Chapter 1

Introduction to Operations Management

Operations Management – Enterprise Resource

Planning (ERP)(MISY 2024)
 Enterprise Systems
• Enterprise Systems

• Also called “enterprise resource planning (ERP)

systems”
• Suite of integrated software modules and a common
central database
• Collects data from many divisions of firm for use in
nearly all of firm’s internal business activities
• Information entered in one process is immediately
available for other processes
 Enterprise Systems
How Enterprise Systems Work
Enterprise
systems feature a
set of integrated
software modules
and a central
database that
enables data to
be shared by
many different
business
processes and
functional areas
throughout the
enterprise
 Enterprise Systems
• Business value of enterprise systems

• Increase operational efficiency.

• Provide firm wide information to support decision
making.
• Enable rapid responses to customer requests for
information or products.
• Include analytical tools to evaluate overall
organizational performance.
TYPES OF ENTERPRISE SYSTEMS AND THEIR FUNCTIONS

 Enterprise resource planning (ERP)

 Supply chain management (SCM)
 Collaborative planning, forecasting, and
replenishment (CPFR)
 Customer relationship management(CRM)
 Knowledge management(KM)

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 Supply Chain Management Systems

 SCM software refers to software that supports the

steps in the supply chain—manufacturing, inventory
control, scheduling, and transportation
 SCM improves decision making, forecasting,
optimization, and analysis

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 Customer Relationship Management Systems

What Is Customer Relationship Management(CRM)?

• Knowing the customer
• In large businesses, too many customers and too many ways
customers interact with firm
• Customer relationship management (CRM) systems
• Capture and integrate customer data from all over the organization.
• Consolidate and analyze customer data.
• Distribute customer information to various systems and customer
touch points across enterprise.
• Provide single enterprise view of customers.
 Customer Relationship Management Systems

Customer Relationship Management (CRM)

CRM systems examine

customers from a
multifaceted
perspective. These
systems use a set of
integrated applications
to address all aspects of
the customer
relationship, including
customer service, sales,
and marketing.
 Customer Relationship Management Systems

CRM Software
• CRM packages range from niche tools to large-scale enterprise
applications.
• More comprehensive have modules for:
• Partner relationship management (PRM)
• Integrating lead generation, pricing, promotions, order
configurations, and availability
• Tools to assess partners’ performances
• Employee relationship management (ERM)
• E.g., setting objectives, employee performance management,
performance-based compensation, employee training
 Customer Relationship Management Systems

CRM Software
• CRM packages typically include tools for:
• Sales force automation (SFA)
• E.g., sales prospect and contact information, and sales quote
generation capabilities
• Customer service
• E.g., assigning and managing customer service requests; Web-
based self-service capabilities
• Marketing
• E.g., capturing prospect and customer data, scheduling and
tracking direct-marketing mailings or e-mail
 Collaborative planning, forecasting, and replenishment
(CPFR)

• CPFR is a set of data-driven business processes designed to

improve the forecasting, and ability to predict and coordinate
with supply chain partners
• CPFR comprises four main collaboration activities:
 Strategy and planning:
• Demand and supply management: Forecasting consumer
demand and order and shipment requirements over the planning
horizon
• Execution: Performing activities, such as placing orders,
shipping and delivery, receiving, stocking, tracking sales
transactions, and making payments
• Analysis: Monitoring outcomes of planning and execution,
assessing results
 Knowledge management
• KM helps organizations identify, select,
organize, disseminate, and share information
and expertise.
Enterprise Resource Planning (ERP)
• An ERP system is an integrated suite of
information technology applications that support
the operations of an enterprise from a process
perspective.
• planning of how business resources (materials,
employees, customers etc.) are acquired and
moved from one state to another

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 ERP….?

• ERP is the software infrastructure that links an

enterprise’s internal applications and supports
its external business processes
• ERP systems are commercial software
packages that integrate business processes,
including supply chains, manufacturing,
finance, human resources, budgeting, sales,
and customer service.

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Characteristics of ERP Applications

 Bring silos of information together to enable

managers to really understand what is going on
 Provide the information access, integrated business
processes, and modern technology platform
necessary to become and remain competitive
 Support all, or a great majority, of a company’s
business functions and processes
 Expand a company’s reach beyond its internal
networks to its suppliers, customers, and partners
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 ERP System Benefits
 Integrated processes and information systems
 More effective and efficient business processes Enables
organizational standardization
 Eliminates information asymmetries
 Provides on-line and real-time information
 Facilitates intra- and inter-organization communication
and collaboration
 Reduced reliance on programmers to maintain and patch
legacy systems; Can reduce complexity of application and
technology portfolios

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 ERP System Benefits
• Integrate financials
• Have one view of the customer
• Standardize manufacturing processes
• Reduce inventory – MRP is used
• Standardize information such as HR and
Customer data
there are others……depends on company

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 ERP System Disadvantages
• Standardized way of conducting business can be a
disadvantage too because levels the playing field
somewhat between companies
• Lack of employee/user acceptance
• Complex solution
• Maintenance of hardware and software
• Costly and time consuming implementations

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IMPLEMENTATION CHALLENGES
• Implementing an enterprise system is challenging
because it requires extensive changes in processes,
people, and existing systems
• Three required changes are:
i. Redesign of business processes
ii. Changes in how people perform their jobs
iii. Integration of many types of information systems

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 Why Companies Don’t Invest in ERP?

• Applications must be tightly aligned with well-defined and

well-designed business processes, which is a standard that
few enterprises are able to achieve
• Selecting the appropriate ERP is time-consuming,
complex, and expensive
• Business processes must be modified to fit the software
• Initial costs to purchase or lease and set up the ERP may
be extremely high
• The complexity of the applications might make it too
difficult for employees to use the ERP correctly for
maximum efficiency
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 Material Management
 It is concerned with planning, organizing and controlling
the flow of materials from their initial purchase through
internal operations to the service point through
distribution.

OR
 Material management is a scientific technique, concerned with
Planning, Organizing &Control of flow of materials, from their
initial purchase to destination.

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 Con…
• Materials management is an essential business function. It is
concerned with planning, acquisition and flow of materials
within the supply chain. Material is one of the four basic
resources.
• Example: Labor, Material, Equipment and Capital of any
industrial or business activity.

• For a long time, it was regarded as a routine function with less

importance. But over the years, with accelerating economic,
technological, societal and environmental changes, this function
has become more important, more complex, and more
professional

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 Con…
• Materials management is the process of planning and controlling
material flows.
• It includes planning and procuring materials, supplier evaluation and
selection, purchasing, expenditure, shipping, receipt processes for materials
(including quality control), warehousing and inventory, and materials
distribution.

• Materials management is a core function of supply chain

management, involving the planning and execution of supply chains
to meet the material requirements of a company or organisation.

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 Scope of materials management
 The different scopes of materials management can be viewed from
three perspectives as discussed below:
As a Basic Function of the Firm: Materials management is one
of the following six functions performed by any firm:
Design : Converts concept into specification
Finance : Acquires and controls capital
Personnel : Manages human resources
Materials : Planning, acquisition and logistics of materials,
service and equipment
Production : Converts materials into goods and services
Marketing : Distributes goods and services to buyers The
contents, supervision and importance of materials management
differ from industry to industry.
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 CON…
As a Manager of Outside Manufacturing: The parts that go into
making of end products can come from two sources: in-house
production or purchase from outside.
• Earlier, firms themselves produced most parts that they needed for
assembly of end products.
• Gradually, firms started identifying, cultivating and exploiting their
core competencies “doing the things they knew how to do the best”
and outsourcing the rest.
• This marked a significant increase in the percentage of purchased
parts.
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 CON…
As a Controller of Cost: Major costs related with material
include ordering or set-up costs, carrying costs, logistics costs
(transportation and warehousing) and shortages or surpluses
costs, besides the cost of purchased items.
• Historically these costs were not accounted separately and were
generally included in overheads.
• As such, their impact was not felt. But now their combined
contribution is measured, which is quite significant and provides
good scope for cutting cost.
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 Origin/evolution of MM
• Since prehistoric times, humans have been concerned with
obtaining, moving, and controlling materials.
• Materials management is the result of a natural evolution; it did
not develop quickly but instead grew as an obvious business
solution to the need to achieve optimum effectiveness in the
various materials functions.

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 CON…
• For decades the materials sector of an enterprise has been
relatively unimportant, compared with the production and
sales side, but it has gained in importance during the last
25-30 years.
• This is clearly indicated by the increasing attachment of this
sector to the commercial side of an enterprise, the
delegation of materials-oriented tasks to highly qualified
people, and -closely correlated - the integration of the materials
sector with the key positions of a company's organizational
hierarchy.
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 Transition of Materials Management
• The transition of materials management has followed the
following pattern in phased manner.
• First phase: Executives who are primarily concerned with
other functions have carried on almost unconsciously all
materials mgt. functions as sidelines.
• Second phase: The major materials management functions are
recognized formally, but these activities report to variety of
executives and are not centralized organizationally.

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 CON…
• Third phase: Materials management functions concerned
with purchased materials are grouped together under a
senior executive, who behave like a line manager.
• Fourth phase: Materials management functions become a
genuine value adding activity.

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 AIM OF MATERIAL MANAGEMENT

To get:
∞ The Right quality
∞ Right quantity of supplies
∞ At the Right time
∞ At the Right place
∞ For the Right cost

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 History of Materials Management:

• Materials management became a vital function of management and the

department of materials management was started at the time of World
War I in the United States of America.
• The advancement of principles of scientific management in the
20th century by F.W. Taylor decreased the cost of production and proper
utilization of materials was enhanced.
• Charles was known as “materials man” because of his book on an
economy of manufacturing and machinery which explains about the
functions of purchasing.
• Between the years 1970 and 1999 materials management enhanced a lot.
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 Importance/Advantages/Benefits
Regular supply is ensured, aiding for uninterrupted
production process.
Procurement and transportation costs can be controlled and
checked.
Efficient stock and stores control minimizes waste.
Timely supply and other inputs is ensured

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 CON…
Best utilization of labor, capital and equipment is ensured.
Congestion in stores and confusion can be avoided,
resulting in better services.
Manufacturing Cycle is reduced to min.
Shortages can be eliminated.

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 Importance of Materials Management in Corporate Policy

• It is necessary to have an integrated approach to

materials management of various functions such as
materials planning, purchasing, receiving stores, inventory
control, scrap and surplus disposal.
• In case some of the functions were to be separately
handled, conflict of interests would occur.

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 Con…
• Purchase department if allowed to operate independently,
may take decisions, which result in sub-optimization such as
discount in buying as important factor without taking into
account of the impact of inventory carrying cost.
• Therefore, to balance the conflicting objectives from the total
organizational point of view, an integrated system, which
results in economy, is essential. Also, it enables the inter-related
functions to exercise better control and co-ordination.

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 Con…
• Lack of availability of adequate materials disturbs the
normal operation or production and causing unnecessary
delay of production or work stoppage.
• The stoppage of work in turn causing additional costs such
as; cost of depreciation of fixed assets, salary of
permanent employee, loss of sales, dissatisfaction of
customer…etc. Thus, effective management of material is
crucial for the performance of any organization.

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 Conclusion

 Material management is an important management tool which

will be very useful in getting the right quality & right quantity
of supplies at right time.
 So, having good materials management will improve the
efficiency of the organization & also make the working
atmosphere healthy any type of organization, whether it is
Private, Government ,Small organization, Big organization and
Household.

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Thankyou!!!

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