Page 116 - DCAP302_ENTERPRISE_RESOURCE_PLANNING

Enterprise Resource Planning

notes
table 6.2
Before erp WitH erp
Business Processes Proliferation of fragmented Re-engineering around a business models
processes with duplication of that confirms with “best practice”
effort
Productivity Lack of openness to customers Direct interactions with customer and
and suppliers suppliers by enhanced ERP modules like
SCM and ERP
Supply chain Lack of integration Linkage with suppliers and customers
management
e-Business Web based interfaces support Web based interfaces are front end to
isolated systems and their integrated system
components
Information Lack of tactical information for Allows cross functional access to the
effective monitoring and control same data for planning and control.
of organizational resources
Communication Lack of effective communications Facilitate organizational communications
with customers and suppliers with customers and suppliers

6.2 reduction in cycle time

Cycle time is the time between placement of the order and delivery of the product. At one end
of the manufacturing spectrum us the make-to-order operation where the cycle time and cost of
production are high. This is because in a make-to-order situation the manufacturer starts making
the product or designing the product only after receiving the order. He will procure the materials
and components required for production only after getting the order. On the other end of the
manufacturing operations is the make-to-stock approach, where the products are manufactured
and kept in the finished goods inventory before the order is placed.
In both cases the cycle time can be reduced by the ERP systems, but the reduction will be more in the
case of make-to-order systems. In the case of make-to-stock, the items are already manufactured
and kept in warehouses or with distributors, for sales. Here the cycle time is reduced not in the
shop floor, but during the order fulfillment. In the earlier days, even for the made-to-stock items,
the cycle time used to be high. This is because the process was manual and if computerized, was
not integrated. Suppose a customer places an order. The order entry clerk has to check whether
the ordered product is available in the warehouse nearest to the customer. If it is not available
there, then he will have to check whether it is available in other warehouses or with any of
the distributors. Then he will have top process the order, inform the concerned warehouse or
distributor to ship the item and then inform the finance department to raise the invoice and so
on. All these used to take time, days and sometimes weeks. But with an ERP system, as soon
as the order is entered into the system, the system checks the availability of the items. If it is
not available at the warehouse closest to the customer, then the warehouse that is closer and
which has the item in stock is identified. The warehouse is informed about the order and the
shipment details are sent to the distribution module, which will perform the necessary tasks like
packaging, picking and so on, so that the goods are delivered on-time. The finance module is also
altered about the order so that they can raise the invoice. All these actions are triggered by the
click of a button by the order entry clerk. Since all the data, updated to the minute, is available
in the centralized database and since all the procedures are automated almost all these activities
are done without human intervention. This efficiency of the ERP systems helps in reducing the
cycle time.
In the case of make-to-order items, the EPR systems save time by integrated with CAD/CAM
systems. Dramatic time and cost reductions are possible when CAD-engineered design are

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