Intranets and Manufacturing

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1 Intranets and Manufacturing Sistem e-businesse (MG-652) Jurusan Manajemen

2 Outline 1. Defining the terminology 2. Emerging Business Requirements 3. Manufacturing Information Systems 4. Intranet-Based Manufacturing 5. Logistics Management 6. Electronic Data Interchange (EDI) 7. Summary 10-October-2001 Chandra Wibowo W. 2

3 Integrated Logistics Agile Manufacturing Customer-Driven Manufacturing Rapid Internal Response to Demand Changes Efficiently Managing Supply Chain Complexity Customer-Driven Manufacturing Real-Time Decision Support Inteligent Process Management Terminology Business Requirements Intranet-Based Manufacturing Electronic Data Interchange (EDI) ebusiness and Manufacturing Manufacturing Information Systems Logistics Management Discrete vs Process Manufacturing Market Types of Manufacturing Information Systems Traditional Logistic Management Case Study : Microsoft Corp. Integrated Logistics Manufacturing Resource Planning Enterprise Resource Planning Manufacturing Execution Systems Modern Logistics Function Forecasting Purchase contract management Purchasing Purchase order management Receiving and warehouse management Distribution Management Distribution requirements planning Warehouse management Transport and fleet management Labor management 10-October-2001 Chandra Wibowo W. 3

4 (1) Defining the terminology Logistics serves as a tool for identifying and effectively managing interfirm linkages in the supply chain (see Fig. 1). Essential to optimizing the supply chain is the integration of key inbound and outbound logistics operations to reduce order cycle time, improve service levels, and reduce operating costs. 10-October-2001 Chandra Wibowo W. 4

5 Achieving these strategic goals demands efficient management of logistics operations that focus on optimum utilization of products, materials, resources, and space. The logistics function can be divided into: Supplier management. Inventory management. Distribution management. Warehouse management. 10-October-2001 Chandra Wibowo W. 5

6 Elements of Logistics Management Logistics Management Inventory Management Purchasing Management Distribution Management Warehouse Management Supplier Management Requisition Management Cash / Invoice Management 10-October-2001 Chandra Wibowo W. 6

7 Supplier Management The goal is to simplify routine transactions, reduce paper handling, and provide an electronic communications framework for daily procurement activities. Firms can electronically communicate purchase orders, delivery schedules, and associated invoiceless payments to their internal and external suppliers. 10-October-2001 Chandra Wibowo W. 7

8 The trend in purchasing is to reduce the number of suppliers and get them to become partners in business in a win/win relationship. The benefits are seen in reduced purchase order (PO) processing costs, increased numbers of POs processed by fewer employees, and reduced order processing cycle times. 10-October-2001 Chandra Wibowo W. 8

9 Inventory Management The goal is to shorten the order-ship-bill cycle. When a majority of partners are electronically linked, information that was faxed or mailed in the past can now be sent instantly. The inventory management solution should enable the reduction of inventory levels, improve inventory turns, and eliminate outof-stock occurences. 10-October-2001 Chandra Wibowo W. 9

10 Distribution Management The goal is to move documents related to shipping (bills of lading, purchase orders, advanced ship notices, and manifest claims). Paperwork that typically took days to cycle in the past can now be sent in moments and contain more accurate data, thus allowing improved resources planning. 10-October-2001 Chandra Wibowo W. 10

11 Warehouse Management The goal is to automate the warehouse distribution process, from receiving and put-away to picking and deployment. The goal is to optimize activity in all the functional areas: warehouse administration, receiving, product storage, picking, and shipping. 10-October-2001 Chandra Wibowo W. 11

12 Agile Manufacturing Manufacturers are stressing quality and speed. Product configurability (must be flexible to support needed material control techniques): Manufacturing data management. (the definition and use of product structure, components, costs). Configuration management. (automates the configuration and order-entry processes). 10-October-2001 Chandra Wibowo W. 12

13 Production Execution Systems PES software tracks the five essential elements of the manufacturing plant floor -- materials, equipment, personnel, specifications/work instructions, and facility conditions in real-time -- and correlates the data for visibility and control of manufacturing operations. 10-October-2001 Chandra Wibowo W. 13

14 PES software has the following components: Master production scheduling -- identifies future production and procurement. Material requirements planning (MRP). Capacity planning (CAP) -- identify capacity bottlenecks, so that adjustment can be made. Shop floor control (SFC) -- provides current status of jobs, work-inprocess, process, etc. Quality management system (QMS) -- implement quality assurance and quality control functions (integrates with all functions). 10-October-2001 Chandra Wibowo W. 14

15 (2) Emerging Business Requirements Emerging requirements for manufacturing or logistics systems can be generalized into three categories: 1. The changes created by customer behavior. 2. The applications that reflect accepted business practices addressing current business trends and strategies. 3. The underlying information technology that enables the above applications. 10-October-2001 Chandra Wibowo W. 15

16 Customer-Driven Manufacturing Customers dictate how business is done today. Customes determine what is built, how it is built, and when it is delivered. Even the design of many products today is influenced by the customer, not the supplier. The companies must recognize trends, react, and make the transition to customer-driven manufacturing. (flexible manufacturing). 10-October-2001 Chandra Wibowo W. 16

17 Rapid Internal Response to Demand Changes Customers expect manufacturers to respond quickly to changing demands This has forced many manufacturing companies into organizational and operational restructuring. The use of MRP with multiple simulations to make products with ease, speed, and reducing costs. -- serve customers better. 10-October-2001 Chandra Wibowo W. 17

18 Efficiently Managing Supply Chain Complexity Manufacturers need to efficiently manage supply chains that are more complex than ever before. With production efficiency already high in many organizations, one way to increase profits is to reduce inventory, purchasing, and distribution costs. Technologies (EDI, bar-coding, etc) required to support the supply-chain management. 10-October-2001 Chandra Wibowo W. 18

19 (3) Manufacturing Information Systems The characteristics of the informations systems depend on the type of manufacturing operations, and can be characterized as discrete, batch process, continuous process, or hybrid (combining more than one form). Batch: fast-food, pharmaceutical, chemical. Continuous: oil refining companies. Hybrid: specialty chemical companies. 10-October-2001 Chandra Wibowo W. 19

20 Discrete vs Process Manufacturing Market Process manufacturers differ from their discrete cousins in 4 respects: 1. Manufacturing methods. 2. Packaging requirements. 3. Assets allocation. 4. Product consistency. Discrete products: automobiles, airplane, etc. Process products: pepsi cola, fries, chips, etc. 10-October-2001 Chandra Wibowo W. 20

21 Process Manufacturing Industry: Key Challenges 3 key challenges that will define success or failure for process manufacturing firms are: 1. Flexible response -- must be able to respond quickly to market trends by supplying their customers with high-quality, low-cost products. (EDI telecommunications). 2. Cost reduction and traceability -- Just-in-Time techniques in order to optimize scheduling. 3. Product consistency/quality -- monitoring the consistency of products. 10-October-2001 Chandra Wibowo W. 21

22 Types of Manufacturing Information Systems The goal of applying computer automation to the manufacturing environment is improved efficiency and lowered costs, both direct and indirect. There are several different computer software applications that are designed for various stages of the product life cycle, from computer-aided design to computerassisted production on the plant floor. 10-October-2001 Chandra Wibowo W. 22

23 Manufacturing Resource Planning MRP systems contain functions for planning production and purchase orders using basic planning rules to project capacity and material requirements for a specific jobs. Be able to create dispatch lists and track working process and job costs. MRP is based on the assumption that orders would be collected, grouped together for material requirements (weekly master production schedule - MPS). 10-October-2001 Chandra Wibowo W. 23

24 Enterprise Resource Planning ERP is strong in support for multiple plants, multiple suppliers, and multiple currencies, and it will schedule an entire multisite, global organization, including such functions as plant management, inventory control, and order processing. ERP systems have evolved from primarily business/accounting systems into something more fully integrated with both plant-floor operations and the larger concerns of the enterprise, especially logistics managements. 10-October-2001 Chandra Wibowo W. 24

25 Manufacturing Execution Systems (MES) MES are factory floor performance monitoring systems that complement the planning systems. MES allows companies to track, monitor, and control the five essential elements of production: materials, equipment, personnel, work instructions, and facilities. MES improves the efficiently of the manufacturing operation and, as such, speeds the time to market. Improve manufacturing performance: cost, quality, service, and regulatory pressures. 10-October-2001 Chandra Wibowo W. 25

26 The Future Integrated Systems The challenge for the future (and why Intranets are useful) lies in integrating the three elements in a single framework: Resource planning: MRP, ERP, and cost accounting systems. Manufacturing execution: the factory-level coordinating and tracking systems. Distributed control: the factory floor devices and process control systems. 10-October-2001 Chandra Wibowo W. 26

27 (4) Intranet-Based Manufacturing 3 critical concepts in the standard system design [PSFT96]: Customer/demad-driven manufacturing. Real-time decision support and advanced planning and scheduling. Intelligent process management - proactive notification and event-driven problem solving. EDI, fax, , web pages, phone call, shared resources, synchronized data, communications. 10-October-2001 Chandra Wibowo W. 27

28 (5) Logistics Management Logistics management is concerned with the strategy and management of the movement and storage of materials and products from suppliers, distribution, retail outlets, and customers. The scope is the physical movement of good starts with the sources of supply and ends at the point of consumption. Problem w/ traditional logistics mgt: too much inventory, too slow to react, and one size fits all. 10-October-2001 Chandra Wibowo W. 28

29 The Modern Logistics Function Forecasting.(inventory management). Purchasing: purchase contract mgt, purchase order mgt, receiving & warehouse mgt. Distribution management: distribution requirement planning (DRP), physical inventory mgt (PIM), warehouse mgt, transport & fleet mgt, and labor mgt. 10-October-2001 Chandra Wibowo W. 29

30 (6) Electronic Data Interchange (EDI) Computer-to-computer exchange of business information has become an increasingly popular form of electronic commerce. EDI enables firms to exchange business information faster, more cheaply, and more accurately than using paper-based systems. EDI used in manufacturing, shipping, warehousing, utilities, pharmaceuticals, construction, petroleum, metals, banking, government, health care, etc. 10-October-2001 Chandra Wibowo W. 30

31 EDI consists of standardized electronic-message formats (transaction sets) for business documents such as requests for quotations, purchase orders, purchase change orders, bill of lading, receiving advices, and invoices. To move to EDI, a company must have computerized accounting records and establish trading partners who agree to exchange EDI transactions. Benefits of EDI: improved in overall record keeping quality, reduced inventory, better information for mgt decision making. 10-October-2001 Chandra Wibowo W. 31

32 EDI in Action See Fig. 2. Document Flow without EDI. See Fig. 3. Document Flow with EDI. Compare the differences! 10-October-2001 Chandra Wibowo W. 32

33 Document Flow without EDI Buyer Seller Purchase request initiated in the organization Finance department Finance department Payment Bill Purchase department Order delivery Paper-based mailroom Paper-based mailroom Order confirmation Sales department Inventory and warehousing Receiving department Product delivery Shipping department Manufacturing department 10-October-2001 Chandra Wibowo W. 33

34 Document Flow with EDI Buyer Seller Purchase request initiated in the organization Finance department Finance department Payment details Purchase-order delivery Billing details Purchase department EDI-capable computer EDI-capable computer Sales department Automatedorder onfirmation Inventory and warehousing Receiving department Product delivery Shipping department Manufacturing department 10-October-2001 Chandra Wibowo W. 34

35 Why Has EDI Adoption Lagged? The limitations of EDI: High costs. Limited accessibility. Rigid requirements Partial solutions. Closed world. 10-October-2001 Chandra Wibowo W. 35

36 (7) Summary This chapter discussed the interplay between electronic commerce and manufacturing in order to ensure higher quality, reduced costs, and increased responsiveness. The logistics function as part of a cohesive supplychain infrastructure. Needs to be devoted to integrated enterprisewide business processes, supported by information systems that provide supply-chain visibility, intelligent planning, and scheduling and execution controls. 10-October-2001 Chandra Wibowo W. 36

37 End of Session Thank You 10-October-2001 Chandra Wibowo W. 37

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