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Manufacturing Simulation Game - "LEGO"

ERP Data Management
Part 1 of 3

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The objective of this article is to expose the participants to the data management challenges that are faced when implementing an enterprise resources planning (ERP) system. Data integrity is vital in a complex, and fully integrated, system such as ERP if the anticipated benefits are to be realized. This becomes even more critical when additional applica­tions such as supply chain synchronization, E-commerce, and sales force automation are also implemented. This paper will describe what hap­pens if the required data integrity and discipline break down. The pre­sentation goes on to show how an effective data management program can be developed so that the organization can achieve benefits and posi­tion itself to achieve a real competitive advantage.
As a project manager, you are feeling very pleased with yourself. You have just successfully completed the implementation of a multiplant ERP system on schedule and within the planned budget. This should be a time for celebration, but it is not! There are a number of concerns that have surfaced in the last few months since the functional users have started to use the new system. The new users are even suggesting that they may have been sold a lemon. Some of the comments that are being made can be summarized as follows:
• System does not work!
• There are an increasing number of part shortages.
• Over the last few weeks, the inventory levels have grown to their highest level in months.
• Customer order on-time delivery performance has decreased, and customers are becoming increasingly annoyed about missed prom­ised delivery dates.
• The expediters, who it had been planned to eliminate, have become increasingly busy, and emergency freight costs have increased dur­ing the last few weeks.
• The divisional controller is suggesting that the margins and profit
picture are not as good as
they would have thought it
should have been with our
Figure 1. In an ideal world
"super new ERP system."
System Implementation
(Clean data to support system tests)
Data Clean-up___ Tasks
• Sales/Marketing
• Engineering
• Manufacturing Engineering
• Manufacturing
• Inventory Control
• Purchasing
• Cost Control
• Finance
All of the above comments are symptoms of a deeper prob­lem that should have been ad­dressed during the new system implementation preparation. The problem is that the data in the new system is not correct. In the old system the users knew
its limitations and just worked around them. In essence, the plant ran in spite of the support­ing computer systems rather than using them to run the day-to-day operations.
When one thinks beyond the ERP environment to appli­cations such as supply chain optimization, E-commerce in its broadest definition, and sales force automation, it very
quickly becomes apparent that accurate data is a requirement to effec­tively support any of these applications. Considering supply chain op­timization and synchronized manufacturing, the need for an accurate assessment of one's future requirements becomes vital if these require­ment quantities are to be delivered just in time, straight to the point of usage, to be immediately assembled into a final product.
As a way to explain the problem, let's consider the standard APICS widget A made from three of component 1, four of component 2, and eight of component 3. The problem is that our bill of material says that the usage of component 3 is only six, and this problem permeates all through the new ERP system that we have just implemented. The way that this simple error will affect many of our key business processes is summarized below:
• In the materials planning process, we are requesting smaller quan­tities from our supplier than we really need. This leads to part short­ages, expediting, and increasing freight costs caused by emergency shipments.
• The pick lists used by the stockroom attendants show the wrong quantity of component 3 when kiting orders for the shop floor.
• The manufacturing process of part A cannot be successfully fin­ished, as there are insufficient parts to complete the shop order. The unplanned issue from the stock room is an indication that we have a problem and could lead to the bill of material being corrected.
• Any cost roll-ups or pricing done using this bill of material will
understate the actual cost of component A.
In the world of E-commerce, the situation is also bad, because we have now transmitted data to our suppliers quickly but incorrectly. If the suppliers are using the bill of material information to assist us with any additional planning tasks, then all their work will be incorrect to some degree.
Hence accurate data is needed if we are to effectively use our new system to run our day-to-day operations and position the company to take advantage of new and emerging technologies. This includes such applications as sales force automation, E-commerce, supply chain op­timization, and synchronized manufacturing. Not only must the data be correctly converted, but it must also be maintained on an ongoing basis. We need an effective data management program.

To Be Continued


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