Enterprise Resource Planning

Transcription

1 Enterprise Resource Planning MPC 6 th Eition Chapter 1a McGraw-Hill/Irwin Copyright 2011 by The McGraw-Hill Companies, Inc. All rights reserve.

2 Enterprise Resource Planning A comprehensive software approach to support ecisions concurrent with planning an controlling the business. ERP systems are, first an foremost, integrate. 1a-2

3 Agena What is ERP? Connecting functional units with ERP The nee for stanarization Support of MPC ecisions Transaction processing Performance metrics The ERP experience 1a-3

4 What is ERP? ERP software is l Multifunctional l Integrate l Moular l Able to facilitate MPC activities 1a-4

5 Multifunctional The ability to track financial performance in monetary terms ($, ) Can track purchasing activity in material units (pouns, kilos, tons) Follows sales in terms of proucts or services Reports manufacturing activity in terms of proucts, resources, or people 1a-5

6 ERP Scope Enterprise resource planning Manufacturing an logistics Manufacturing planning an control Sales an operations planning (front en) Material an capacity planning (engine) Material an venor management (back en) Enterprise planning moels Enterprise performance measures Data warehousing Report generation Transaction processing Human resource management Finance Sales an marketing 1a-6

7 Integrate Data entere by one functional area upates all other functional areas Eliminates reposting of ata (errors) Ensures a common vision 1a-7

8 Moular Functional units (finance, sales, manufacturing, etc.) are narrowly focuse Functional units can be combine to create a single system Software from other sources can be connecte as well 1a-8

9 Forecasting Prouction planning MPC Activity Support Material planning Inventory management 1a-9

10 Process Stanarization Without stanar terminology, integration is impossible l What is eman? l What is inventory? l How are exchange rates etermine? l What transfer costs apply (for internal transactions)? l What labor rates are applie? 1a-10

11 Decision Support Helping users make ecisions about running the business l People make the ecisions, software provies them with better tools an information 1a-11

12 Transaction Processing An ERP system is esigne to process business transactions in real time, working from a single atabase Data warehouse software may be ae to facilitate queries not built into the ERP system 1a-12

13 Performance Metrics Functional Silos Each area is responsible for optimizing its own operation, with no consieration for how the overall firm is affecte Purchasing pursues cost rather than quality Manufacturing buils long runs rather than responing to customers Distribution focuses on cost of elivery stages instea of total system costs 1a-13

14 Integrate Supply Chain Metrics Develope by the Supply Chain Council Designe to measure the impact of ecisions on the entire supply chain Avois evelopment of functional silos by eveloping metrics that reflect the entire supply chain 1a-14

15 Supply Chain Metrics Source: Supply Chain Council Measure Description Best-in- Class Delivery performance Fill rate by line item Perfect orer fulfillment Orer fulfillment lea time Percentage of orers shippe accoring to scheule 93% 69% Percentage of actual line items fille 97% 88% Average Complete orers shippe on time 92.4% 65.7% Time from when an orer is place until it is receive by the customer 135 ays 225 ays Warranty cost Warranty expenses as a % of revenue 1.2% 2.4% Inventory Days of supply hel in inventory 55 ays 84 ays Cash-to-cash cycle time Asset turns Time require to turn cash use to purchase raw materials into cash receive from customers Measure of how many times per year assets are use to generate revenue 35.6 ays 99.4 ays 4.7 turns 1.7 turns 1a-15

16 Cash-to-Cash Cycle Time Integrates the finance function with purchasing, manufacturing, an sales/ istribution Cash-to-cash cycle time = Inventory ays of supply + Days of sales outstaning Average payment perio for material Procurement cycle Manufacturing cycle Sales an istribution cycle Purchase cost of material Accounts payable Raw materials inventory Work-in-process Finishe goos inventory Distribution inventory Accounts receivable 1a-16

17 ERP View of Cash-to-Cash Time ERP atabase Purchasing Accounts payable Manufacturing Inventory Cost of sales Cash-to-cash cycle time Sales an istribution Sales Accounts receivable 1a-17

18 Calculating Cash-to-Cash Time Average aily sales (S ) Accounts receivable ays (AR ) S = S AR = AR S Average aily cost of sales (C ) C = S CS Average ays of inventory (I ) I = I C Accounts payable cycle time (AP ) AP = AP C Cash-to-cash cycle time Cash to cash cycle time = AR + I AP 1a-18

19 Cash-to-Cash Example Sales over last 30 ays = $1,020,000 Accounts receivable = $200,000 Inventory value = $400,000 Cost of sales = 60% of total sales Accounts payable = $160,000 Cash to cash cycle time S = S = AR = AR S = C I = S CS I C 1,020, , = 34,000(0.6) = 400,000 = 34,000 = = = ,400 = 5.88 ays 20,400 ays AP 160,000 AP = = = 7. ays C 20, = AR + I AP = = ays 1a-19

20 The ERP Experience Eli Lilly an Company l Integration of a global company l Process improvement l Simplifie training l Strategic irection l Organizational flexibility l Set of global policies 1a-20

21 Concluing Principles Reunant transactions must be reuce or eliminate. To maintain ata accuracy an realize efficiencies, information must be capture at the initial entry, using ocumente processes. Processes nee to be change to support the ata nees of the ERP system harware an software alone isn t sufficient. 1a-21

22 Concluing Principles The company must efine a comprehensive set of performance measures, with policies an goals that correspon to these measures. IT economies of scale can be obtaine from supporting fewer harware an software platforms. 1a-22

23 Quiz Chapter 1a To free the ERP system for basic applications, a is often use to capture, manage, an analyze ata. For a firm with average aily sales (S ) of $200,000, current inventory (I) of $1,000,000, an cost of sales (CS) of 50%, what is the average ays of inventory (I )? Which of the following actions woul be likely to increase the cash-to-cycle time for a firm? Increasing the cost, but not the price, of the prouct Taking avantage of early pay iscounts with suppliers Revaluing inventory to reflect reuctions in purchasing prices 1a-23