MRP, ERP och JIT. Styrningsnivåer. Johann Packendorff. The development of ERP. Increasing impact on the whole supply

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1 MRP, ERP och JIT Johann Packendorff Styrningsnivåer The development of ERP Increasing impact on the whole supply network Manufacturing Resource Planning (MRPII) Material Requirements Planning (MRP) Web-integrated Enterprise Resource Planning (Collaborative Commerce, c-commerce) Enterprise Resource Planning (ERP) Increasing integration of information systems 1

2 MRP: Materialplanering, 70-tal, datorisering MRPII: Systemintegrering, 80-tal The meaning of MRP Supply of products and services The operation s resources MRP Deciding the volume and timing of materials flow in dependent conditions Demand for products and services The operation s customers Total future is made up of known and forecast Total Demand Forecast element of Known orders Time in future 2

3 The process of MRP1 Explode the master production schedule. Identify what parts and assemblies are required. Check whether the required parts and assemblies are available. For every part or assembly that is required, but not available, identify when work needs to be started for it to be made available by its due date Generate the appropriate works and purchase orders. Repeat the process for the next level of the bill of materials. Master production schedule (MPS) Forecast Sister plant R & D Promotion requirements etc. Known orders Master production schedule Key capacity constraints Spares Safety stock requirements Inventory levels Material requirements planning (MRP) Customer orders Master production schedule Forecast Bill of materials Material requirements planning Inventory records Purchase orders Materials plans Works orders 3

4 Closed-loop MRP We wish to make 300 units per month. Materials plans Production plan realistic? Capacity plans Resource Can we make requirements 300 units per plan month? We wish to make 7 units for day 35. Master production schedule realistic? Can wemake 7 Rough-cut units for day capacity plan 35? Therefore we will need to make 5 box assemblies for week 35. Materials plans realistic? Capacity Can we make 5 requirements box assemblies plan for week 35? The concept of MRP II Marketing Finance Central database Design Operations Case: TrailerTech Since 1985, TrailerTech Inc. has provided the agriculture, construction and transportation industries with state-of-the-art trailer equipment. Manufacturing approximately 2,500 units a year, TrailTech s 90 employees were experiencing growing pains. BOM inaccuracies created - inventory discrepancies - material shortages - manufacturing bottlenecks, - missed delivery dates - substandard productivity - employee frustration over BOM inaccuracies 4

5 Previous manufacturing software did not provide TrailerTech s engineers with an efficient method to create BOMs, resulting in engineering short cuts. Inaccurately engineered BOMs negatively affected the entire manufacturing process. Inventory inaccuracy due to bad BOMs led to material shortages and panic purchasing. Inefficient use of machinery caused unnecessary shop floor bottlenecks. Finished goods were not coming off the production line on time, creating consistent delinquent delivery dates. Resulting financial statements did not accurately reflect a true picture of the company. As the company grew, without an adequate business system, TrailerTech s problems were growing with them. After three months of system evaluation the selection committee opted for Intuitive s 100 percent Microsoft technology-based solution. The fully integrated functionality along with the layout of the user interface assured TrailerTech of a quick and easy learning curve. A diligent reference review provided additional assurance of system reliability and support. It was imperative for TrailerTech to implement a system capable of accurate and timely BOM creation. With accurate BOM information available, dramatic improvements in inventory levels and production on the shop floor were possible. After implementing Intuitive ERP, TrailerTech immediately enjoyed a reduction in the manufacturing cycle. The ERP provided TrailerTech s engineers with the ability to create BOMs quickly and accurately. This allowed TrailerTech to install an orderly release of work orders to the shop floor, making production more consistent. Within a month we could see considerable improvements on shop floor flow, said Gerald Geoffrion, TrailTech s general manager. The production bottlenecks of the past have been eliminated. TrailTech s delivery dates are now shorter and more reliable. Our book-to-bill cycle, based on a constant order book value, has been reduced by 30 percent, said Geoffrion. ERP has given us the tools to improve shop floor efficiency to that extent. Additionally, customer complaints of delinquent deliveries have been dramatically reduced, improving stress levels throughout the plant. Improved inventory accuracy resulted in reduced inventory shortages and the elimination of panic purchasing. Financial Statements now reflect a more accurate view of sales growth and the resulting bottom-line improvement. 5

6 We were experiencing a lot of frustration prior to implementation. Delivery promises to our customers were not being met. This created a tense work environment, said Geoffrion. All of our customers appreciate the increased reliability of delivery dates. Employee morale has improved. Stress levels throughout the plant are much lower. The impact has also been felt at the higher levels of the organization. Senior management is appreciative of the stability of production, the reliability of delivery dates and the increased accuracy of the financials, said Geoffrion. They often comment that the operation now runs itself. In addition to the operational benefits, Geoffrion states that the reports that the system can generate are excellent. The ease at which queries can be created and converted into Pivot tables or OLAP cubes is also a great feature. Now, TrailerTech can focus on enabling new business and growth strategies. TrailTech is now in the process of beginning a lean initiative in the plant, explained Geoffrion. Without the information and structure that ERP provides us, this would be almost impossible to do. ERP integrates several systems Senior management and stakeholders Suppliers Back-office staff Financial Operations Purchasing and supply HRM Employees Strategic reporting Sales and marketing Integrated database Delivery and logistics Service Front-office staff Customers A Simple Example of ERP Flow Order Payroll Inventory? Order Parts Customer Pick Up Make more Sales Statistics Billing Commission Customer Pays Financial Reports 6

7 SAP Oracle Applications PeopleSoft Baan JD Edwards Seibel Systems ERPs Why Implement an ERP? New technology Cost savings Reengineering -- automate tasks Competitive edge Accounting & control The Truth about ERPs Complex Expensive Require a team Consulting Opportunities 7

8 MRP and the introduction of JIT strategies Just-in-time (JIT) Begrepp som utvecklades på Toyota Fokuserade initialt på JIT inom själva produktionen, dvs rätt material på rätt plats vid rätt tid (varken tidigare eller senare). Lagerhållning i olika steg skulle elimineras Senare JIT utvidgning av tänkandet till hela Supply Chains Traditional approach: JIT material flow stage A buffer inventory stage B buffer inventory stage C JIT approach: orders orders stage A stage B stage C deliveries deliveries 8

9 JIT approach focus on producing only when needed traditional approach focus on high capacity utilization more stoppages because of problems more production at each stage high inventory means less chance of problems being exposed and solved extra production goes into inventory because of continuing stoppages at stages lower capacity utilization, but no surplus production goes into inventory fewer stoppages low inventory so problems are exposed and solved JIT and capacity utilization The basic working practices of JIT discipline and standards flexibility of working practices equality of conditions basic working practices creativity quality of working life development of personnel autonomy to intervene Scheduling In conventional planning, and production quantities / timing are often different, resulting in idle inventory and lumpy JIT PULL SCHEDULING: couples usage and production allows local planning / control simplifies communication (e.g. Kanban) emphasis: make only as needed simplicity 9

10 Visible, enforced improvement Traditional production systems often accept waste and use the insurance of all types of inventory. In JIT systems: gradual reduction of inventory identify exposed problems eliminate these problems repeat the cycle emphasis: small step continuous improvement expose waste and eliminate it JIT purchasing In conventional businesses, vendors are often viewed as adversaries, not to be trusted. Buyers prefer several competing vendors to drive down purchase prices JIT businesses recognise that: purchase price is not the only cost suppliers can be valuable partners by: helping to design products eliminating uncertainties of quality and delivery eliminating overheads (e.g. paperwork) local suppliers reduce purchasing costs emphasis: positive relationships mutual benefits supplier development JIT and MRP - splitting the BOM master production schedule bill of materials for common parts bill of materials for options parts rate-based weekly requirements time-phased volume-based weekly requirements schedules supplier s schedules schedules Kanban cards Jfr volymvärdeanalys! batch schedules 10

11 JIT and MRP - control MRP Control simplified bill of materials master production schedule materials requirement planning orders management system factory assembly schedule purchasing Kanban control vendors goods in cell 1 cell 2 cell 3 final assembly How JIT and MRP can coexist High MRP JIT + MRP Level of control Low Job-based techniques Low JIT Volume Governed by integrated technology High High Variety Low JIT, MRP, or both? complex structures PERT JIT MRP MRP simple structures JIT simple routings complex routings 11

12 Transformation towards the JIT approach - summary basic strategy - how do we compete? basic disciplines - attitudes, housekeeping, quality standards process control; supplier quality eliminate waste; JIT techniques, supplier involvement eliminate errors at source - error proofing (Poka-Yoke); automatic monitoring. 12

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