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ERP or Enterprise Resource Planning is IT software that integrates business activities across an enterprisefrom product planning, parts purchasing, inventory control, and product distribution, to order tracking. ERP may also include application modules for the finance, accounting and human resources aspects of a business. SAP and Oracle are the two ERP leading vendors. From a business perspective, ERP today has expanded from simply coordinating manufacturing processes to being the integrator of enterprise-wide backend processes. ERP has also evolved technologically from a monolithic legacy implementation into flexible, tiered, client-server architecture.
Increased information transparency to enable better decisions Agility in acquisitions and carve-outs or divestments Increased regulatory compliance Robust and future-proofed backbone systems
There are cost savings on the IT side, often around 10-15%, especially when different ERP implementations are being harmonized. These IT savings include: Reduced ERP implementation costs due to a common template Reduced application maintenance costs Lower integration cost due to standard interfaces Lower infrastructure costs With an awareness of the best practices and a good understanding of ERP project complexities, the risks in an ERP implementation are usually outweighed by the benefits. The ERP discussion on investment return is one of mindset more than one of standalone business cases.
entering the order, whereas for the make-to-stock entries, configuration is done in the product definition, that is, on the material master. This burdens the early discussions during the design phase of an ERP implementation. Fundamental decisions need to be made very early in the project about how many (finished product) materials should be defined: one extreme is to define by material group which needs to be configured completely in the order, or the other end of the spectrum is to define all possible/feasible characteristic combinations which can possibly explode into an extremely large number of finished product definitions. A steel product tend to explode towards the end of production processing; in other words, the bill of material stands on its head or is v-shaped, as shown in Figure 1. This means that the later in the process you define a product, the higher the number of products to be defined becomes. ERP solutions today can readily handle the complexities this of the V-shaped bill of material. They allow characteristics based product configuration with automatic deduction of characteristics, characteristic value inheritance from sales order header to item level, entry of multiple order units such as pieces, tons, dimensions, and so on. Characteristics then drive production, shipping and purchasing processes across the supply chain
Challenge 5: Complex production scheduling combining both continuous and batch production
Figure 2 below illustrates the flow in a typical steel mill. While the blast furnace and converter work in batches, the caster works continuously and the finishing lines work in batches again.
The batches need to be selected based on characteristics during production, preparation and shipment planning. This means that the planning process needs to be able to derive batches with characteristics inheritance and history tracing. Finally, the scheduling part of the planning system needs to be able to work with multiple and dynamic bottlenecks that is, bottlenecks which can change based on incidents such as production problems in certain process steps. ERP systems today can handle all of these situations.
Production completion then posts an updated status of the orders into the ERP system, including stock receipts of finished products, and so forth.
Figure 3 is also important because it lets you identify gaps among a companys different IT systems. A typical gap occurs between the ERP and MES (process control and machine control) systems, where the system is actually combination of custom-built applications and manual spreadsheets. Bridging this gap properly is essential forrealizing the business benefits of the IT investments. If the applications in Figure 3 are to provide true value, they need to be robust, integrated and cost efficient. A recent IBM survey indicates that steel clients process control and MES systems are custom-built applications 66% of the time, and that these custom-built applications usually differ from mill to mill. Clearly, this risks creating sub-optimal processes and leaves the company open to all the problems of maintaining custom-built, legacy applications.
The key element for ERP success is to know how to implement an ERP project. Past experiences recommends best practices such as: Rapid/realistic project timelines due to external pressures (acquisition synergies, legal reorganization) Command-and-control approaches from a central project management office A global business process owner who has the authority and credibility to approve process designs and business model/ organization changes
However, theres much more to it than these few general principles. Implementing ERP is complex and takes a team of knowledgeable and experienced ERP professionals to successfully implement an ERP project.