The Application of Information Technology in the Workplace - Essay Example

The Application of Information Technology in the Workplace 1.0 Introduction Manufacturing and service-oriented companies in the rapidly globalizing marketplace are now being driven to pursue world’s best practices in order to survive, expand and succeed. Almost all companies recognize the need to develop world class methodologies and systems that will give them the ‘productivity tool’ which will provide the company the ability to compete effectively. Companies on different industry fields are always on the hunt for the ultimate process or system which will ensure consumers of quality goods that comes at a reasonable price. According to Anderegg (2007), the continuous search for the system that will improve business operations has provided the necessary impetus for the development of a popular tool called the Enterprise Resource Planning (ERP). Also made possible with the availability of computer technology specifically with the development of IBM AS/400 computer and Microsoft's Windows NT which allowed software packages to become more and more user-friendly, ERP has developed to the point that it has become industry specific making it possible for ERP package to be designed to address one's specific industry idiosyncrasies. (Brown and Vessey, 2003) ERP is actually an improved version of Business Resource Planning (BRP) which came from Material Resource Planning II (MRPII) which is in turn a descendant of Material Resource Planning (MRP). All of these are essentially computer-based approaches to scheduling and planning of material requirements and inventory. ERP has been regarded as the "answer" to the productivity and economic troubles of service and manufacturing enterprises. Due to its effectiveness, the use of ERP system as an enterprise management software tool has become widespread in spite of the presence and availability of other products in the marketplace. The purpose of this series of articles is to contribute a review and analysis of the following questions: 1. What is MRPII/ERP software solutions and how did they evolve? 2. What are the advantages in suing ERP? 3. What are the disadvantages of using ERP and the solutions perceived?. 2.0 The Development of ERP There is but one daily practical problem that manufacturing organizations face in their operations whatever their products maybe and that is customers would always want products to be manufactured and delivered faster than one can actually make them. There will always be nearly impossible time frames and one is forced to comply if one is interested in surviving the competition. This state of affairs obviously demand some level of planning which involves companies needing to control the quantities and types of raw materials, planning what products are to be produced and how much and ensuring that not only the current but also the foreseeable future demand can be addressed. And it needs to be done in the lowest cost possible. Planning is very important because any error can wipe out profits. Purchasing insufficient quantities of raw materials or the wrong one can lead to delays in meeting customer needs which can destroy the client loyalty. Excess items, apart from those which can be used for future operations, represent wasted money translating to lesser profit margins. There is always the possibility of stocks not being used at all or being used at a much later time which is particularly troublesome with food manufacturers because of their product’s short life cycle. Producing at the wrong time can lead to customer deadlines to be missed. These problems have made it necessary for the development of systems that can provide efficient handling of data. It was said to have started with the MRP concept leading to the ERP system that we now have today. In the following discussion, I discuss the evolution from the MRP to MRP II and finally to ERP systems. 2.1 The MRP Concept MRP stands for Material Requirements Planning and is a computer software based production planning and inventory control system that finds used in the management of manufacturing processes. While it is now automated, MRP can be also accomplished manually. With regards to its functions, MRP is designed to meet three objectives: 1) Ensure materials and products are available for production and delivery to customers; 2) Maintain the lowest possible level of inventory; 3) Plan manufacturing activities, delivery schedules and purchasing activities According to Dehning and Stratopoulos (2003), MRP (Material Requirements Planning) concept is actually a recent innovation coming to the scene in the 1960’s but has rapidly evolved to become the basis for most software systems supporting production planning and control in industrial practice due to the good assistance it provides in order processing, data handling and inventory book-keeping. A typical MRP system follows a successive planning concept and is depicted in the Figure 1: Figure 1: MRP Diagram (Head, 2005; Injazz, 2001) 2.1.1 Steps in MRP As shown in Fugure 1, MRP involves the following steps: a. Master Production Scheduling - Master Production Scheduling prepares a short-term production plan for end or main products based on existing medium term aggregate production plan and customer orders and a medium-term aggregate production plan. When accomplished, the scheduling provides the Master Production Schedule commonly referred to as the MPS. b. Material Requirements Planning – the MPS is now used as basis for computing derived demands for all components required for producing the end products. The relevant planning data are the current inventory status (including planned receipts), planned lead times and the bill-of-materials structure. After all of these have been determined, lot sizes are computed assuming that infinite capacity is available. The results of these computations are production quantities per period and per item. c. Capacity Requirements Planning – For each operation and process required in making the product, a time frame must be constructed by employing standard project planning algorithms, such as the Critical Path Method (CPM). It is assumed that there is an infinite source of raw materials and equipment (infinite loading). The resulting capacity requirements computed by assuming infinite loading are tabulated and graphed. This is then compared with available capacities and will usually show that the production plan developed at this stage is not feasible. This is the point in time where experience of human planners comes into play. The experienced planner makes adjustments to make the production plan feasible by shifting operations on the time axis or if this is not possible due to conflicts in resource requirements if different operations, the human planner extends capacity by overtime in order to generate a feasible production schedule. d. Production Control - In the last stage, orders are released and assigned to the resources that will be used to manufacture the said orders. Each resource orders are scheduled employing simple priority rules. MRP systems have two final outputs and a variety of reports and notices. They are the following: 1) Recommended Production Schedule – this output provides the detailed schedule of the required minimum start and completion dates with quantities for each step of the Routing and Bill of Material required to satisfy the demand from the MPS. 2) Recommended Purchasing Schedule – this output provides the dates that the purchased items should be received into the facility and the time that Purchase Orders or Blanket Order Release should occur to match the production schedules. The system also provides purchase orders which informs suppliers to provide materials and reschedule notices which recommend cancelling, delaying, speeding up or increasing existing orders. It should be noted that outputs are recommended and is subject to review of trained people due to the variety of changing conditions in companies in order to gain benefits in set-up or freight savings. Customization is beyond the the linear calculations capacity of the MRP computer software. 2.1.2 Problems with MRP systems As in most computer software, the MRP is subject to the concept called ‘Garbage In, Garbage Out” which basically requires the integrity of the data for correct outputs. In the ERP, any errors in the inventory data, the master production schedule or the bill of materials data leads to incorrect outputs. Integrity of data in the MRP is so important that vendors of this type of system recommend at least 99% data integrity for useful results. (King, 2005) Another major problem with MRP systems is the need to specify the time it will take a manufacturing unit to manufacture a product from its component parts assuming they are all available. This time required must be the same for all products without regards for the quantity being made, or other items being made simultaneously in the factory. (Head, 2005) MRP systems do not also recognize the fact that manufacturers may have factories placed in different cities or even countries. It produces outputs as if the contributing factories were neighbors. It has no capacity to organize needs and inventory by individual factory or to intercommunicate needs among the units so that they can redistribute components in order to serve the overall enterprise. The other major drawback of MRP is that it does not consider capacity in its calculations which means that outputs impossible to implement due to manpower or machine or suppler capacity constraints. However this is largely dealt with by MRP II. (King, 2005) 2.2 The MRP II 2.2.1 Steps and Processes involved in MRP II Manufacturing Resource Planning (MRP II) is defined as a method for the effective planning of all resources of a manufacturing company. MRPII, like the MRP, is an incremental information integration business process strategy that makes use of hardware and software applications linked to a central database that stores and delivers business information and data. It improves upon the concept of MRP as it addresses financial planning in dollars, operational planning in units and has the capacity to simulate different scenarios to answer "what-if" questions and extension of closed-loop MRP. As with all software, MRP II is also dependent on human skills, dedication to data base accuracy and computer resources. (Monk and Wagner, 2006) Many items can be part of an MRP II but the basic ones are the computer system, manufacturing control system and an inventory reduction plan. It can also either be based on either purchased / licensed or in-house software. MRPII actually makes use of MRP as its jump-off point. MRP provides MRP II the schedule and coordination of raw materials purchasing as the latter facilitates the development of a detailed production schedule that accounts for labor and machine capacity and the schedule of production runs according to the arrival of materials. MRP II outputs are labor and machine schedule. The data about the cost of production, including labor and machine times as well as the materials used together with the final production numbers is sent by the MRPII system to accounting and finance. Figure 2 illustrates the flow process for MRP II: Figure 2: MRP II Diagram (Waldner, 1992) References: Anderegg, Travis (2007). MRP/MRPII/ERP/ERM – Confusing Terms and Definitions for a Murky Alphabet Soup. . Retrieved on 25 October 2007 Brown, C., and I. Vessey (2003). "Managing the Next Wave of Enterprise Systems: Leveraging Lessons from ERP," MIS Quarterly Executive, 2(1), 2003. Dehning,B. and T.Stratopoulos (2003). 'Determinants of a Sustainable Competitive Advantage Due to an IT-enabled Strategy,' Journal of Strategic Information Systems, Vol. 12, 2003 Head, Simon (2005). The New Ruthless Economy. Work and Power in the Digital Age. Oxford UP. Injazz J. Chen (2001), "Planning for ERP systems: analysis and future trend", Business Process Management Journal (MCB UP Ltd) 7: 374-386, ISSN 1463-7154 King. W (2005)., "Ensuring ERP implementation success," Information Systems Management, Summer 2005. Monk, Ellen & Wagner, Bret (2006), Concepts in Enterprise Resource Planning (Second ed.), Boston: Thomson Course Technology. Turban et al. (2008). Information Technology for Management, Transforming Organizations in the Digital Economy. Massachusetts: John Wiley & Sons, Inc., p. 320. Yusuf, Y., A. Gunasekaran, and M. Abthorpe (2004), "Enterprise Information Systems Project Implementation: A Case Study of ERP in Rolls-Royce," International Journal of Production Economics, 87(3), February 2004. Read More