Enterprise Resource Planning Sales and

Operations Planning
 Outline
ERP ?

HOW ERP CONNECTS THE FUNCTIONAL UNITS

HOW SUPPLY CHAIN PLANNING AND CONTROL FITS WITHIN ERP

PERFORMANCE METRICS

WHAT IS SALES AND OPERATIONS PLANNING?

AGGREGATE PLANNING TECHNIQUES

YIELD MANAGEMENT
 ERP ?
A computer system that integrates application which describing a software system that
integrates application programs in finance, manufacturing, logistics, sales and marketing,
human resources, and other functions in a firm. This integration is accomplished through a
database shared by all the application programs.

ERP requires a company to have consistent definitions across functional areas.

Companies implementing ERP strive to derive benefits through much greater efficiency
gained by an integrated supply chain planning and control process
 ERP ?
There are four aspects of ERP software that determine the quality of an ERP system:

The software should be multifunctional in scope with the ability to track all
function

The software should be integrated

The software needs to be modular in structure

The software must facilitate basic planning and control activities

 ERP ?
Objective of an ERP

relates to how well the

relates to the
system helps the user
posting and
Transaction Decision support make intelligent
tracking of the
judgments about how
activities that processing
to run the business
document the
business.
HOW ERP CONNECTS THE FUNCTIONAL UNITS
 HOW ERP CONNECTS THE FUNCTIONAL UNITS

FINANCE
An ERP system provides a common platform for financial data capture, a common set of numbers, and
processes, facilitating rapid reconciliation of the general ledger

Manufacturing and Logistics

Sales and operations planning, Materials management, Plant maintenance, Quality management ,
Production planning and control, Project management

Sales and Marketing

This group of system components supports activities such as customer management; sales order
management; forecasting, order management, credit checking configuration management

Human Resources
This set of applications supports the capabilities needed to manage, schedule, pay, hire, and
train the people who make an organization run.
 HOW ERP CONNECTS THE FUNCTIONAL UNITS

Customized Software
Even though the scope of applications included in standard ERP packages is very large, additional software
will usually be required because of the unique characteristics of each company

Data Integration
Working from a single database, transactions document each of the activities that compose the processes
used by the enterprise to conduct business.

Transactions are processed in real time

To facilitate queries not built into the standard ERP system software, a separate
data warehouse is commonly employed
 HOW SUPPLY CHAIN PLANNING AND CONTROL FITS WITHIN ERP

SAP Supply Chain Management

The supply chain design module provides a centralized overview of the entire supply chain and
key performance indicator
Collaborative demand and supply planning helps match demand to supply

SAP Supply Chain Execution

Materials management

Collaborative manufacturing

Collaborative fulfillment
 HOW SUPPLY CHAIN PLANNING AND CONTROL FITS WITHIN ERP

SAP Supply Chain Collaboration

Inventory collaboration hub Enterprise portal

Collaborative replenishment planning Mobile supply chain management

Vendor managed inventory (VMI)

SAP Supply Chain Coordination

Supply chain event management

Supply chain performance management

 PERFORMANCE METRICS
TO EVALUATE INTEGRATED SYSTEM EFFECTIVENESS

An ERP system can provide the data needed for a comprehensive set of performance measures to
evaluate strategic alignment of the various functions with the firm’s strategy.

Our goal is a more holistic approach to management of the firm. Exhibit 17.3 depicts three major
functional areas that make up the internal supply chain of a manufacturing enterprise
 PERFORMANCE METRICS
TO EVALUATE INTEGRATED SYSTEM EFFECTIVENESS

The “Functional Silo” Approach

business are teams of employees, grouped by function, that all operate separately from each other,
without cross-collaboration.
Consider the implications if all three areas are allowed to work independently.

Integrated Supply Chain Metrics

The APICS Supply Chain Council has developed many metrics to measure the performance of the
overall supply chain
A particularly useful approach to measuring performance not only captures the integrated
impact that the three classic functions have on the entire business supply chain, it also
integrates the finance function
PERFORMANCE METRICS
TO EVALUATE INTEGRATED SYSTEM EFFECTIVENESS
 PERFORMANCE METRICS
TO EVALUATE INTEGRATED SYSTEM EFFECTIVENESS

Cash-to-cash cycle time

Such a metric, which measures the relative efficiency of a supply chain, is cash-to-cash cycle time.
Cash-to-cash cycle time integrates the purchasing, manufacturing, and sales/distribution cycles, but
it also relates well to the financial

Cash-to-cash cycle time = Inventory days of supply + Days of sales outstanding

– Average payment period for material
PERFORMANCE METRICS
TO EVALUATE INTEGRATED SYSTEM EFFECTIVENESS

Calculating the Cash-to-Cash

Cycle Time
 WHAT IS SALES AND OPERATIONS PLANNING?

Sales and operations planning

The process that companies use to keep demand and supply in balance by coordinating
manufacturing, distribution, marketing, and financial plans

The term sales and operations planning was coined by companies to refer to the process that
helps firms keep demand and supply in balance. In operations management, this process
traditionally was called aggregate planning

Aggregate operations plan

A plan for labor and production for the intermediate term with the objective to minimize the
cost of resources needed to meet demand
WHAT IS SALES AND OPERATIONS PLANNING?

Long-range planning
One year or more.

Intermediate-range planning
Involves a time period of
usually 3 to 18 months

Short-range planning
From a day to six months
 WHAT IS SALES AND OPERATIONS PLANNING?

The Aggregate Operations Plan

The aggregate operations plan is concerned with setting production rates by product group or other
broad categories for the intermediate term (3 to 18 months)

The main purpose of the aggregate plan is to specify the optimal combination of production rate,
workforce level, and inventory on hand.

In general, the external environment is outside the production planner’s direct control, but in some firms,
demand for the product can be managed

The internal factors themselves differ in their controllability

WHAT IS SALES AND OPERATIONS PLANNING?
 WHAT IS SALES AND OPERATIONS PLANNING?

Production planning strategies

Plans for meeting demand that involve trade-offs in the number of workers employed, work hours,
inventory, and shortages
There are essentially three production planning strategies : Chase strategy, Stable workforce—
variable work hours, Level strategy

Relevant Costs
Four costs are relevant to the aggregate production plan :
• Basic production costs
• Costs associated with changes in the production rate
• Inventory holding costs
• Backordering costs
 AGGREGATE PLANNING TECHNIQUES

A Cut-and-Try Example
Companies commonly use simple cut-and-try charting and graphic methods to develop
aggregate plans. A cut-and-try approach involves costing out various production planning
alternatives and selecting the one that is best

A firm with pronounced seasonal variation normally plans production for a full year to
capture the extremes in demand during the busiest and slowest months.

A Cut-and-Try approach does not guarantee finding a minimum cost solution. However,
spreadsheet programs, such as Microsoft Excel, can perform A Cut-and-Try cost estimates
in seconds and have improved analysis. Aggregate planning can also be applied in service
businesses
 AGGREGATE PLANNING TECHNIQUES

A Cut-and-Try Example
 YIELD MANAGEMENT

Yield management can be defined as the process of allocating the right type of capacity to the right
type of customer at the right price and time to maximize revenue or yield.

From an operational perspective, yield management is most effective when

• Demand can be segmented by customer

• Fixed costs are high and variable costs are low
• Inventory is perishable
• Product can be sold in advance
• Demand is highly variable
 YIELD MANAGEMENT

Operating Yield Management Systems

Pricing structures must appear logical to the customer and justify the different prices.

Handling variability in arrival or starting times, duration, and time between customers.

Managing the service process

Training workers and managers to work in an environment where overbooking and price
changes are standard occurrences that directly impact the customer.
Terima Kasih!