signup and view all the answers

    The Ultimate goal of capacity planning is to evaluate production capacity against managerial accounting standards.

    <p>False</p> Signup and view all the answers

    ERP systems eliminate the need for sales forecasts in production planning.

    <p>False</p> Signup and view all the answers

    Automated data collection systems can gather real-time information using mobile devices.

    <p>True</p> Signup and view all the answers

    Materials Management modules in ERP are designed to create excessive work orders to streamline production.

    <p>False</p> Signup and view all the answers

    Study Notes

    ERP Systems: Production and Materials Management

    • ERP systems encompass production management and materials management.
    • Objectives include examining production management and materials management systems in ERP, and understanding the interplay of business processes supporting these systems.
    • A case study, Atlantic Manufacturing, illustrates challenges like inconsistent raw materials and finished products, delayed change specifications, long lead times, and inadequate information sharing resulting in lost purchasing requisitions.
    • Manufacturing systems evolved from re-order inventory systems to high-volume production (60s-80s), then mainframe-based databases enabling flexible production to meet customer needs (late 80s), and finally, integration of processes and data for operational efficiency and total supply chain integration in the 90s.
    • Traditional production systems lack integration between divisions, with production decoupled from sales potentially leading to inaccurate inventory levels and purchasing decisions, causing either raw material shortages or excess, and surplus or shortages of finished products leading to excess inventory.

    Production Systems Objectives

    • Objectives for production systems include creating a production plan, acquiring raw materials, scheduling equipment, facilities, and human resources, designing products, and producing appropriate quantities with expected quality levels.

    Production Planning and Manufacturing Processes

    • Operational-level processes include daily activities, purchasing, receiving, inspection and processing of deliveries, quality control (monitoring and managing deliveries and product quality), and maintaining appropriate inventory levels.

    Information Systems Support

    • Information systems support production planning and manufacturing processes through data collection systems, material management, bill of materials (BOM), inventory management, and cost accounting systems.

    Material Resource Planning (MRP)

    • Key MRP processes include identifying stock needs, calculating lead times for stock, determining safety stock levels, assigning effective order quantities, and producing accurate purchase orders.
    • MRP relies on inputs from the master production schedule (MPS).
    • MPS utilizes sales forecasts to identify needed products.

    MRP Vocabulary

    • MRP: Amount and timing of raw materials orders needed to support the master production schedule (MPS).
    • BOM: Recipe of materials needed to make a product.
    • Lead times: Time for suppliers to receive and process orders, and ship to manufacturers.
    • Lot sizing: Production quantities.
    • MPS: Master production schedule.
    • Gross requirements: Raw materials needed for production.
    • Planned orders: Sufficient raw materials for production.

    Just-in-Time (JIT) Systems

    • Ideal for production and manufacturing, maintaining only necessary inventory levels.
    • Materials delivered only as needed to meet production schedules.
    • Uses EDI or internet for placing orders.
    • Continuous replenishments of raw materials help reduce storage costs.
    • Improves supply chain and value chain management.

    Capacity Planning

    • Evaluation of production capacity against production goals through specific information, time-phased plans for products and production areas.
    • Includes production scheduling, allocation of specific facilities, estimations of needed human resources, and integrating product design and development with cost information supporting comparisons of alternatives and reducing expenses.

    Production Planning and Materials Management Modules

    • ERP extends information distribution, supporting materials requirement planning, inventory management, and capacity planning through merging multiple databases.
    • Eliminates paperwork, bottlenecks, decreasing design costs, lead times and personnel costs, and increasing productivity.
    • Sales forecasts are utilized in creating production plans and master production schedules (MPS), determining quantities and dates for finished products, enabling an efficient and detailed material plan while determining when orders are needed and creating work orders sent for production, with ERP systems providing integration.

    Materials Management Modules

    • Manufacturing Execution Systems (MES): Factory floor information and communication systems providing real-time feedback, which can also be integrated with back-end applications.
    • Advanced Planning and Scheduling (APS) systems: Business analysis and support leveraging real-time data for effective decision support.
    • Data Collection which leverages real-time data gathered using mobile phones or internet-enabled devices while allowing automated data collection.

    eBusiness Strategies

    • Facilitates communication through supply chains while integrating B2B communications.
    • Availability of many suppliers, fast and easy information exchange facilitated by internet.
    • eMarketplaces enable aggregation of buyers, which helps in purchasing power enhancement while minimizing costs.
    • Eliminating traditional supply chains and issues, with more efficient management of RFPs.

    Featured Article: What ERP Can Offer ABC

    • Focuses on using manufacturing data in managerial accounting modules within ERP systems to control costs, enhance productivity, and streamline operations. Data integration in ERP systems strengthens managerial decision-making.
    • Further focuses on using ABC data within and activity-based costing system and the advantages of using ERP systems.

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    Description

    This quiz explores ERP systems focusing on production and materials management. It examines the objectives, challenges, and historical evolution of these systems within manufacturing, illustrated through a case study of Atlantic Manufacturing. Understand how integrated processes enhance operational efficiency and address common pitfalls in traditional production systems.

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