MRP II with ERP

In the 1970s material requirement planning (MRP) was developed as a mechanism for manufacturing companies to calculate more precisely what materials they required, at what time and in optimum quantities.

MRP (and MRPII ) evolved from the earliest commercial database management package developed by Gene Thomas at IBM in the 1960s.

Manufacturing resource planning (MRP II) is defined by APICS as a method for the effective planning of all resources of a manufacturing company. Ideally, it addresses operational planning in units, financial planning, and has a simulation capability to answer "what-if" questions and extension of closed-loop MRP.

Manufacturing Resource Planning (MRPII) evolved from MRP, because many companies realised that as well as the need to calculate their material requirements precisely, they also required detailed capacity planning, scheduling, shop floor control and other calculations.
MRPII introduced the closed-loop model, which uses a centrally held data file to record, monitor and report on various company activities. By comparing forecasts with actual data, companies can analyse performance and improve processes to achieve better efficiency.
Caliach MRP is Caliach's established MRPII system for managing core manufacturing activities
Enterprise resource planning (ERP) developed MRPII even further to embrace all business functions, not just those concerned with actual manufacturing. ERP encompasses materials planning, efficient production, profitability, customer satisfaction - almost every aspect of business.
ERP also incorporates the principles of global supply chain management, in which the value of every activity in the supply chain is analysed, along with the growing development of Internet or web-enabled procurement.

Manufacturing Resource Planning (MRP II) system provides a way to create a seamless interface between engineering and manufacturing. In brief, MRP II controls inventory ordering and distribution through a simple set of questions:

• What are we going to make?

• What does it take to make it?

• What have we got?

• What do we have to get?

An integrated information system used by businesses. Manufacturing Resource Planning (MRP II) evolved from early Materials Requirement Planning (MRP) systems by including the integration of additional data, such as employee and financial needs. The system is designed to centralize, integrate and process information for effective decision making in scheduling, design engineering, inventory management and cost control in manufacturing.

Building Blocks of MRP II
Basic Modules	Ancillary Modules	Related Modules
1. Master Production Scheduling (MPS) 2. Item Master Data (Technical Data) 3. Bill of Materials (BOM) (Technical Data) 4. Production Resources Data (Manufacturing Technical Data) 5. Inventories & Orders (Inventory Control) 6. Purchasing Management 7. Material Requirements Planning (MRP) 8. Shop Floor Control (SFC) 9. Capacity Requirements Planning (CRP) 10. Standard Costing (Cost Control) 11. Cost Reporting / Management (Cost Control) 12.  Distribution Resource Planning (DRP)	1.  Business Planning 2.  Lot Traceability 3.  Contract Management 4.   Tool Management 5.  Engineering Change Control 6.  Configuration Management 7.  Shop Floor Data Collection 8.  Sales Analysis and Forecasting 9.   Finite Capacity Scheduling (FCS)	1.  General Ledger 2.  Accounts Payable (Purchase Ledger) 3.   Accounts Receivable (Sales Ledger) 4.  Sales Order Management 5.  Distribution Requirements Planning (DRP) 6.   [Automated] Warehouse Management 7. Project Management 8.  Technical Records 9.   Estimating 10.  CAD/CAM 11.  CAPP

MASTER PRODUCTION SCHEDULE.
The master production schedule (MPS) is basically the production schedule for finished goods. This schedule is usually derived from current orders, plus any forecast requirements. The MPS is divided into units of time called "buckets." While any time frame may be utilized, usually days or weeks is appropriate. 
BILL-OF-MATERIALS.
The bill-of-materials is a file made up of bills-of-material (BOM). Each BOM is a hierarchical listing of the type and number of parts needed to produce one unit of finished goods. Other information, such as the routings (the route through the system that individual parts take on the way to becoming a finished good), alternate routings, or substitute materials may be also be contained with the BOM.
The bill-of-material can be used to determine the gross number of component parts needed to manufacturer a given number of finished goods. Since a gross number is determined, safety stock can be reduced because component parts may be shared by any number of finished goods (this is known as commonality).

Benefits
MRP II systems can provide:

§  Better control of inventories

§  Improved scheduling

§  Productive relationships with suppliers

For design / engineering:

§  Improved design control

§  Better quality and quality control

For financial and costing:

§  Reduced working capital for inventory

§  Improved cash flow through quicker deliveries

§  Accurate inventory records

Modern Enterprise with ERP

Significance and principles of BPR:

BPR (Business Process Re-engineering) - the idea of BPR first sprang from Michael Hammer in his article (Hammer 1990), `Reengineering work: don’t automate, obliterate’. Manganelli and Klein (1994) define BPR as the rapid and radical redesign of strategic, value-added business processes, and the systems, policies, and organizational structures that support them- to optimize the work-
flows and productivity in an organization. They offer a definition that focuses on optimizing work flow and productivity in an organization. Hammer and Champy (1993) define re-engineering as `the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed’.

What is Business Process Re-engineering (BPR)?

Business Process Re-engineering simply implies eliminating tasks that does not add value to a business process while reorganization the value adding tasks. It can also be perceived as a restructuring of redundant dependent tasks or work order. It involves a re-thinking and consequently a re-molding. In appreciating this concept, it is expedient to view a process as a "chain of tasks". The truth is that in a typical business process, you can have some redundant tasks that if not present does not really have any impact. Such tasks can be eliminated thus streamlining business process.

   

Business Process Reengineering is a pre-requisite for going ahead with a powerful planning tool, ERP. An in depth BPR study has to be done before taking up ERP. Business Process Reengineering brings out deficiencies of the existing system and attempts to maximize productivity through restructuring and re-organizing the human resources as well as divisions and departments in the organization Business Process Engineering evolves the following Steps:

1. Study the current system

2. Design and develop new systems

3. Define Process, organization structure and procedure

4. Develop customize the software

5. Train people o Implement new system The principle followed for BRP may be defined as USA principle(Understand, Simplify Automate) i.e., Understanding the existing practices, Simplifying the Processes and Automate the Process.

6. Story-boarding Combining ERP Brain storming Rearranging

Principles of BPR

1. Effective institute Leadership: BPR prerequisite is an effective leader which includes granting Stewardship coupled with clear accountability.

2. Goal Orientation: Process of enterprise must be organized around goal and not tasks. the principle helps ensure that the activities of organization are structured in a manner that emphasizes the accomplishment of business goals.

3. Responsiveness to customer needs: BPR activities are ultimately devoted to increasing Customer and User Satisfaction. This devotion necessitates responsiveness to customer needs and priorities which include needs that are explicitly stated and those which are merely expected.

4. Process Orientation: Create process owners and make them responsible for process output. Process Orientation leads to greater accountability for process performance.

5. Value Focus: non value added activities must be identified and targeted for elimination. This principle ensures that business activities are focused on keeping customer satisfied because “value” is defined in terms of perceived benefits to the customer.

6. Virtual Resource: geographically distributed resources must be treated as if they were Centralized. This principle ensures the best utilization of organization assets, promotes sharing of enterprise knowledge and minimizes chances of local performance optimization.

7. Concurrency: activities must be performed concurrently to the greatest extent possible within the budget constraints of an organization

8. Non redundancy: information must be captured once for cost-effectiveness.

9. Modularity: decision making agents must be placed where work is performed.

10. Paradigm Shift: encourage thinking out of the box, which leads to radical and fundamental changes that are the target of reengineering activities.

11. Management information and Knowledge assets: information and knowledge are resources that can be leveraged to achieve competitive advantage and an actual realization of “information integrated agile enterprise” vision can only be accomplished by taking advantages of those resources.

How BPR plays a critical role in ERP implementation?

Processes, organization, structure and information technologies are the key components of BPR, which automates business processes across the enterprise and provides an organization with a well-designed and well-managed information system. While implementing ERP, the organizations have two options to consider.

Either the organization must reengineer business processes before implementing ERP or directly implement ERP and avoid reengineering.

In the first option of reengineering business processes, before implementing ERP, the organization needs to analyze current processes, identify non-value adding activities and redesign the process to create value for the customer, and then develop in-house applications or modify an ERP system package to suit the organizations requirements. In this case, employees will develop a good sense of process orientation and ownership.

This would also be a customized solution keeping with line of the organization's structure, culture, existing IT resources, employee needs and disruption to routine work during the change programmer likely to be the least. It could have a high probability of implementation. The drawback of this option is that the reengineered process may not be the best in the class, as the organization may not have access to world-class release and best practices. Moreover, this may be the only chance to radically improve in the near future and most attention should be paid while choosing the right ERP. Also, developing an in-house application or implementing a modified ERP is not advisable.

Benefits of BPR are:

1. Business process is streamlined.
2. Business process is optimized and more efficient.
3. Strict controls can be enforced and monitored.
4. Best practices can be adhered to.
5. Time and cost saving as a result of eliminated redundant tasks. 

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