Swayam Siddhi College of Mgt & Research

SSCMR Presentor : Dr Arloph A. Johnvieira

RESOURCE PLG. :

ERP & MRP

Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira

Enterprise Resource Planning (ERP) is software

designed for organising & managing business
processes (Core & Administrative) by sharing
information across functional areas.

Core Processes include Production Planning & Control,

Inventory management, Purchasing & Distribution.

Administrative processes include Accounting, (Cost

control , accounts payable & receivable , etc ) and
Human resource management .
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira

Modules of ERP
(Typically Four modules & fully integrated)
1. Finance & Accounting module (FA)
2. Sales & Mktg incl. Distribution module (SD)
3. Production & Material Module(MM)
4. Human Resources Module (HR)
SAP –R/3 version has 5 modules
FA, SD, PP, MM, HR.
Add on module is Logistics (Impex)
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
 First Generation ERP : Only can handle business
transactions , does not support supply chains
Plenty of Statistics, Reports were mere snapshots of
business at a single point in time , did not support
continuous planning needed in supply chain. This led to
development of Planning systems on decision making.

 Second Generation ERP : overcomes this deficiency

(SAP-R/3 version)
(ERP & SCM software can work together helping in decision
making) Eg. IBM, Colgate-Palmolive , Marico etc.

 Third Generaton ERP : overcomes earlier version

shortcomings and has adva nce SCM: SAP S/4 HANA 1909
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Benefits of ERP
Integrates the complete range of organisation’s
operations & thus presents a holistic view of business
functions from a single info & IT architecture .
Tangible benefits of ERP :
 Reduction in Inventory & Staffing
 Increased productivity
 Improved order management
 Quicker closing of financial cycles
 Reduced IT & purchasing costs
 Improved cash flow management
 Increased revenue & profits
 Reduced transportation & logistics costs
 Improved On time Delivery performance (OTIF)
 Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira

Intangible benefits of ERP:

 Improved visibility of corporate data

 Improved customer responsiveness
 Better integration between systems
 Standardisation of computing platforms
 Improved flexibility
 Global sharing of information
 Better visibility into the SCM process
 Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Selection of ERP
1. Functionality 2. Ease of use & 3. Total cost of Ownership

Total COST of Ownership (ERP systems)

1.Software Cost ( Basic Cost of Development )
2.Services Cost (External professional services includes implementation,
training, customization, or consulting but do not include company
employees)
3.3 years Maintenance Costs ( Paid on per user basis , includes technical
cost, bug fixes & new product innovations )

Total Costs of Ownership of ERP varies with size of the company

< $50mn sales : avg. total cost was $366,583 (around 0.75 % )
Bet $ 50mn & $ 100mn sales : avg. total cost was $892,765 (0.89 % - 1.75%)
Bet $ 500mn & $ 1 bn sales : avg costs was $ 3,483,776 (0.7 % - 0.35 % )
Exceeding $ 5 bn sales : Avg Cost was $ 7,148,750 (around 0.15 % )
(Avg. no. of Users from a low of 35 went upto a high of 3274)
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Overview of MRP
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
History of MRP
1960 : MRP I (Material Requirements Planning) Closed loop system.
for controlling Inventory .(Operating & Distribution Inv.)
1970 –MRP II (Manufacturing Resources Planning )
Three major components (Mgt. Plg., Opr. Plg., Opr execution)
Purpose of MRP
1. Inventory: Determine the Quantity & Timing of the material
requirements
2. Maintain Priorities : Order with right due date & keep due date valid
3. Capacity : Plan for a complete & accurate load and plan for an
adequate time for future load
Objectives of MRP
1. To improve customer service by meeting delivery schedules promised
and shortening lead times
2. To reduce inventory costs by reducing inventory levels
3. To improve Plant efficiency by better use of productive resources
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Potential Benefits of MRP
Sales, Planning ,Scheduling , Purchasing , Finance ,
Inventory , Production , Engineering
Tangible Benefits
1.Reduced Inv., 2.Reduced idle time, 3.Reduced set up
time, 4.Ability to change the MPS, 5.Ability to price more
competitively, 6.Better customer service ,7.Better
response to market demand, 8.Reduced sales price,
Intangible Benefits :
1.Aids capacity planning, 2.Helps Managers to planned
Schedule before order release,3. tells when to expedite or
postpone, 4.helps to delay or cancel orders, 5.changes
order executions, 6.Advances or delays order due dates
 Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira

Planning Framework

 Multiple levels of Dependency (Dependant & Independent

demand )
 Product Structure : BOM & Product Tree with levels
 Time Phasing the requirement (Time when reqd., when to order
& when to expect)
 Determining the Lot size :
Lot For Lot (LFL) = Net Reqts,
FOQ =Fixed Qty ordered irresp of demand
POQ(Periodic Order Qty ) = N divided by D/Q or
where Q=EOQ , D=Demand /year, N is No of wks /yr
N in weeks = EOQ/Annual Demand in Units
 Incorporating lead time information
 Establishing the Planning premises
 Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
MRP Inputs
1.MPS (Master Production Schedule)
2. BOM ( Bill of Material)
3. Inventory Status
4.Gross Requirements :
(GR) = (POR x BOMxQ) + ID (Ind.demand)
5. Scheduled Receipts {Pld order release(POR) + lead time }
6. On Hand Inventory of period n is
= (On hand Inv. of n-1) + (Sch Receipts of n) –
(Gross Reqt of n)
7. Net Reqts = (GR of n) – (Sch. Receipts of n) –
(On hand inv. of n-1)
8.Planned Order Releases (POR) =
Planned receipt of Net reqts – lead time)
9. Lot for Lot Ordering ( LFL )lot size
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Issues one needs to consider in any MRP system

1. Lot Sizing: LFL, FOQ, POQ, EOQ or EBQ

2. Safety Stock : As per Inventory policy
3. Scrap Allowances : Material explosion with loss factor
4. Pegging (Next Slide: Table 13.4)
5. Cycle Counting : Inventories updated every cycle of
MRP run
6. Updating : Regenerative method or Net Change
Method
7. Time Fence: Length of time that elapse without
change in MPS to stabilize MRP.
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Resource Planning Effects across the Organisation

Marketing :
 Concerned with MPS which indicates when FG will be ready .
 Material scarcity can be allocated judiciously by marketing .
 ERP helps Mktg. track actual sales at final product .

Accounting :
 Calculates future material commitments based on MRP
 Develops cashflows budgets and the inventory investment to
support current MPS

Information Systems:
 ERP helps Info systems to use a single database for both internal &
external stakeholders of Supply Chain.
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Resource Planning Effects across the Organisation
Purchasing :
 Lead times are part of MRP which is provided by Purchase
dept .
 ERP facilitates Supplier (Vendor ) Managed inventory
approaches
 Reduces transaction costs for purchasing .
Manufacturing :
 Mfg uses output of MRP to develop daily mfg. schedules
 MRP ensure right material is available at right time in right
qty to support MPS.
 Increases profitability as Mfg. is being carried out for products
actually needed to satisfy customer demand.
 MRP helps better inventory mgt , Planners for scheduling and
expediting materials to support MPS.
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
Problems faced in Implementation of MRP
1. Data integrity is low
2. Discipline of Updating is poor
3. Uncertainties outside the Mgt. control eg. supply delays
Judicious use of SAFETY stock & SAFETY Lead time helps overcome
above issues

Cause of Failures of MRP

1. Lack of Top Mgt. commitment
2. Was conceived as a complete & Stand alone system rather than as part of
the total system
3. Unable to function with a JIT production approach
4. Needs high degree of accuracy for operation , at times require changing
way of working
5. Rigid as it develops a schedule , it is quite difficult to deviate from a
schedule if need arises
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira

Dependant Factors for Successful

Implementation of MRP:
1. Management Commitment
2. User Involvement
3. Education & Training
4. Selection of Packages
5. Data Accuracy
6. Realistic MPS
Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira
 Swayam Siddhi College of Mgt & Research
SSCMR Presentor : Dr Arloph A. Johnvieira

Excel Problems of MRP

&
SAP B1/B2 version Demo
Tentative date : Saturday, 2nd week Feb, 2021 (10am to
3pm)
SAP Industry implementors lecture in IT lab of SSCMR .
Combined batch of Mktg, Finance, Operations & HR , & IT
in SSCMR IT lab
Simple version B1 , not R3 version so easy to understand

Morning 10 am to 1pm
(Demo.of Benefits by doing Transactions.)
( Lunch Break 1 to 2pm )
Afternoon : 2 pm to 3pm (Q & A )