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ERP 101
Introduction to ERP for Manufacturing & Distribution
Pat Garrehy
Founder and CEO,
Rootstock
David Bush
Senior Manufacturing Consultant,
Rootstock
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
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)
Three key concepts before
we dive into the subject
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
Organization of
manufacturing & distribution
companies
A Typical Software Company
Administration Finance
Marketing Sales
IT
Support/ServiceEngineering
HR
Internal External
A Typical Distribution Company
Administration Finance
Marketing Sales
ITHR
Internal External
Support/Service
PurchasingMaterial Control
Cost Accounting Receiving/Shipping
Engineering
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
Four terms you will be
hearing often
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
Multi-level BOM
Bicycle
Frame Wheel Transmission Control Accessories
Wheel RimsWheel TiresSpokes
Level 0
Level 1
Level 2
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
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
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
A Brief History of Time: From
BOMP to MRP to ERP
1960s: IBM Releases BOMP
• “Bill of Materials Processor”
• Pre-mainframe
• Adapted existing BOMs for
manufacturing projects and adjusted
them for production amounts
1960s
BOMP
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
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
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
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
Now, let’s get into a little more
detail about MRP & ERP
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.
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
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?
Calculating the Correct Quantity
Bicycle (1)
Frame (1) Wheel (2) Transmission (1) Control (2) Accessories
Wheel Rims (2)Wheel Tires (2)Spokes (256)
Level 0
Level 1
Level 2
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
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….
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.
So, what goes into a modern,
end-to-end ERP?
Human
Resources
PLM, PDM, CAD
Quality
Management
Financial Consolidation
to Corporate
Transportation
Management
Payroll
Configure-Price-
Quote
Forecasting &
Planning MRP, DRP
Purchasing &
Receiving
Manufacturing,
Production,
Capacity
Scheduling
Engineering,
Product Marketing
Inventory,
Warehouse
Project, Cost
Accounting
Order
Fulfilment,
Invoicing
General Ledger,
Financial Reporting
Accounts
Receivable
Accounts
Payable
Service, RMA,
Repair, Field
MPS, Long Term Forecasting
WMS
Time &
Attendance
Subscription
Billing
Sales Order,
ATP
CRM Case, SLA
ERP for Manufacturing & Distribution
Q&A
www.rootstock.com
888.524.0123
marketing@rootstock.com
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
Sign Up Now

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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)
  • 4. Three key concepts before we dive into the subject
  • 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
  • 6. Organization of manufacturing & distribution companies
  • 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
  • 10. Four terms you will be hearing often
  • 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
  • 12. Multi-level BOM Bicycle Frame Wheel Transmission Control Accessories Wheel RimsWheel TiresSpokes Level 0 Level 1 Level 2
  • 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
  • 16. A Brief History of Time: From BOMP to MRP to ERP
  • 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?
  • 26. Calculating the Correct Quantity Bicycle (1) Frame (1) Wheel (2) Transmission (1) Control (2) Accessories Wheel Rims (2)Wheel Tires (2)Spokes (256) Level 0 Level 1 Level 2
  • 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.
  • 30. So, what goes into a modern, end-to-end ERP?
  • 31. Human Resources PLM, PDM, CAD Quality Management Financial Consolidation to Corporate Transportation Management Payroll Configure-Price- Quote Forecasting & Planning MRP, DRP Purchasing & Receiving Manufacturing, Production, Capacity Scheduling Engineering, Product Marketing Inventory, Warehouse Project, Cost Accounting Order Fulfilment, Invoicing General Ledger, Financial Reporting Accounts Receivable Accounts Payable Service, RMA, Repair, Field MPS, Long Term Forecasting WMS Time & Attendance Subscription Billing Sales Order, ATP CRM Case, SLA ERP for Manufacturing & Distribution
  • 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 Sign Up Now