ERP Systems in Production Management

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.

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.