QFD is a method of
translating higher-level objectives into concrete actions and
metrics, using a tool known as the house of quality. This approach
uses the customer requirements as input, then breaks them down by
defining how each requirement can be satisfied. It can be used
iteratively, at consecutively lower levels. Once a company has
decided how it will delight its customers, and what each functional
area in the company must do to actually achieve the corporate
objectives, it has the design objectives for its TEI/ERP system. It
can then tailor its system to meet those objectives.
New Product Idea Database
As marketing listens to customer desires, sees current competitive
products, and hears about potential new competitive products, they
can file those ideas in a new product database. R&D or product
engineering also contributes to this database as they visit
customers to see how the customers are using the company's existing
products. R&D uses this data as a primary source as they develop new
products. This database normally resides outside ERP today's
Sales and Operations Planning
While marketing represents the customer's desires, a manufacturer
must also contend with other competing forces. Sales and operations
planning (S&OP) is a process that integrates all the plans for the
business (sales, marketing, development, manufacturing, sourcing,
and financial). The S&OP process reconciles all supply, demand, and
new product plans at both the aggregate and detailed levels, tying
them to the business plan. The planned production levels by product
line drive the master production schedule and determine starring
requirements. The expected sales by product line can form the basis
for the more detailed sales forecasts and for revenue projections.
Manufacturers constantly balance strategic variables to continue to
meet continued changes from customers and suppliers. These variables
include inventory levels, capacity, alternative sources of supply,
lead time to the customer, and new product introductions.
Virtually all activities within an ERP system are directly connected
with the financial system. The S&OP process produces a top-level
financial plan for several months out, which informs the financial
executives of projected profitability and cash flow.
The ERP system plans the detailed execution of the sales and
operations plan. The financial planning system can then combine
these detailed projections of cash outflows and inflows with other
financial data (e.g. investment income, business acquisitions) to
create and maintain detailed financial projections.
Executive Decision Support
Executive decision support encompasses three areas:
1. Decision Support Simulation
Simulation tools can help executives understand the impact of
strategic and tactical decisions on operating indicators and the
profit and loss. These tools utilize data from throughout the TEI/ERP
system to project answers to questions such as, what would be the
impact on operations and our P&L if we
• changed our model mix, discontinued products, and/or added
• accepted a hot customer order that requires capacity in our
bottleneck work center?
• brought additional work in that we are currently letting our
• outsourced some current work to suppliers?
• added an additional shift in a bottleneck work cell?
• accepted the customer order for less than our desired selling
2. Alert Warning Systems
Alert warning systems in TEI/ERP systems warn executives when the
system detects that the threshold value that has been set for a
particular attribute has been exceeded. For example, a CEO could set
a threshold for yields in a given manufacturing plant; if the actual
yields for a given day or week fall below that threshold, the TEI/ERP
system would automatically notify the CEO.
This can be a very powerful tool for upper and middle management.
Senior management can set thresholds for each of the attributes that
are keys to financial and operational performance, such as gross
margin, production volumes, and yield. They can also set thresholds
for the attributes on which they are measured by their customers,
such as on-time shipments. Middle management can set thresholds for
the items for which they are responsible.
3. Business Process Modeling
Several PC-based tools allow a company to model its business
processes to simulate throughput and bottlenecks visually, watching
the queues build behind bottlenecks. These tools can be extremely
useful in modelling current and proposed business processes in a
variety of circumstances, including plant layout, information flows,
and ERP implementations (especially in the conference room pilot).
To Be Continued
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