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Project Based Manufacturing
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THE IDEAL BUSINESS SYSTEM FRAMEWORK

The expression "the whole is greater then the sum of the individual parts" applies to the ideal business system framework. Ear­lier in the paper we discussed the islands of

information typical of a company operating on an ETO basis. Indi­vidually these systems are excellent supporting departmental activities but are suboptimal in supporting the overall project lifecycle in today's competitive world economy. The key to solving or at least minimizing most of the critical business issues discussed in this paper is integrat­ing all systems into a cohesive whole. We have been progressing or evolving toward this complete system framework for some time.

In the late eighties and early nineties, the aerospace and defense community drove, in the pursuit of efficiencies (do not laugh, it is true), the evolution of MRP II and then enterprise resources planning (ERP), the successor to MRP II to support project-oriented manufacturing. This was a significant achievement that was not widely known in the commercial ETO community at large until recently. Since then, ad­vanced and affordable computing technology has made the integration or at minimum interfacing of the other important business systems to project-oriented ERP feasible, systems such as bidding and estimat­ing, product data management (PDM), project management, and project accounting. A number of commercial firms operating on an ETO basis have pioneered this new variant of ERP.

 

During their pioneering efforts they found that the earlier project-oriented MRP II/ERP model needed enhancement to work harmoni­ously with all of its new peers. Some of the needed enhancements:

 

      the ability of ERP, which is due-date-oriented to work with project management systems that are task and duration oriented

      the ability to effectively manage value-added services

      the ability to not only collect costs at the project level but to plan for and recognize revenues

      the ability to create bid-specific structures beyond the traditional
project-specific bill of material (BOM).

•   the ability to effectively manage material supplied to subcontractors. Since these new capabilities are a significant addition to the project-oriented ERP model, it seems appropriate to refer to this enhanced and improved model as extended project-oriented ERP. Figure 6 is an attempt to graphically depict this improved model.

For those interested in extended project-oriented ERP, there is some good news. The APICS Complex Industries SIG and the Project Man­agement Institute's (PMI) Manufacturing SIG are exploring the possi­bility of collaborating on this enhanced model for project-oriented manufacturing. If they are successful in finding ways of working to­gether, it will benefit the ETO community in that this new model will be documented, refined, and distributed to industry by them. Both or­ganizations are effective as educating professional societies.

SUMMARY

      The ETO operating environment is significantly different from that
found in traditional discrete manufacturing.

      There are a number of departments or functions unique to the ETO
operational environment.

      The lifecycle of an ETO project is complex, and there are frequent
revisions to the end-item specifications.

      The front-end processes—the defining of customer requirements,
bidding and estimating, contract definition, and preliminary design
engineering—is often the most difficult project phase.

      Most companies operating on an ETO basis have disconnected departmental systems resulting in "islands of information."

      An incomplete requirements definition in combination with the is­
lands of information are the root causes for many of the critical business issues impacting organizational competitiveness.

      The evolution of ERP and advanced computing technology have made the integration of the various department systems feasible and desirable.

      This new integrated business model is often called extended project-oriented ERP.

      A few progressive professional societies are in the process of or­
ganizing the underlying body of knowledge to support this new
model.


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