Master of Business Administration in Information

System
MBA- Semester IV
MI0029- Enterprise Resource Planning – 2 Credits
(Book ID: B0899)
Assignment Set- 1 (30 Marks)
Note: Each question carries 10 Marks. Answer all the questions.

Question.1 What do you mean by Enterprise Resource Planning? Also Discuss

the advantages of ERP? [10 Marks]

Ans : Enterprise Resource Planning (ERP) is an integrated computer-based system used

to manage internal and external resources, including tangible assets, financial resources,
materials, and human resources. Its purpose is to facilitate the flow of information between
all business functions inside the boundaries of the organization and manage the connections
to outside stakeholders.Enterprise Resource Planning (ERP) covers the techniques and
concepts employed for the integrated management of businesses as a whole, from the
viewpoint of the effective use of management resources, to improve the efficiency of an
enterprise. ERP packages are integrated (covering all business functions) software
packages that support the above ERP concepts.

Originally, ERP packages were targeted at the manufacturing industry, and consisted
mainly of functions for planning and managing core businesses such as sales
management, production management, accounting and financial affairs, etc. However, in
recent years, adaptation not only to the manufacturing industry, but also to diverse types
of industry has become possible and the expansion of implementation and use has been
progressing on a global level.

ERP software is designed to model and automate many of the basic processes of a
company, from finance to the shop floor, with the goal of integrating information across
the company and eliminating complex, expensive links between computer systems that
were never meant to talk to each other.
Above figure shows how information is integrated within an organisation using an
ERP system.

The Advantages of ERP

Installing an ERP system has many advantages – both direct and indirect. The direct
advantages include improved efficiency, information integration for better decision
making, faster response time to customer queries, etc. The indirect benefits include better
corporate image, improved customer goodwill, customer satisfaction, and so on. The
following are some of the direct benefits of an ERP system:

· Business Integration

· Flexibility

· Better Analysis and Planning Capabilities

· Use of Latest Technology

Business Integration

The first and most important advantage lies in the promotion of integration. The reason
why ERP packages are considered to be integrated is the automatic data updating
(automatic data exchange among applications) that is possible among the related business
components. Since conventional company information systems were aimed at the
optimization of independent business functions in business units, almost all were weak in
terms of the communication and integration of information that transcended the different
business functions. In the case of large companies in particular, the timing of system
construction and directives differs for each product and department/function and
sometimes, they are disconnected. For this reason, it has become an obstacle in the shift
to new product and business classification. In the case of ERP packages, the data of
related business functions is also automatically updated at the time a transaction occurs.
For this reason, one is able to grasp business details in real time, and carry out various
types of management decisions in a timely manner, based on that information.

Flexibility

The second advantage of ERP packages is their flexibility. Different languages,

currencies, accounting standards and so on can be covered in one system and and
functions that comprehensively manage multiple locations of a company can be packaged
and implemented automatically. To cope with company globalization and system
unification, this flexibility is essential, and one can say that it has major advantages, not
simply for development and maintenance, but also in terms of management.
Better Analysis and Planning Capabilities

Yet another advantage is the boost to the planning functions. By enabling the
comprehensive and unified management of related business and its data, it becomes
possible to fully utilize many types of decision support systems and simulation functions.
Furthermore, since it becomes possible to carry out, flexibly and in real time, the filing
and analysis of data from a variety of dimensions, one is able to give the decision-makers
the information they want; thus enabling them to make better and informed decisions.

Use of Latest Technology

The fourth advantage is the utilization of the latest developments in Information

Technology (IT). The ERP vendors were very quick to realize that in order to grow and
to sustain that growth, they had to embrace the latest developments in the field of
Information Technology. Therefore, they quickly adapted their systems to take advantage
of the latest technologies like open systems, client/server technology, Internet/Intranet,
CALS (Computer-Aided Acquisition and Logistics Support), electronic-commerce, etc. It
is this quick adaptation to the latest changes in Information Technology that makes the
flexible adaptation to changes in future business environments possible. It is this
flexibility that makes the incorporation of the latest technology possible during system
customization, maintenance and expansion phases.

As has been stated above, ERP includes many of the functions that will be necessary for
future systems. However, undertaking reforms to company structures and business
processes, so as to enable the full use of these major features, is the greatest task for
companies that will use them. It is necessary to take note that casually proceeding with
the implementation of ERP, merely for reasons of system reconstruction or preparation
for the year 2000, is likely to result in turning the above mentioned advantages into
disadvantages.

Question 2 Discuss the Concept of Quality Management in concept with Module

Function ? [10 Marks]

Ans : A quality management system (QMS) can be expressed as the organizational

structure, procedures, processes and resources needed to implement quality management.
With product quality under the microscope in all industries today, every company strives
for superior quality in its products and services. All
manufacturing modules track quality control activities across the enterprise–from
intermediate producers to finished goods. These systems allow a wide variety of
characteristics and parameters to be specified in test and inspection operations and
maintain an extensive history to improve product quality and identify recurring problems.

Elimination of defects in standard product designs and manufacturing methods, before

production, is just as important as eliminating defects
during production. In fact, to achieve quality levels, manufacturers must focus on
identifying and correcting defects in underlying product designs and production methods
and not simply inspect the in-coming material and finished goods. The Quality
Management Systems usually support the bench-marking and use of optimal product
design, process engineering and quality assurance data by all functional departments
within the manufacturing enterprise, thereby facilitating definition of repeatable
processes, root cause analysis and the continuous improvement of manufacturing
methods. This documentation supports the job functions of the quality assurance and
production managers in validating the manufacturer’s conformance to ISO9000, Good
Manufacturing Practices (GMP) worldwide, MIL-Q-9858 in the United States, and a va-
riety of country specific industry standards of quality assurance. Specification Control in
the Quality Management System offers a state-of-the-art approach for documenting
specifications and enables an organization to standardise and simplify its quality
assurance and control functions. Sample types sample rules and testing levels are
completely user-defined for maximum flexibility and ease of use. Maintenance of
standard specifications, detailed sampling instructions and testing procedures is
performed on-line. Cyclic, subsequent and repeat testing options are available to support
the material acceptance function, with breakdowns of test procedures into multiple
dispositions to improve inventory turnover and reduce inspection lead- j times. The
system’s database eliminates redundant specifications and
ensures that a single change to standard procedures takes effect immediately throughout
the organization. User-defined review and commitment controls ensure maximum
accuracy. The Material Procurement subsystem provides tools for implementing Total
Quality Management programs within an organization. Original manufacturers may be
defined independently from vendors, so that businesses can strictly adhere to quality
assurance and control functions, without preventing their buyers from seeking the best
possible price and delivery terms. Each item supplied by an original manufacturer may be
linked to a standard product specification. Actual test results and material disposition
histories are retained by item, lot, original manufacturer and specification for in-depth
quality performance review and analysis.

Material Inspection subsystem offers a wide range of capabilities for process supervision
and control. These capabilities are fully integrated with the other modules like
purchasing, inventory management and shop floor control functions to ensure that the
right quality control procedures are followed. Capabilities include on-line maintenance of
product specifications by production method and customer, event driven sample requests,
sample log-in, test results entry, quality performance analysis and equipment calibration
support. Product quality metrics are collected and archived in a manner that offers full
support for statistical process control techniques. Material Disposition is another feature
available in many systems that offers advanced material review and disposition functions
that ensure the right quality control decisions are made and leave an audit trail of
decisions for compliance purposes. Capabilities include automated material review and
approval, automated material dispositioning, sub-lot control, optional automatic second
dispositioning, optional automatic repeat testing, grading, redesignation, and
implementation of user-defined policies and procedures for authorisation and control.
Production Reporting supports complete production reporting. Both
employee and crew labour reporting is possible, with crew reporting automatically
allocating efficiencies between crew members. User-defined shift teams can be entered to
support quality circles and subsequent reporting of results. Employee/clock maintenance
provides for designation of employees and teams. Both labour grades and labour rates can
be designated. Labour grades entered by employees override those designated for the
work centre. Labour rates enable the entry of actual cost data, even when labour grades
have not been established. The Shop Floor Control system is fully integrated with Cost
Accounting and Control. Both production reporting and employee/clock maintenance
contribute data that is summarised at the time of shop order close with full variance
analysis reporting made available to the user. Shop Floor Control also makes use of a
powerful and flexible shop calendar facility, which can be global with overrides
reflecting each facility and each work centre within the facility.

Question 3 Explain SAP’s ERP Packages in detail? [10 Marks]

Ans : SAP designed the enhancement package for SAP ERP to easily deliver business-
and industry-specific functionality, enterprise services bundles, and other functions that
enhance and simplify the use of the SAP ERP application through improvements to the
user interface and processes. SAP is the first software provider to use SOA to deliver new
functionality, enterprise services bundles, and simplified user interfaces through
enhancement packages. Enterprise services are one of the ways that SAP is implementing
a program of service as part of our strategy to provide SOA across all products. SAP
customers and partners can suggest ideas for new services and help develop them by
participating in the Enterprise Services Community program.

The evaluation/selection process is one of the most important phases of the ERP
implementation, because the package that you select will decide the success or failure of
the project. Since ERP systems involve huge
investments, once a package is purchased, it is not an easy task to switch to another one.
So it is a ‘do it right the first time’ proposition. There is little room for error.

The most important factor that should be kept in mind when analysing the different
packages is that none of them are perfect. The idea that there is no perfect package needs
to be understood by everyone in the decision-making team. The objective of the selection
process is not to identify a package that covers each and every requirement (a perfect fit).
The objective is to find a package that is flexible enough to meet the company’s needs, or
in other words, a software that could be customised to obtain a ‘good fit’.

Once the packages to be evaluated are identified, the company needs to develop a
selection criteria that will permit the evaluation of all the available packages on the same
scale. To choose the best system, the company should identify the system that meets the
business needs, that matches the business profile and that which identifies with the
business practices of the company. It is impossible to get a system that will perform,
exactly as the company does business, but the aim should be to get the system that has the
least number of differences.

According to S Shankarnarayanan, Senior Consultant with Baan Infosystems India Pvt

Ltd. (ERP Systems – Using IT to gain a competitive advantage), some important points to
be kept in mind while evaluating ERP software include:

· Functional fit with the company’s business processes

· Degree of integration between the various components of the ERP system

· Flexibilityl and scalability

· Complexity

· User friendliness

· Quick implementation

· Ability to support multi-site planning and control

· Technology–client/server capabilities, database independence, security

· Availability of regular upgrades

· Amount of customization required

· Local support infrastructure

· Availability of reference sites

· Total costs, including cost of license, training, implementation, main tenance,

customization and hardware requirements.

It is always better to form a selection or evaluation committee that will do the evaluation
process. This committee should comprise of people from the various departments (the
functional experts), the top management (preferably the CIO or COO) and consultants
(package experts). The selection committee should be entrusted with the task of choosing
a package for the company. Since all business functions are represented and the
management is involved, the package that is selected will have company-wide
acceptance. The package experts or the consultants can act as mediators, or play the role
of explaining the pros and cons of each package.
Master of Business Administration in Information
System
MBA- Semester IV
MI0029- Enterprise Resource Planning – 2 Credits
(Book ID: B0899)
Assignment Set- 2 (30 Marks)
Note: Each question carries 10 Marks. Answer all the questions.

Question.1 What are the different phases of ERP implementation lifecycle? [10
Marks]

Ans : The different phases of the ERP implementation are given below:

1. Pre-Evaluation S creening :

Once the company has decided to go in for the ERP system, the search for the perfect
package starts. But there are hundreds of ERP vendors – of all sizes and shapes – all
claiming to have the solution that is ideal for you. Analysing all the packages before
reaching a decision is not a viable solution. It is also a very time consuming process. So it
is better to limit the number of packages that are evaluated to less than five. It is always
better to do a thorough and detailed evaluation of a small number of packages, than doing
a superficial analysis of dozens of packages. Hence, the company should do a pre-
evaluation screening to limit the number of packages that are to be evaluated by the
committee. Not all packages are equal–each has its own strengths and weakness. The pre-
evaluation process should eliminate those packages that are not at all suitable for the
company’s business processes. One can zero in on the few best packages by looking at
the product literature of the vendors, getting help from external consultants and most
importantly, by finding out what package is used by companies which are similar. It is
always better to find out how the different packages are performing in environments
similar to yours.

If one studies the history of the ERP packages and finds out how each package evolved, it
soon becomes evident that every ERP package grew out of the xperience or opportunity
of a group of people, working in a specific business, who created systems that could deal
with certain business segments. It is generally accepted that most ERP packages are
stronger in certain areas than in others, and each one is madly trying to add functionality
in areas where they have been lacking. For example, PeopleSoft is strong in HR and less
so in manufacturing; Baan, on the other hand, is historically stronger in manufacturing
than in finance and so on.
2. Package Evaluation

The evaluation/selection process is one of the most important phases of the ERP
implementation, because the package that you select will decide the success or failure of
the project. Since ERP systems involve huge
investments, once a package is purchased, it is not an easy task to switch to another one.
So it is a ‘do it right the first time’ proposition. There is little room for error.

The most important factor that should be kept in mind when analysing the different
packages is that none of them are perfect. The idea that there is no perfect package needs
to be understood by everyone in the decision-making team. The objective of the selection
process is not to identify a package that covers each and every requirement (a perfect fit).
The objective is to find a package that is flexible enough to meet the company’s needs, or
in other words, a software that could be customised to obtain a ‘good fit’.

Once the packages to be evaluated are identified, the company needs to develop a
selection criteria that will permit the evaluation of all the available packages on the same
scale. To choose the best system, the company should identify the system that meets the
business needs, that matches the business profile and that which identifies with the
business practices of the company. It is impossible to get a system that will perform,
exactly as the company does business, but the aim should be to get the system that has the
least number of differences.

3. Project Planning Phase

This is the phase that designs the implementation process. It is in this phase that the
details of how to go about the implementation are decided. Time schedules, deadlines,
etc. for the project are arrived at. The project plan is developed. Roles are identified and
responsibilities are assigned. The organizational resources that will be used for the
implementation effort are decided and the people who are supposed to head the
implementation are identified. The implementation team members are selected and task
allocation is done. This phase will decide when to begin the project, how to do it and
when the project is supposed to be completed. This is the phase which will plan the "what
to do’ in case of contingencies; how to monitor the progress of the implementation; what
control measures should be installed and what corrective actions should be taken when
things get out of control. The project planning is usually done by a committee constituted
by the team leaders of each implementation group. The committee will be headed by the
ERP in-charge (usually the CIO or COO). The committee will meet periodically (during
the entire implementation lifecycle) to review the progress and chart the future course of
actions.
4. Gap Analysis

This is, arguably, the most crucial phase for the success of the ERP
implementation. Put very simply, this is the process through which companies create a
complete model of where they are now, and in which direction they want to head in the
future. The trick is to design a model which both anticipates and covers any functional
gaps. It has been estimated that even the best ERP package, custom tailored to a
company’s needs, meets only 80% of the company’s functional requirements.

The remaining 20% of these requirements present a problematic issue for the company’s
BPR (business process re-engineering). One of the most affordable, albeit painful,
solutions entails altering the business to fit’ the ERP package. Of course, a company can
simply agree to live without a particular function (the cheap but annoying solution).
Other solutions include:

· Pinning your hopes on an upgrade (low cost but risky)

· Identifying a third-party product that might fill the gap (hopefully it also partners with
the ERP packages, keeping interfacing to a minimum)

· Designing a custom program

· Altering the ERP source code, (the most expensive alternative; usually reserved for
mission-critical installations)

5 Reengineering

It is in this phase that the human factors are taken into account. In ERP implementation
settings, reengineering has two different connotations. The first connotation is the
controversial one, involving the use of ERP to aid in downsizing efforts. And there have
been occasions where high-level executives have invoked the reengineering slogan, and
purchased an ERP package with the aim of reducing significant numbers of employees.
While every implementation is going to involve some change in job responsibilities, as
processes become more automated and efficient, it is best to treat ERP as an investment
as well as a cost-cutting measure, rather than as a downsizing tool. ‘Downsizing’ is a
business practice that may have its place, but it should not be cloaked within the glossier
slogan of ‘reengineering’, or justified by the purchase of an ERP package. ERP should
engender business change, but should not endanger the jobs of thousands of employees.

The second use of the word reengineering in the ERP field [or business process
reengineering (BPR) as it is usually called], refers to an ERP
implementation model initially designed and used with much success by the ‘Big Six’
consulting firms. The BPR approach to an ERP implementation implies that there are
really two separate, but closely linked implementations involved on an ERP site: a
technical implementation and a business process implementation. The BPR approach
emphasises the human element of necessary change within organizations. This approach
is generally more time consuming, and has received its share of criticism for creating
bloated budgets and extended projects. But adherents of the BPR approach to ERP,
would argue that there is no way that you can ignore the human element in an
implementation that involves significant changes in responsibilities. As the ERP market
shifts to a mid-market focus, and as all implementations are becoming more cost-
sensitive, the BPR approach has come under some real scrutiny.

6 Configuration

This is the main functional area of the ERP implementation. There is a bit of mystique
around the configuration process and for good reason: the Holy Grail or unwritten rule of
ERP implementation is, synchronising existing company practices with the ERP package
rather than changing the source code and customising it to suit the company. In order to
do so, business processes have to be understood and mapped in such a way that the
arrived-at solutions match up with the overall goals of the company. But, companies
can’t just shut down their operations while the mapping processes take place. Hence the
prototype–a simulation of the actual business processes of the company–will be used.
The prototype allows for thorough testing of the "to be" model in a controlled
environment. As the ERP consultants configure and test the prototype, they attempt to
solve any logistical problems inherent in the BPR before the actual go-live
implementation.

Configuring a company’s system reveals not only the strengths of a company’s business
process but also–and perhaps more importantly–its weaknesses. It’s vital to the health of
the company and to the success of the ERP implementation that those configuring the
system are able to explain what won’t fit into the package, and where the gaps in
functionality occur. For example, a company might have an accounting practice that
cannot be configured into the system or some shipping process that won’t conform to the
package. The company obviously needs to know which processes have to change in the
process of implementation. Finding out what will work and what won’t requires a
knowledge of the business process itself, and an ability to work with people throughout
the company. So, people with such skills should be assigned to these tasks. As a rule, in
most large implementations, the functional configurations are split between the different
areas within the company, so some will attend to HR, some will be involved in financials
and so forth.

ERP vendors are constantly striving to lower configuration costs. Strategies currently
being pursued include automation and pre-configuration. Baan for instance, has
developed Orgware, an automated configuration tool, while SAP has pre-configured
industry-specific templates that can be tweaked for each individual company
(Accelerated SAP Solutions).
7 Implementation Team Training

Around the same time that the configuration is taking place, the implementation team is
being trained, not so much how to use the system, but how to implement it. This is the
phase where the company trains its employees to implement and later, run the system.
The ERP vendors and the hired consultants will leave after the implementation is over.
But for the company to be self-sufficient in running the ERP system, it should have a
good in-house team that can handle the various situations. Thus, it is very vital that the
company recognises the importance of this phase and selects those employees who have
the right attitude–people who are willing to change, learn new things and are not afraid of
technology–and good functional knowledge.

8 Testing

This is the phase where you try to break the system. You have reached a point where you
are testing real case scenarios. The system is configured and now you must come up with
extreme-case scenarios–system overloads, multiple users logging on at the same time
with the same query, users entering invalid data, hackers trying to access restricted areas
and so on. The test cases must be designed specifically to find the weak links in the
system and these bugs should be fixed before going live.

9 Going Live

This is it. Lights on, switches thrown, gloves off. On the technical side, the work is
almost complete–data conversion is done, databases are up and running; and on the
functional side, the prototype is fully configured and tested and ready to go operational.
The system is officially proclaimed operational, even though the implementation team
must have been testing it and running it successfully for some time. But once the system
is ‘live’, the old system is removed, and the new system is used for doing business.

10 End-User Training

This is the phase where the actual users of the system will be given training on how to
use the system. This phase starts much before the system goes live. The employees who
are going to use the new system are identified. Their current skills are noted and based on
the current skill levels, they are divided into groups. Then each group is given training on
the new system. This training is very important as the success of the ERP system is in the
hands of the end-users. So these training sessions should give the participants an overall
view of the system and how individual actions would affect the entire system. In addition
to these general topics, each employee is trained on the job or task that he/she ip
supposed to perform once the system goes live. It is human nature to resist change. Also
many people are afraid of computers and other new technologies. So there will be
resistance to change. Another factor is that not all people will be successful in making the
changeover. The company management should address these concerns and take necessary
actions to avoid failure. The end-user training is much more important and much more
difficult (since most end-users are not thrilled at having to change) than the
implementation team training. Companies are beginning to take this phase seriously, as
there is statistical evidence now, which shows that most implementations fail because of
a lack of end-user training.

Post-Implementation (Maintenance Mode)

One important factor that should be kept in mind is that the post-
implementation phase is very critical. Once the implementation is over, the vendors and
the hired consultants will go. To reap the full benefits of the ERP system, it is very
important that the system should get enterprise-wide acceptance. There should be enough
employees who are trained to handle the problems that might crop-up. There should be
people, within the company, who have the technical prowess to make the necessary
enhancements to the system as and when required. The system must be upgraded as and
when new versions or new technologies are introduced. Here the organization should
think in terms of the incremental benefits of the new enhancements. Because with any
upgradation or enhancements, there will be a lot of other aspects like user training that
have to be considered. So instead of going in for upgradation as and when a new version
is announced by the vendor, the organization should first analyse the costs and benefits.

The post-ERP organization will need a different set of roles and skills than those with
less integrated kinds of systems. At a minimum, everyone who uses these systems needs
to be trained on how they work, how they relate to the business process and how a
transaction ripples through the entire company whenever they press a key. The training
will never end; it is an ongoing process; new people will always be coming in, and new
functionality will always be entering the organization.

Question.2 what is CAD/CAM and what are its advantages? [10 Marks]

Ans : CAD/CAM is the other major focus area for the manufacturing sector.
Traditionally, the automotive and aerospace industries are the largest consumers of
CAD/CAM. With the automotive sector in the doldrums, vendors were not able to meet
their expectations from this industry. On the other hand, the farm auto sector did better in
comparison. Mahindra & Mahindra (Tractor Division) has grown considerably in the last
three years and their manufacturing capacity has doubled. This is accompanied with
significant enhancement in design capacity. Increasing design capacity is also a
competitive edge for a company. For example, Tata Johnson Controls, which makes
seating systems, started off by designing seats solely for Ford and then, with increased
design capacity using advanced CAD/CAM, went on to supply seating systems to many
other auto majors. The major focus area in CAD /CAM is on design analysis,
development, and manufacturing. Styling and ergonomics are the refinement areas to
achieve design excellence. There were only marginal investments in modeling. There is
also a trend towards reverse engineering, especially in the engineering and appliances
industry. Manufacturing, companies in the BPL Group have taken up reverse
engineering.
Product data management (PDM) is another leading edge of the CAD/CAM philosophy.
TELCO and Mahindra Ford have integrated many of their suppliers. For the supplier, it
means enhanced competence and improved competitiveness. Many of these suppliers,
with their improved design capacity anc integration with OEMs, have also started
exporting. Brakes India is supplying brakes to many of the European auto manufacturers.

Another reason, which prompts a company to make design an imperative is the improved
alignment that many manufacturing organizations have acquired due to business process
reengineering. An important trend is the integration of tier 1 and tier 2 suppliers with
OEMs, for standard product information.

In the heavy engineering sector, many companies have signed up multi year contracts
with global majors like SDRC and PTC. BHEL has a five-year CAD/CAM contract
across all units with SDRC. Similarly Siemens, L&T, and Lakshmi Machine Works are
investing in CAD/CAM to beef up their research capability.

Computer-Aided-Design/Computer-Aided-Manufacturing (CAD/CAM) advantages

are following :

· Graphics Capabilities: CAD systems allow the designer to view a product from
different perspectives, including three-dimensional rotations, and various cross-sections.
The designer can also make proportional changes in scale, or change the angle of an arc
with the click of a computer mouse rather than having to redraw the entire product.

· Design, storage and retrieval: Some CAD systems can store the design characteristics
of existing products and components. Then, for example, if a company needs a gear for a
new product, the designer can enter the relevant information about the gear, such as its
diameter, tooth pattern, and required hardness, into the CAD system. The CAD system
determines whether the company is already using an identical or sufficiently similar gear,
in which case a new one is unnecessary. If not, a gear that has similar properties may
exist. The designer can then use the design of this similar gear as a starting point for the
new gear. This capability not only promotes the use of common components but also
reduces design time.

· Automatic evaluation of specifications: One of the most time-consuming aspects of

design for highly technical products is calculating whether or not product specifications,
such as strength, heat resistance or aerodynamic drag, are satisfied. These calculations
can be programmed into some CAD systems so that whenever the designer changes the
design (by altering the shape or material to be used), these performance characteristics
are recalculated automatically and compared to the product requirements. This is
sometimes called Computer-Aided-Engineering (CAE).

The overall benefits of CAD systems can be substantial. The features described above
reduce development time and cost, and they improve product quality because more
design options can be evaluated in greater detail more quickly. For example, Motorola
used three-dimensional CAD to produce its award-winning MicroTac pocket sized
cellular phone two years ahead of the competition. It is not uncommon for CAD systems
to reduce product cycle times by 10-50%.

Even greater time and cost reductions have resulted from recent advances whereby,
CAD-engineered designs are converted automatically into software programs for
computerised production machines. These are called Computer-Aided-Design/Computer-
Assisted-Manufacturing (CAD/CAM) systems. This automatic conversion eliminates the
costly and time consuming steps of having a person convert design drawings into a
computer program for computer-controlled production equipment, such as robots or
machine tools. CAD and CAD/CAM systems are not used by large automotive or
electronics companies alone. Future Enterprises, the largest maker of wedding jewellery
in the United States, reported that its CAD/CAM system reduced the time required to
design and make jewellery from five months to one week.

Question.3 what are the major steps towards total quality Management? [10 Marks]

Ans : Total Quality Management is a structured system for managing the quality of
products, processes, and resources of an organization in order to satisfy its internal and
external customers, as well as its suppliers. Its main objective is sustained (if not
progressive) customer satisfaction through continuous improvement, which is
accomplished by systematic methods for problem solving, breakthrough achievement,
and sustenance of good results (standardization).

There is no standard or hard-line procedure for implementing TQM. Every company can
practice TQM in a manner it sees best for its organization. However, a company’s TQM
program must always be structured and internally standardized, i.e., everyone within an
organization must practice TQM in the structured manner set forth by management.
TQM may be considered as a collection of principles and processes that have been
proven to be effective in business quality management over time. It goes back to the
teachings of Drucker, Juran, Deming, Ishikawa, etc, who each have studied and
developed ideas for improving organizational management.

A Major Step toward Total Quality Management

By introducing a coherent set of audited processes to the product development cycle, a

PDM system goes a long way towards establishing an environment for ISO9000
compliance and Total Quality Management (TQM). Man} the fundamental principals of
TQM, such as ‘empowerment of the individual to identify and solve problems, are
inherent in the PDM structure. The form controls, checks, change management processes
and defined responsibility also ensure that the PDM system you select, contributes to the
organization conformance with international quality standards.

Make-to-Order (MTO) and Make-to-Stock (NITS)

One way to classify the manufacturing operations is by the amount of processing the
product requires, after the company receives an order from customer. At one end of the
processing spectrum is the make-to-order (MTO) company. This company does not begin
processing the material for the component or product until it has received an order from
the customer. In some cases, the company may not even procure the material and
components until after it receives the order. This type of manufacturing operations is
practiced when the company competes on the basis of product customisation and serves
its customer base by providing unique and/or highly specialised items. The MTO
company also bases its production planning on firm customer orders.

At the opposite end of the spectrum is the make-to-stock (MTS) company, which
manufactures products and places them in inventory before it receives customers’ orders.
Either the customer purchases the products directly from the inventory at a retail outlet,
or the company ships the product ‘off-the-shelf from the finished goods inventory at the
factory or at a distribution centre. MTS companies rely heavily on market analysis and
demand forecasting in planning the production of their products with respect to the
product mix and volume.

Figure 4.2 shows the relation between the output variety (degree of customisation) and
the type of manufacturing operation. As is evident from the graph, the output variety is
highest when the company is operating in the make-to-order mode, as the companies can
serve each and every individual customer in the way he/she wants. But the cycle time will
be more and the cost of the product will also be more. But in the case of a MTS company,
the products are already made and kept in the inventory for the customer to pick up. Here,
the customer won’t get any individual attention or customisation; he can buy what is
available with the company. The MTS company will be making products in lots and the
cost of the products will be less as the economies of scale will be at work and there will
not be any waiting period for the customer after placing the order.

Assemble-to-Order (ATO)

Another variation of the manufacturing operations is the assemble-to-order (ATO)

company. The assemble-to-order company manufactures standardised, option modules
according to the forecasts it has made and then assembles a specific combination, or
package of modules, after receiving the customer’s order. The classic example is the
automobile manufacturer. After receiving orders from a host of dealers, the manufacturer
specifies the exact production schedule for the automobiles.
Above Figure shows Relation between output variety and the type of
manufacturing process.

The schedule is based on the options order by the customers—automatic transmission or

manual transmission, air-conditioning, standard or digital control panel, leather, cloth or
vinyl seating, a so on. Many components for assembling the automobiles would have be
ordered or started into production before receiving the customer’s order based upon
demand forecasts. Thus, the major processing that remains when the orders come in is
assembly. This approach shortens the time between placement of the order and delivery
of the product – cycle time.

Engineer-to-Order (ETO)

Yet another variation of the manufacturing operations is the engineer-to-order (ETO)

company. The engineer-to-order company is the ultimate in product variety, product
customisation and flexibility. In this mode of operation, anything will be manufactured as
per order – but at a price. The expensive clothing of the ‘bold and beautiful’ is an
example of this kind of production. Products are made for each customer and even the
minute details, for example, the texture and feel of the cloth, the color of the threads, the
size of the collar and so on will differ from one customer to another, depending upon the
customer’s preferences. So the manufacturer cannot keep anything in inventory, he will
have to order only once the customer has given his/her specifications. Obviously, the cost
of production will be highest in this mode of production.

Configure-to-Order (CTO)

Along the broad spectrum of make-to-order manufacturing, there is a growing

convergence between strictly assemble-to-order (limited options and features) and
completely engineer-to-order (just about anything goes, at a cost) environments. This
evolving environment is often referred to as configure-to-order. Using a rules-based
product configuration system, configure-to-order (CTO) manufacturers are able to
simplify the order entry process and retain engineer-to-order (ETO) flexibility, without
maintaining bills of materials for every possible combination of product options.

Manufacturing planning and control is broadly categorised as either make-to-order

(MTO) or make-to-stock (MTS). The material and production planners within these
communities confront unique challenges in the face of demand management. MTS
manufacturers produce end items that are stocked and are ordinarily available, prior to
receipt of a customer order. For MTO manufacturers, the identity of the end item is often
unknown until the receipt of a customer order. As a result, a certain level of standard
subassemblies is typically inventoried to expedite delivery of the finished product.

Traditionally, MTO manufacturers have had to choose between ATO and ETO. ATO
suppliers face the need to extend product lines, add features, and increase flexibility to
meet customer demands. ETO manufacturers feel a pressure to standardise at least some
of their product lines to reduce costs and remain competitive. Today, the CTO
environment has emerged in response to customers’ demands for individualised products
with shortened lead-times, improved quality and competitive prices. Virtually any
manufacturer that uses features, options, or variable dimensions is a candidate for
entering the CTO environment.

Transitioning to a CTO environment requires an evolution of the core planning tools that
support the business. Traditional MRP tools rely on predefined bills of material and
routings to support the planning process. For those moving from an ATO environment,
existing bills and routings no longer represent the increasing end item availability and
complexity. For material and production planners, the transition to CTO combines the
challenges of planning in ATO and ETO environments. Planners are responsible for
determining material and subassembly quantities at the right time. Faced with the lengthy
new product introduction process, planners have virtually no advance information. The
new or modified manufacturing bill is not available until after the customer order is
received. Until a sales history is accrued for the newly introduced features and options,
planners are not able to monitor and improve forecasts.

Without software support tools, planners have few alternatives in developing a planning
platform. Generally, bills and routings are constructed to reflect the manufacturing
process. Each level of the bill and associated routing steps, represent individual shop
orders. Planners work with a different set of bills and routings, that are structured to
represent demand percentages and load consumption of various options and defined
common subassemblies. When customers request either a subtle change to a previous
order or a complete new design, new part numbers have to be created, bills and routings
developed or copied and modified, and costs assigned and rolled up Finally, accounting
can calculate if there is any profit margin. By the time planners have access to the final
bill and routing, material requirement! planning (MRP) and capacity planning (CP) have
nothing to say except ‘expedite’ and ‘overload.’

One option is to pre-define all possible combinations of options and features, even if
many will never be sold. This approach creates an engineering maintenance nightmare,
however, and does nothing to facilitate forecasting Another option is to manually create
part numbers, bills and routings on a ‘as needed’ basis. Not only is this a time-consuming
process, but it is also prone to errors. The only other option is to develop cumbersome
combinations of ’special’ sales orders and phantom part numbers, creating an enterprise-
wide nightmare.

In response to the need for an accurate planning platform, several manufacturing software
packages are now available with powerful ‘configurations.’ The configuration process
allows orders to be taken by answering questions with pre-defined rules, that reduce order
and entry errors. Many configurations also support the entry of a specific code string that
allows customers to order ‘just like the last time’ or ‘just like the last time but make these
yellow instead of red.’ The configuration then populates the attributes of the newly
configured item, tests for configuration conflicts, and generates the appropriate bill of
material, routing and price based on rules and calculations.

The part number, assigned to the new item, can be formatted as an intelligent part number
or simply given the next sequential assignment. The end item description and operation
text in the routing reflects the result of the entry selections or text keyed directly by the
operator. Setup and run times in the routing and quantity per assembly in the bills, can be
calculated based on selections or user inputs.

The key component of a configuration is the blueprint of valid combinations of features

and options. This blueprint, or ‘CTO model’, uses a traditional bill of material model
with parent and component relationships. Rules and calculations then ensure that the
resulting configuration can be built by defining the way to build it and also establish a
selling price. The flexibility of establishing this CTO model is clearly an important aspect
of selecting the best configuration software for your business. Few functional areas are
exempt from the impact of transitioning to a new way of entering sales orders;
automatically generating new part numbers, bills and routings; building and shipping
products; and recording the financial results of doing business. The design of the CTO
model must support:

· Ease of quoting and order entry.

· Accurate pricing, discounting and commissioning.

· Essential customer documents such as packing lists and invoices, required shop paper,
and applicable financial records.

Input from product data management, sales and marketing, manufacturing, and finance is
required to develop a CTO model that supports the integrated environment. It is
important to understand how the configuration generates the "appropriate" bill of material
and routing because they are at the core of the planning process. Typically, a CTO model
represents a translation of product engineering rules that define relationships among
product options, materials and manufacturing processes. Multiple CTO models
differentiate different sets of valid relationships and required processes.
The CTO model presents valid options within a model, and applies rules or calculations
based on selections. For example, a CTO model of a personal computer would have a set
of component options such as case styles (slimline or tower), CPUs (66 or 100 MHz),
hard drives (520MB or 1.2GB), and monitors (VGA or SVGA). Structured beneath the
options would be the real item part numbers. (There could be several levels of options
before the real part number level.)

Key considerations for material and production planners are the modularity of the real
bills of material that will be combined in the configured end item, and the level at which
sales analysis records will be stored. In many instances, the structure (if bills and routings
exist at all) needs to be re-examined in light of how it will support the CTO model.

With the introduction of configurations, the lengthy process of product introduction is

greatly reduced by the ability of the configuration to automatically create new part
numbers, generate bills and routings, and assign prices. However, unless the
manufacturing bills have been reviewed and contoured to a CTO model, the result is
often inaccurate/inadequate information, faster!

With the architecture of the CTO model, and the ability to capture sales analysis
information at the option level, planners have a tool to improve their planning models.
The ability to capture sales analysis records on the options provides the ability to accrue
data for use in forecasting software. For example, within the accessories option, each
occurrence of a mouse, modem NIC, sound card and CD-ROM selection is captured as a
sales analysis record. This information is available for summarisation at a month or year
end. The data, can be reviewed and massaged, then input to the forecasting algorithms.
Instead of forecasting at the accessory level with the use of percentage bills of material,
information is automatically monitored and maintained at the detail level.

The considerable power of configuration software provides the means t< quickly develop
accurate part, bill, and routing information. In addition t< maintaining sales analysis
information at the configured item level, detail information by option is also available.
This provides a powerful database for the dissection of market data. It also becomes the
foundation for improving forecasting and planning capabilities.