ERP
Content
1
Manufacturing IT Systems
Backbone- an ERP
State of The Art and Future Roadmap
What is an ERP?
2
(Enterprise Resource Planning) An integrated information
system that serves all departments within an enterprise
Integrated :
uses a common database e.g. same customer master in
finance & sales
Real time updates e.g. goods receiving updates inventory
automatically
All Departments
Procurement, stores, production, distribution, sales,
costing , finance, marketing
Enterprise Resources Planning Evolution
3
SCM
BPR
MRP
MRP II
ERP
IT
Goal: link information across entire enterprise:
• Manufacturing
• Distribution
• Accounting
• Personnel
4
Potential Benefits of ERP
Better operational efficiencies through Improved
planning
Faster decision making through real time
information
Better cross functional collaboration
Introduction of best practices brings in business
improvements
How are the benefits achieved?
5
• Integration leads to real time
information
• Standardization brings in efficiency
• One-source data removes redundancies
• Best practices improve operations
Best Practices: Planning Hierarchy
6
Long
Term
Demand
Forecast
Resource
Planning
Aggregate Production
Planning
Rough-cut Capacity
Planning
Master Production
Scheduling
Bills of
Material
Inventory
Status
Short
Term
Medium
Term
Material Requirements
Planning
Job
Pool
Job
Release
Job
Dispatching
Capacity Requirements
Planning
Routing
Data
Best Practices: Medium Term Planning
7
Master Production
Scheduling
• MPS drives MRP
• accurate in near term (firm
orders)
• May be inaccurate in long
term (forecasts)
• Software supports
• forecasting
• order entry
• netting against inventory
Rough Cut Capacity
planning
Material Requirement
Planning
• Quick check on capacity of
key resources
• Use Bill of Resource (BOR)
for each item in MPS
• Generates usage of
resources by exploding
MPS against BOR (offset by
lead-times)
• Infeasibilities addressed by
altering MPS or adding
capacity (e.g., overtime)
• Software supports
• BOR
• Resource usage plan
• Develop a product structure
• Build a gross requirements
plan
• Build a net requirements
plan
• Determine lot sizes for lotfor-lot, EOQ, and PPB
• Software supports
• Product structures
• Inventory records
• Order sizing
• BOM explosion
Best Practices: Short Term Planning
8
Capacity Requirement Planning
• Uses routing data (work centers and times)
for all items
• Explodes orders against routing information
• Generates usage profile of all work centers
• Identifies overload conditions
• Software supports
• Routing
• Work center
• Set up time & run time of operations
Production Activity Control
• Sometimes called “shop floor control”
• Provides routing/standard time information
• Sets planned start times
• Can be used for prioritizing/expediting
• Software supports
• compare planned with actual throughput.
• Work center scheduling
Best Practices: Short Term Planning
9
Stock Requirements Post MRP Run in SAP
10
RCCP in SAP
11
Multi Resource Planning Board in SAP
12
Production Scheduler in SAP
13
ERP Business Benefits- Case Study-Infor
14
Market leader in food processing equipment manufacturing &
turnkey projects
Turnover increased from 2200 M to 5040 M without
additional investment in capacity
ITR improvement – 6 MINR against target of 7 MINR
Capacity Utilization – 36.7 MINR against 20.2 MINR
Rationalization of Back-Office functions/Man-power
Standardization of Systems and Processes across the
Organization in line with parent company standard
Having a Computer System with the ability to support future
implementations on CRM, e-Com, Web-trade, SCM, etc.
Overcoming the dependency on Legacy Computer Systems
running the risk of becoming obsolete in 2 to 3 years time.
Implementation Success Factors
15
Customer & Supplier don’t have same
expectations from the project
70% of implementation
projects fail
Level of expectation
Top management
commitment
Project team
Functionality vs.
requirements
Customer modifications
End-user skill and training
Enough resources not allocated to achieve its
objectives
Customer project team does not have
sufficient skill or mandate to make and
enforce the solution decisions
The implemented functionality is not
supporting the customer’s business processes.
Modifications to the system create functional
and financial problems, as well as disrupt the
project plan
End user skill is not sufficient to operate
the system
Typical ERP Modules
16
Sales &
Distribution
Materials
Management
Production
Planning
Quality
Management
Plant
Maintenance
Human
Resources
Financial
Accounting
Controlling
Asset
Management
Project
System
Plant
Maintenance
Business Process Coverage
17
Top 3 ERPs- SAP/Oracle/Infor
18
SAP
Oracle
Infor
Revenue
€17.56B
$9.3B
$2.8B
No of customers
293,500
400000
73000
No of employees
74400
122000
12900
Market Share
24%
12%
6%
Module Overview-SAP
19
Module Overview-Oracle
20
ORACLE E-BUSINESS SUITE
CRM
HUMAN
RESOURCES
FINANCIALS
PROJECTS
SELF-SERVICE
BUSINESS INTELLIGENCE
Oracle Web Employees
LOCAL EXTENSIONS
VERTICAL EXTENSIONS
SCM
MANUFAC TURING
Module Process Interaction–Order to Cash Example
21
Financials
Sales & Distribution
Warehouse
Management
Business Document
Quotation
document
Quotation
Business Document
Sales Order
document
Business Document
Business Document
Sales Order
document
Sales Order based
on quotation ref.
Availability check and
product allocation
Credit Limit Check
Sales Order
document
Unblock sales order
Business Document
Delivery
document
Business Document
Sales Order
document
Delivery
Picking and confirmation
Business Document
Delivery
document
Business Document
Completed
Delivery doc.
Packing
Business Document
Delivery
document
Billing
Account
Balancing
Incoming payment
Post goods issue
ERP Architectures
22
3 tier 1990s
2 tier Client Server 1980s
n tier 2000+
Technical Architecture -SAP
23
Hardware
UNIX Systems
Bull
IBM
Digital
SNI
HP
SUN
Bull/Zenith
Compaq
Data General
...
Operating
AIX
Reliant
systems Digital UNIX UNIX (SINIX)
HP-UX
Databases
Dialog
SAPGUI
Languages
SOLARIS
ADABAS D
DB2 for AIX
INFORMIX-On Line
ORACLE
Digital
NCR
HP (Intel) Sequent
IBM (Intel) SNI
Windows NT
ADABAS D
MS SQL Server
INFORMIX-Online
ORACLE
IBM
AS/400
IBM
S/390
OS/400
OS/390
DB2/400
DB2/390
Windows 3.1, Windows 95, Windows NT,
OSF/Motif, OS/2 Presentation Manager (PM),
Macintosh, Java
ABAP/4, C, C++, HTML, Java, ActiveX-Controls
Windows NT,
Windows 95,
PM, Java
Technical Architecture -Oracle
24
Client
Sun 1.5 Java
Runtime
Environment
(JRE) i.e.
Java Virtual
machine (JVM)
: J2SE Plug-in
Middle Tier
Apache Web Server 2.0
JRE (Java Runtime Environment) – 1.5
JDK (Java Development Kit) – 1.5.X
Oracle containers for J2EE (OC4J)
Oracle Process Manager and
Notification Server
Oracle Forms/Reports 10g
Database Tier
Oracle 10g Enterprise Edition
Typical Total Cost of ERP Ownership
25
Small businesses: $10000 - $150,000
Mid-sized businesses: $150,000 - $1 million
Large enterprises: $1 million - $10+ million
•Database
management
system costs:
5% to 10%
•Infrastructure
costs: 10% to
20%
•Software
costs: 15% to
30%
•Human
resources
costs: 40% to
60%
Typical ERP Vertical Solutions
26
•Aerospace and Defence
•Automotive
•Banking
•Chemicals
•Consumer Products
•Defence and Security
•Engineering, Construction, and Operations
•Food & Beverages
•Fashion
•Healthcare
•High Tech
•Higher Education and Research
•Industrial Machinery and Components
•Insurance
•Life Sciences
•Media
•Mill Products
•Mining
•Oil and Gas
•Professional Services
•Public Sector
•Retail
•Sports and Entertainment
•Telecommunications
•Travel and Transportation
•Utilities
•Wholesale Distribution
Advance Add-on Systems
27
Core ERP is a generic solution- caters to basic business
processes of an enterprise
For further business improvements ERP vendors offer best of
breed add-on systems
Enterprises buy these depending on the needs
Base ERP
Add on
Production Planning
Advanced Planning &
scheduling
Scheduling
Manufacturing Execution systems
Inventory management
Inventory Optimization
Extended ERP -Linkages with Other Systems
28
Enterprise Application Architecture
Enterprise Resource Planning
Internal Business Processes
Customer Relationship Management
Marketing – Sales - Service
Customers
Partners
Supply Chain Management
Sourcing - Procurement
Partner Relationship
Management
Selling – Distribution
Knowledge Management
Collaboration – Decision
Support
Employees
Suppliers
Typical ERP Comparison: Features don’t differentiate
29
ERP Selection Criteria
30
Functionality- support for critical business processes
Cost- provides a good return on investment
Flexibility- ease of customization
Technology- commercially available platforms
Support- local presence/support contracts
Implementation experience- partner with industry credentials
Global footprint- presence across geographies
Typical Selection Process
Request for
information
Request for
proposal
Demo
Commercial
Discussions
Contract
Finalization
ERP Trends-2015
31
Blurred lines between SaaS and on premise ERP software
Continued adoption of mobile and business intelligence solutions.
ERP software will no longer be limited to ERP.
Best-of-breed systems will make a comeback
Integration and solution architecture will become increasingly
important.
Watch out for the new Tier I ERP vendor Infor
Convergence of ERP and consumer user interfaces.
ERP failures are still very real risks.
Higher failure rates of ERP vendors and consultants.
Increasing dichotomy between ERP success and ERP failure
Source: Panorama Consulting ERP Report 2015
Future ERP Roadmap
32
Source: Gartner Report
2015
33
Thank You
Milind Khirwadkar
Manufacturing IT Systems
Backbone- an ERP
State of The Art and Future Roadmap
What is an ERP?
2
(Enterprise Resource Planning) An integrated information
system that serves all departments within an enterprise
Integrated :
uses a common database e.g. same customer master in
finance & sales
Real time updates e.g. goods receiving updates inventory
automatically
All Departments
Procurement, stores, production, distribution, sales,
costing , finance, marketing
Enterprise Resources Planning Evolution
3
SCM
BPR
MRP
MRP II
ERP
IT
Goal: link information across entire enterprise:
• Manufacturing
• Distribution
• Accounting
• Personnel
4
Potential Benefits of ERP
Better operational efficiencies through Improved
planning
Faster decision making through real time
information
Better cross functional collaboration
Introduction of best practices brings in business
improvements
How are the benefits achieved?
5
• Integration leads to real time
information
• Standardization brings in efficiency
• One-source data removes redundancies
• Best practices improve operations
Best Practices: Planning Hierarchy
6
Long
Term
Demand
Forecast
Resource
Planning
Aggregate Production
Planning
Rough-cut Capacity
Planning
Master Production
Scheduling
Bills of
Material
Inventory
Status
Short
Term
Medium
Term
Material Requirements
Planning
Job
Pool
Job
Release
Job
Dispatching
Capacity Requirements
Planning
Routing
Data
Best Practices: Medium Term Planning
7
Master Production
Scheduling
• MPS drives MRP
• accurate in near term (firm
orders)
• May be inaccurate in long
term (forecasts)
• Software supports
• forecasting
• order entry
• netting against inventory
Rough Cut Capacity
planning
Material Requirement
Planning
• Quick check on capacity of
key resources
• Use Bill of Resource (BOR)
for each item in MPS
• Generates usage of
resources by exploding
MPS against BOR (offset by
lead-times)
• Infeasibilities addressed by
altering MPS or adding
capacity (e.g., overtime)
• Software supports
• BOR
• Resource usage plan
• Develop a product structure
• Build a gross requirements
plan
• Build a net requirements
plan
• Determine lot sizes for lotfor-lot, EOQ, and PPB
• Software supports
• Product structures
• Inventory records
• Order sizing
• BOM explosion
Best Practices: Short Term Planning
8
Capacity Requirement Planning
• Uses routing data (work centers and times)
for all items
• Explodes orders against routing information
• Generates usage profile of all work centers
• Identifies overload conditions
• Software supports
• Routing
• Work center
• Set up time & run time of operations
Production Activity Control
• Sometimes called “shop floor control”
• Provides routing/standard time information
• Sets planned start times
• Can be used for prioritizing/expediting
• Software supports
• compare planned with actual throughput.
• Work center scheduling
Best Practices: Short Term Planning
9
Stock Requirements Post MRP Run in SAP
10
RCCP in SAP
11
Multi Resource Planning Board in SAP
12
Production Scheduler in SAP
13
ERP Business Benefits- Case Study-Infor
14
Market leader in food processing equipment manufacturing &
turnkey projects
Turnover increased from 2200 M to 5040 M without
additional investment in capacity
ITR improvement – 6 MINR against target of 7 MINR
Capacity Utilization – 36.7 MINR against 20.2 MINR
Rationalization of Back-Office functions/Man-power
Standardization of Systems and Processes across the
Organization in line with parent company standard
Having a Computer System with the ability to support future
implementations on CRM, e-Com, Web-trade, SCM, etc.
Overcoming the dependency on Legacy Computer Systems
running the risk of becoming obsolete in 2 to 3 years time.
Implementation Success Factors
15
Customer & Supplier don’t have same
expectations from the project
70% of implementation
projects fail
Level of expectation
Top management
commitment
Project team
Functionality vs.
requirements
Customer modifications
End-user skill and training
Enough resources not allocated to achieve its
objectives
Customer project team does not have
sufficient skill or mandate to make and
enforce the solution decisions
The implemented functionality is not
supporting the customer’s business processes.
Modifications to the system create functional
and financial problems, as well as disrupt the
project plan
End user skill is not sufficient to operate
the system
Typical ERP Modules
16
Sales &
Distribution
Materials
Management
Production
Planning
Quality
Management
Plant
Maintenance
Human
Resources
Financial
Accounting
Controlling
Asset
Management
Project
System
Plant
Maintenance
Business Process Coverage
17
Top 3 ERPs- SAP/Oracle/Infor
18
SAP
Oracle
Infor
Revenue
€17.56B
$9.3B
$2.8B
No of customers
293,500
400000
73000
No of employees
74400
122000
12900
Market Share
24%
12%
6%
Module Overview-SAP
19
Module Overview-Oracle
20
ORACLE E-BUSINESS SUITE
CRM
HUMAN
RESOURCES
FINANCIALS
PROJECTS
SELF-SERVICE
BUSINESS INTELLIGENCE
Oracle Web Employees
LOCAL EXTENSIONS
VERTICAL EXTENSIONS
SCM
MANUFAC TURING
Module Process Interaction–Order to Cash Example
21
Financials
Sales & Distribution
Warehouse
Management
Business Document
Quotation
document
Quotation
Business Document
Sales Order
document
Business Document
Business Document
Sales Order
document
Sales Order based
on quotation ref.
Availability check and
product allocation
Credit Limit Check
Sales Order
document
Unblock sales order
Business Document
Delivery
document
Business Document
Sales Order
document
Delivery
Picking and confirmation
Business Document
Delivery
document
Business Document
Completed
Delivery doc.
Packing
Business Document
Delivery
document
Billing
Account
Balancing
Incoming payment
Post goods issue
ERP Architectures
22
3 tier 1990s
2 tier Client Server 1980s
n tier 2000+
Technical Architecture -SAP
23
Hardware
UNIX Systems
Bull
IBM
Digital
SNI
HP
SUN
Bull/Zenith
Compaq
Data General
...
Operating
AIX
Reliant
systems Digital UNIX UNIX (SINIX)
HP-UX
Databases
Dialog
SAPGUI
Languages
SOLARIS
ADABAS D
DB2 for AIX
INFORMIX-On Line
ORACLE
Digital
NCR
HP (Intel) Sequent
IBM (Intel) SNI
Windows NT
ADABAS D
MS SQL Server
INFORMIX-Online
ORACLE
IBM
AS/400
IBM
S/390
OS/400
OS/390
DB2/400
DB2/390
Windows 3.1, Windows 95, Windows NT,
OSF/Motif, OS/2 Presentation Manager (PM),
Macintosh, Java
ABAP/4, C, C++, HTML, Java, ActiveX-Controls
Windows NT,
Windows 95,
PM, Java
Technical Architecture -Oracle
24
Client
Sun 1.5 Java
Runtime
Environment
(JRE) i.e.
Java Virtual
machine (JVM)
: J2SE Plug-in
Middle Tier
Apache Web Server 2.0
JRE (Java Runtime Environment) – 1.5
JDK (Java Development Kit) – 1.5.X
Oracle containers for J2EE (OC4J)
Oracle Process Manager and
Notification Server
Oracle Forms/Reports 10g
Database Tier
Oracle 10g Enterprise Edition
Typical Total Cost of ERP Ownership
25
Small businesses: $10000 - $150,000
Mid-sized businesses: $150,000 - $1 million
Large enterprises: $1 million - $10+ million
•Database
management
system costs:
5% to 10%
•Infrastructure
costs: 10% to
20%
•Software
costs: 15% to
30%
•Human
resources
costs: 40% to
60%
Typical ERP Vertical Solutions
26
•Aerospace and Defence
•Automotive
•Banking
•Chemicals
•Consumer Products
•Defence and Security
•Engineering, Construction, and Operations
•Food & Beverages
•Fashion
•Healthcare
•High Tech
•Higher Education and Research
•Industrial Machinery and Components
•Insurance
•Life Sciences
•Media
•Mill Products
•Mining
•Oil and Gas
•Professional Services
•Public Sector
•Retail
•Sports and Entertainment
•Telecommunications
•Travel and Transportation
•Utilities
•Wholesale Distribution
Advance Add-on Systems
27
Core ERP is a generic solution- caters to basic business
processes of an enterprise
For further business improvements ERP vendors offer best of
breed add-on systems
Enterprises buy these depending on the needs
Base ERP
Add on
Production Planning
Advanced Planning &
scheduling
Scheduling
Manufacturing Execution systems
Inventory management
Inventory Optimization
Extended ERP -Linkages with Other Systems
28
Enterprise Application Architecture
Enterprise Resource Planning
Internal Business Processes
Customer Relationship Management
Marketing – Sales - Service
Customers
Partners
Supply Chain Management
Sourcing - Procurement
Partner Relationship
Management
Selling – Distribution
Knowledge Management
Collaboration – Decision
Support
Employees
Suppliers
Typical ERP Comparison: Features don’t differentiate
29
ERP Selection Criteria
30
Functionality- support for critical business processes
Cost- provides a good return on investment
Flexibility- ease of customization
Technology- commercially available platforms
Support- local presence/support contracts
Implementation experience- partner with industry credentials
Global footprint- presence across geographies
Typical Selection Process
Request for
information
Request for
proposal
Demo
Commercial
Discussions
Contract
Finalization
ERP Trends-2015
31
Blurred lines between SaaS and on premise ERP software
Continued adoption of mobile and business intelligence solutions.
ERP software will no longer be limited to ERP.
Best-of-breed systems will make a comeback
Integration and solution architecture will become increasingly
important.
Watch out for the new Tier I ERP vendor Infor
Convergence of ERP and consumer user interfaces.
ERP failures are still very real risks.
Higher failure rates of ERP vendors and consultants.
Increasing dichotomy between ERP success and ERP failure
Source: Panorama Consulting ERP Report 2015
Future ERP Roadmap
32
Source: Gartner Report
2015
33
Thank You
Milind Khirwadkar
