Chap001a - ERP

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Transcript of Chap001a - ERP

Demand ManagementCopyright © 2011 by The McGraw-Hill Companies, Inc. All rights reserved.
McGraw-Hill/Irwin
A comprehensive software approach to support decisions concurrent with planning and controlling the business.
ERP systems are, first and foremost, integrated.
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Agenda
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Multifunctional
Can track purchasing activity in material units (pounds, kilos, tons)
Follows sales in terms of products or services
Reports manufacturing activity in terms of products, resources, or people
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Material and capacity planning (engine)
Material and vendor management
Functional units can be combined to create a single system
Software from other sources can be connected as well
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What is demand?
What is inventory?
What transfer costs apply (for internal transactions)?
What labor rates are applied?
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Helping users make decisions about running the business
People make the decisions, software provides them with better tools and information
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Transaction Processing
An ERP system is designed to process business transactions in real time, working from a single database
Data warehouse software may be added to facilitate queries not built into the ERP system
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Developed by the Supply Chain Council
Designed to measure the impact of decisions on the entire supply chain
Avoids development of functional silos by developing metrics that reflect the entire supply chain
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93%
69%
Percentage of actual line items filled
97%
88%
92.4%
65.7%
Order fulfillment lead time
Time from when an order is placed until it is received by the customer
135 days
225 days
Warranty cost
1.2%
2.4%
Inventory
55 days
84 days
Cash-to-cash cycle time
Time required to turn cash used to purchase raw materials into cash received from customers
35.6 days
99.4 days
Asset turns
Measure of how many times per year assets are used to generate revenue
4.7 turns
1.7 turns
Procurement cycle
Manufacturing cycle
Distribution inventory
Accounts receivable
Cash-to-cash cycle time = Inventory days of supply + Days of sales outstanding – Average payment period for material
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ERP database
Accounts payable
Average days of inventory (Id)
Accounts payable cycle time (APd)
Cash-to-cash cycle time
Accounts receivable = $200,000
Inventory value = $400,000
Accounts payable = $160,000
Process improvement
Simplified training
Strategic direction
Organizational flexibility
Redundant transactions must be reduced or eliminated.
To maintain data accuracy and realize efficiencies, information must be captured at the initial entry, using documented processes.
Processes need to be changed to support the data needs of the ERP system–hardware and software alone isn’t sufficient.
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Concluding Principles
The company must define a comprehensive set of performance measures, with policies and goals that correspond to these measures.
IT economies of scale can be obtained from supporting fewer hardware and software platforms.
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Quiz – Chapter 1a
To free the ERP system for basic applications, a _______ _______ is often used to capture, manage, and analyze data.
For a firm with average daily sales (Sd) of $200,000, current inventory (I) of $1,000,000, and cost of sales (CS) of 50%, what is the average days of inventory (Id)?
Which of the following actions would be likely to increase the cash-to-cycle time for a firm?
Increasing the cost, but not the price, of the product
Taking advantage of “early pay” discounts with suppliers
Revaluing inventory to reflect reductions in purchasing prices
d
S
S
d