ERP Systems: Production & Materials Management
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Questions and Answers

What is a key benefit of integrating ERP systems with activity-based costing systems?

  • It eliminates the requirement for process controls.
  • It simplifies the budgeting process without any formal measures.
  • It improves the accuracy and availability of activity cost driver information. (correct)
  • It reduces the need for direct costs calculation.

How do ERP systems contribute to production planning and materials management?

  • By eliminating the need for JIT systems.
  • By linking production planning directly to organizational sales forecasts.
  • By facilitating communication along the supply chain. (correct)
  • By focusing solely on financial metrics.

What role does activity-based budgeting play in the context of ERP systems?

  • It does not require the collection of nonfinancial measures.
  • It anticipates demand and estimates practical capacity. (correct)
  • It focuses exclusively on financial indicators.
  • It relies only on historical data for planning.

Which of the following is NOT a feature of SAP’s R/3 system related to materials management?

<p>Facilitates uncoordinated inventory tracking. (B)</p> Signup and view all the answers

What is a challenge that activity-based costing systems face according to the content?

<p>Identifying accurate activity cost drivers can be difficult. (A)</p> Signup and view all the answers

Which characteristic of ERP systems contributes to improved process integrity?

<p>They collect nonfinancial measures as drivers through a formal process. (B)</p> Signup and view all the answers

What does activity-based costing allow businesses to do regarding direct costs?

<p>Attribute direct costs to specific products based on accurate drivers. (C)</p> Signup and view all the answers

What aspect of traditional production systems is regarded as a limitation?

<p>Their lack of integration within the organization. (A)</p> Signup and view all the answers

What is the primary goal of a manufacturing execution system (MES)?

<p>To provide production-focused real-time feedback (C)</p> Signup and view all the answers

What is a disadvantage of traditional production systems addressed by ERP systems?

<p>Inaccurate forecasting leading to excess inventory (D)</p> Signup and view all the answers

Which of the following processes is NOT part of Material Resource Planning (MRP)?

<p>Developing marketing strategies (A)</p> Signup and view all the answers

Which component does the Materials Management System NOT directly support?

<p>Human resources scheduling (B)</p> Signup and view all the answers

What is a major benefit of Just-in-Time (JIT) systems?

<p>Eliminating storage costs (C)</p> Signup and view all the answers

What does capacity planning primarily evaluate?

<p>Production goals against production capacity (C)</p> Signup and view all the answers

Which factor is essential for accurate production planning?

<p>Sales forecasts (B)</p> Signup and view all the answers

What does the acronym APS stand for in the context of materials management?

<p>Advanced Planning and Scheduling (B)</p> Signup and view all the answers

How does ERP enhance materials management efficiency?

<p>By integrating various databases and eliminating bottlenecks (C)</p> Signup and view all the answers

Which of these is NOT a function of the production planning system?

<p>Predicting market trends (C)</p> Signup and view all the answers

What role does collaborative demand management play in ERP systems?

<p>Aligning production plans with actual customer demand (D)</p> Signup and view all the answers

Which is a challenge faced by Atlantic Manufacturing as mentioned?

<p>Timeliness of change specifications (D)</p> Signup and view all the answers

In the context of ERP, what does demand management fundamentally address?

<p>Determining quantities and timings for production (D)</p> Signup and view all the answers

What aspect is prioritized in accurate production scheduling?

<p>Allocating specific facilities related to production (D)</p> Signup and view all the answers

Activity-based costing systems always rely on financial measures for accuracy.

<p>False (B)</p> Signup and view all the answers

ERP systems improve the reliability of cost driver information by integrating multiple systems.

<p>True (A)</p> Signup and view all the answers

The number of pallet moves is considered an indirect cost driver in materials handling.

<p>False (B)</p> Signup and view all the answers

Activity-based budgeting is solely focused on historical data from previous processes.

<p>False (B)</p> Signup and view all the answers

Traditional production systems typically provide a high level of integration within an organization.

<p>False (B)</p> Signup and view all the answers

ERP systems do not enhance communications along the supply chain.

<p>False (B)</p> Signup and view all the answers

Nonfinancial measures used as drivers in ERP systems are collected through a formal process.

<p>True (A)</p> Signup and view all the answers

Direct costs in activity-based costing can be calculated as part of overhead costs.

<p>False (B)</p> Signup and view all the answers

SAP’s R/3 system integrates production planning solely without links to material management.

<p>False (B)</p> Signup and view all the answers

The primary goal of activity-based budgeting is to reduce labor costs at any expense.

<p>False (B)</p> Signup and view all the answers

The primary objective of Just-in-Time systems is to maintain excess inventory levels.

<p>False (B)</p> Signup and view all the answers

The main advantage of integrating ERP systems is to increase lead times during production.

<p>False (B)</p> Signup and view all the answers

Material Resource Planning (MRP) utilizes estimated production goals to dictate when materials should be ordered.

<p>False (B)</p> Signup and view all the answers

In the 1960s through the 1980s, production systems were primarily focused on low-volume production of many products.

<p>False (B)</p> Signup and view all the answers

One of the problems with traditional production systems is the lack of integration between sales and production divisions.

<p>True (A)</p> Signup and view all the answers

Quality control in production systems only involves monitoring finished products and does not include incoming materials.

<p>False (B)</p> Signup and view all the answers

ERP systems enhance productivity by eliminating paperwork and bottlenecks in production processes.

<p>True (A)</p> Signup and view all the answers

Capacity planning simply estimates the amount of raw materials needed for production without considering production goals.

<p>False (B)</p> Signup and view all the answers

The main role of Material Management Systems is to solely track finished products.

<p>False (B)</p> Signup and view all the answers

Data collection systems within ERP support operational-level processes by providing real-time information.

<p>True (A)</p> Signup and view all the answers

Flashcards

ERP Production Management

ERP component managing the production process, connecting it to sales and inventory.

Materials Management in ERP

ERP component overseeing the acquisition and use of materials; links to purchasing, receiving, and quality control.

Traditional Production Systems Problem

Lack of integration between departments (sales, production, etc.) leads to incorrect forecasts, inventory issues, and financial problems.

Production Planning Objectives

Creating production schedules, acquiring materials, scheduling resources, designing and producing products at the right quality and quantity.

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Material Requirements Planning (MRP)

A process that uses sales forecasts to determine the materials needed to produce products.

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Just-in-Time (JIT) Systems

A production method that aims to only have necessary inventory and materials delivered only when needed.

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Capacity Planning

Assessing production capability to meet goals and create time-phased plans for products and production areas.

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ERP Integration Impact

ERP systems improve production planning, inventory management, and capacity planning by integrating data and processes across the organization.

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Manufacturing Execution Systems (MES)

Factory floor information systems providing real-time feedback in production.

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eBusiness Strategies in Production

Utilizing e-commerce and the internet to facilitate communication throughout the supply chain.

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ERP systems and Activity-Based Costing

ERP systems improve the availability and reliability of activity cost driver information, enabling better integration of various systems.

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Activity-Based Costing Systems

Activity-based costing systems need the correct activity cost driver, but are often not controlled or supported by established accounting systems.

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Activity Cost Driver

A factor that drives or influences the cost of an activity, like the number of pallet moves.

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SAP R/3 system

ERP system linking production planning and materials management, establishing standards, treating materials handling as a process.

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Activity-Based Budgeting

Budgeting method anticipating demand on processes, estimating capacity, and direct costs.

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Traditional Production Systems

Lack integration within an organization, and usually lack coordination with manufacturing at the operational level.

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ERP System Purpose

ERP systems integrate production planning and materials management, supporting better communication and e-business opportunities along supply chains.

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Data Integration (in Management Decision Making)

Data integration supports managerial decision-making by providing a holistic view of business operations and facilitating better forecasting, planning, and problem-solving.

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ERP Production Management

ERP component linking production to sales and inventory.

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Materials Management

Managing materials – getting them, using them, and checking quality.

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Traditional Production Problems

Lack of integration causes poor forecasts, inventory issues, and financial problems.

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Production Planning Goals

Making plans for production, acquiring materials, and scheduling resources.

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Material Requirements Planning (MRP)

Planning materials needed based on sales forecasts.

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Just-in-Time (JIT) Systems

Producing only what's needed, when needed, with minimal inventory.

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Capacity Planning

Evaluating production capability to meet goals.

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ERP Integration Benefits

ERP improves planning, inventory, and capacity by linking processes.

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Manufacturing Execution Systems (MES)

Factory floor systems providing real-time feedback.

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E-business in Production

Using the internet to improve supply chain communication.

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ERP & Activity-Based Costing

ERP systems improve the accessibility and dependability of activity cost driver information, enabling better integration of various systems.

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Activity-Based Costing Systems

Systems needing the correct activity cost driver, but often not well-supported by existing accounting systems.

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Activity Cost Driver

A factor influencing the cost of an activity, like the number of pallet moves.

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SAP R/3 System

An ERP system linking production planning and materials management, allowing the establishment of standards and treating materials handling as a process.

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Activity-Based Budgeting

A budgeting method anticipating demand on processes, estimating capacity and direct costs.

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Traditional Production Systems Problem

A lack of integration between an organization's departments (sales, production) leads to poor forecasts, inventory issues, and problems tracking financial data.

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ERP System Benefits

ERP systems integrate production planning and materials management, enabling improved communication and e-business opportunities in supply chains.

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Data Integration Impact

Data integration provides a holistic view of business operations, facilitating better decision making through better forecasting, planning, and problem-solving during managerial decision-making.

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Study Notes

Enterprise Resource Planning (ERP) Systems: Production and Materials Management

  • ERP systems integrate production and materials management processes.
  • The objectives of this chapter are to examine production and materials management within ERP systems, and to understand how they work together.
  • Atlantic Manufacturing faced issues like inconsistent raw materials and finished products, late change specifications, long lead times, and inadequate information sharing between divisions. This highlighted the weaknesses of traditional production systems.
  • Manufacturing systems evolved from re-order inventory models in the past to high-volume production then dynamic, flexible production models. Mainframe-based databases helped production of new products to meet customer needs, as well as enabling flexible production capabilities.

Problems with Traditional Production Systems

  • Lack of integration between divisions in an organization's production processes.
  • Production disconnected from sales, resulting in incorrect inventory levels and inaccurate purchasing decisions.
  • Inconsistent production forecasts lead to shortages or excess raw materials, and excess finished products or shortages.
  • Excess inventories negatively impacted cash flow and profitability.

Production Systems Objectives

  • Create production plans.
  • Acquire raw materials.
  • Schedule equipment, facilities, and human resources appropriately.
  • Design products.
  • Produce goods with appropriate quantities and quality levels.

Production Planning and Manufacturing Processes (Operational Level)

  • Daily activities encompass purchasing the correct quantity of raw materials and supplies, receiving and inspecting deliveries, quality control (monitoring quality and unacceptable deliveries), and inventory management.

Information Systems Support

  • Production planning and manufacturing processes are supported by data collection systems, material management systems, bill of materials (BOM) systems, inventory management systems, and cost accounting systems.

Material Resource Planning (MRP) Processes

  • Identifying stock needed.
  • Calculating lead time for stock.
  • Determining safety stock levels.
  • Assigning most cost-effective order quantities.
  • Producing accurate purchase orders.
  • MRP inputs come from the Master Production Schedule (MPS).
  • MPS identifies needed products based on sales forecasts.

MRP Vocabulary (Table 6-3)

  • MRP: Amount and timing of raw material orders to fulfill the Master Production Schedule (MPS).
  • BOM: Recipe of materials needed to make a product.
  • Lead times: Time for supplier to receive, process, and ship order to manufacturer.
  • 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 production and manufacturing situation, with only necessary inventory levels.
  • Supplies delivered just as needed to meet production schedule.
  • Continuous replenishment of raw materials, through EDI or Internet.
  • Reduces storage costs and space for pre- and post-production.
  • Improves supply chain and value chain management.

Capacity Planning

  • Evaluating production capacity against production goals, requiring specific information.
  • Creating time-phased plans for product and production area.
  • Scheduling and allocation of specific facilities, and estimating human resources needed.
  • Integrating product design and development with cost information for comparison of alternatives.

ERP Production Planning and Materials Management Modules

  • Extends information distribution supporting materials requirements planning, inventory management, and capacity planning.
  • Merges multiple databases eliminating paperwork, decreasing costs and lead times, and boosting productivity.
  • Develops production plans using sales forecasts.
  • Determines quantities and dates for finished products using MPS and demand management.
  • Provides efficient material plans, determining when and what needs ordering, and creates work orders sent to production.
  • Provides complete integration support.

Materials Management Modules

  • MES (Manufacturing Execution Systems): Factory floor information and communication systems providing real-time feedback.
  • APS (Advanced Planning and Scheduling Systems): Supports business analysis, decision support, and leverage of real-time data for decision making via mobile phones and Internet-enabled devices.

eBusiness Strategies

  • Facilitates communication along the supply chain using B2B methods.
  • Enables easy exchange of information using the internet, enabling many suppliers.
  • eMarketplaces allow aggregation of buyers improving purchasing power.
  • Reduces costs and eliminates traditional supply chain problems.

ERP and Activity-Based Costing (ABC)

  • ERP systems help use manufacturing data in managerial accounting modules to control costs maximizing productivity.
  • Data integration supports managerial decision making using ABC.
  • Activity-based costing systems need correct activity cost drivers and non-financial measures.
  • ERP systems improve availability, reliability, and integration of multiple systems enabling accurate activity cost driver determination; direct costs determined instead of overhead.
  • SAP's R/3 system effectively links production planning with materials management, allows standards establishment, and attributes materials handling process to specific products.
  • ERP systems support activity-based budgeting estimating and anticipating demand, capacity, and materials and direct costs; can be used to improve processes, determine adjustments, and collect nonfinancial measures for use as drivers using formal processes with built-in controls for reliability and integrity.

Summary

  • Traditional production systems lack integration.
  • Most production planning is uncoordinated at operational levels.
  • ERP systems enable material resource planning, JIT, and capacity planning.
  • ERP facilitates communication along the supply chain and e-business functions, and improves operations overall.

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This quiz explores the integration of production and materials management within ERP systems. It covers the evolution of manufacturing systems and highlights issues faced by traditional production methods. Understand how ERP systems can address these challenges and improve organizational efficiency.

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