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MI0029 – Enterprise Resource Planning Assignment Set- 1

1. What do you mean by Enterprise Resource Planning? Also Discuss the advantages of ERP? [10 Marks] Answer: Enterprise Resource Planning (ERP) is an integrated computer-based system used to manage internal and external resources, including tangible assets, financial resources, materials, and human resources. Its purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. Enterprise Resource Planning (ERP) covers the techniques and concepts employed for the integrated management of businesses as a whole, from the viewpoint of the effective use of management resources, to improve the efficiency of an enterprise. ERP packages are integrated (covering all business functions) software packages that support the above ERP concepts. Originally, ERP packages were targeted at the manufacturing industry, and consisted mainly of functions for planning and managing core businesses such as sales management, production management, accounting and financial affairs, etc. However, in recent years, adaptation not only to the manufacturing industry, but also to diverse types of industry has become possible and the expansion of implementation and use has been progressing on a global level. ERP software is designed to model and automate many of the basic processes of a company, from finance to the shop floor, with the goal of integrating information across the company and eliminating complex, expensive links between computer systems that were never meant to talk to each other.

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Above figure shows how information is integrated within an organisation using an ERP system. The Advantages of ERP Installing an ERP system has many advantages – both direct and indirect. The direct advantages include improved efficiency, information integration for better decision making, faster response time to customer queries, etc. The indirect benefits include better corporate image, improved customer goodwill, customer satisfaction, and so on. The following are some of the direct benefits of an ERP system: · Business Integration · Flexibility · Better Analysis and Planning Capabilities · Use of Latest Technology Business Integration The first and most important advantage lies in the promotion of integration. The reason why ERP packages are considered to be integrated is the automatic data updating (automatic data exchange among applications) that is possible among the related business components. Since conventional company information systems were aimed at the optimization of independent business functions in business units, almost all were weak in terms of the communication and integration of information that transcended the different business MI0029 – Enterprise Resource Planning - 83 -

functions. In the case of large companies in particular, the timing of system construction and directives differs for each product and department/function and sometimes, they are disconnected. For this reason, it has become an obstacle in the shift to new product and business classification. In the case of ERP packages, the data of related business functions is also automatically updated at the time a transaction occurs. For this reason, one is able to grasp business details in real time, and carry out various types of management decisions in a timely manner, based on that information. Flexibility The second advantage of ERP packages is their flexibility. Different languages, currencies, accounting standards and so on can be covered in one system and and functions that comprehensively manage multiple locations of a company can be packaged and implemented automatically. To cope with company globalization and system unification, this flexibility is essential, and one can say that it has major advantages, not simply for development and maintenance, but also in terms of management. Better Analysis and Planning Capabilities Yet another advantage is the boost to the planning functions. By enabling the comprehensive and unified management of related business and its data, it becomes possible to fully utilize many types of decision support systems and simulation functions. Furthermore, since it becomes possible to carry out, flexibly and in real time, the filing and analysis of data from a variety of dimensions, one is able to give the decision-makers the information they want; thus enabling them to make better and informed decisions. Use of Latest Technology The fourth advantage is the utilization of the latest developments in Information Technology (IT). The ERP vendors were very quick to realize that in order to grow and to sustain that growth, they had to embrace the latest developments in the field of Information Technology. Therefore, they quickly adapted their systems to take advantage of the latest technologies like open systems, client/server technology, Internet/Intranet, CALS (Computer-Aided Acquisition and Logistics Support), electronic-commerce, etc. It is this quick adaptation to the latest changes in Information Technology that makes the flexible adaptation to changes in future business environments possible. It is MI0029 – Enterprise Resource Planning - 84 -

this flexibility that makes the incorporation of the latest technology possible during system customization, maintenance and expansion phases. As has been stated above, ERP includes many of the functions that will be necessary for future systems. However, undertaking reforms to company structures and business processes, so as to enable the full use of these major features, is the greatest task for companies that will use them. It is necessary to take note that casually proceeding with the implementation of ERP, merely for reasons of system reconstruction or preparation for the year 2000, is likely to result in turning the above mentioned advantages into disadvantages.

2. Discuss the Concept of Quality Management in concept with Module Function ? [10 Marks] Answer: A quality management system (QMS) can be expressed as the organizational structure, procedures, processes and resources needed to implement quality management. With product quality under the microscope in all industries today, every company strives for superior quality in its products and services. All manufacturing modules track quality control activities across the enterprise–from intermediate producers to finished goods. These systems allow a wide variety of characteristics and parameters to be specified in test and inspection operations and maintain an extensive history to improve product quality and identify recurring problems. Elimination of defects in standard product designs and manufacturing methods, before production, is just as important as eliminating defects during production. In fact, to achieve quality levels, manufacturers must focus on identifying and correcting defects in underlying product designs and production methods and not simply inspect the in-coming material and finished goods. The Quality Management Systems usually support the bench-marking and use of optimal product design, process engineering and quality assurance data by all functional departments within the manufacturing enterprise, thereby facilitating definition of MI0029 – Enterprise Resource Planning - 85 -

repeatable processes, root cause analysis and the continuous improvement of manufacturing methods. This documentation supports the job functions of the quality assurance and production managers in validating the manufacturer’s conformance to ISO9000, Good Manufacturing Practices (GMP) worldwide, MIL-Q-9858 in the United States, and a variety of country specific industry standards of quality assurance. Specification Control in the Quality Management System offers a state-of-the-art approach for documenting specifications and enables an organization to standardise and simplify its quality assurance and control functions. Sample types sample rules and testing levels are completely user-defined for maximum flexibility and ease of use. Maintenance of standard specifications, detailed sampling instructions and testing procedures is performed on-line. Cyclic, subsequent and repeat testing options are available to support the material acceptance function, with breakdowns of test procedures into multiple dispositions to improve inventory turnover and reduce inspection lead- j times. The system’s database eliminates redundant specifications and ensures that a single change to standard procedures takes effect immediately throughout the organization. User-defined review and commitment controls ensure maximum accuracy. The Material Procurement subsystem provides tools for implementing Total Quality Management programs within an organization. Original manufacturers may be defined independently from vendors, so that businesses can strictly adhere to quality assurance and control functions, without preventing their buyers from seeking the best possible price and delivery terms. Each item supplied by an original manufacturer may be linked to a standard product specification. Actual test results and material disposition histories are retained by item, lot, original manufacturer and specification for in-depth quality performance review and analysis. Material Inspection subsystem offers a wide range of capabilities for process supervision and control. These capabilities are fully integrated with the other modules like purchasing, inventory management and shop floor control functions to ensure that the right quality control procedures are followed. Capabilities include on-line maintenance of product specifications by production method and customer, event driven sample requests, sample log-in, test results entry, quality performance analysis and equipment calibration support. Product quality metrics are collected and archived in a manner that offers full support for statistical process control techniques. Material Disposition is another feature available in many systems that offers advanced material review and disposition functions that ensure the right quality MI0029 – Enterprise Resource Planning - 86 -

control decisions are made and leave an audit trail of decisions for compliance purposes. Capabilities include automated material review and approval, automated material dispositioning, sub-lot control, optional automatic second dispositioning, optional automatic repeat testing, grading, redesignation, and implementation of user-defined policies and procedures for authorisation and control. Production Reporting supports complete production reporting. Both employee and crew labour reporting is possible, with crew reporting automatically allocating efficiencies between crew members. Userdefined shift teams can be entered to support quality circles and subsequent reporting of results. Employee/clock maintenance provides for designation of employees and teams. Both labour grades and labour rates can be designated. Labour grades entered by employees override those designated for the work centre. Labour rates enable the entry of actual cost data, even when labour grades have not been established. The Shop Floor Control system is fully integrated with Cost Accounting and Control. Both production reporting and employee/clock maintenance contribute data that is summarised at the time of shop order close with full variance analysis reporting made available to the user. Shop Floor Control also makes use of a powerful and flexible shop calendar facility, which can be global with overrides reflecting each facility and each work centre within the facility.

3. Explain SAP’s ERP Packages in detail? [10 Marks] Answer: SAP designed the enhancement package for SAP ERP to easily deliver business- and industry-specific functionality, enterprise services bundles, and other functions that enhance and simplify the use of the SAP ERP application through improvements to the user interface and processes. SAP is the first software provider to use SOA to deliver new functionality, enterprise services bundles, and simplified user interfaces through enhancement packages. Enterprise services are one of the ways that SAP is implementing a program of service as part of our strategy to provide SOA across all products. SAP customers and partners can suggest ideas for new services and help develop them by participating in the Enterprise Services Community program.

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The evaluation/selection process is one of the most important phases of the ERP implementation, because the package that you select will decide the success or failure of the project. Since ERP systems involve huge investments, once a package is purchased, it is not an easy task to switch to another one. So it is a ‘do it right the first time’ proposition. There is little room for error. The most important factor that should be kept in mind when analysing the different packages is that none of them are perfect. The idea that there is no perfect package needs to be understood by everyone in the decision-making team. The objective of the selection process is not to identify a package that covers each and every requirement (a perfect fit). The objective is to find a package that is flexible enough to meet the company’s needs, or in other words, a software that could be customised to obtain a ‘good fit’. Once the packages to be evaluated are identified, the company needs to develop a selection criteria that will permit the evaluation of all the available packages on the same scale. To choose the best system, the company should identify the system that meets the business needs, that matches the business profile and that which identifies with the business practices of the company. It is impossible to get a system that will perform, exactly as the company does business, but the aim should be to get the system that has the least number of differences. According to S Shankarnarayanan, Senior Consultant with Baan Infosystems India Pvt Ltd. (ERP Systems – Using IT to gain a competitive advantage), some important points to be kept in mind while evaluating ERP software include: · Functional fit with the company’s business processes · Degree of integration between the various components of the ERP system · Flexibilityl and scalability · Complexity · User friendliness · Quick implementation

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· Ability to support multi-site planning and control · Technology–client/server capabilities, database independence, security · Availability of regular upgrades · Amount of customization required · Local support infrastructure · Availability of reference sites · Total costs, including cost of license, training, implementation, main tenance, customization and hardware requirements. It is always better to form a selection or evaluation committee that will do the evaluation process. This committee should comprise of people from the various departments (the functional experts), the top management (preferably the CIO or COO) and consultants (package experts). The selection committee should be entrusted with the task of choosing a package for the company. Since all business functions are represented and the management is involved, the package that is selected will have company-wide acceptance. The package experts or the consultants can act as mediators, or play the role of explaining the pros and cons of each package.

MI0029 – Enterprise Resource Planning Assignment Set- 2

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1. What are the different phases of ERP implementation lifecycle? [10 Marks] Answer : The different phases of the ERP implementation are given below: 1. Pre-Evaluation S creening : Once the company has decided to go in for the ERP system, the search for the perfect package starts. But there are hundreds of ERP vendors – of all sizes and shapes – all claiming to have the solution that is ideal for you. Analysing all the packages before reaching a decision is not a viable solution. It is also a very time consuming process. So it is better to limit the number of packages that are evaluated to less than five. It is always better to do a thorough and detailed evaluation of a small number of packages, than doing a superficial analysis of dozens of packages. Hence, the company should do a pre-evaluation screening to limit the number of packages that are to be evaluated by the committee. Not all packages are equal–each has its own strengths and weakness. The pre-evaluation process should eliminate those packages that are not at all suitable for the company’s business processes. One can zero in on the few best packages by looking at the product literature of the vendors, getting help from external consultants and most importantly, by finding out what package is used by companies which are similar. It is always better to find out how the different packages are performing in environments similar to yours. If one studies the history of the ERP packages and finds out how each package evolved, it soon becomes evident that every ERP package grew out of the xperience or opportunity of a group of people, working in a specific business, who created systems that could deal with certain business segments. It is generally accepted that most ERP packages are stronger in certain areas than in others, and each one is madly trying to add functionality in areas where they have been lacking. For example, PeopleSoft is strong in HR and less so in manufacturing; Baan, on the other hand, is historically stronger in manufacturing than in finance and so on.

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The evaluation/selection process is one of the most important phases of the ERP implementation, because the package that you select will decide the success or failure of the project. Since ERP systems involve huge investments, once a package is purchased, it is not an easy task to switch to another one. So it is a ‘do it right the first time’ proposition. There is little room for error. The most important factor that should be kept in mind when analysing the different packages is that none of them are perfect. The idea that there is no perfect package needs to be understood by everyone in the decision-making team. The objective of the selection process is not to identify a package that covers each and every requirement (a perfect fit). The objective is to find a package that is flexible enough to meet the company’s needs, or in other words, a software that could be customised to obtain a ‘good fit’. Once the packages to be evaluated are identified, the company needs to develop a selection criteria that will permit the evaluation of all the available packages on the same scale. To choose the best system, the company should identify the system that meets the business needs, that matches the business profile and that which identifies with the business practices of the company. It is impossible to get a system that will perform, exactly as the company does business, but the aim should be to get the system that has the least number of differences. 3. Project Planning Phase This is the phase that designs the implementation process. It is in this phase that the details of how to go about the implementation are decided. Time schedules, deadlines, etc. for the project are arrived at. The project plan is developed. Roles are identified and responsibilities are assigned. The organizational resources that will be used for the implementation effort are decided and the people who are supposed to head the implementation are identified. The implementation team members are selected and task allocation is done. This phase will decide when to begin the project, how to do it and when the project is supposed to be completed. This is the phase which will plan the "what to do’ in case of contingencies; how to monitor the progress of the implementation; what control measures should be installed and what corrective actions should be taken when things get out of control. The project planning is usually done by a committee constituted by the team leaders of each implementation group. The committee will be headed by the ERP in-charge (usually the CIO or COO). The committee MI0029 – Enterprise Resource Planning - 91 -

will meet periodically (during the entire implementation lifecycle) to review the progress and chart the future course of actions. 4. Gap Analysis This is, arguably, the most crucial phase for the success of the ERP implementation. Put very simply, this is the process through which companies create a complete model of where they are now, and in which direction they want to head in the future. The trick is to design a model which both anticipates and covers any functional gaps. It has been estimated that even the best ERP package, custom tailored to a company’s needs, meets only 80% of the company’s functional requirements. The remaining 20% of these requirements present a problematic issue for the company’s BPR (business process re-engineering). One of the most affordable, albeit painful, solutions entails altering the business to fit’ the ERP package. Of course, a company can simply agree to live without a particular function (the cheap but annoying solution). Other solutions include: · Pinning your hopes on an upgrade (low cost but risky) · Identifying a third-party product that might fill the gap (hopefully it also partners with the ERP packages, keeping interfacing to a minimum) · Designing a custom program · Altering the ERP source code, (the most expensive alternative; usually reserved for mission-critical installations)

5 Reengineering It is in this phase that the human factors are taken into account. In ERP implementation settings, reengineering has two different connotations. The first connotation is the controversial one, involving the use of ERP to aid in downsizing efforts. And there have been occasions where high-level executives have invoked the reengineering slogan, and purchased an ERP package with the aim of reducing significant numbers of employees. While every implementation is going to involve some change in job responsibilities, as processes become more MI0029 – Enterprise Resource Planning - 92 -

automated and efficient, it is best to treat ERP as an investment as well as a cost-cutting measure, rather than as a downsizing tool. ‘Downsizing’ is a business practice that may have its place, but it should not be cloaked within the glossier slogan of ‘reengineering’, or justified by the purchase of an ERP package. ERP should engender business change, but should not endanger the jobs of thousands of employees. The second use of the word reengineering in the ERP field [or business process reengineering (BPR) as it is usually called], refers to an ERP implementation model initially designed and used with much success by the ‘Big Six’ consulting firms. The BPR approach to an ERP implementation implies that there are really two separate, but closely linked implementations involved on an ERP site: a technical implementation and a business process implementation. The BPR approach emphasises the human element of necessary change within organizations. This approach is generally more time consuming, and has received its share of criticism for creating bloated budgets and extended projects. But adherents of the BPR approach to ERP, would argue that there is no way that you can ignore the human element in an implementation that involves significant changes in responsibilities. As the ERP market shifts to a mid-market focus, and as all implementations are becoming more cost-sensitive, the BPR approach has come under some real scrutiny. 6 Configuration This is the main functional area of the ERP implementation. There is a bit of mystique around the configuration process and for good reason: the Holy Grail or unwritten rule of ERP implementation is, synchronising existing company practices with the ERP package rather than changing the source code and customising it to suit the company. In order to do so, business processes have to be understood and mapped in such a way that the arrived-at solutions match up with the overall goals of the company. But, companies can’t just shut down their operations while the mapping processes take place. Hence the prototype–a simulation of the actual business processes of the company–will be used. The prototype allows for thorough testing of the "to be" model in a controlled environment. As the ERP consultants configure and test the prototype, they attempt to solve any logistical problems inherent in the BPR before the actual go-live implementation. Configuring a company’s system reveals not only the strengths of a company’s business process but also–and perhaps more importantly– MI0029 – Enterprise Resource Planning - 93 -

its weaknesses. It’s vital to the health of the company and to the success of the ERP implementation that those configuring the system are able to explain what won’t fit into the package, and where the gaps in functionality occur. For example, a company might have an accounting practice that cannot be configured into the system or some shipping process that won’t conform to the package. The company obviously needs to know which processes have to change in the process of implementation. Finding out what will work and what won’t requires a knowledge of the business process itself, and an ability to work with people throughout the company. So, people with such skills should be assigned to these tasks. As a rule, in most large implementations, the functional configurations are split between the different areas within the company, so some will attend to HR, some will be involved in financials and so forth. ERP vendors are constantly striving to lower configuration costs. Strategies currently being pursued include automation and preconfiguration. Baan for instance, has developed Orgware, an automated configuration tool, while SAP has pre-configured industryspecific templates that can be tweaked for each individual company (Accelerated SAP Solutions). 7 Implementation Team Training Around the same time that the configuration is taking place, the implementation team is being trained, not so much how to use the system, but how to implement it. This is the phase where the company trains its employees to implement and later, run the system. The ERP vendors and the hired consultants will leave after the implementation is over. But for the company to be self-sufficient in running the ERP system, it should have a good in-house team that can handle the various situations. Thus, it is very vital that the company recognises the importance of this phase and selects those employees who have the right attitude–people who are willing to change, learn new things and are not afraid of technology–and good functional knowledge. 8 Testing This is the phase where you try to break the system. You have reached a point where you are testing real case scenarios. The system is configured and now you must come up with extreme-case scenarios– system overloads, multiple users logging on at the same time with the same query, users entering invalid data, hackers trying to access restricted areas and so on. The test cases must be designed MI0029 – Enterprise Resource Planning - 94 -

specifically to find the weak links in the system and these bugs should be fixed before going live. 9 Going Live This is it. Lights on, switches thrown, gloves off. On the technical side, the work is almost complete–data conversion is done, databases are up and running; and on the functional side, the prototype is fully configured and tested and ready to go operational. The system is officially proclaimed operational, even though the implementation team must have been testing it and running it successfully for some time. But once the system is ‘live’, the old system is removed, and the new system is used for doing business.

10 End-User Training This is the phase where the actual users of the system will be given training on how to use the system. This phase starts much before the system goes live. The employees who are going to use the new system are identified. Their current skills are noted and based on the current skill levels, they are divided into groups. Then each group is given training on the new system. This training is very important as the success of the ERP system is in the hands of the end-users. So these training sessions should give the participants an overall view of the system and how individual actions would affect the entire system. In addition to these general topics, each employee is trained on the job or task that he/she ip supposed to perform once the system goes live. It is human nature to resist change. Also many people are afraid of computers and other new technologies. So there will be resistance to change. Another factor is that not all people will be successful in making the changeover. The company management should address these concerns and take necessary actions to avoid failure. The enduser training is much more important and much more difficult (since most end-users are not thrilled at having to change) than the implementation team training. Companies are beginning to take this phase seriously, as there is statistical evidence now, which shows that most implementations fail because of a lack of end-user training. Post-Implementation (Maintenance Mode)

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One important factor that should be kept in mind is that the postimplementation phase is very critical. Once the implementation is over, the vendors and the hired consultants will go. To reap the full benefits of the ERP system, it is very important that the system should get enterprise-wide acceptance. There should be enough employees who are trained to handle the problems that might crop-up. There should be people, within the company, who have the technical prowess to make the necessary enhancements to the system as and when required. The system must be upgraded as and when new versions or new technologies are introduced. Here the organization should think in terms of the incremental benefits of the new enhancements. Because with any upgradation or enhancements, there will be a lot of other aspects like user training that have to be considered. So instead of going in for upgradation as and when a new version is announced by the vendor, the organization should first analyse the costs and benefits. The post-ERP organization will need a different set of roles and skills than those with less integrated kinds of systems. At a minimum, everyone who uses these systems needs to be trained on how they work, how they relate to the business process and how a transaction ripples through the entire company whenever they press a key. The training will never end; it is an ongoing process; new people will always be coming in, and new functionality will always be entering the organization. 2. what is CAD/CAM and what are its advantages? [10 Marks] Answer : CAD/CAM is the other major focus area for the manufacturing sector. Traditionally, the automotive and aerospace industries are the largest consumers of CAD/CAM. With the automotive sector in the doldrums, vendors were not able to meet their expectations from this industry. On the other hand, the farm auto sector did better in comparison. Mahindra & Mahindra (Tractor Division) has grown considerably in the last three years and their manufacturing capacity has doubled. This is accompanied with significant enhancement in design capacity. Increasing design capacity is also a competitive edge for a company. For example, Tata Johnson Controls, which makes seating systems, started off by designing seats solely for Ford and then, with increased design capacity using advanced CAD/CAM, went on to supply seating systems to many other auto majors. The major focus area in CAD /CAM is on design analysis, MI0029 – Enterprise Resource Planning - 96 -

development, and manufacturing. Styling and ergonomics are the refinement areas to achieve design excellence. There were only marginal investments in modeling. There is also a trend towards reverse engineering, especially in the engineering and appliances industry. Manufacturing, companies in the BPL Group have taken up reverse engineering. Product data management (PDM) is another leading edge of the CAD/CAM philosophy. TELCO and Mahindra Ford have integrated many of their suppliers. For the supplier, it means enhanced competence and improved competitiveness. Many of these suppliers, with their improved design capacity anc integration with OEMs, have also started exporting. Brakes India is supplying brakes to many of the European auto manufacturers. Another reason, which prompts a company to make design an imperative is the improved alignment that many manufacturing organizations have acquired due to business process reengineering. An important trend is the integration of tier 1 and tier 2 suppliers with OEMs, for standard product information. In the heavy engineering sector, many companies have signed up multi year contracts with global majors like SDRC and PTC. BHEL has a five-year CAD/CAM contract across all units with SDRC. Similarly Siemens, L&T, and Lakshmi Machine Works are investing in CAD/CAM to beef up their research capability. Computer-Aided-Design/Computer-Aided-Manufacturing (CAD/CAM) advantages are following : · Graphics Capabilities: CAD systems allow the designer to view a product from different perspectives, including three-dimensional rotations, and various cross-sections. The designer can also make proportional changes in scale, or change the angle of an arc with the click of a computer mouse rather than having to redraw the entire product. · Design, storage and retrieval: Some CAD systems can store the design characteristics of existing products and components. Then, for example, if a company needs a gear for a new product, the designer can enter the relevant information about the gear, such as its diameter, tooth pattern, and required hardness, into the CAD system. The CAD system determines whether the company is already using an identical or sufficiently similar gear, in which case a new one is MI0029 – Enterprise Resource Planning - 97 -

unnecessary. If not, a gear that has similar properties may exist. The designer can then use the design of this similar gear as a starting point for the new gear. This capability not only promotes the use of common components but also reduces design time. · Automatic evaluation of specifications: One of the most timeconsuming aspects of design for highly technical products is calculating whether or not product specifications, such as strength, heat resistance or aerodynamic drag, are satisfied. These calculations can be programmed into some CAD systems so that whenever the designer changes the design (by altering the shape or material to be used), these performance characteristics are recalculated automatically and compared to the product requirements. This is sometimes called Computer-Aided-Engineering (CAE). The overall benefits of CAD systems can be substantial. The features described above reduce development time and cost, and they improve product quality because more design options can be evaluated in greater detail more quickly. For example, Motorola used threedimensional CAD to produce its award-winning MicroTac pocket sized cellular phone two years ahead of the competition. It is not uncommon for CAD systems to reduce product cycle times by 10-50%. Even greater time and cost reductions have resulted from recent advances whereby, CAD-engineered designs are converted automatically into software programs for computerised production machines. These are called Computer-Aided-Design/ComputerAssisted-Manufacturing (CAD/CAM) systems. This automatic conversion eliminates the costly and time consuming steps of having a person convert design drawings into a computer program for computercontrolled production equipment, such as robots or machine tools. CAD and CAD/CAM systems are not used by large automotive or electronics companies alone. Future Enterprises, the largest maker of wedding jewellery in the United States, reported that its CAD/CAM system reduced the time required to design and make jewellery from five months to one week. 3. What are the major steps towards total quality Management? [10 Marks] Answer : Total Quality Management is a structured system for managing the quality of products, processes, and resources of an organization in order to satisfy its internal and external customers, as well as its suppliers. Its main objective is sustained (if not MI0029 – Enterprise Resource Planning - 98 -

progressive) customer satisfaction through continuous improvement, which is accomplished by systematic methods for problem solving, breakthrough achievement, and sustenance of good results (standardization). There is no standard or hard-line procedure for implementing TQM. Every company can practice TQM in a manner it sees best for its organization. However, a company’s TQM program must always be structured and internally standardized, i.e., everyone within an organization must practice TQM in the structured manner set forth by management. TQM may be considered as a collection of principles and processes that have been proven to be effective in business quality management over time. It goes back to the teachings of Drucker, Juran, Deming, Ishikawa, etc, who each have studied and developed ideas for improving organizational management. A Major Step toward Total Quality Management By introducing a coherent set of audited processes to the product development cycle, a PDM system goes a long way towards establishing an environment for ISO9000 compliance and Total Quality Management (TQM). Man} the fundamental principals of TQM, such as ‘empowerment of the individual to identify and solve problems, are inherent in the PDM structure. The form controls, checks, change management processes and defined responsibility also ensure that the PDM system you select, contributes to the organization conformance with international quality standards. Make-to-Order (MTO) and Make-to-Stock (NITS) One way to classify the manufacturing operations is by the amount of processing the product requires, after the company receives an order from customer. At one end of the processing spectrum is the make-toorder (MTO) company. This company does not begin processing the material for the component or product until it has received an order from the customer. In some cases, the company may not even procure the material and components until after it receives the order. This type of manufacturing operations is practiced when the company competes on the basis of product customisation and serves its customer base by providing unique and/or highly specialised items. The MTO company also bases its production planning on firm customer orders.

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At the opposite end of the spectrum is the make-to-stock (MTS) company, which manufactures products and places them in inventory before it receives customers’ orders. Either the customer purchases the products directly from the inventory at a retail outlet, or the company ships the product ‘off-the-shelf from the finished goods inventory at the factory or at a distribution centre. MTS companies rely heavily on market analysis and demand forecasting in planning the production of their products with respect to the product mix and volume. Figure 4.2 shows the relation between the output variety (degree of customisation) and the type of manufacturing operation. As is evident from the graph, the output variety is highest when the company is operating in the make-to-order mode, as the companies can serve each and every individual customer in the way he/she wants. But the cycle time will be more and the cost of the product will also be more. But in the case of a MTS company, the products are already made and kept in the inventory for the customer to pick up. Here, the customer won’t get any individual attention or customisation; he can buy what is available with the company. The MTS company will be making products in lots and the cost of the products will be less as the economies of scale will be at work and there will not be any waiting period for the customer after placing the order. Assemble-to-Order (ATO) Another variation of the manufacturing operations is the assemble-toorder (ATO) company. The assemble-to-order company manufactures standardised, option modules according to the forecasts it has made and then assembles a specific combination, or package of modules, after receiving the customer’s order. The classic example is the automobile manufacturer. After receiving orders from a host of dealers, the manufacturer specifies the exact production schedule for the automobiles.

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Above Figure shows Relation between output variety and the type of manufacturing process.

The schedule is based on the options order by the customers— automatic transmission or manual transmission, air-conditioning, standard or digital control panel, leather, cloth or vinyl seating, a so on. Many components for assembling the automobiles would have be ordered or started into production before receiving the customer’s order based upon demand forecasts. Thus, the major processing that remains when the orders come in is assembly. This approach shortens the time between placement of the order and delivery of the product – cycle time. Engineer-to-Order (ETO) Yet another variation of the manufacturing operations is the engineerto-order (ETO) company. The engineer-to-order company is the ultimate in product variety, product customisation and flexibility. In this mode of operation, anything will be manufactured as per order – but at a price. The expensive clothing of the ‘bold and beautiful’ is an example of this kind of production. Products are made for each customer and even the minute details, for example, the texture and feel of the cloth, the color of the threads, the size of the collar and so on will differ from one customer to another, depending upon the customer’s preferences. So the manufacturer cannot keep anything in inventory, he will have to order only once the customer has given his/her specifications. Obviously, the cost of production will be highest in this mode of production.

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Configure-to-Order (CTO) Along the broad spectrum of make-to-order manufacturing, there is a growing convergence between strictly assemble-to-order (limited options and features) and completely engineer-to-order (just about anything goes, at a cost) environments. This evolving environment is often referred to as configure-to-order. Using a rules-based product configuration system, configure-to-order (CTO) manufacturers are able to simplify the order entry process and retain engineer-to-order (ETO) flexibility, without maintaining bills of materials for every possible combination of product options. Manufacturing planning and control is broadly categorised as either make-to-order (MTO) or make-to-stock (MTS). The material and production planners within these communities confront unique challenges in the face of demand management. MTS manufacturers produce end items that are stocked and are ordinarily available, prior to receipt of a customer order. For MTO manufacturers, the identity of the end item is often unknown until the receipt of a customer order. As a result, a certain level of standard subassemblies is typically inventoried to expedite delivery of the finished product. Traditionally, MTO manufacturers have had to choose between ATO and ETO. ATO suppliers face the need to extend product lines, add features, and increase flexibility to meet customer demands. ETO manufacturers feel a pressure to standardise at least some of their product lines to reduce costs and remain competitive. Today, the CTO environment has emerged in response to customers’ demands for individualised products with shortened lead-times, improved quality and competitive prices. Virtually any manufacturer that uses features, options, or variable dimensions is a candidate for entering the CTO environment. Transitioning to a CTO environment requires an evolution of the core planning tools that support the business. Traditional MRP tools rely on predefined bills of material and routings to support the planning process. For those moving from an ATO environment, existing bills and routings no longer represent the increasing end item availability and complexity. For material and production planners, the transition to CTO combines the challenges of planning in ATO and ETO environments. MI0029 – Enterprise Resource Planning - 102 -

Planners are responsible for determining material and subassembly quantities at the right time. Faced with the lengthy new product introduction process, planners have virtually no advance information. The new or modified manufacturing bill is not available until after the customer order is received. Until a sales history is accrued for the newly introduced features and options, planners are not able to monitor and improve forecasts. Without software support tools, planners have few alternatives in developing a planning platform. Generally, bills and routings are constructed to reflect the manufacturing process. Each level of the bill and associated routing steps, represent individual shop orders. Planners work with a different set of bills and routings, that are structured to represent demand percentages and load consumption of various options and defined common subassemblies. When customers request either a subtle change to a previous order or a complete new design, new part numbers have to be created, bills and routings developed or copied and modified, and costs assigned and rolled up Finally, accounting can calculate if there is any profit margin. By the time planners have access to the final bill and routing, material requirement! planning (MRP) and capacity planning (CP) have nothing to say except ‘expedite’ and ‘overload.’ One option is to pre-define all possible combinations of options and features, even if many will never be sold. This approach creates an engineering maintenance nightmare, however, and does nothing to facilitate forecasting Another option is to manually create part numbers, bills and routings on a ‘as needed’ basis. Not only is this a time-consuming process, but it is also prone to errors. The only other option is to develop cumbersome combinations of ’special’ sales orders and phantom part numbers, creating an enterprise-wide nightmare. In response to the need for an accurate planning platform, several manufacturing software packages are now available with powerful ‘configurations.’ The configuration process allows orders to be taken by answering questions with pre-defined rules, that reduce order and entry errors. Many configurations also support the entry of a specific code string that allows customers to order ‘just like the last time’ or ‘just like the last time but make these yellow instead of red.’ The configuration then populates the attributes of the newly configured item, tests for configuration conflicts, and generates the appropriate bill of material, routing and price based on rules and calculations.

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The part number, assigned to the new item, can be formatted as an intelligent part number or simply given the next sequential assignment. The end item description and operation text in the routing reflects the result of the entry selections or text keyed directly by the operator. Setup and run times in the routing and quantity per assembly in the bills, can be calculated based on selections or user inputs. The key component of a configuration is the blueprint of valid combinations of features and options. This blueprint, or ‘CTO model’, uses a traditional bill of material model with parent and component relationships. Rules and calculations then ensure that the resulting configuration can be built by defining the way to build it and also establish a selling price. The flexibility of establishing this CTO model is clearly an important aspect of selecting the best configuration software for your business. Few functional areas are exempt from the impact of transitioning to a new way of entering sales orders; automatically generating new part numbers, bills and routings; building and shipping products; and recording the financial results of doing business. The design of the CTO model must support: · Ease of quoting and order entry. · Accurate pricing, discounting and commissioning. · Essential customer documents such as packing lists and invoices, required shop paper, and applicable financial records. Input from product data management, sales and marketing, manufacturing, and finance is required to develop a CTO model that supports the integrated environment. It is important to understand how the configuration generates the "appropriate" bill of material and routing because they are at the core of the planning process. Typically, a CTO model represents a translation of product engineering rules that define relationships among product options, materials and manufacturing processes. Multiple CTO models differentiate different sets of valid relationships and required processes. The CTO model presents valid options within a model, and applies rules or calculations based on selections. For example, a CTO model of a personal computer would have a set of component options such as case styles (slimline or tower), CPUs (66 or 100 MHz), hard drives (520MB or 1.2GB), and monitors (VGA or SVGA). Structured beneath the options would be the real item part numbers. (There could be several levels of options before the real part number level.) MI0029 – Enterprise Resource Planning - 104 -

Key considerations for material and production planners are the modularity of the real bills of material that will be combined in the configured end item, and the level at which sales analysis records will be stored. In many instances, the structure (if bills and routings exist at all) needs to be re-examined in light of how it will support the CTO model. With the introduction of configurations, the lengthy process of product introduction is greatly reduced by the ability of the configuration to automatically create new part numbers, generate bills and routings, and assign prices. However, unless the manufacturing bills have been reviewed and contoured to a CTO model, the result is often inaccurate/inadequate information, faster! With the architecture of the CTO model, and the ability to capture sales analysis information at the option level, planners have a tool to improve their planning models. The ability to capture sales analysis records on the options provides the ability to accrue data for use in forecasting software. For example, within the accessories option, each occurrence of a mouse, modem NIC, sound card and CD-ROM selection is captured as a sales analysis record. This information is available for summarisation at a month or year end. The data, can be reviewed and massaged, then input to the forecasting algorithms. Instead of forecasting at the accessory level with the use of percentage bills of material, information is automatically monitored and maintained at the detail level. The considerable power of configuration software provides the means t< quickly develop accurate part, bill, and routing information. In addition t< maintaining sales analysis information at the configured item level, detail information by option is also available. This provides a powerful database for the dissection of market data. It also becomes the foundation for improving forecasting and planning capabilities.

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