Page 1 of 10 Trends Affecting Manufacturers and ERP* The evolution of ERP systems has been driven by the emergence

of new business practices and information technologies. These have been supported by the growing maturity of the manufacturing profession, and by the evolving development of commercially available software packages. New business practices include supply chain management, customer-oriented strategies and customer relationship management (CRM), just-in-time (JIT) and lean manufacturing, virtual manufacturing, and "demassified" multi-site operations. These new business practices sometimes represent a reformulation and synthesis of previous ideas, or current themes in the literature. New information technologies include ecommerce, computer integrated manufacturing (CIM), and advanced planning and scheduling (APS). The commercially available software packages reflect variations in origins and orientation, as well as software maturity. Although progress has been made to standardize vocabulary and conceptual frameworks for generally-accepted manufacturing practices, the underlying design of each ERP software package reflects wide variations in interpretation of these practices. *This is Part One of a three-part article reprinted from Maximizing Your ERP System by Dr. Scott Hamilton. Bridging the theory and realities of current ERP systems, Maximizing Your ERP System provides practical guidance for managing manufacturing in various environments. Drawing on case studies from Dr. Scott Hamilton's first-hand experience in consulting with more than a thousand firms, it covers common problems and working solutions for how to effectively implement and use ERP systems. This excerpt on "Trends Affecting Manufacturing and ERP" is drawn from one of the book's twenty-five chapters. The book can be ordered on The trends discussed in this part are: Supply Chain Management Customer-Oriented Strategies and CRM JIT and Lean Manufacturing Reprinted with permission from McGraw-Hill. Supply Chain Management Supply chain management (SCM) emphasizes the need to model the manufacturing enterprise from the perspective of the supply chain in order to synchronize supplies with demands and respond to change. An ERP system provides the tools to model various supply chain scenarios, from simple to complex. In many ways, the perspective of supply chain management has helped push the evolving scope of ERP applications. The supply chain model for a particular manufacturing enterprise reflects the company's product, industry, and its position within the supply chain. Supply chain models range from the simple to complex. The two supply chain models shown in Figure 2-1 help illustrate the impact on an ERP system.

In addition to internally produced items. requiring visibility of available inventory across the distribution network. The ERP system must handle buy and make items. Items may also be drop-shipped from supplier and subcontractor sites. it supplies components for external production at subcontractors and sister plants. It involves multiple sites. authorized distributors (for approved manufacturer part numbers). distributors. For example. On the demand side. make items. and transfer items for both "buy complete" and "subcontracted" products at sister plants. with inventory at distribution centers replenished from manufacturing plants. Sales orders can be shipped from designated sites. and internally produces items for direct sale and shipment to customers. Previous Page 3 of 10 Customer-Oriented Strategies and CRM . More Complex Model. an ERP system must handle inventory stocked at customer sites and supplier's material stocked at the manufacturing enterprise. The "complex" manufacturing enterprise sells and ships products direct to customers and through multiple sales channels. and from sister plants. The ERP system must handle buy and subcontract items. The "complex" manufacturing enterprise buys items from external suppliers. such as resellers.Figure 2-1 Supply Chain Models Simple Model. Supply chain concepts also intersect with JIT and virtual manufacturing strategies. supply chain management concepts intersect with the philosophy of customer-oriented strategies and e-business. and original equipment manufacturers (OEMs). Initiatives in supply chain management have created other requirements for ERP applications. The "simple" manufacturing enterprise buys items from external suppliers. The supply chain perspective has helped expand the scope of ERP beyond coordination of internal production activities to align supplies with demands. and a single-site operation.

The benefits are reflected in future streams of revenue (as measured by customer lifetime value). a rules-based configurator can define customer requirements and suggest appropriate products. Note that some applications support more than one step. This include direct sales order placement. Example. a willingness to pay price premiums. eliminating intermediaries while offering "no hassle" immediate information to customers. Example. or create a quote for a custom production configuration. It continues through product acquisition and ends when the customer terminates product usage. The steps in the customer relationship follow a predictable pattern. and a hesitation to switch to competitors. and inquiries about order/shipment status. Figure 2-2 identifies the life cycle steps with illustrations of ERP applications that address each step. referrals. and have been termed the customer relationship life cycle. Figure 2-2: ERP Applications across the Customer Relationship Life Cycle Innovative uses of information technology illustrate how some of the applications noted in Figure 2-2 can increase the level of customer service and differentiate a firm's goods and services. Portable computers make it feasible for a salesperson." For example. beginning with the customer's initial contact with the firm. . and differentiating some aspect of the enterprise behavior. or analyst to use ERP applications during face-to-face meetings for quick responses without waiting until they are "back at the office.ERP applications have evolved to cover the entire spectrum of customer service. field service representative. E-business can provide customers with direct access to ERP applications. along with loyalty. Information technology (IT) applications can be used in every life cycle step to differentiate interactions with the customer. Customer-oriented strategies focus on building relationships with the most valued customers via costeffective interaction.

Changes in organizational structure. These changes reflect the basic thrust to simplify operations and eliminate waste such as unnecessary transaction processing. procurement. This has also been termed a demand-pull or flow manufacturing strategy. sales order. such as a manufacturing cell. The customer benefits from improved customer service. and alters the planner/buyer responsibilities for coordinating supply chain activities. Lower costs may be achieved because of cost efficiencies and the long-term commitments expressed in extended contracts and stable demand patterns. a reliable source of supply.g. a JIT approach requires several changes in business structure. A customer-oriented strategy can also be employed when the customer and manufacturer are closely linked in a partner relationship. Possible changes to factory layout. Product design is changed from a sequential. and elimination of inspection operations and setup time. This involves overcoming old values (e. Page 5 of 10 JIT Impact on Product/Process Design Changes to factory layout are reflected in definitions of new resources.ERP applications addressing these customer service steps have often been developed independently. reducing staff support functions (such as industrial engineering. about large lot sizes. The CRM applications require integration with the rest of ERP applications. responsibility. Page 4 of 10 JIT and Lean Manufacturing A just-in-time or lean manufacturing strategy focuses on simplifying operations and eliminating waste. A JIT approach also requires changes in an ERP system. and product information. faster run rates reflecting process improvements. This involves increasing the responsibilities of production personnel. segmented approach of hand-offs (from marketing to design engineering to manufacturing engineering to purchasing and production) to simultaneous engineering by an interdisciplinary team. Changes to routings include date effectivities for phasing-in factory layout changes. and processes. such as the software packages referred to as customer relationship management. A JIT approach specifically impacts ERP applications for product/process design. To be successful. Changes in process design often result in significantly . and cost accounting.. such as dedicating a manufacturing cell or "focused factory" to a family of similar products. and possibly lower costs. such as the integration of customer master. and promotes a flexible manufacturing organization that can produce to exact customer demand. and quality control). long runs. production control. and worker capabilities and attitudes. and inventory buffers) and instilling new ones. or other group of people/equipment. Changes to the product design process. production. and eliminating layers of management. demand management. assembly line. management policies and practices. Factory layout changes involve simplification of material flow. Changes in corporate culture. Changes to responsibilities. The customer service chapter provides further explanation of CRM applications and the integration with an ERP system. These resources have different cost structures and routing operation times. A JIT approach typically eliminates separate inspectors.

visual or electronic signals communicate the need for replenishment of stocked items and for make-to-order items. for example. These may be expressed in electronic signals. from weeks to days or even hours). In many cases. provides the basis for kanban replenishment quantities and trigger points. where the shipments trigger auto-deduction of material components and resource usage. Production may be coordinated using an electronic "kanban board" by a work center to identify items/quantities to complete. The identity of the pacemaker resource. Completions can result in auto-deduction of materials and resources. and inventory plans²can be used to calculate the projected daily usage rates for stocked items. or multiple potential constraining resources. forecasts.. Sales orders trigger production of make-to-order items. In the simplest form of JIT. production schedules. products with widely varying time requirements for the pacemaker resource(s). for example. These environments can be characterized by longer manufacturing cycle times. Previous Page 6 of 10 JIT Impact on Demand Management Demands within ERP²stemming from sales orders. for example. Page 7 of 10 JIT Impact on Production A JIT production environment often synchronizes production activities using replenishment signals. The simplification efforts embodied in JIT and lean manufacturing strategies typically simplify the nature of production scheduling. and completions may be assigned to a time period for tracking costs by period (rather than by order). The production rate (or work released to production) should match the demand rate. or visual signals such as empty containers or kanban cards.g. requiring a dynamic daily usage rate. production of various items within a product family involves a single linear flow and a single constraining resource or pacemaker. and recommended planner actions. An ERP system requires new replenishment methods to support JIT approaches to replenishment. Replenishment of a stocked item. resources with differing capabilities. JIT Impact on Procurement Next . thereby eliminating traditional coordination tools such as manufacturing orders. In this "order-less" environment. Some JIT environments require more advanced scheduling capabilities. thereby impacting approaches to sales and operations planning and to production scheduling. This demand rate (also called takt time) can fluctuate over time. An inventory buffer or time buffer is typically defined for the pacemaker resource to ensure continuous operation. you only enter sales orders and record shipments. Previous upstream activities are paced accordingly and production operates at a continuous flow. the need to synchronize multiple parallel legs (rather than a single linear flow).reduced production lead-times (e. A dynamically calculated daily usage rate. may change based on product mix changes. especially when production lead-times (or manufacturing cycle times) can be reduced to hours (or days) . may be triggered by an empty container or by inventory transactions that reduce an item's inventory below a re-order point.

Figure 2-3 Case Study: A JIT Demand Pull Scenario Next Page 10 of 10 Need for Order-Less and Order-Based Capabilities Most firms involved in orderless manufacturing require ERP applications that can support both orderless and orderbased production. As shown in Figure 2. For example. and available-to-promise logic ensures the promised delivery fits within the production rate of the assembly line. The shipment transaction backflushes floor-stock material based on the end-item's bill of material. The end-item gets produced to actual sales orders. Previous Page 9 of 10 Case Study: A JIT Demand-Pull Scenario An industrial products manufacturer initiated its JIT efforts by constructing a manufacturing cell for producing similar products that were a subset of all items being produced. These firms are just starting JIT . Material receipts are typically recognized as a release against a blanket purchase order. It also had a dedicated feeder line producing an intermediate item.JIT can also synchronize procurement activities using electronic or visual replenishment signals. kanbans.3. the supplier may access his version of the electronic "kanban board" to coordinate replenishment. A vendor schedule can be used to communicate long-range requirements to a supplier. suppliers replenished floor stock inventory for the manufacturing cell and feeder line based on electronicallycommunicated.

The book can be ordered on amazon. Previous ERP and Virtual Manufacturing Virtual manufacturers contract with suppliers for outsourcing almost all manufacturing activities. He can be reached at ScottHamiltonPhD@aol. Back to Top . mean that an ERP system must handle bills for buy and subcontract items. and repairs. or have partial JIT implementations with a subset of the factory and products. Scott Hamilton's first-hand experience in consulting with more than a thousand firms. It may need to recognize different costs for an item stocked in two locations. An ERP system must handle subcontract purchase orders. handle sales orders that designate the ship-from location. Depending on the virtual manufacturing scenario. and communicate shipping requirements to the different locations. and helped design several influential ERP packages. Hamilton has conducted hundreds of executive seminars. A subcontract item's bill defines the subset of components that will be supplied to the subcontractor. Scott Hamilton. This concludes Part One of a three-part article reprinted from Maximizing Your ERP System by Dr. summarized in Figure 2-4. Maximizing Your ERP System provides practical guidance for managing manufacturing in various environments. Bridging the theory and realities of current ERP or (612) 963-1163. They define the items and bills within an ERP system. Drawing on case studies from Dr. the bill defines reference information for a "buy complete" item. taught MBA classes at four universities. and track kits of components as well as direct-ship components to the subcontractor. engineering projects. This excerpt on "Trends Affecting Manufacturing and ERP" is drawn from one of the book's twenty-five chapters. Dr. About the Author In addition to consulting. A virtual manufacturer takes responsibility for the complete product design for documentation and costing purposes. or the internal production activities for a "make" item. These bills can be used for cost roll-up and material planning calculations. the supplied material for a "subcontract" item. it covers common problems and working solutions for how to effectively implement and use ERP systems. Variations in virtual manufacturing scenarios. such as custom product It may need to track overseas shipments and capture the landed costs. Even manufacturers with complete JIT implementations may have some order-based activities.implementations. new product development.

Scott Hamilton. and either kits them for shipment to the subcontractor or has them drop-shipped directly. The end item may be stocked at the subcontractor or sent to the virtual manufacturer. or sent back to the virtual manufacturer's location. Buy Complete. This is Part Two of a three-part article reprinted from Maximizing Your ERP System by Dr. Multiple levels of subcontractors may even be used. Scott Hamilton's first-hand experience in consulting with more than a thousand firms. The book can be ordered on amazon. The virtual manufacturer purchases the end-item "complete. with the possibility of different item costs between the locations. The subcontractor makes an intermediate The virtual manufacturer purchases these component parts. for subsequent shipment to a customer. it covers common problems and working solutions for how to effectively implement and use ERP systems. . Inventory of the end item may be kept at the supplier. Drawing on case studies from Dr. The virtual manufacturer purchases all components "complete. where some or all of the component parts are supplied to the subcontractor (either as a kit or direct drop-shipment). such as high shipping costs from an overseas vendor." with internal final assembly and test of the end item. The subcontractor sends the completed intermediate to the virtual manufacturer. where some or all of the component parts are supplied to the subcontractor. The trends discussed in this part are: ERP and Virtual Manufacturing "Demassified" Multisite Operation E-business (or E-commerce) For the first three trends discussed.Figure 2-4 Virtual Manufacturing Scenarios Final Assembly + Subcontract Manufacturing. Final Assembly. Subcontract Final Assembly. The subcontractor makes the end item. who performs final assembly with other components and tests the completed end item. Maximizing Your ERP System provides practical guidance for managing manufacturing in various environments. Costs of the item may differ between the two locations because of high transportation costs. Bridging the theory and realities of current ERP systems. This excerpt on "Trends Affecting Manufacturing and ERP" is drawn from one of the book's twenty-five chapters." No components are supplied to the vendor. go to Part One.

an autonomous ERP system fosters the sense of "ownership" within plant management. rather than a large centrally managed organization. they have experienced difficulties in implementing a centralized ERP application. they can be implemented faster and at less cost. a newly acquired unit must convert from an existing information system to a system that meets central specifications. It facilitates the ability to tailor the application to local operational requirements and management style. Stand-alone ERP applications can be easily deployed at remote sites of larger firms. It helps middle managers become profit-oriented. Less MIS expertise is required for system administration. since the system and site stay together. The Advantages of Decentralizing the Organization The movement to smaller plants has an objective of fostering an entrepreneurial spirit and "ownership" within the plant management and employees. These thrusts to "demassify" the organization have been coupled with efforts to push decision making down in the organization. In many cases. empower the local management team. Stand-alone ERP applications work best in autonomous manufacturing sites. reduce corporate staff. Operations management typically drives the decision to decentralize and downsize the ERP systems. They also question the costs (or allocations) of corporate MIS services and consulting assistance. Next . With a centralized ERP system. while enforcing consistent corporate procedures via a standardized ERP package. In particular. with replenishment from multiple plants. such as an off-shore manufacturing plant. The degree of coordination between business units affects the ability to decentralize and downsize the ERP applications. and eliminate layers of management. The minimum coordination typically reflects periodic updates of the corporate general ledger using the plant's consolidated general ledger data. Divesting a business unit may change the overhead allocations and pricing for services from the central ERP system. For example. Associated with this general trend is decentralization of the ERP systems and the MIS function. Decisions are delegated to personnel who best understand the local operation and can create the best solutions to problems in the shortest time. Compared to mainframe centralized applications. and end-user decision support tools (such as spreadsheets and report-writers) make users less dependent on MIS staff for customizations. and inadequate support from a corporate MIS function. A standalone ERP application facilitates the acquisition and divestiture of an autonomous site.Page 2 of 9 "Demassified" Multisite Operations Many firms with multisite operations are adopting a management bias towards small autonomous business units. The smaller size reduces bureaucracy. a centralized ERP application is typically required for a firm that takes sales orders for shipment from multiple distribution sites. It gives them greater control of the tools to plan and control their business. Previous Page 3 of 9 Decentralizing Information Systems for ERP The availability of low-cost easy-to-implement micro-based ERP systems has enabled and accelerated the movement to downsize. which typically require minimum coordination between sites.

. which operated as autonomous business units to manufacture and sell products to Chinese markets. On the customer side. a fully-configured ERP system (hardware and software) was shipped from the corporate office. A large US-based transportation equipment manufacturer established several overseas plants in China. customers can place orders and check status at any time of day without waiting for normal business hours or availability of customer services personnel. E-business applications represent 24/7 availability for customers and suppliers. termed e-business or e-commerce applications. or custom products with predefined options. with payment by credit card. The US corporate plant supplied components to the overseas plants.Page 4 of 9 Case Studies on Autonomous Sites A Swedish consumer products company involved in appliances has over 100 plants around the world. where a web site enables companies to buy and sell from each other using a common technology platform. Orders are often placed by one-time customers. delivery and price. Each plant operates as an autonomous business unit with its own ERP system. Collaboration in a business-to-business relationship (sometimes termed c-commerce) can be carried out within a framework that integrates the firms' business processes and manages knowledge across organizational boundaries. E-business applications differ slightly between business-to-business and business-to-consumer relationships. As each site was established. Work-flow capabilities²with access to technical documents/drawings and electronic signoff procedures²can facilitate this collaboration. Collaborative product development. One example involves an on-line catalog of standard products.Business-to-business (termed B2B) relationships generally involve negotiation and collaboration. for example.Business-to-consumer (termed B2C) relationships do not generally involve negotiation and collaboration. One example involves an electronic marketplace or trading exchange. Previous Page 5 of 9 E-business (or E-commerce) An ERP system provides the foundation for many electronic business applications. The management and ERP system were ready to run each remote plant on the first day of operation. The database and associated procedures had already been prepared by the local management team during training sessions at the corporate offices. It was especially critical that the ERP software vendor had language translations and local support for the 15 languages (and 25 countries) encompassed by the multi-site operations. for example. covering issues such as product specifications. with fixed prices. may involve multiple trading partners providing components. and reduced personnel requirements for handling inquiries and coordination. . Page 6 of 9 EDI Applications Next .

The core concept is that basic transactions in supply chain activities can be replaced by electronic communication. which flow through to an ERP system for specifying customer requirements. and advanced ship notices upon shipment to customers. such as the 856 transaction for an advanced ship notice transaction. typically via the "shopping cart" analogy. . The system provides availability and pricing information. or use "expert assistance" to guide them to the correct product. To load their shopping cart. include releases for shipment and shipping schedules (from the customer) that represent demands. Page 7 of 9 Quotes and Sales Orders E-business can facilitate collaboration between the customer and sales (or the sales channel). It can be structured around the key constructs in an ERP system. The user can save the cart (with a user-specified description) for subsequent use. The system may identify previous purchases. The vendor schedule in one ERP system. a user can directly identify items. can be generated as standard EDI transactions and subsequently translated into a customer shipping schedule in a second ERP system.EDI standards have been developed for US markets in various industries. such as quotations and sales orders. Figure 2-5 Supply Chain EDI: Basic Transactions for Scheduling & Delivery An EDI transaction requires a mapping between the standard transaction format and the transaction format in an ERP system. Each transaction has been identified by an ANSI identifier. for example. specifications and other descriptive information. Some of the basis transactions. select from user-defined templates or previous orders. such as text or other objects. Other standards apply in European and Asian markets. The customer can obtain quotes and enter sales orders directly. This step in sales order processing²termed "configure order"²often precedes the actual sales order. It can support attachments to the quote/order. and suggest related purchases (for up-selling and cross-selling purposes). and access to product pictures. select from catalogs. The standard EDI transaction format provides a bridge between two different ERP systems. shown in Figure 2-5. such as automotive and retail industries.

A rules-based configurator can prompt the user through a decision-tree of questions. Computer-aided design applications require item data from an ERP system and provide item and bill of material data to an ERP system. coordination of functional activities to meet strategic plans. Scott Hamilton's first-hand experience in consulting with more than a thousand firms. The book can be ordered on amazon. such as credit card processing. Efforts to link these stand-alone applications to ERP are termed computer integrated manufacturing (CIM). and gathers additional information to process orders from "guest" or new customers. ERP and Computer Integrated Manufacturing (CIM) Individual standalone IT applications for structured tasks have been reasonably easy to justify and implement in a specific functional area. and revised as needed. Maximizing Your ERP System provides practical guidance for managing manufacturing in various environments. Labor transactions may also feed a time and attendance system or a payroll application.A custom product can also be configured without personal assistance. . and integration of activities between the firm and its customers and suppliers. Shop floor data collection applications require information about manufacturing orders and routings from an ERP system. Confirmations can be sent via e-mail about the quotations. The system prompts established customers for ship-to and bill-to information. Some examples are a computer aided design (CAD) system in design engineering. The relationship between CIM applications and an ERP system can be demonstrated by examples of data exchanges that loosely couple the parts of the system. It provides integration across functional areas. Bridging the theory and realities of current ERP Drawing on case studies from Dr. This excerpt on "Trends Affecting Manufacturing and ERP" is drawn from one of the book's twenty-five chapters. The configuration can be saved as an item in the shopping cart. a statistical process control (SPC) application in quality management. The "check out" process enforces credit management policies and payment methods. Scott Hamilton. and an automated material handling system in distribution. Each item in a shopping cart represents a line item on a quote. This is Part Three of a three-part article reprinted from Maximizing Your ERP System by Dr. sales orders and shipments. it covers common problems and working solutions for how to effectively implement and use ERP systems. They provide material movement and labor time transactions to an ERP system. Page 2 of 8 Examples of CIM Applications An ERP system provides the basic planning and control system to manage a manufacturing operation. and the "check out" process converts the cart contents to sales order line items. and provides pricing information based on responses. The trends discussed in this part are: ERP and Computer Integrated Manufacturing (CIM) ERP and Advanced Planning and Scheduling (APS) Evolution of ERP Software Packages ERP and Generally Accepted Manufacturing Practices For the first six trends discussed go to Part One and Part Two.

A sales forecasting system may be as simple as a standard micro-based software package. shipments. This quality data can supplement standard ERP functionality. Automated assembly systems and flexible manufacturing systems require ERP information about the manufacturing schedule and product/process design. it is critical that business processes be reengineered and simplified. Events within an ERP system can be monitored so that additional applications get launched. component parts and identification of numerically controlled machine programs. The same tool also enables other applications to update the ERP database. quality data may be collected about defects and reason codes. the tools should enable you to extend and supplement ERP functionality without affecting source code. such as lot. such as spreadsheets and report-writers. They provide information about manufacturing events. such as data collection systems and rules-based configurator packages.Quality management applications. can provide detailed tracking of manufacturing processes. invoices and returns that provide key inputs to generating a statistical forecast. Previous Page 3 of 8 Approaches for Integrating CIM Applications Several approaches can be taken to link CIM applications with an ERP system. such as units completed and scrap. or personnel get notified as a result of the event. The cost and difficulty of integrating a CIM application increase as the level of integration becomes more extensive. Events occurring outside the ERP system may also be monitored to trigger actions. such as routing details. Data Import. Data import capabilities can be used to initially load the ERP database with data from existing systems. An ERP system maintains historical sales data about bookings. and the resulting forecast provides the primary inputs to ERP for a sales plan and inventory plan. Automated material handling systems require information about picking and shipping schedules from an ERP system and provide material movement data to ERP. The tools include: Open Database Connectivity (ODBC) Design. Previous Page 4 of 8 ERP and Advanced Planning and Scheduling (APS) Next . or a customized decision support application. An ODBC design within an ERP system makes it easy to access the data with off-the-shelf industry standard decision support tools. A data export capability provides the additional benefit of extracting ERP data for use in an external application.and serial-tracking and inspection requirements. so that you can easily upgrade to new releases from the ERP software vendor. Before undertaking significant capital outlays for CIM integration. For example. Event Manager. such as an SPC and laboratory information management system (LIMS). tools. Tools provided by the ERP software vendor and the software's database management system facilitate (or constrain) the approaches for integrating CIM applications. Ideally. or about product attributes.

where the level of integration evolved through several design iterations. The ERP application supported infinite capacity planning to identify overloaded periods for key resources. Page 5 of 8 Case Study: Integrating MRP Logic and an APS Application One ERP software vendor integrated a stand-alone APS application with its ERP system. In the context of production activities. which means demands must be adjusted to align with the schedule (such as revising sales order delivery promises). APS logic can have difficulties with component date effectivities. subcontract purchase orders. The ERP system acted as the master database for resources. by-products/co-products. bills/routings. For example. detailed routing information. Actual production activities reported in the ERP system provided the basis for calculating remaining work in the APS application. MRP logic uses backward infinite scheduling to explode demands for make items through the bills and generate production schedules. The APS logic underlying a specific schedule can be very complex. as well as less expensive. Many ERP systems provide APS logic as a supplement to MRP logic. APS applications have been maturing so that they are becoming easier to implement and use. APS logic uses finite scheduling based on capacity and material constraints to synchronize activities in the supply chain. planned manufacturing orders. it helps to understand the starting points of MRP logic and APS logic. phantoms. It assumes infinite resource capacity and no material constraints. It uploaded the resulting schedule to the ERP system for coordinating procurement activities and making delivery promises. and generated detailed production schedules for each resource. manufacturing orders (generated by MRP logic). inventory buffers by resource. some ERP systems calculate a variable lead-time and operation due dates that reflect simplistic models of available capacity and scheduling rules. The comprehensive modeling and finite scheduling logic have a degree of complexity making APS difficult to implement. Using MRP logic provides a simple yet sufficient synchronization of supply chain activities for many environments. APS logic can generate schedules that do not meet due dates. bill of material .Many ERP systems employ MRP logic as the primary engine for coordinating supply chain activities. Advanced planning and scheduling (APS) logic represents a major change from traditional MRP logic for scheduling purposes. To explain the differences. and inventory/purchases. requiring manual adjustments to loads or available capacity during overloaded periods. the integration handled phantoms. and finite scheduling rules. The APS application performed finite scheduling using resource and material constraints. This means the scheduling person requires easy drill-down to the scheduling exceptions and rationale. APS automatically schedules manufacturing orders (and operation due dates) based on comprehensive models of available resource capacity. such as a finite scheduling module. The following case study highlights some of the issues in integrating APS logic with MRP logic. This data was replicated in the APS application. The focus of APS logic²manufacturing orders²seems to run counter to JIT philosophies involving order-less manufacturing. With manufacturing orders. APS logic has been incorporated into some ERP systems as the primary engine for coordinating supply chain activities. where the APS application supported comprehensive models of resource availability. Schedules automatically generated by APS may need manual overrides. and resource availability was then modified in the APS application. Integration between the APS application and the ERP system covered most of the manufacturing issues. In addition. and other issues.

reporting requirements. multiple parallel legs (rather than a single linear flow). TOC starts with the production rate of the pacemaker resource. APS logic and the TOC approach both employ detailed routing data to schedule orders through the pacemaker or bottleneck resource. and updates to the order-dependent bill in the ERP system. Previous Page 6 of 8 APS Logic and the Theory of Constraints The theory of constraints (abbreviated as TOC) is a management philosophy that focuses attention on the constraining resource within a production process. resulting in the timely release of materials to support scheduling at the pacemaker. Operations at prior (and subsequent) resources are synchronized to the pacemaker resource. products with widely varying time requirements for the pacemaker resources. Differences between APS logic and the TOC approach include the need for routing data for other non-constrained resources. It could be argued that simple routing data for APS logic accomplishes the same purpose as lead-time offsets. Some environments require more advanced scheduling capabilities. whereas the TOC approach does not. whereas a TOC approach becomes more difficult. and the use of inventory buffers. This approach has been coined "drum-buffer-rope. and/or resources with varying capabilities. In addition. APS logic uses routing data for other non-constrained resources to synchronize prior and subsequent operations (via backward and forward finite scheduling). its buffer. The production rate and buffer reflect the family of items produced by the resource. APS logic requires reporting of actual work performed (such as unit completions by operation) to calculate remaining work at non-constraining resources. APS logic often has difficulties with the concept of inventory buffers. Improvement activities focus on the constraint. split operations (across multiple machines). parallel and alternate operations. whereas the TOC approach focuses on the schedule and inventory buffers at the constraining resource.dependencies. and the pull-through effect (the rope) on other activities. The production schedules for resources involved in prior operations ensure that releases match the production rate (or capacity) of the pacemaker resource. and provides additional benefits in costing and capacity planning. operation attributes (such as setup matrices)." since it focuses on the pacemaker's schedule (the drum). APS logic provides these scheduling capabilities. Page 7 of 8 Next . These environments can be characterized by multiple potential constraining resources (dependent on the product mix). APS logic generates detailed schedules for every resource and focuses on schedule adherence. As a simplified explanation. whereas the TOC approach employs simplistic rules such as lead-time offsets. and a time buffer or inventory buffer to protect the constraining resource from disruptions. Difficulties were encountered in handling component date effectivities (since they were not recognized in the APS application) and capable-to-promise calculations across a multi-level bill (since MRP logic was required to calculate multiple manufacturing orders prior to downloading them to APS).

and also to early bill of material processing logic. and the body of knowledge represented by APICS (American Production and Inventory Control Society). Explanations in this book are based on conceptual frameworks that reflect generally accepted approaches taken in most ERP systems.Evolution of ERP Software Packages ERP software packages have evolved over time to support a wide variety of manufacturing environments and business practices. Hence. The arguments for a best-of-breed approach to third-party packages make sense for peripheral ERP applications. These enhancements are typically driven by user group requests and target market requirements. The starting points for ERP can be traced to early accounting systems that handled sales order processing. An ERP software package matures over time with additions of new modules and functionality by the software vendor. Variations in ERP software packages can also be traced to their maturity and the use of third-party applications. The third-party approach does not work as well with core ERP applications. New initiatives in an ERP package are often constrained by concerns about upgrading the installed base. Additional modules within an ERP package frequently reflect third-party packages. This has been complicated by the different ways in which a given ERP system simulates or models a manufacturing business. Limitations in connectivity tools and in the package's fundamental logic typically constrain approaches to third party packages. a discrete versus process orientation. quality management. a standard versus custom product orientation. and/or the expense of re-writing the entire system. Variations in ERP software packages can frequently be traced to their origins. new initiatives often take the form of third-party packages that are unencumbered by concerns about an installed base or technology platform. such as order entry or purchasing. Extensions to the framework to support new business practices²such as order-less environments²may be cumbersome and overly complex. Generally accepted manufacturing practices. and CRM. or even ignore needed functionality. since these require more integration points and extensive common data. especially when new functionality runs counter to the package's fundamental design. The conceptual framework underlying an ERP system's design may provide an overly complex approach to needed functionality. This includes comparisons to alternative approaches taken in some . such as human resources. This includes an accounting versus manufacturing orientation. have not been widely agreed-upon and consistently implemented. This sometimes results in multiple mutuallyexclusive versions of software modules. and a standard package versus toolkit orientation. They have also evolved in terms of ease-of-use and ease-of-implementation. Increased functionality frequently reflects increased complexity. with various degrees of integration and replicated data. a mainframe versus microcomputer origin. Increased complexity makes it very difficult to re-engineer the software package to a simpler fundamental design. upgrading the technology foundation. New initiatives are also constrained by the sheer complexity of an existing ERP system. sales forecasting. in contrast. rather than natural extensions that reflect simple symmetric solutions. The relevant chapters in this book provide further explanations of generally accepted approaches (and natural extensions) for each concept. basic purchasing functions and inventory. Page 8 of 8 ERP and Generally Accepted Manufacturing Practices Generally accepted accounting practices have been widely accepted and consistently implemented in most ERP systems.

This excerpt on "Trends Affecting Manufacturing and ERP" is drawn from one of the book's twenty-five The key point is that each ERP system can provide different solution approaches to handling various manufacturing practices. . Scott Hamilton. The book can be ordered on amazon. Bridging the theory and realities of current ERP systems. Maximizing Your ERP System provides practical guidance for managing manufacturing in various environments. Hamilton has conducted hundreds of executive seminars. This concludes Part Three of a three-part article reprinted from Maximizing Your ERP System by Dr. and helped design several influential ERP packages.ERP systems. it covers common problems and working solutions for how to effectively implement and use ERP systems. For the first six trends discussed go to Part One and Part Two. Dr. Drawing on case studies from or (612) 963-1163. taught MBA classes at four universities. Scott Hamilton's first-hand experience in consulting with more than a thousand firms. About the Author In addition to consulting. He can be reached at ScottHamiltonPhD@aol.