ERP - Making It Happen by Wallace, Kremzar

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ERP - Making It Happen by Wallace, Kremzar is the book titled ERP: Making It Happen. The Implementers Guide to Success with Enterprise Resource Planning authored by Thomas F. Wallace and Michael H. Kremzar and published by John Wiley & Sons, Inc. in 2001.

Copyright belongs to Thomas F. Wallace and Michael H. Kremzar.

A number of the definitions in the glossary are based on ones in James F. Cox III and John H. Blackstone Jr., eds., APICS Dictionary, ninth edition (Falls Church, VA: APICS 1998).

  • ABC classification. A sorting of the items in an inventory in decreasing order of annual dollar volume or other criteria. This array is then split into three classes, called A, B, and C. Class A contains the items with the highest annual dollar volume and receives the most attention. The medium Class B receives less attention, and Class C, which contains the low-dollar volume items, is controlled routinely. The ABC principle is that effort saved through relaxed controls on low-value items will be applied to reduce inventories of high-value items.
  • Action message. An ERP output that identifies the need for and the type of action to be taken to correct a current or a potential problem. Examples of action messages are Release Order, Reschedule Out, and Cancel.
  • Advanced planning system (APS). A decision support tool that employs a) enhanced mathematical/statistical capabilities, b) a powerful simulation capability, and/or c) other advanced techniques to help provide superior plans and schedules.
  • Allocation. In MRP, an allocated item is one for which a picking order has been released to the stockroom but not yet sent out of the stockroom. It is an uncashed stockroom requisition.
  • Anticipated delay report. A report, normally issued by both manufacturing and purchasing to the master scheduling or material planning functions, regarding jobs or purchase orders that will not be completed on time, explaining why not, and telling when they will be completed. This is an essential ingredient of a closed-loop system.
  • APICS. Formerly the American Production & Inventory Control Society. Now identified as The Educational Society for Resource Management.
  • Assemble-to-order. A process where the final products are finished to customers' configurations out of standard components. Many personal computers are produced and sold on an assemble-to-order basis.
  • Automatic rescheduling. Allowing the computer to automatically change due dates on scheduled receipts when it detects that due dates and required dates are out of phase. Automatic rescheduling is usually not a good idea.
  • Available-to-promise (ATP). The uncommitted portion of inventory and/or future production. This figure is frequently calculated from the master schedule and is used as the primary tool for order promising. See Capable-to-Promise.
  • Backflush. The deduction from inventory of the components used in production by exploding the bill of materials by the count of parent items produced. See Post-deduct Inventory Transaction Processing.
  • Backlog. All of the customer orders received but not yet shipped, irrespective of when they are specified for shipment.
  • Back scheduling. A technique for calculating operations start and due dates. The schedule is calculated starting with the due date for the order and working backward to determine the required completion dates for each operation. This technique is used primarily in job shops (see Appendix B).
  • Bill of material. A listing of all the subassemblies, intermediates, parts, and raw materials that go into a parent item, showing the quantity of each component required. May also be called formula, recipe, or ingredients list in certain industries.
  • Bucketed system. An MRP, DRP, or other time-phased system in which data are accumulated into time periods or buckets. If the period of accumulation were to be one week, then the system would be said to have weekly buckets.
  • Bucketless system. An MRP, DRP, or other time-phased system in which data are processed, stored, and displayed using dated records rather than defined time periods or buckets.
  • Business plan. A statement of income projections, costs, and profits usually accompanied by budgets and a projected balance sheet as well as a cash flow statement. It is usually stated in dollars. The business plan and the Sales & Operations Plan, although normally stated in different units of measure, should be in agreement with each other.
  • CAD/CAM. The integration of Computer Aided Design and Computer Aided Manufacturing to achieve automation from design through manufacturing.
  • Capable-to-promise. An advanced form of available-to-promise (ATP). ATP looks at future production as specified by the master schedule. Capable-to-promise goes farther: It also looks at what could be produced, out of available material and capacity, even though not formally scheduled. This capability is sometimes found in advanced planning systems (APS).
  • Capacity requirements planning. The process of determining how much labor and/or machine resources are required to accomplish the tasks of production, and making plans to provide these resources. Open production orders, as well as planned orders in the MRP system, are input to CRP which translates these orders into hours of work by work center by time period. In earlier years, the computer portion of CRP was called infinite loading, a misnomer. This technique is used primarily in job shops (see Appendix B).
  • Cellular manufacturing. A method of organizing production equipment which locates dissimilar equipment together. The goal is to produce items from start to finish in one sequential flow, as opposed to a traditional job shop (functional) arrangement which requires moves and queues between each operation. See Group Technology, Flow Shop, Job Shop.
  • Closed-loop MRP. The second step in the evolution of ERP. This is a set of business processes built around Material Requirements Planning and also including the additional planning functions of production planning, master scheduling, and Capacity Requirements Planning. Further, once the planning phase is complete and the plans have been accepted as realistic and attainable, the execution functions come into play. These include the plant floor control functions of input-output measurement, dispatching, plus anticipated delay reports from both the plant and suppliers, supplier scheduling, and so forth. The term closed loop implies that not only is each of these elements included in the overall system but also that there is feedback from the execution functions so that the planning can be kept valid at all times. See Material Requirements Planning, Manufacturing Resource Planning, Enterprise Resource Planning.
  • Common parts bill (of material). A type of planning bill which groups all common components for a product or family of products into one bill of material.
  • Continuous replenishment (CR). Often called CRP for Continuous Replenishment Process or Program. The practice of partnering between distribution channel members that changes the traditional replenishment process from distributor-generated purchase orders, based on economic order quantities, to the replenishment of products based on actual and forecasted product demand.
  • Cumulative lead time. The longest time involved to accomplish the activity in question. For any item planned through MRP it is found by reviewing each bill of material path below the item, and whichever path adds up the greatest number defines cumulative lead time. Also called aggregate lead time, stacked lead time, composite lead time, or critical path lead time.
  • Cycle counting. A physical inventory-taking technique where inventory is counted on a periodic schedule rather than once a year. For example, a cycle inventory count may be taken when an item reaches its reorder point, when new stock is received, or on a regular basis, usually more frequently for high-value fast-moving items, and less frequently for low-value or slow moving items. Most effective cycle counting systems require the counting of a certain number of items every work day.
  • Dampeners. A technique within Material Requirements Planning used to suppress the reporting of certain action messages created during the computer processing of MRP. Extensive use of dampeners is not recommended.
  • Demand. A need for a particular product or component. The demand could come from a variety of sources (i.e., customer order, forecast, interplant, branch warehouse, service part), or to manufacture the next higher level. See Dependent Demand, Independent Demand.
  • Demand management. The function of recognizing and managing all of the demands for products to ensure that the master scheduling function is aware of them. It encompasses the activities of forecasting, order entry, order promising, branch warehouse requirements, interplant requirements, interplant orders, and service parts requirements.
  • Demonstrated capacity. Capacity calculated from actual performance data, usually number of items produced times standard hours per item plus the standard set-up time for each job. Sometimes referred to as earned hours.
  • Dependent demand. Demand is considered dependent when it comes from production schedules for other items. These demands should be calculated, not forecasted. A given item may have both dependent and independent demand at any given time. See Independent Demand.
  • Direct-deduct inventory transaction processing. A method of inventory bookkeeping which decreases the book (computer) inventory of an item as material is issued from stock, and increases the book inventory as material is received into stock. The key concept here is that the book record is updated together with the movement of material out of or into stock. As a result, the book record represents what is physically in stock. See Post-Deduct Inventory Transaction Processing.
  • Dispatch list. A listing of manufacturing orders in priority sequence according to the dispatching rules being used. The dispatch list is usually communicated to the manufacturing floor via hard copy or CRT display, and contains detailed information on priority, location, quantity, and the capacity requirements of the manufacturing order by operation. Dispatch lists are normally generated daily or more frequently and oriented by work center. Used primarily in job shops (see Appendix B).
  • Distribution center (DC). A facility stocking finished goods and/or service items. A typical company, for example, might have a manufacturing facility in Philadelphia and distribution centers in Atlanta, Dallas, Los Angeles, San Francisco, and Chicago. A DC serving a group of satellite warehouses is usually called a regional distribution center.
  • Distribution requirements planning. The function of determining the needs to replenish inventory at distribution centers. A time-phased order point approach is used, where the planned orders at the branch warehouse level are exploded via MRP logic to become gross requirements on the supplying source. In the case of multilevel distribution networks, this explosion process can continue down through the various levels of master DC, factory warehouse, and so on, and become input to the master schedule. Demand on the supplying source(s) is recognized as dependent, and standard MRP logic applies.
  • Distribution resource planning (DRP). The extension of Distribution Requirements Planning into the planning of the key resources contained in a distribution system: warehouse space, manpower, money, trucks and freight cars, and so forth.
  • Efficient consumer response (ECR). A strategy in which the grocery retailer, distributor, and supplier trading partners work closely together to eliminate excess costs from the grocery supply chain. This is a global movement to enhance the efficiency of product introductions, merchandising, promotions, and replenishment.
  • Electronic data interchange (EDI). The computer-to-computer exchange of information between separate organizations, using specific protocols.
  • Engineer-to-order product. A product that requires engineering design, and bill of material and routing development before manufacturing can be completed. Such products typically require master scheduling of average or typical items or expected activities and capacities, with many individual components being identified only after preliminary design work is complete.
  • Enterprise resource planning (ERP). predicts and balances demand and supply. It is an enterprise-wide set of forecasting, planning, and scheduling tools, which: (a) links customers and suppliers into a complete supply chain, (b) employs proven processes for decision-making, and (c) coordinates sales, marketing, operations, logistics, purchasing, finance, product development, and human resources. It's goals include high levels of customer service, productivity, cost reduction, and inventory turnover, and it provides the foundation for effective supply chain management and e-commerce. It does this by developing plans and schedules so that the right resources—manpower, materials, machinery, and money—are available in the right amount when needed. Enterprise Resource Planning is a direct outgrowth and extension of Manufacturing Resource Planning and, as such, includes all of MRP II's capabilities. ERP is more powerful in that it: a) applies a single set of resource planning tools across the entire enterprise, b) provides real time integration of sales, operating, and financial data, and c) connects resource planning approaches to the extended supply chain of customers and suppliers.
  • Final assembly schedule (FAS). Also referred to as the finishing schedule as it may include other operations than simply the final operation. For make-to-order products, it is prepared after receipt of a customer order, is constrained by the availability of material and capacity, and it schedules the operations required to complete the product from the level where it is stocked (or master scheduled) to the end item level.
  • Finite loading. Conceptually, the term means putting no more work into a work center than it can be expected to execute. The specific term usually refers to a computer technique that involves automatic plant priority revision in order to level load operation-by-operation. Also called finite scheduling.
  • Group technology. An engineering and manufacturing approach that identifies the sameness of parts, equipment, or processes. It provides for rapid retrieval of existing designs and facilitates a cellular form of production equipment layout.
  • Hedge. 1) In master scheduling, a quantity of stock used to protect against uncertainty in demand. The hedge is similar to safety stock, except that a hedge has the dimension of timing as well as amount. 2) In purchasing, a purchase or sale transaction having as its purpose the elimination of the negative aspects of price fluctuations.
  • Independent demand. Demand for an item is considered independent when unrelated to the demand for other items. Demand for finished goods and service parts are examples of independent demand.
  • Infinite loading. See Capacity Requirements Planning.
  • Input-output control. A technique for capacity control where actual output from a work center is compared with the planned output (as developed by CRP and approved by manufacturing). The input is also monitored to see if it corresponds with plans so that work centers will not be expected to generate output when jobs are not available to work on.
  • Interplant demand. Material to be shipped to another plant or division within the corporation. Although it is not a customer order, it is usually handled by the master scheduling system in a similar manner.
  • Inventory turnover. The number of times that an inventory turns over during the year. One way to compute inventory turnover is to divide the average inventory level into the annual cost of sales. For example, if average inventory were three million dollars and cost of sales were thirty million, the inventory would be considered to turn ten times per year. Turnover can also be calculated on a forward-looking basis, using the forecast rather than historic sales data.
  • Job shop. A functional organization whose departments or work centers are organized around particular types of equipment or operation, such as drilling, blending, spinning, or assembly. Products move through departments by individual production orders. See Flow Shop.
  • Just-in-time. In the broad sense, Just-in-Time is an approach to achieving excellence in manufacturing. In the narrow (and less correct) sense, Just-in-Time is considered by some as a production and logistics method designed to result in minimum inventory by having material arrive at each operation just in time to be used. See Lean Manufacturing.
  • Kanban. A method for Just-in-Time production in which consuming (downstream) operations pull from feeding (upstream) operations. Feeding operations are authorized to produce only after receiving a kanban card (or other trigger) from the consuming operation. Kanban in Japanese loosely translates to "card." Syn: demand pull.
  • Lead time. A span of time required to perform an activity. In a logistics context, the activity in question is normally the procurement of materials and/or products either from an outside supplier or from one's own manufacturing facility. The individual components of any given lead time can include some or all of the following: order preparation time, queue time, move or transportation time, receiving and inspection time.
  • Lean manufacturing. An approach to production that emphasizes the minimization of the amount of all the resources (including time) used in the various activities of the enterprise. It involves identifying and eliminating non-value-adding activities in design, production, supply chain management, and dealing with the customers.
  • Load. The amount of scheduled work ahead of a manufacturing facility, usually expressed in terms of hours of work or units of production.
  • Logistics. In an industrial context, this term refers to the functions of obtaining and distributing material and product.
  • Lot-for-lot. An order quantity technique in MRP which generates planned orders in quantities equal to the net requirements in each period. Also called discrete, one-for-one.
  • Make-to-order product. The end item is finished after receipt of a customer order. Frequently, long lead-time components are planned prior to the order arriving in order to reduce the delivery time to the customer. Where options or other subassemblies are stocked prior to customer orders arriving, the term assemble-to-order is frequently used.
  • Make-to-stock product. The end item is shipped from finished goods off the shelf, and therefore, is finished prior to a customer order arriving.
  • Manufacturing resource planning (MRP II). The third step in the evolution of ERP. This is a method for the effective planning of the resources of a manufacturing company. It addresses operational planning in units, financial planning in dollars, and has a simulation capability to answer what if questions. MRP II is made up of a variety of functions, each linked together: business planning, Sales & Operations Planning, demand management, master scheduling, Material Requirements Planning, capacity Requirements Planning, and the execution support systems for capacity and material. Output from these tools is integrated with financial reports such as the business plan, purchase commitment report, shipping budget, inventory projections in dollars, and so on. Manufacturing Resource Planning is a direct outgrowth and extension of closedloop MRP. See Material Requirements Planning, Closed-Loop MRP, Enterprise Resource Planning.
  • Master production schedule (MPS). See master schedule.
  • Master schedule (MS). The anticipated build schedule. The master scheduler maintains this schedule and, in turn, it drives MRP. It represents what the company plans to produce expressed in specific configurations, quantities, and dates. The master schedule must take into account customer orders and forecasts, backlog, availability of material, availability of capacity, management policy, and goals.
  • Material requirements planning (MRP). The first step in the evolution of ERP. This is a set of techniques which uses bills of material, in TEAMFLY Team-Fly® ventory data, and the master schedule to calculate requirements for materials. It makes recommendations to release replenishment orders for material. Further, since it is time phased, it makes recommendations to reschedule open orders when due dates and need dates are not in phase. See Closed-Loop MRP, Manufacturing Resource Planning, Enterprise Resource Planning.
  • Materials management. An organizational structure which groups the functions related to the complete cycle of material flow, from the purchase and internal control of production materials to the warehousing, shipping, and distribution of the finished product.
  • Modular bill (of material). A type of planning bill which is arranged in product modules or options. Often used in companies where the product has many optional features (e.g., automobiles, computers). See Planning Bill.
  • Net change mrp. A method of processing Material Requirements Planning on the computer whereby the material plan is continually retained in the computer. Whenever there is a change in requirements, open order, or inventory status, bills of material, or the like, a partial recalculation of requirements is made only for those parts affected by the change.
  • Net requirements. In MRP, the net requirements for an item are derived as a result of netting gross requirements against inventory on hand and the scheduled receipts. Net requirements, lot sized and offset for lead time, become planned orders.
  • On-hand balance. The quantity shown in the inventory records as being physically in stock. (APICS)
  • Open order. An active manufacturing order or purchase order. See Scheduled Receipts.
  • Option. A choice or feature offered to customers for customizing the end product. In many companies, the term option means a mandatory choice (i.e., the customer must select from one of the available choices). For example, in ordering a new car, the customer must specify an engine (option) but need not necessarily select an air conditioner.
  • Order entry. The process of accepting and translating what a customer wants into terms used by the provider. This can be as simple as creating shipping documents for a finished goods product to a far more complicated series of activities including engineering effort for make-to-order products. A key element in the order promising process is customer order promising.
  • Order promising. The process of making a delivery commitment (i.e., answering the question "When can you ship?") See Available-to-Promise.
  • Order quantity. The amount of an item to be ordered. Also called lot size.
  • Pegging. In MRP pegging shows, for a given item, the details of the sources of its gross requirements and/or allocations. Pegging can be thought of as live where-used information.
  • Period order quantity. An order quantity technique in which the order quantity will be equal to the net requirements for a given number of periods (days or weeks) into the future. Also called days supply, weeks supply, fixed period.
  • Picking. The process of issuing components to the production floor on a job-by-job basis. Also called kitting.
  • Picking list. A document used to pick manufacturing orders, listing the components and quantities required.
  • Planner/buyer. See Supplier Scheduler.
  • Planning bill (of material). An artificial grouping of items in bill of material format, used to facilitate master scheduling and/or material planning. A modular bill of material is one type of planning bill.
  • Plant floor control. A system for utilizing data from the plant floor as well as data processing files to maintain and communicate status information on shop orders (manufacturing orders) and work centers. The major subfunctions of shop floor control are: 1) assigning priority of each shop order, 2) maintaining work-in-process quantity information, 3) conveying shop order status information, 4) providing actual input and output data for capacity control purposes, 5) providing quantity by location by shop order for work-in-process inventory and accounting purposes, 6) providing measurements of efficiency, utilization, and productivity of manpower and machines. Syn: Shop Floor Control.
  • Post-deduct inventory transaction processing. A method of inventory bookkeeping where the book (computer) inventory of components is reduced only after completion of production of their upper level parent. This approach has the disadvantage of a built-in differential between the book record and what is physically in stock. Also called backflush.
  • Product structure. See Bill of Material.
  • Pull system. Usually refers to how material is moved on the plant floor. Pull indicates that material moves to the next operation only as needed by that next operation. See Kanban.
  • Push system. Usually refers to how material is moved on the plant floor. Push indicates that material moves to the next operation automatically upon completion of the prior operation.
  • Queue. In manufacturing, the jobs at a given work center waiting to be processed. As queues increase, so do average lead times and work-inprocess inventories.
  • Queue time. The amount of time a job waits at a work center before work is performed on the job. Queue time is one element of total manufacturing lead time. Increases in queue time result in direct increases to manufacturing lead time.
  • Quick-slice. A method of implementing most of the ERP functions into a small slice of the business, typically one product or product line, in a very short time.
  • Regeneration MRP. A method of processing Material Requirements Planning on the computer whereby the master schedule is totally exploded down through all bills of material to maintain valid priorities. New requirements and planned orders are completely regenerated at that time. See Net change MRP.
  • Repetitive manufacturing. Production of discrete units, planned and executed via schedule, usually at relatively high speeds and volumes. Material tends to move in a sequential flow. See Flow Shop.
  • Rescheduling assumption. A fundamental piece of MRP logic which assumes that existing open orders can be rescheduled in nearer time periods more easily than new orders can be released and completed. As a result, planned order receipts are not created until all scheduled receipts have been applied to cover gross requirements.
  • Resource requirements planning. See Rough-Cut Capacity Planning.
  • Rough-cut capacity planning. The process of converting the production plan (from Sales & Operations Planning) and/or the master schedule into capacity needs for key resources: manpower, machinery, warehouse space, suppliers' capabilities and, in some cases, money. Product load profiles are often used to accomplish this. The purpose of Rough-Cut Capacity Planning is to evaluate the plan prior to attempting to implement it. Sometimes called Resource Requirements Planning.
  • Routing. Information detailing the manufacture of a particular item. It includes the operations to be performed, their sequence, the various work centers to be involved, and the standards for set-up and run times. In some companies, the routing also includes information on tooling, operator skill levels, inspection operations, testing requirements, and so forth.
  • Safety stock. A quantity of stock planned to be available to protect against fluctuations in demand and/or supply.
  • Safety time. A technique whereby material is planned to arrive ahead of the requirement date. This difference between the requirement date and the planned in-stock date is safety time.
  • Sales & operations planning (S&OP). A business process that helps companies keep demand and supply in balance. It does that by focusing on aggregate volumes—product families and groups—so that mix issues (individual products and customer orders) can be handled more readily. It occurs on a monthly cycle and displays information in both units and dollars. S&OP is cross-functional, involving general management, the sales and marketing department(s), operations, finance, and product development. It occurs at multiple levels within the company, up to and including the executive in charge of the business unit. S&OP links the company's strategic plans and business plan to its detailed processes -- the order entry, master scheduling, plant scheduling, and purchasing tools used to run the business on a week-to-week, day-to-day, and hourto-hour basis. Used properly, S&OP enables the company's managers to view the business holistically and provides them with a window into the future.
  • Sales plan. The overall level of sales expected to be achieved. Usually stated as a monthly volume of sales for a product family (group of products, items, options, features, etc.). It needs to be expressed in units identical to the production plan (as well as dollars) for planning purposes. It should represent the sales and marketing department manager's commitment to take all reasonable steps necessary to make the sales forecast (a prediction) accurately represent actual customer orders received.
  • Scheduled receipts. Within MRP, open production orders and open purchase orders are considered as scheduled receipts on their due date and will be treated as part of available inventory during the netting process for the time period in question. Scheduled receipt dates and/or quantities are not normally altered automatically by the computer. Further, scheduled receipts are not exploded into requirements for components, as MRP logic assumes that all components required for the manufacture of the item in question have either been allocated or issued to the plant floor.
  • Service parts. Parts used for the repair and/or maintenance of a product. Also called repair parts, spares.
  • Shop floor control. See Plant Floor Control.
  • Simulation. Within ERP, utilizing operational data to perform what-if evaluations of alternative plans, to answer the question: "Can we do it?" If yes, the simulation can then be run in financial mode to help answer the question: "Do we really want to?"
  • Supplier scheduler. A person whose main job is working with suppliers regarding what's needed and when. Supplier schedulers are in direct contact with both MRP and the suppliers. They do the material planning for the items under their control, communicate the resultant schedules to their assigned suppliers, do follow-up, resolve problems, and so forth. The supplier schedulers are normally organized by commodity, as are the buyers. By using the supplier scheduler approach, the buyers are freed from day-to-day order placement and expediting, and therefore have the time to do cost reduction, negotiation, supplier selection, alternate sourcing, and the like. Syn: Vendor Scheduler, Planner/Buyer.
  • Supplier scheduling. A purchasing approach which provides suppliers with schedules rather than individual hard-copy purchase orders. Normally a supplier scheduling process will include a business agreement (contract) for each supplier, a daily or weekly schedule for each supplier extending for some time into the future, and individuals called supplier schedulers. Also required is a formal priority planning system that works well, because it is essential in this arrangement to provide the suppliers with consistently valid due dates. Some form of supplier scheduling is essential for Just-in-Time purchasing. Syn: Vendor Scheduling.
  • Supply chain. 1) The processes from the initial acquisition raw materials to the ultimate consumption of the finished product linking across supplier-user companies. 2) The functions inside and outside a company that enable the value chain to make products and provide services to the customer.
  • Time fence. A point in time where various restrictions or changes in operating procedures take place. For example, changes to the master schedule can be accomplished easily beyond the cumulative lead time; whereas, changes inside the cumulative lead time become increasingly more difficult. Time fences can be used to define these points.
  • Two-level master schedule. A master scheduling approach for make-to-order products where an end product type is master scheduled along with selected key options, features, attachments, and common parts.
  • Vendor scheduler. See Supplier Scheduler.
  • Vendor scheduling. See Supplier Scheduling.
  • Work-in-process. Product in various stages of completion, including raw material that has been released for initial processing and completely processed material awaiting final inspection and acceptance as finished product or shipment to a customer. Many accounting systems also include semi-finished stock and components in this category.
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