Electronic Commerce

Semester 2 Term 2 Lecture 29

Manufacturing Resource Planning

• MRP systems contain functions for planning production and purchase orders using basic planning rules to project capacity and material requirements for a specific job

• MRP is based on the assumption that orders would be collected, grouped together and subsequently organised into efficient production runs called the weekly master production schedule

Enterprise Resource Planning• With the increasing push toward customise manufacturing,

the need for flexibility was not addressed adequately by existing MRP systems

• Thus the desire to replace MRP systems with ERP arose• ERP is strong in support of multiple plants, multiple

suppliers and multiple currencies and it will schedule an entire multisite, global organisation, including such functions as plant management, inventory control, and order processing

• These processes are increasingly integrated with other applications such as HR, distribution and accounts receivable

Manufacturing Execution Systems (MES)

• These are factory floor performance monitoring systems that complement that planning systems

• They allow companies to track, monitor and control the five essential elements of production: materials, equipment, personnel, work instructions, and facilities

• Drucker believes MES systems are necessary because traditional cost accounting measures only the cost of producing and ignores the cost of not producing whether the result of machine downtime or quality defects that require scrapping or reworking a product

The Future: Integrated Systems

• The challenge for the future (and why Intranets are useful) lies in integrating the three elements in a single framework:– Resource planning: the MRP, ERP and cost

accounting systems– Manufacturing execution: the factory-level

coordinating and tracking systems– Distributed control: the factory floor devices

and process control systems

Why is a Single Framework Necessary?

• For many years individual plants of large manufacturers or multinationals operated with a high degree of independence

• Each plant might run different factory management software, employ different practices for scheduling and quality control, and even use different terminology and measurements for calculating yields, and monitoring key performance indicators – rework rates, customer service, unit cost and lead times

• As a result, it was difficult to benchmark or compare plants, transfer products and/or processes, or ascertain and transfer best practice

Intranet-Based Manufacturing

• To maintain a competitive advantage in today’s global marketplace, an Intranet-based software solution must take a more contemporary and innovative approach to addressing today’s manufacturing issues

• A new generation of manufacturing systems should embody three critical concepts into the standard system design:– Customer/demand-driven manufacturing– Real-time decision support and advanced planning and

scheduling– Intelligent process management – proactive notification and

event-driven problem solving

Customer Driven Manufacturing

• Inevitably, information systems must address the changes in focus from factory management to demand management

• New systems must address changing core concepts in manufacturing, such as cycle time reductions that have been addressed by a number of new methods, including JIT and flow manufacturing

Real-Time Decision Support

• Traditional MRP/ERP systems rely on cumbersome, time-consuming batch processing

• They are based on single source optimisation (I.e. material capacity) that is performed in a linear fashion

• These work in the batch mode because of the volumes of data required, and can be run during off-hours, typically weekly

• However, between the last batch run and the next scheduled run, the plant is operating with outdated and, in some cases, inaccurate information

Intelligent Process Management

• All business applications include some administrative workflow elements e.g. anything that required approvals such as purchase requisitions; review of lot expirations, materials shortages and cost variances and sequenced production activity that involves movement from one operation to the next, purchase requisitions to suppliers, and distribution

• Workflow technology targets these types of tasks can also be used for proactive notification e.g. in the case of credit problems