This is the first webinar of ERP 101 series.
Key topics discussed in the webinar:
The special needs of Manufacturing and Distribution organizations.
Key terms - Bill of Materials, MRP, and ERP.
The evolution of ERP over the last four decades.
The differences between MRP and ERP, and how they fit in with other business systems.
ERP 101- Introduction to ERP for Manufacturing & Distribution
1. ERP 101
Introduction to ERP for Manufacturing & Distribution
Pat Garrehy
Founder and CEO,
Rootstock
David Bush
Senior Manufacturing Consultant,
Rootstock
2. Meet Our Speakers
David Bush
Senior Manufacturing Consultant, Rootstock
• 30+ years of manufacturing and MRP/ERP systems
experience
• Previously at General Microcircuits, Consona
Corporation, Relevant Business Systems, Inc
Pat Garrehy
Founder and CEO, Rootstock
• 40+ years of manufacturing and MRP/ERP systems
experience
• Founder and CEO at Relevant Business Systems
• Previously at Martin Marietta
3. About This Webinar Series
• This is a 10-part webinar series that will:
– Focus on ERP for Manufacturing & Distribution
– Touch upon the evolution of ERP from MRP and MRPII
– Describe ERP in business English with a focus on real-life use cases
• It will not be:
– A highly technical description of each module in an ERP system (that
might come in a future series)
5. Before We Go Into ERP
• Organization of manufacturing & distribution companies
– What is the organizational structure?
– Why does that matter here?
• Four terms you will be hearing often
– BOM
– MRP
– MRPII
– ERP
• The evolution BOMP to MRP to MRPII to ERP
7. A Typical Software Company
Administration Finance
Marketing Sales
IT
Support/ServiceEngineering
HR
Internal External
8. A Typical Distribution Company
Administration Finance
Marketing Sales
ITHR
Internal External
Support/Service
PurchasingMaterial Control
Cost Accounting Receiving/Shipping
Engineering
9. A Typical Manufacturing Company
Internal External
These functions:
Have distinct needs
Have specific processes
Are highly interconnected
Administration Finance
Marketing Sales
ITHR
Support/Service
Purchasing
Material
Control
Cost
Accounting
Receiving/Shipping
Production
Control
Engineering
11. Bill of Materials (BOM)
A bill of materials or product structure (sometimes bill of material, BOM or associated
list) is a list of the raw materials, sub-assemblies, intermediate assemblies, sub-
components, parts and the quantities of each needed to manufacture an end product.
- Wikipedia
Finished Product Product’s Component Parts Bill of Materials
13. Material Requirements Planning (MRP) And MRPII
Material Requirements Planning (MRP) is a computer-based production planning and
inventory control system. MRP is concerned with both production scheduling and
inventory control. It is a material control system that attempts to keep adequate
inventory levels to assure that required materials are available when needed.
- Columbia University
Manufacturing resource planning (MRP II) is defined as a method for the effective
planning of all resources of a manufacturing company. Ideally, it addresses operational
planning in units, financial planning, and has a simulation capability to answer "what-
if" questions and extension of closed-loop MRP.
- Wikipedia
14. MRP Illustrated
Work Orders (Production Control)
Purchase Requisitions (Material Control)
Purchase Orders (Purchasing)
Receiving, Inventory, Shipping = ‘Closed Loop MRP’
A/R, A/P, G/L (Finance) and Sales Order Management
Std. or avg. costing (Cost Accounting)
BOM
(Engineering)
MRP
Engine
Sales Orders
(Sales)
MRP
MRPII
Finance
Sales
Administration
Marketing
ITHR
Support/Servic
e
Purchasing
Material
Control
Cost
Accounting
Receiving/Shipp
ing
Production
Control
Engineering
15. Enterprise Resource Planning
Enterprise Resource Planning (ERP) is a category of business-management software—
typically a suite of integrated applications—that an organization can use to collect,
store, manage and interpret data from many business activities, including: product
planning, purchase. manufacturing or service delivery.
- Wikipedia
Administration Finance
Marketing Sales
ITHR
Support/Servic
e
Purchasing
Material
Control
Cost
Accounting
Shipping/Recei
ving
Production
Control
Engineering
17. 1960s: IBM Releases BOMP
• “Bill of Materials Processor”
• Pre-mainframe
• Adapted existing BOMs for
manufacturing projects and adjusted
them for production amounts
1960s
BOMP
18. 1970s: MRP Goes Mainstream
• Built on Mainframes
• COTS (Commercial Off-the-Shelf)
• MRP, Payroll, A/R, A/P, G/L, Sales Orders
• Each of these was standalone and did
not work with each other
1960s/70s
MRP
1960s
BOMP
19. 1980s: MRP Evolves Into MRPII
• Built on Mini- and Micro-computers
• Initial integration between MRP, A/R,
A/P, G/L, Cost Accounting, Sales Orders
• Payroll still not hooked into MRPII
1980s
MRPII
1960s
BOMP
1970s
MRP
20. 1990s: MRPII Evolves Into ERP
• Gartner coins the term “Enterprise
Resource Planning” (early ‘90s)
• Client-Server
• MRPII integrated with payroll and HR
• “ERP” starts to go outside manufacturing
• Massive investments driven partly by
Y2K
1990s
ERP
1960s
BOMP
1980s
MRPII
1970s
MRP
21. 2000+: ERP Expands, Goes Into Cloud
• Cloud deployment
• CRM, HR, Finance, Professional Services,
Supply Chain, Project Management
• Increasingly integrated modules
• New trends: Mobile
2000s
Cloud ERP
1960s
BOMP
1980s
MRPII
1990s
ERP
1970s
MRP
22. Now, let’s get into a little more
detail about MRP & ERP
23. ERP: More Than Just MRP
• Enterprise Resource Planning
– The ability to plan the resources required to meet the needs of your
customers and internal demands.
– This is not simply a new term for MRP.
What are the differences between ERP and MRP?
Let’s see.
24. MRP – A Key Part of the ERP System
• MRP is Material Requirements Planning.
• It focuses on material, while ERP broadens the focus to the
resources of the entire Enterprise.
• MRP balances supplies and demands to keep inventory at the
correct level.
• Critical for manufacturing and distribution
25. Key Considerations
• Considerations when planning component levels include:
– Planning material in the correct quantity and time frame. But…
– How do you calculate the correct quantity?
27. Key Considerations
• Considerations when planning component levels include:
– Planning material in the correct quantity and time frame. But…
– How do you calculate the correct quantity?
– How do you calculate the correct time frame for material availability?
– Are there other considerations: EOQ, cash flow, inventory turns?
– What about shop floor capacity, scheduling, handling outside
operations?
Now we are moving outside the parameters of an MRP
algorithm which is what material control deals with into what
Production Control deals with
28. How Does ERP Help With Overlapping Issues?
• Break each problem down into manageable functions that mimic
human reasoning.
• Let’s see how this works when planning a quantity of material to
order.
– Besides the immediate demand, are there other requirements to
consider?
– Will any quantity be lost in production for setup, scrap, etc?
– Are there economic order quantities to be considered?
– What about inventory turns or scrap in stores?
• All of these issues could affect the quantity to be ordered. But
there is more….
29. How Does ERP Help With Overlapping Issues?...
Cont’d
• Break each problem down into manageable functions that
mimic human reasoning.
• What factors besides Order Quantity could affect Production?
– Shop Floor Capacity
– Shipping/Receiving Schedules
– Cash Flow
The ERP System will help planners keep all of these factors in
view, providing a complete picture of the manufacturing process
and associated factors to be considered.
33. The ERP 101 Webinar Series
Date Topic
Aug 2, 2016 An Introduction to ERP for Manufacturing
Aug 16, 2016 Engineering Basics– The Importance of Part Numbers and Bills of Material
TBA Engineering – Learn how Change Orders and/or Revisions ensures that ERP system data is
accurate and up-to-date
TBA Shop Floor – Explore how ERP is used to create and maintain Work Centers, Routings and
Procedures
TBA Shop Floor – See how scheduling the Shop Floor through ERP controls Labor and Machines
TBA Procurement – Link your Vendors and Purchased Parts via ERP
TBA MRP – Step though an overview of this vital ERP subset
TBA Sales – See how you can link your Customers and Products via ERP
TBA Manufacturing Accounting – An overview using standard cost
TBA Manufacturing Accounting – An overview using weighted cost
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