ExoLytic, Inc.
A Discussion on Supply Chain
ExoLytic, Inc. offers an array of consultancy services
in supply chain management from initial value proposition, strategic vision,
practical application, basic and advanced training to expedite and quality
performance implementation. We will help make your project a success from
Six Sigma ERP to lean manufacturing along with our industry-acclaimed
implementation services in quality and ISO consultancy.
The supply chain is a relatively simple concept. The complexities frequently experienced are typically due to the misunderstanding of its component modules and how to manage/utilize them to effectively fulfill the business goal of economically delivering customer satisfaction. In this series, we will discuss ERP, a major piece of the “Supply Chain”, in layman’s terms to take away some of the mysteries involved. However, even knowing about and having the tools alone will not ensure a successful implementation. Knowledge and how to navigate the pitfalls is the key. The ExoLytic method provides those insights and process checks to make our customers successful.
by Peter Tang
What is ERP?
Most people, when asked, that question usually answer
SAP, Oracle, Hyperion,
ERP has multiple components. To be successful in an
ERP, all the components have to work together in order to complete the task.
An integrated Bill of Materials
Thorough understanding of capacity
An understanding of a measurable efficiency
Optimization of production lot sizing
Detailed on hand inventories listing
Algorithms that reflect the integrated
business operation for fulfillment of customer demands.
An accurate demand forecast
An accurate demand forecast is perhaps the most
difficult piece of the ERP tools to attain with a high level of functional
confidence. It is also a very critical part in making ERP work. An accurate
forecast leads off the calculation for what is required to fulfill the
completion of the delivery cycle. However, the only truly well-known demand
item that has certainty is backlog. That is, Orders taken but not shipped is
known as backlog, while the purchase order is in-hand with fulfillment terms
agreed upon. Once shipped, backlog becomes sales.
The voodoo-magic element usually submitted by
planners should be qualified and extracted away from the rest of the
forecast by planning, history and competitive intelligence. ExoLytic can
show how this is done through statistical data techniques and
performing/designing empirical field research techniques for your
organization.
An integrated Bill of Materials
An integrated BOM (bill of materials) is a must.
This does not have to be complicated, but a detailed and consistent tiering
from raw materials through work-in-progress finishing with finished goods
and the assembly/transformation steps must be integrated. For each of the
steps, a listing of the material used by quantity is made for the higher
level output, whether it is an assembly or a transformation for each next
level step. A part number must be assigned to each higher level. In assembly
manufacturing, these are generally called a sub-assembly. In a process
environment, these are generally named after the progression step in the
process. For example, in the semiconductor industry it is common to use
process steps such as photo-lithography, etching, ion implant, dicing, etc.
to delineate the progress. Each distinct industry has its own jargon, but
the processes used for BOM creation are similar. The major caveat is that
the unit of measure must reflect a consistent (application) usage. In many
industries, raw material is purchased in bulk but used in a different
configuration in the process. In the plastic industry, monomers and
polymers, and resins are purchased in tank loads or truck loads and in tons
but are used in pounds, grams, ounces, or the equivalent liquid measures.
ExoLytic can help attain the consistency needed by reviewing, identifying
weaknesses and improving the ECO (engineering change order) process.
Thorough understanding of capacity
Understanding capacity is also critical. Capacity
dynamics change with the business environment. Do you run a one- shift
operation or a three- shift operation or something else? Is preventive
maintenance scheduled on your process equipment? Is there set- up time
involved and planned for product change over? Output per machine hour, does
this change by product? Man hours required to produce, does this change by
product?
An effective utilization plan
Utilization, given a known capacity, how much of
this is used? Actual usable time per man/machine hours divided by planned
usable machine/man hours. What are the reasons for non usage? Planned
maintenance, set- up time takes away available usable capacity.
An understanding of a measurable efficiency
Efficiency and utilization are linked and impact
capacity. Efficiency is actual units output divided by expected units
output. The formula efficiency X utilization = effectivity is always in
play. All three attributes play in the planning of production output and
should be monitored regularly.
Optimization
of production lot sizing
Given an understanding of capacity, efficiency, and
utilization, trade offs must be made for cost effectiveness. Should a
production lot be run on efficiency alone? Can a short run be made? The
impact of each decision can be quantified. The cost of raw material, labor
and process time and overhead expended is a calculation available with this
understanding. When put together, production means expended cash. If the
output is not shipped, this is sunk cash, that which is not returned. On top
of it all, the cost of storage, maintenance and interest on borrowed money
to sustain the business must be added to invested cash not returning to the
business through account receivable collection will be critical to the
future success of any business.
Detailed on hand inventories listing
Complete perpetual inventories that are accurate
are also a must. Finished goods, work in progress, and raw material. The
unit of measure must be consistent with how it is used, not how it is
purchased. Unit of measure completes the link between all three types of
inventory.
A relational database
The heart of all ERP systems is a relational
database engine. Whether it is called SAP, Oracle or any other ERP package,
they all start with a relational database engine. Oracle started life with
the acquisition of DBMS RDB from Digital Equipment Corp. Many successful
home grown ERP packages started with a no more than a desktop rdb such as
dbase, FoxPro, Access or File Maker. Others used various SQL and compatible
databases as the engine. A relational database allows quick access to stored
data for use by the application. Logic translated to algorithms manipulates
the data to produce results.
Algorithms that reflect the integrated business operation for
fulfillment of customer demands.
The basic algorithm is subtraction. Match and
subtract, the results will be what is required for the most part. Items like
delivery requirements, lead time and production schedules must be factored
in to complete the ERP. These will be addressed by the ExoLytic team with
each client on an individual basis since they are different in each case.
In this discussion of ERP, ExoLytic hopes to take some of the mystery out of the process. However, Specific client needs must be addressed individually. ExoLytic provides the finest consultancy for businesses in the areas of quality management, ISO implementation and training, supply chain management that includes; lean manufacturing, MRP/ERP consulting and training, financial management, activity based management/costing and IFRS. Please contact ExoLytic for further information, ask for Jim Saropoulos 781.929.5008, or Peter Tang 781.548.1803 or via email.
