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M0254 - ERP (Enterprise Resources Planning)
Session 6 - Production and Operation Information System

Production and Materials Management
Planning
Need accurate forecasts from Marketing and Sales
Compare costs with Accounting


Learning Objectives
Describe steps in the production planning process of a high volume manufacturer like Fitter Snacker
Describe Fitter Snacker’s production and materials management problems
Describe how a structured process for production and materials management planning enhances efficiency and decision making
Describe how production planning data in an ERP system can be shared with suppliers to increase supply-chain efficiency
Production and Materials Management at Fitter Snacker
Must answer the following questions:
How much of each bar should be produced?
What quantities of raw materials should be ordered?
When should raw materials be ordered
General Approaches to Production
Make-to-stock: Items produced in anticipation of orders
Make-to-order: Items produced to meet specific customer orders
Assemble to order: Final product assembled from make-to-stock items
Fitter Snacker Manufacturing Process
Fitter Snacker Production Problems
Communications
Marketing does not share data with production (sales promotions and large, unexpected orders)
Inventory
True inventory status not known
No real-time data on actual sales
Accounting and Purchasing
Difficulty forecasting raw material and labor costs
Adjusting accounts for actual vs. standard costs time consuming and done infrequently
Production Planning Process
Work from sales forecast to create aggregate production plan
Break down aggregate plan into more specific plans
Use production plan to determine raw material requirements
ERP Approach to Production Planning



Sales and Operations Planning in ERP
Sales and Operations Planning
Sales and Operations Planning
Sales and Operations Planning

Demand Management
Demand Management
Calculation for Week 5

MRP
Bill of Material
MRP
MRP Record
MRP List in ERP
Stock Requirements List in ERP
Detailed Production Scheduling
Snack bar production line is bottleneck
Scheduling of production line is key to determining detailed production schedule
Detailed Production Scheduling
Length of production runs
Longer runs reduces cost of setups
Longer runs increase capacity utilization
Shorter runs reduces cost of inventory

Providing Production Data to Accounting
Production data does not get entered into an ERP system directly
Many methods of gathering shop floor data are available
ERP allows shop floor data to be collected once for production and accounting purposes, and data is consistent in both areas
ERP in Supply Chain Management
Supply Chain Management and ERP
ERP not required for Supply Chain Management (SCM)
ERP can facilitate sharing information in real time
Use of internet can reduce communication costs
Supply Chain Metrics
Total Supply Chain
Cash-to-cash cycle time: Time from paying for raw materials to the time when cash is collected from the customer
Total supply chain costs

Supply Chain Metrics
Buyer-Supplier
Initial fill rate
Initial-order lead-time
On-time performance

Chapter Summary
An ERP system can improve the efficiency of the production and purchasing processes. Efficiency begins with Marketing sharing sales forecasts with Production, which shares its production plans with Purchasing

Chapter Summary continued
Production planning can be done without an ERP system, but and ERP system allows production to be linked to Purchasing and Accounting. This data sharing increases a company’s overall efficiency
Chapter Summary continued
Companies are building on their ERP systems to practice supply chain management. In doing this, the company looks at itself as part of a large process that includes customers and suppliers. Using information more efficiently along the supply chain can significantly reduce costs.