Chase - Shankar - Jacobs
Chase - Shankar - Jacobs
Chase - Shankar - Jacobs
Operations and
Supply Chain
Management
CHASE | SHANKAR | JACOBS
17–1
ENTERPRISE
RESOURCE
PLANNING
SYSTEMS
Chapter Seventeen
McGraw-Hill/Irwin Copyright © 2014 by The McGraw-Hill Companies, Inc. All rights reserved.
17–2
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Learning Objectives
• LO17–1: Understand what an enterprise resource planning
(ERP) system is.
17–4
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Agenda
What is ERP?
Transaction processing
Performance metrics
17–6
ERP Vendors
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
17–7
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
What is Required for ERP?
• ERP requires
– Consistent numbers across all applications
– Software should be:
Multifunctional (manufacturing, service, etc.)
Integrated (handled only once across all applications)
Modular
Able to facilitate MPC activities
– Routine decision making
– Capacity for all transaction processing
17–8
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
ERP and Decision Support
• ERP software
– Supports analysis of data for decision support
– Helps make intelligent decisions
– Note: People make decisions not software
• Bolt-on software modifies and enables new
approaches to decision making
• Modifies existing procedures to make it more
efficient
17–9
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Decision Support
• Helping users make decisions about
running the business
– People make the decisions; software
provides them with better tools and
information.
17–10
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Transaction Processing
• An ERP system is designed to process
business transactions in real time, working
from a single database.
17–11
ERP Scope
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
17–12
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
What is Data Integration?
Data entered by one functional area updates all other functional areas and the
data are processed in real time.
17–13
Forecasting
Forecasting
Material
Material
planning
planning
Support
MPC Activity
MPC Activity Support
management
manageme
Inventory
Inventory
planning
planning
Production
Production
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
17–14
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Process Standardization
• Without standard terminology, integration is
impossible.
– What is demand?
– What is inventory?
– How are exchange rates determined?
– What transfer costs apply (for internal
transactions)?
– What labor rates are applied?
17–15
Integrated Supply Chain
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Metrics
• Developed by the Supply Chain Council.
17–16
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Cash-to-Cash Cycle Time
• Integrates the finance function with
purchasing, manufacturing, and
sales/distribution
Cash-to-cash cycle time = Inventory days of supply + Days of sales
outstanding – Average payment period for material
17–18
Supply Chain Metrics
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
17–19
Time
ERP View of Cash-to-Cash
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
17–20
Calculating Cash-to-Cash
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Time
S
Average daily sales (Sd) Sd
d
AR
Accounts receivable days (ARd) ARd
d
I
Average days of inventory (Id) Id
Cd
17-21
17–21
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Cash-to-Cash Example
• Sales over last 30 days = $1,020,000 S 1,020,000
Sd 34,000
d 30
Cash to cash cycle time ARd I d APd 5.88 19.6 7.84 17.64 days
17-22
17–22
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
The ERP Experience
• Eli Lilly and Company
– Integration of a global company
– Process improvement
– Simplified training
– Strategic direction
– Organizational flexibility
– Set of global policies
17–23
Copyright © 2014 by McGraw Hill Education (India) Private Limited. All rights reserved.
Concluding Principles
• Redundant transactions must be reduced or eliminated.
17–25