Monday, April 25, 2011

ERP Functions: Supply Chain Management

After completing the functionalities of Planning department we shall now move on to the main nerve of the business i.e. Supply Chain Management simply SCM.

Here I am not going in very specific and theoretical definition of SCM. I am just explaining the general meaning of SCM in industries. 

SCM as the name suggests is managing of the Material flow in and out of the industry. 
In general sense, broadly SCM flow can be shown as below

Purchase:- Material required for the production of the Products and smooth running of industry is procured by the Purchase department. Managing suppliers to get least negotiable purchase price and at the same time ensuring the delivery date of the supply as per the requirement of the user department is the key role of purchase department.

Stores:- Storing the various type of materials, spare parts, machines etc in a proper common place and maintaining the stock of the materials is the role of the Stores. Every Material that comes in or goes out must be under control of Stores, and stores have to maintain proper records of each of the materials. Ensuring the stock of critical items to be always present in the stores is one of the major task of the stores.

Logistics:- Managing the transportation of goods which are coming in and also going out is the key role of logistic department. Apart from arranging of vehicles for in coming and out going materials, maintaining documents related to same comes under responsibility of this department. This department is linked with Purchase and Stores for ensuring proper delivery of the materials inside the industry, then with Sales and Marketing for the despatch of Products to the Customers as per the Delivery schedule in the Sales Order.

We shall look in depth with each of the departments and its roles and responsibilities in an industry. SCM plays a major role in maintaining the proper functioning of the overall functions of the all the departments. Hence effective and also powerful SCM is must for any successful Industry.

Monday, April 18, 2011

ERP Functions: Planning 5

With the hot summer starting in India we continue with our journey on ERP Functions. Last week we have started understanding synchronization of all the planning processes. We have arrived the capacity planning for the Production Qty from adding back log, rejections etc.

Capacity planning gave the process sequences for the production and the date and time of the operations. Now we need to do the MRP for this capacity planning. We need the To Be Produced Qty for the MRP. This is arrived by following steps.

1. We have the Capacity planning of Products To Be Produced with details of processes for each products and the date and time and the Production Qty.
2. From BOM of the Products To be Produced, the Material, Qty and the Processes which requires materials is listed.
3. By Combining both these we get the To be Produced Qty for BOM along with the date of its requirement. From which we can arrive the material wise Qty required and also delivery schedule for the material.

Now we got the Material wise Qty and Date requirement. Any continuously production running industry will have some material in their inventory as stock. Also there will be purchase orders placed for the Material and the material may not have received yet. Thirdly Planning department might already have requested for the material but Purchase department might not have released the Purchase order for the material. So in order to arrive the Material wise Qty requirement which is to be given to purchase department all these have to be considered. 

Lets see how this is arrived in following steps

1. From the Total Required Qty minus the Stock in the inventory.
2. Divide this result material wise and delivery date wise qty.
3. From the result of above step minus the pending delivery Purchase Order qty that are having delivery date before the delivery requirement date of the material.
4. From the above result minus the pending Purchase Requisition qty that are having requisition date before the delivery requirement date of the material.
5. This final arrived material wise date wise qty requirement is the New Material Requirement for the production plan.

In formula

Final Required Qty = Total Requirement - Stock Qty - Pending Purchase Delivery Qty before Delivery schedule - Pending Purchase Requisition Qty before schedule

There will be some material which requires Minimum stock to be maintained. In that case Final Required Qty will be the Final Required Qty arrived from above formula + Minimum Stock of the material.

So Finally we get the Material Requirement Qty with delivery dates. We already have the Capacity Planning which gives the schedule for each processes for the production of products. This is the synchronization of the planning processes by which the Final Production Plan is prepared and circulated to respective departments.

1. Capacity Planning is broken to department wise and process wise and circulated to production department and the process owners.

2. Material Requirement Planning for the Capacity Planning is issued to Stores Department to keep the material ready on the requirement dates. 

3. Material Requirement Planning with the Final required Qty and Delivery Dates is circulated to Purchase Department for placing Purchase Order.

With this we complete the long journey of Planning Department functions. In the coming week you shall get the knowledge about the Main Course of Supply Chain Management (SCM). Keep watching this space..

Monday, April 11, 2011

ERP Functions: Planning 4

With the victory of Anti Corruption movement of Anna Hazare we ended the last week along with IPL Season 4 inauguration. In previous 3 weeks of our ERP journey we understood the various functionalities of Planning department. Lets review them briefly.

Initially Planning Department will have delivery plan from the marketing team. 

The Planning Department will further break the delivery plan into monthly, weekly and daily production plans.

According to the Production plan MRP is arrived. MRP = To be Produced Qty X BOM (Bill of Material)

Along with MRP, Capacity Planning is arrived from the Production Plan to frame the timing schedule for production.

In the last blog we have learnt that the synchronization of all these will be the Executable Production Plan for the company. Now in this Blog we will see how Synchronization is carried out.

Production process is continuous. Stoppages in production process is a huge loss to the company as all the 3Ms will be idle even though company has invested in them. So in order to make production continuous planning department has to plan accordingly. That is why Planning Department is crucial in the operation of whole company.  To have the production continuous, Planning department has to plan the production before to start of the month. Hence Delivery Plan from the Marketing is received well before the start of the month.

Now when the planning department starts the process of Production Planning for the Delivery plan there are certain aspects to be considered.  
1. Production will be running for the previous month plan and there will be products which are in different stage of production.
2. There may be backlog of previous month production plan due to various issues of production.
3. There may be rejection of previous month production.
4. Delivery plan might have been changed during the course of the month because of customer requirement variations.
5. There may be rework of customer rejection, internal rejections due to which other production might have been affected.

So simply Production planning for next month can not be done by Delivery plan alone. Now lets see how the planning department will consolidate all these and then arrives MRP, Capacity and finally the synchronization of all these to arrive Executable Production Plan.

First Step is to arrive the net production to be done. This is arrived from
Production Qty = Delivery Plan Qty + Back Log Production Qty + Rejection to be Re-produced Qty + Rework Qty + Developmental Qty

This Production Qty is the quantity which is to be produced in the next month. Now the primary task is to find out the time required for the production of each of the products in this Production Qty. With this time according to delivery plan the first level of production of products and quantity priority is arrived. We have discussed this in Previous Blog of Capacity Planning. The Capacity Planning gives the Date of each process of the production of each product.

Next step is to arrive the MRP to meet the production requirement according to the above arrive Capacity Planning. For this we need to consider only those production processes of the product which requires materials (Raw Material, Consumption).This planning itself is little lengthy process, so we will understand it in next week. Along with that we shall also look into Planning of other requirements of the production like Machine Tools, Gauges. 

Keep watching this space...

Monday, April 4, 2011

ERP Functions: Planning 3

It was a great welcome to the New Year with our Cricket team winning World Cup and our Tennis doubles player retaining the number one position. Here I am continuing my sharing of knowledge of ERP. In the last blog we talked about Material Requirement Planning. In this Blog lets discuss on Capacity Planning.

Capacity planning is nothing but planning of left out 2Ms i.e. Machine and Manpower. Again for the planning of these two resources to execute the production and give out the output, base is The Delivery Plan or the Monthly Production Plan.

We have understood from MRP execution is that each product will have BOM (Bill Of Material) which provides the data for calculation of material requirement as per production qty of the product. Now in the same for each product there must be some master which will define the utilization of manpower and machine. This master is called Routing Card.

Routing Card will define the process sequences for the production of the product, the machines required for each process. Usually machines in an industry are capable of doing multiple processes and multiple products. So each machine will have process wise and product wise timings required for completion. This time is called as cycle time. In simple words if a Machine produces N number of a product in t time then cycle time is N/t. This cycle time is the measure of Machine resource required.

Each machine requires an operator or more to operate the machine for completion of process. In most of the cases this manpower requirement for the machine is independent of processes or the products. So the manpower requirement for the machine is constant all the time. Hence based on the machines and production forecast manpower is already recruited. So that manpower planning for each monthly production plan is nothing but Machine utilization planning.

Now we have routing card for the products in which sequence of processes required for producing the product is defined. Each process will have machine to do the processing. Each machine will have manpower defined for operating the machine. With these data in background capacity planning is to be done for the Monthly Production Plan.

With these data of we will get the Production-Hour requirement for the Monthly Production plan by the following formula
Total Production Time= Sum (Quantity of the product as in Planning X Cycle Time)
In words each product will have routing card with process sequence defined, each process in the routing card will have machine cycle time defined. Total of Cycle Time X Production Qty of all the processes is Production Time required for a product. By summing up the production hour for all the products Total Production Time required is obtained. 

In the Monthly Production Plan delivery dates of product are the target time dead lines which are to be achieved based of Total Production Time calculated. Following are the thumb rule steps for this planning

1. Higher Production time and earlier Delivery date products are started first
2. Lower Production time and earlier Delivery date comes next
3. Next is Higher production time and later delivery date products 
4. Lastly lower production time and later Delivery date products

This is brief of capacity planning. If this looks complex, there are more complex things to be considered in planning. You must have understood that synchronized MRP and Capacity Planning is the one which will meet the Monthly Production Plan Target Dates and produces the products ready of delivery. Also in an continuously running industries there will be already products may be in finished status or in between some processes. So these are also to be considered.

Relax, I will not be confusing you more in this blog. We will see these complex synchronization and Final Planning which is ready for execution in the upcoming blog on next Monday. Keep watching..