Operations and Supply Chain Management The Core

266 OPERATIONS AND SUPPLY CHAIN MANAGEMENT
LO9–1 Explain
what material
requirements
planning (MRP) is.
Enterprise resource
planning (ERP)
A computer system
that integrates
application programs
in accounting, sales,
manufacturing, and
the other functions in
a firm.
UNDERSTANDING MATERIAL
REQUIREMENTS PLANNING
Enterprise resource planning (ERP) is a computer system that integrates application
programs in accounting, sales, manufacturing, and the other functions in a firm. This integration
is accomplished through a database shared by all the application programs. Current
ERP vendors have set new standards in information integration that can significantly
benefit a company. When implemented correctly, ERP links all areas of the business.
Manufacturing knows about new orders as soon as they are entered into the system. Sales
knows the exact status of a customer order. Purchasing knows what manufacturing needs
to the minute, and the accounting system is updated as all relevant transactions occur. The
potential benefits of ERP are huge.
The operations and supply functions in an ERP system include many applications. In
Exhibit 9.1, we see a diagram that depicts typical operations and supply chain functions.
∙ In sales and distribution (SD), products or services are sold to customers. All the
details of shipping to the customer and invoices are handled in these modules.
∙ Production planning (PP) supports both discrete and process manufacturing processes
and includes the material requirements planning (MRP) application, which is
the topic of this chapter.
∙ Quality management (QM) plans and implements procedures for inspection and
quality assurance. It is integrated with the procurement and production processes
so that the user can identify inspection points both for incoming materials and for
products during the manufacturing process.
∙ Material management (MM) covers all tasks within the supply chain, including purchasing,
vendor evaluation, invoice verification, and material use planning. It also
includes inventory and warehouse management.
∙ Plant maintenance (PM) supports the activities associated with planning and performing
repairs and preventive maintenance. Completion and cost reports are available
and maintenance activities can be managed and measured.
exhibit 9.1
Operations and Supply Integration Overview
Sales
Customer
catalog
Order
entry
Delivery/
shipment
Goods
issue
Invoicing
Sales info
system
Production
Sales &
operations
planning
Demand
management
MRP
Production control
and capacity planning
Production
Quality
Quality
planning
Quality
inspection
Quality
control
Materials
Requisition
Purchase
order
Inventory
Invoice
verification
Maintenance
Asset
structure
Preventive
maintenance
planning
Maintenance
task
processing
Corrective
maintenance
tasks
Maintenance
history and
reliability analysis