Author: vinaykjay

As the changes in the ERP gets bigger adapting to changes like the demands of big data, the growth of the cloud, and the Internet of Things (IOT) are what we are seeing today. Here is a quick look at some of the major trends that will affect ERP in the next few years.

Wider Integration: In theory an ERP system is a complete, self-contained package. In practice more and more companies are discovering that it isn’t. ERP needs to communicate with other software, and systems such as factory floor automation, and vendors and owners are working hard to make that happen.

Already some third-party software is coming equipped with stubs to connect directly with major packages such as SAP and Oracle. Other vendors are providing middleware products that will allow ERP systems to tie to other applications – at the expense of a variable amount of integration effort.

This trend will continue and the integration job will get easier as time goes on a vendors get more sophisticated and users get more aware and demanding.

IOT: With the Internet of Things, the world is becoming a lot more connected and this is going to have a major impact on ERP. More and more devices will be able to communicate over the internet, including sensors and other shop floor devices. This trend will spread down to individual devices on the shop floor, the warehouse and other parts of the business and the information will become increasingly important in maintaining fine control over all aspects of the business.

Ease of Use: Ease of use and ease of installation is an on-going trend. ERP vendors of all classes are hard at work trying to make their products easier. This has been going on for at least the last decade and the trend is accelerating. This is mostly a matter of vendors figuring out how to respond to customers’ demands to simplify the ERP experience.

The Cloud: The cloud, of course, is the most outstanding example of a future trend. While growth of ERP installations in general is in the low single digits, cloud installations are growing at double digits as more users, especially SMEs, find using Software as a Service (SaaS) in the cloud preferable to trying to install a complete system themselves. Since SMEs are the fastest growing segment of the ERP business, this reflects in the overall growth figures for SaaS.

The time frame for all this is variable. The impact of the Internet of Things is probably the furthest off, while the cloud and ease of use are already having an impact today. But over the rest of the decade all of these trends will grow.

 

Source: http://it.toolbox.com/blogs/inside-erp/the-internet-of-things-and-the-future-of-erp-71508

 

 

 

Processing the data in an integrated fashion can promote improvement of business performance. To achieve such an integration, you have to map data points that belong to specific business processes to the relevant databases. Carrying out this analysis in a systematic fashion lets you plan for the level of integration you want and select the technology to achieve it.

Store Your Data Where You Need It: Production staff use ERP systems for planning. While your integration can give employees broader access to data, it is more efficient to store it in the system where it is most needed while limiting data duplication as much as possible.

Mapping Order Processing: An important point of integration is in order processing. When you integrate the process, you map the required data between the CRM and ERP systems.  For example, the order entry employee might see a form populated with customer and order information from the CRM system and with information on inventory and production scheduling from the ERP system. The employee can schedule production and obtain a planned shipping date. When he submits the form, the details of the order are passed to the ERP database.

Data for Shipping and Invoicing: For simple processes where employee intervention is not required, you can automate the transfer of data. While the mapping, consisting of identifying the information to be transferred, is the most important part of the integration, you can avoid data duplication by transferring the location where the data is stored rather than the actual data.

Customer Service Records: You can carry out such mapping of data for other business processes in your company. For example, information on customer service is vital for ERP. information, such as warranty claims, defective product reports and customer complaints, are mapped to the ERP system. ERP has access to product-related information for quality assurance and continuous improvement. purposes. CRM stores customer-specific information.

http://smallbusiness.chron.com/map-business-processes-integrating-crm-erp-77332.html

MRP integrates data from a variety of sources including inventory, production scheduling and bills of materials to calculate the most efficient and effective purchasing and shipping schedules for parts, components and subassemblies required to manufacture a product.

To ensure that an MRP system runs smoothly, it is important to avoid five major material requirements planning pitfalls:

1. Inadequate Bill Of Materials

All production planning starts with a bill of materials – if that is wrong, virtually everything else affecting production will be wrong as well. The BOM drives operations, purchasing, manufacturing, and logistics – the data from a manufacturing BOM is used to inform ERP, MRP, and the manufacturing execution system (MES). The more complete and accurate a BOM, the better the decisions made regarding inventory levels, operational efficiency, and the most cost-effective and profitable way to get products to customers.

2. Lack of understanding of planning fundamentals

Proper material requirements planning is a complex process that requires good analytical skills and strategic thinking. What is important to understand is that planning is a strategy and purchasing is a task. The individual in the planning role may not be familiar with the principles of supply and demand or know how to interpret the information coming out of the MRP system. This can be a major stumbling block for effective material requirements planning.

3. Absence of Forecasting

An MRP planner must anticipate what the company will need to successfully manufacture and deliver products. The only way to do that is to have a forecasting mechanism and model. Without proper forecasting there is no planning. Material requirements planning becomes reactive instead of proactive – that’s not an MRP strategy, that’s simply purchasing.

4. Treating suppliers as vendors, not partners

Our main suppliers are the initial key to effective material requirements planning. Without their cooperation, we will have no materials to make your products. It’s critical to involve our key suppliers in your MRP beyond simply sending them purchase orders. By developing a close relationship with them, we can have a better view of the supply chain and create supplier agreements that work well for both parties to ensure a ready supply of raw materials for production.

All these material requirements planning pitfalls highlight the need to establish good metrics and business analytics. Metrics enable you to measure planning accuracy and facilitate the continuous improvement critical to optimizing ERP and streamlining manufacturing operations.

 

Inventory management is central to getting the results you need from your ERP. At the same time, your ERP helps provide the good inventory management you need.

1. Planning Replenishment Orders

Inventory management allows us to properly plan replenishment orders. Our inventory quantity must be accurate so when the signal to buy or make more is received; we have confidence that we need to take action. ERP inventory management system allows us to categorize parts which helps easily order the right quantity. One item is ordered only when there is a specific demand in exactly the quantity to meet the demand. Another item is ordered when at a lower cost and easily procured. Our goal here is to make fewer transaction so that we order enough to cater the demand. Hence optimizing inventory means fewer transactions and that leads to better inventory accuracy.

2. Surplus Inventory Management

You can quickly see and react to surplus inventory. Whether the surplus is caused by a decrease in some demand or you learn that the economy of a good buy wasn’t so economical, your ERP inventory management system will spotlight the surplus immediately. This leads our capital to be bound in the inventory instead of earning money.

3. Inventory Turnover Tracking

You can track turnover of inventory by segments and not just overall. ERP inventory management systems allow you to categorize your inventory in many ways and to analyze whether your inventory assumptions are true.

4. Business Savings

You save time and money through better inventory organization using your ERP inventory management software. Better organization can lead to improved customer satisfaction. Organization might mean moving your items with the most transactions to locations at the front of the stock room and near each other. It could mean combining the parts used for a particular order in nearby bins. ERP is easily used to improve inventory organization and the results can be much improved efficiency and better productivity in your stock room. Your employee satisfaction goes up and your profits right along with it.

 

A Make-to-Stock company carries finished goods in its inventory in an anticipation for order. Most of such companies promises quick delivery, typically either same day or the nesxt day.

But the problem of course, is guessing how much each of the finished goods to keep in each stock unit. Too high stock can tie up the company’s cash and consume space, also the risk of obsolescence. Too low may incur in lost sales and unhappy customer.

There are four primary factors that influence the amount of finished goods carried by a Make to Stock company.

 

1. Reorder Point:  We must carry enough stock to cover the variability of our demand over the reorder point time.   For example, assume that our lead time to reorder is three weeks, with average demand of 100 units per week.   We have scheduled our production at 100 units per week.   We would, therefore, need to carry a “safety stock” level of inventory sufficient to cover the historical variability of demand over this three-week period.
2. Production Lot Size:   If our planned production lot size exceeds the typical order quantity, some amount of finished goods will remain in stock between deliveries. Let’s assume that our average shipping rate is 100 units per week, and our production lot size is 400 units.   On average, we would have 300 units left over when our production lot arrives.   These would last for approximately four weeks and obviously effect our level of finished goods inventory. Therefore, The greater the lot sizes, the greater the resulting average inventory level.
3. Production Reliability (on-time completions): The poorer the reliability of on-time completions, the greater the level of finished goods inventory required to assure the targeted service level.
4. Variability of Demand: The amount of inventory required to avoid a stock-out is considerably less if demand varies from 90 to 110 every week, vs, varying from 0 to 300 per week.   There are many components that cause variability of customer demand.   Some of those components are within our control. Others are controlled by customer marketplace.

Given this factors that affects the make-to-stock companies, it is easy to make goods that can’t be sold, and not to make goods that could be sold.  The net effect is to reduce potential throughput.

This week was review about the different process in ERP systems, Accounting, Procurement, and Fulfillment from an ERP perspective. Particularly we analyzed and the business issues of Target Canada from an ERP perspective.

Finding the right ERP software solution is a difficult and resource-intensive task for any company, and with Target’s tight timeframe, successfully implementing a system within 2 years was next to impossible. Although using the existing system proved to be successful in US, and also familiar for the employees to work, it didn’t include features specific to Canadian market. Some of the issues were as follows:

1. Target had bad data management with lot of errors. This was one of the main reasons for critical failure of ERP systems in Target Canada.
2. The timeline that retailers and employees was set on was unrealistic. This led its supply chain to plunge in chaos.
3. Training is vital to a business’s success with a new software system. User errors are inevitable, but they can be easily managed when a business allows itself to roll out a new system gradually instead of implementing it drastically.

Takeaway in this case would be that companies must be ready to invest the time and resources necessary for making their implementation a successful one.

 

SAP Haus party was a chance for us to get connected with SAP’s future technologies and their team leaders. It showcased its newest technologies like 3d-printing, oculus, cloud technologies and IoT. I was particularly interested in its Innovation team that designs compelling set of innovative business products. Currently the hottest topics trending in SAP are Blockchain Technology- decentralized computing beyond bitcoin that’s offering blockchain-as-a-Service. Today, although technical aspects still exceed the business aspects, I take this opportunity to talk about some of the interesting use cases of it.

• It provides decentralized markets that can kill e-commerce because it will be possible for any two people in the planet to trade with one another without depending on any institution.

• As blockchains and sidechains proliferate, there are several important implications for the Internet of Things and the development of Smart Systems. For one, blockchain technology could provide a way to track the unique history of individual devices, by recording a ledger of data exchanges between it and other devices, web services, and human users.

• Existing electronic voting systems all suffer from a serious design flaw: They are proprietary, that is, centralized by design, meaning there is a single supplier that controls the code base ^[4], the database, and the system outputs and supplies the monitoring tools at the same time. The blockchain works as a secure transaction database, to log votes and audit vote results in a trustworthy way.

• Multiple issues such as high transfer cost, limited money distribution methods, limited brand options, limited ways to deal with money, etc. hold enormous potential for innovation in financial services.

• Smart transportation is about maximising already-existing infrastructure and resources rather than adding new ones.  Real-time ridesharing is the key, enabling people with private cars to share their journey with others traveling in the same direction. What blockchain adds on top of this is the possibility to put together users without any middlemen thanks to decentralized platforms.

The Currency exchange and remittance use case is perhaps the most advanced of the list since it has been implemented worldwide.

Procurement plays an important role in preparing for demand. It involves planning for right quantity of raw materials required for meeting the demand of finished goods. Although it seems quiet predictable to procure right quantity of materials through technologies like Big Data for several industries like consumer products, automotive industry, retail etc, it is more difficult in food processing industry. Therefore, it is resulting in lost sales or excessive inventory.

As we discussed in class, we can make purchasing as cheap as possible by meeting the economies of scale resulting to minimized cost, selecting a standard vendor and getting best quality, and having contracts to get good lead times. With data driven intelligence it would be easy to optimize all the factors like cost, quality and time, considering market is not influenced by uncontrollable variables like weather.

Weather is the major barrier in planning for purchasing for raw material in food processing industry as monsoon affects the production of crops and thus as availability for raw material purchasing. This results in burden from procurement standpoint with excessive pricing. Therefore procurement of raw materials in food processing industry has become one of the major business issue in decision making with regards to materials requirement and planning. The effect is then again cascaded to sales through lost sales, and lack of intelligence to prepare for the consumer demand. With emerging technology, I believe this issue will be addressed by providing proper intelligence to plan for procurement and thus by effectively meeting consumer demands.

 

 

 

 

Data in the ERP system is stored centrally, and this makes it possible to consolidate all the data during a process. Data is classified as three main types:

• Organizational Data: it represents the structure of an organization. There are three main types of Organizational Data namely: Client, Company Code, and Plant. Client forms the highest form in an organization. A client can have as many numbers of companies, but each company can have only one client. Each of these company is represented using Company Code. All of these company has a plant that performs various functions of a company, and it is represented using Plant.
• Master Data: All of the entities involved in a process is represented using Master Data.
• Transactional Data: Process in a context of Organizational Data uses Master Data for execution, and this results in Transactional Data. Each of these execution produces a documents namely: Transactional, and Virtual document.

Most, but not all of the process impacts the financial document on a transactional step. Process that creates the Impact on this financial data are inventory, finance, and asset accounting. This impact is recorded in General Ledger. List of accounts that can be included in General Ledger is called Chart of Accounts. There are three types of accounts: Operational account, Country specific, and Group account.  Recording data on financial document is based on double entry accounting system, where every transaction has a debit entry and a credit entry.  We record impacts based on revenue principle and matching principle.

My professional experience includes working in a rice industry. Typical functional areas of our industry included Purchase, Production and Operations, Inventory and Warehouse Management, Sales and Marketing. Each of these process had to be started simultaneously. Procurement began with buying paddy as raw material from the suppliers. Then accounts payable will be recorded. Once paddy is processed to rice, it will be stored in the warehouse for transportation. Now as soon as we have orders from the end customers, we deliver the goods according to order, and record the accounts receivables.

I feel it is very overwhelming to head all these business process from procurement to selling of goods by single person. This was even one of the main reason why this startup had failed. Therefore, after listening to my first class of ERP, I understand that apart from having a good idea, it is also very vital to have a effective execution strategy. So compartmentalizing and setting up a particular workforce to work on each of these process will allow them to run efficiently. Complementing these will be the integration of process through ERP systems by breaking the Silo effect between the process to allow running of the entire workflow efficiently and effectively.