Computer Aided Production Management

1.0 Introduction
Computer aided production management (CAPM) systems are potentially the most cost effective and
rewarding of all aspects of new technology which can be applied to a company. Properly specified,
chosen and installed these systems can produce very quick results in terms of payback on investment.
They are basically strategic planning and control tools which can be applied to individual areas of an
organisation or company wide. It is a fundamental link in the path towards a totally computer integrated
manufacturing (CIM) system. Therefore, as shown in Figure 1, traditionally in the manufacturing sector
CAPM lie at the heart of any engineering company’s computer integrated manufacturing strategy
(adapted from [1]).

FIGURE 1 - CAPM WITHIN THE CIM MODEL

Manual systems carry out the same functions but their effectiveness decreases as organisations expand
and the volume of information requiring handling and processing increases. Users of such systems,
particularly in organisations making large varieties of products, tend to spend a great deal of their time
‘fire fighting’ (Figure 2 [4]). Indeed, in this situation, the analysis of data, whatever the scale of the
business, is very difficult or well nigh impossible.

Many of the tasks carried out are routine and require the constant updating of key information throughout
the manufacturing process, eg raising orders, planning material requirements, planning machine
schedules, monitoring performance, etc. Because of the nature of the tasks, production management
systems are a prime target for computerisation.

CAPM is concerned with controlling whatever resources are available with the object of making the best
use of these resources. Another common title used for this application is computer aided production
control, however, as described later, this is only one small part of the typical CAPM system.

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FIGURE 2 - PRODUCTION MANAGEMENT?

It can cover every aspect of manufacturing management:

(a) stock control;
(b) job costing;
(c) sales order processing;
(d) purchase ordering;
(e) materials requirements planning;
(f) production scheduling;
(g) capacity planning;
(h) bills-of-materials;
(i) shop floor data collection.

The aim is to have all information ‘on line’ with no paperwork or at least the amount of paperwork used
reduced to an absolute minimum; in reality however, this tends not to be the case. As people become used
to having such a rich data source for production management purposes they demand more information. A
large networked central or well-managed distributed database should be accessible to all users of the
system for information, updating and analysis.

CAPM is effectively a hierarchy of scheduling systems (Figure 3) and many microcomputer and mini-
computer based marketing packages are now available in this area.

The application of CAPM can be divided up into main areas:

(a) Production Planning;
(b) Production Control.

These are shown in both the figures overleaf.

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FIGURE 3 - CAPM - A HIERARCHY OF SCHEDULING SYSTEMS [3]

Usually within proprietary CAPM systems, package modules can be purchased separately and integrated
gradually within a company as they are implemented. However, it must be remembered that they should
link in with other computerised engineering applications.

The CAPM activities associated with (a) and (b) in the above figure are detailed in Figure 4.

FIGURE 4 - CAPM ACTIVITIES [3]

2.0 Production Planning

The task of production planning involves the preparation of schedules and information required to carry
out the monitoring and production control of the manufacturing process.

The functions carried out under this heading are usually split up into two specific parts, namely:
(a) Material Requirements Planning;
(b) Capacity Requirements Planning.

2.1 Material Requirements Planning (MRP)

Material requirements planning (MRP) enables order requirements to be generated for both internal and
external component parts, sub-assemblies and assemblies and any other procured items.

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For MRP, a ‘Master Delivery Schedule (MDS)’ is required. This is based on forecast requirements and
customer orders and is usually prepared by the company’s top management. This represents future
planned order requirements for all top level products. An MRP run is carried out against this schedule
after considering current stocks, work-in-progress and outstanding orders.

This identifies: (a) what needs to be ordered to achieve the MDS;

(b) when it needs to be ordered;
(c) what materials and other purchases are required

The main advantages of such a system are:

(a) stock levels are kept to a minimum;
(b) it ensures the correct parts are ordered at the correct place at the correct
time;
(c) it reduces considerably the amount of time spent on administration and
clerical tasks associated with ordering and purchasing.

So the characteristics of MRP are:

(a) forward looking: not based on past trends;
(b) time-phasing of replenishment process;
(c) takes account of the inter-relationships between components and sub-
assemblies;
(d) oriented to final product rather than components;
(e) maximizes the availability of groups of products.

'MRP is basically a set of decision rules designed to translate a master production schedule into time-
phased net requirements for each component part.’ [2]

In the early 1960s only a handful of firms were using MRP. By 1971, 150 US firms had applied it, by
1975 700 US firms and by 1985-6 a UK survey of 131 manufacturers showed that 25% of British firms
were regularly using MRP.

The key data required for each part, sub-assembly and assembly is the ‘Product Structure’, more
commonly known as the ‘Bill of Material’ (BOM). Figure 5 illustrates a typical example of a BOM.

Separate data file records are created for each assembly and its constituent parts, usually as stock file
records. These are then combined into separate BOM file records depending on the make up of the
assembly or component raw material requirements.

Due to the fact that lead times exists for each part then, once the master delivery schedule (MDS)
quantity is known for the top level item, assembly, sub-assembly, component, procured item and raw
material requirement quantities, order release dates and order due dates can be calculated by ‘exploding’
the BOMs. It is a formal, mechanical method of scheduling whereby the timing of purchases or output
from production operations to meet master production schedule requirements is determined by offsetting
the requirements by the length of the lead time. This is illustrated diagrammatically in Figures 6 and 7.

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FIGURE 5 - A TYPICAL BILL OF MATERIAL (BOM)

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R1 C1

C1

S3 S1

C3 A1

e.g. Start
Date for S2 e.g. Finish
Date for S2
C4

S2

C3

FIGURE 6 - 'EXPLODING THE BOMs'

TIME SCHEDULE
C2
R2

Week Number: 1 2 3 4 5 6 7

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(Exploding, aggregating,
scheduling)

FIGURE 7 - MATERIAL REQUIREMENTS PLANNING [4]

Such a system: (a) takes information from the MDS;

(b) breaks down requirements based on the BOM data;
(c) deducts existing stocks and current outstanding open orders to net future
requirements;
(d) outputs planned orders based on lead times (it reschedules or cancels
unopened orders from the previous MRP run or creates new orders with
targets);
(e) schedules the delivery of parts in the order they are required by the
customer – thus reducing the need to hold large stocks of finished parts of
raw materials required for assembly or component manufacture;
(f) on approval of orders by Procurement/Purchasing, individual internal and
external order requests are produced and passed on to in-house or external
suppliers.

A worked example of a typical MRP schedule is now given, similar to the method used in [3] and [12].

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in

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MRP has been traditionally used for manufacturing or servicing fixed order quantities, especially those
predicted by methods such as EOQ (see later).

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EXAMPLE: For the previous MRP table illustrated, say the minimum production run quantity or
minimum purchase quantity is fixed at 200 then the previous table would now take the following shape:

PART NUMBER - S2 ITEM DESCRIPTION - SUB-ASSEMBLY 2

Week Number 1 2 3 4 5 6 7 8 9 10

Gross Requirements 40 80 160 40

-60 -20
Scheduled Receipts 20

Projected Inventory 40 60 20 140 180 140

Net Requirements 200 200

Planned Orders 200 200

Safety stocks, spares, batching up, etc. can also be built into a schedule.

MRP systems do not have to operate in time ‘buckets’ of one week; this can be set to one month, one day
or even be ‘bucketless’. Planning horizons are set to the overall largest assembly lead time. As batch
sizes are reduced then this can also be made shorter thus giving more flexibility in the creation of
manufacturing plans and in defining future requirements both from a product and manufacturing
resources point of view. Depending on how a company wishes to operate them, some modern systems
carry out an automatic dynamic rescheduling of requirements as soon as a new order is received.

A batch sizing policy must be decided on before implementing MRP, eg EOQ, make-to-order,
period batch, etc. One typical refinement to MRP systems is the inclusion of safety stock as a buffer
against deviations from the master production schedule caused by demand fluctuations and variable
supplier lead times. One way of doing this is to extend the lead times, as shown below, by calculating a
Purchase Order Lead Time. This is built into the master schedule to minimise the risk of a stockout and
subsequently used to determine an appropriate purchase order release time (e.g. Figure 8) for each item.

800
700
Number of Batches

600
500 Probability of late delivery
400 Mean LT

300
200
100
0
110

130

150
170

190
10

30
50

70

90

k standard deviations
Batch Size
FIGURE 8 - MRP PURCHASE ORDER TIME ESTIMATION

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Purchase Order Release Time (T) [6]:

T = mean LT + k .σ (where LT= Lead Time)

Interestingly, looking at service levels for multiple-product orders, it has been shown that with regard to
stockout:
Service level = (1- stockout risk) n x 100%
where n = no. of separate products in an order
e.g. say the stockout risk for each product = 0.02.
So for 1 product in the order:
service level = (1- 0.02) 1 x 100% = 98%
For 12 products in the order:
service level = (1- 0.02) 12 x 100% = 78%

This is inherent in most traditional production/service systems to some degree.

The full ‘explosion’ of BOM data in relation to the MDS requires many calculations and large amounts of
processing time hence the reason MRP is a task ideally suited to computerisation.

2.1.1 Drawbacks in MRP

MRP as an approach to planning manufacturing requirements has a number of fundamental drawbacks

which have to be overcome or compensated for in relation to the manufacturing process.

(a) MRP accepts lead time as fixed; it does not attempt to reduce them. Usually lead times are based
on the average batch size or a purchase order release time (see above). However, in an environment
where the batch size can fluctuate then this can schedule orders too early or too late depending on
whether the order quantity is above or below the average. This leads to order scheduling problems, stock
problems, shop floor scheduling problems, etc.

MRP is concerned with using lead times only. Feedback to the MRP system through monitoring the
accuracy of schedules and make estimated times critical.

(b) MRP assumes all operations are complete before the next one starts. In practice ‘transfer’ batches
can be used (Figure 9) (adapted from [3]). Within MRP batches can be split for urgent work but as a
policy this is not encouraged.
Product A = 500mins

Product B = 500mins

Product A = 500mins

Product B = 500mins

FIGURE 9 - COMPARISON OF MRP AND THE TRANSFER BATCH

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(c) The modern approach of ‘make to order’ is difficult to fit into MRP unless a deliberate policy of
small batch sizes is used. For larger batch sizes, it is not flexible enough for this. Also MRP is a multi-
cycle ordering system.

800
Mean LT
700
Mean LT
Number of Batches
600
500
Mean LT
400
σ
300
200
100
σ
0

110

130

150

170

190
10

30

50

70

90
Batch Size
FIGURE 10 - AFFECT OF LEANER MANUFACTURING SYSTEM ON MRP BATCH SIZE

Reengineering of the manufacturing system, making it leaner, enables smaller average batch sizes,
smaller standard deviations and more ‘predictable’ lead times. This helps in the application of MRP
systems to make-to-order environments (e.g. Figure 10)

(d) Inaccurate MDSs due to:

• forecasting errors;
• short-term, unplanned reallocation of resources;
• inaccurate inventory records;
• unreliable lead times from suppliers;
• variability of lead times from internal and external sources;
• infrequent updating of MRP.
• heavy computational demand.

Inaccuracies in key elements of data can compound each other to degrade the overall integrity of the plan
to such a degree that ‘fire-fighting’ becomes the norm, consuming excessive resources and resulting in
unacceptable performance.

Forecast accuracy 80%

Master production schedule accuracy 90%
Plan adherence 60%
Inventory accuracy 75%
Bill of materials accuracy 95%
Vendor performance 80%

Overall plan accuracy 25%

75% of MRP activity is ‘firefighting’ [14]

MRP is easier to implement and gives better results where the operation is less complex; especially where
it has few components and there is a more stable demand. They are inherently difficult to implement and
these difficulties increase with the move to more responsive manufacturing.

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2.2 Capacity Requirements Planning (CRP)

Once the internal order requirements and associated delivery dates are known (say from an MRP run)
capacity requirements can be scheduled and planned.

2.2.1 Calculating Operation Times and Lead Times

Before capacity schedules and plans can be carried out a process plan (Figure 11) is required for all
machined, processed or assembled parts. This outlines the following:

(a) operation machines and sequences

(b) operation set-up times
(c) unit machining times
(d) raw material requirements.

FIGURE 11 - PROCESS PLANNING DATA FOR CAPACITY SCHEDULING

Using this and the orders information it is possible to calculate part operation times and make times as
well as raw material requirements for the batch concerned.

The setting time (ST) codes and the unit value (UV) codes are for this specific example only and will
vary according to different types of proprietary production management systems. UVs may also be
known as unit times, unit machining times, piece part times, etc.

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EXAMPLE

Assume the queuing time for the turning operations in the previous example is 3 days and all other
operations 5 days. Calculate the lead time in days for a batch of 18 components assuming a 7.5 hour
working day.

Note how the queuing time dominates as a proportion of the overall lead time, this is the norm in a batch
manufacturing, functional layout environment.

2.2.2 Capacity Scheduling and Planning

Knowing the date required for each works order from the MRP run all batches can be scheduled for the
relevant work centres in the plan.

This process is known as capacity scheduling and can be carried out with reference to ‘infinite’ or
‘finite’ resources.

For infinite resources the schedule will assume that there is enough capacity available to carry out all
work. Detailed scheduling on a daily basis is normally carried out by shop floor supervision working to a
priority list supplied by the CAPM system. The main advantage of this system is that no rescheduling of
‘old’ orders needs to be carried out and only ‘new’ orders are scheduled. This reduces computer
processing time required.

Finite scheduling packages will reschedule ‘old’ and ‘new’ orders and try to fit them in with relation to a
pre-determined priority and manufacturing capacity. New schedules usually have to be run on a regular
basis due to the fact that capacity considerations fluctuate so much. Some companies prefer the infinite
method because it is claimed that as soon as the finite schedule is produced it is immediately out of date
due to changes in capacity caused by machine breakdown, employee absence, etc. However, some

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companies prefer the finite method because it takes most of the control for local scheduling away from
the shop floor and is more realistic than a wide open infinite schedule.

The type of schedule chosen depends on the requirements, history and suitability of the company
concerned.

Two types of batch scheduling technique are common, namely:

(a) backward scheduling (Figure 12);
(b) forward scheduling (figure 17).

(a) Backward Scheduling

FIGURE 12 - BACKWARD SCHEDULING

From the delivery date supplied by the MRP run successive operation times and queue times are
subtracted.

As scheduling takes place individual work-in-progress (WIP) file records are created which contain
information relating to each individual operation, eg operation number, manufacturing resource, setting
time, manufacturing time, operation time, scheduled or latest start dates, etc. The latter being predicted
during the course of the schedule. These records are later updated with job and operation completion
data, e.g. who carried out the work, start time, finish time, etc., as the actual work is goes through the
predetermined manufacturing sequence.

These can be used later to set or determine work priorities for each manufacturing facility. This depends
on the priority and scheduling rules used by the CAPM system applied.

WIP records are also updated during the production control phase as operations are completed or held up.

EXAMPLE
Assume the date required for the batch in the previous example was December 16th, which in turn
requires a one week safety time. Determine the latest start dates for each operation and the weeks in
which they fall using the scheduling calendar supplied.
Solution:
Operation Number Work Centre Latest Start Date Week Number
10 Raw Material 31st October 44
20 Centre Lathe 3rd November 44
30 Centre Lathe 8th November 45
40 Mill 16th November 46
50 Painting 24th November 47/48
60 Inspection 6th December 49

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See Figure 13 for detailed schedule.

FIGURE 13 - BATCH BACKWARD SCHEDULE

As batches are individually scheduled, individual work centre loads are obtained and accumulated for
specific time periods. These can be daily, weekly or monthly time ‘buckets’. This is known as capacity
planning.

A typical capacity requirements planning load profile for a work centre is shown in Figure 14. Marketed
CAPM management systems can produce profiles of this kind; these can be ‘on-line’ and accessible to all
shop floor personnel.

FIGURE 14 - CAPACITY PLANNING LOAD PROFILE FOR WORK CENTRE

Using this type of output capacity can be planned for any manufacturing requirements. Overloads can be
moved forwards or backwards to lower loaded periods; this in turn should even out capacity. As new
work is scheduled and old work completed, the CAPM WIP file records created during scheduling are
updated and work centre loads adjusted accordingly.

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Some systems have scheduling algorithms which try to balance work loads in relation to the capacity
available, ie the maximum number of men and/or machines. This is called finite scheduling.
This means that all WIP must be scheduled and rescheduled on a regular basis to allow for breakdowns,
holidays, absences, new priorities etc.

An infinite scheduling system allows the short term schedule decision making to be carried out at shop
floor level. New work is added to the overall schedule without changing any of the other previously
scheduled batch details The system assumes that there is enough capacity available to complete the
scheduled work load, ie infinite capacity, regardless of the amount of work to be carried out.

Shot term scheduling decisions taken at this stage may be:

(a) sub-let work to similar machines;
(b) plan overtime;
(c) doubt/treble shift;
(d) externally sub-contract;
(e) re-plan for other facilities.

Capacity planning is normally a short term activity carried out after the work schedule is released.

However, a common approach is now applied whereby this function is carried out prior to releasing the
materials plan, i.e. work centre loads are checked and balanced beforehand. This 'closed loop' MRP
approach evolved into ‘Manufacturing Resource Planning’ (MRPII) (Figure 15) (Adapted from [13]).

FIGURE 15 -
MANUFACTURING
RESOURCE PLANNING
(MRPII) (Adapted from [13])

MRPII incorporates a CRP loop after the original MRP run has been carried out. The former could
involve ‘rough cut capacity planning’ where only key work centres are considered or ‘detailed capacity
planning’ where the work loads are all investigated before plan implementation can take place. ‘Rough
cut’ capacity planning would be carried out after a broad strategic planning exercise had been completed;
the latter probably being developed using a strategic planning computer simulation package. MRPII also
involves a philosophical approach to people management and involvement, e.g. employee participation,
education and training, overall manufacturing systems strategy, goals, etc. as well as integrating
inventory control with MRP.

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Developed in early 1980s the idea was to have a company-wide application of such systems within a
company, although at this time it mainly focussed manufacturing companies. Within it there is heavy
software dependence, particularly on the need for accurate data. It is typically very difficult and
expensive to implement.

Some successes have been published, e.g. at Leyland trucks it was claimed that manufacturing lead times
were cut from 17 to 6 weeks with the inventory of axles cut from 3 weeks to 1 week.

MRPII was a precursor of Business Process Re-engineering and, particularly, Enterprise Resource
Planning (ERP) - see later.

Note that MRP and MRPII are considered as ‘push’ systems when it comes to material and capacity
scheduling and ordering. However, they can be considered as complementary rather than alternative
approaches to product scheduling and control when compared to 'pull' systems such as just-in-time (JIT).
The latter will be covered in later lectures; however, Figure 16 below illustrates how the MRP/MRPII
diagram can be modified to incorporate JIT ‘PULL’ scheduling. Sometimes the combination of MRP II
and JIT in this way is called MRP III.

Orders/Forecast Master Production Schedule

Material Requirements
Simplified Bill-of-Materials Factory Assembly Schedule
Planning

Purchasing Kanban controlled Final

Assembly

Suppliers Goods
Cell 1 Cell 2 Cell 3
Delivery

FIGURE 16 - MODIFIED MRP FOR JIT [Adapted from [3])

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(b) Forward Scheduling

FIGURE 17 - FORWARD SCHEDULING

Forward scheduling is the opposite of backward scheduling.

A batch is scheduled from the current date and an anticipated delivery date calculated. This can be a
finite or infinite capacity scheduling system. It is normally used by companies not working to an MRP
system or customer delivery dates.

If used in an MRP environment it tends to mean that parts are delivered in the wrong order therefore it
causes high finished stocks and delays. Some systems forward schedule a batch if the overall lead time
cannot be fitted into a backward schedule. The customer may then alter the MRP database to suite future
orders if required.

Forward scheduling is also used to calculate ‘slack’ time in some off-the-shelf CAPM packages. Jobs are
backward scheduled and forward scheduled and the amount of slack between the forward schedule finish
date and the backward schedule start date, or the amount of overlap between the schedule, dictates the
priority of the job.

2.3 Lot Sizing

Determining batch or lot sizes for components or assemblies has, in the past, been turned into a scientific
study; this has been to the detriment of manufacturing output simply because the main technique applied
‘Economic Order Quantity’ (EQQ) has many defects. This theory assumes that the final stocks of any
part or assembly is used at a standard, linear rate which means that a stock profile of its use can be drawn
as shown in Figure 18; consequently the average stock level in stores is the half of the maximum.

FIGURE 18 - EOQ THEORETICAL STOCK LEVELS [(Adapted from 15])

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In addition to this it is assumed that the carrying cost varies linearly with an increasing lot size and that
the preparation cost (which includes the proportional cost of set-up time and ordering) reduces in the
manner shown in Figure 19 [15, 16].

FIGURE 19 - THEORETICAL EOQ MODEL [15, 16]

The carrying cost is usually based on an average company-wide value for holding in stores and does not
consider the actual investment in manufacturing the actual items concerned or the time for which they are
held. Combining these two curves gives a point at which the combined costs of carrying and preparation
can be minimised at a specific batch size; this is known as the EOQ.

The main assumptions are:

(a) preparation costs fall rapidly as batch size increases;
(b) carrying costs are directly proportional to batch size;
(c) EOQ calculated for every part therefore the overall costs are minimised.

Analysing mathematically and minimising the total cost curve gives the following proof.

This implies that an EOQ can be determined for all manufactured items; however, there are a number of
major drawbacks with this analysis:
(a) It implies that, even for functional layout, a fixed batch size must be made.
(b) It implies that one part’s batch size can be fixed in isolation from the rest (not so in MRP).
(c) It is not used in mass production, where ideally it should be.
(d) It assumes demand and usage are constant.

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In reality the ‘Cost’ versus ‘Batch Size’ curve takes the form shown in Figure 20 [adapted from [16]);
this is very different from the theoretical model.

FIGURE 20 - ACTUAL EOQ MODEL (Adapted from [16])

Therefore, beware of anyone implying the EOQ is an effective model on which to base batch sizes,
especially in a batch manufacturing, make-to-order environment. It will probably only work, if at all, in
very specialised cases. Other lot-sizing techniques are used, eg make-to-order, transfer quantity, period
batching, set-up quantity (different parts – same set-up), lot size of one. The latter is the lot size goal that
the Japanese in particular aim for in their manufacturing environment (see Just-in-Time).

2.4 Shop Floor Information

In a manufacturing environment, after scheduling, a batch record card or job card is usually issued for
each batch, this may also be known as a traveller. Individual operation cards may also be printed. Each
job card will be accompanied by a copy of the part process plan, a properly updated drawing and a
material requisition. The job card is updated as operations are completed and is an historical document
that monitors the status of batch progress. On-line data collection systems and good CAPM terminal
access can reduce the need for information to be duplicated on such a card.

Other information which can also be supplied to the shop floor:

(a) queue prints or work-to-lists which give each work centre operator a list of job priorities in relation to
the capacity schedule;
(b) load prints outlining capacity planning information;
(c) late work or batches behind prints for late WIP chasing.

Although hard copy print-outs have been referred to it is more beneficial for companies to have on-line
queue pints and capacity planning facilities due to the fact that these are updated as soon as operations are
‘booked-off’. Hard copy outputs are out of date as soon as they are issued and work starts to move.
Manual updating of WIP is then necessary.

Another benefit is the existence of a large manufacturing database for analysis and system monitoring.

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3.0 Production Control

Production control is that part of the CAPM system which is directly concerned with shop floor
interaction. It links the factory floor with all other CAPM elements and transforms the planning
decisions made at a higher level into control commands for manufacture.

It also transforms data input from the shop floor into updated performance information which is fed back
and used further by the planning function. Production control includes:
(a) manufacturing order approval and release;
(b) operation scheduling and loading;
(c) material staging and issuing;
(d) WIP priority control;
(e) capacity control of WIP;
(f) quality control of WIP;
(g) manufacturing order release;
(h) process evaluation;
(i) CAPP information interfacing;
(j) stock control.

It is a short term activity which tends to be data intensive.

This function has a number of pre-defined goals.

(1) Work-in-Progress:
(a) reduced investment;
(b) balanced work load;
(c) improved delivery;
(d) reduced lead times.
(2) Quality:
(a) reduced defects and scrap:
(b) reduced appraisal costs.

(3) Labour:
(a) improved efficiency;
(b) improved utilisation;
(c) increased operator satisfaction.

(4) Equipment:
(a) improved utilisation;
(b) improved availability;
(c) reduced set-up costs.

As operations are completed the database is updated which automatically updates work-to-lists, capacity
planning information, etc.

Within the modern manufacturing environment, production control is also responsible for tape, process
planning and tooling scheduling, management and distribution.

Shop floor data collection can take a number of forms in relation to the information being gathered and
the manner in which it is collected (Figure 21).

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FIGURE 21 - SHOP FLOOR DATA COLLECTION

Central booking terminals, machine booking or data collection terminals via DNC links, ‘swipe cards’,
bar coding, etc. are all means by which data can be collected.

The systems chosen depend on the company’s requirements, the capital investment available and the type
of product and manufacturing system being managed.

3.0 CAPM System Links

The links which exit within a company in relation to CAPM systems may take the form of either paper
information, which will have to be keyed in, or computerised data which will be input to the system
utilising procedures and protocols which automatically update the database. The main advantages of the
latter approach are that it is quicker and information does not have to be re-input thus reducing the scope
for further errors in input data.

CAPM systems receive information from the following functions:

Manufacturing Engineering:
Process plan operation sequences, et-up times, machining times, NC data references, tooling
references, etc. These are all required for capacity scheduling purposes. Manufacturing resource and
layout information.
Sales/Marketing:
Master production schedule, future requirements, cost enquiries, etc.
Shop Floor/Production:
Job status, updating of WIP, stock control data, feedback on manufacturing times and methods.
Vendors
Order status and delivery, stock control data, feedback on ordering lead times.

CAPM systems supply information to the following functions.

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Manufacturing Engineering:
Performance measurement on men and resources, tooling/work centre availability, modification to
times and methods, job/contract status, etc.
Sales/Marketing:
Estimates and quotes, job/contract status, job/contract performance, etc.
Shop Floor/Production:
Priorities, control data/documentation, capacity schedules and plans, resource availability,
job/contract/stock/tooling status, performance feedback etc.
Vendors
Order requirements, delivery dates and quantities.

As mentioned previously CAPM has a key role in relation to the application of a CIM environment
within a manufacturing company.

The requirements for such system must not be looked at in isolation but must be determined in relation to
the CIM strategy developed by the company, particularly with regard to shared data and distributed
computer systems communications.

5.0 A Typical Marketed CAPM System

CAPM systems generally operated in such a way that they can be applied in a wide variety of
manufacturing companies. They are not product dependent and are of great benefit to an organisation as
long as they are well specified and justified beforehand, then implemented in a structured fashion with
the proper commitment and organisation from top management as well as the necessary support staff,
education and training at all levels within the firm.

The implementation of such a system should not be taken lightly with responsibility for system
implementation and running being given to an accountable individual or system ‘champion’ who will see
the project through to completion. This person must also have the necessary power to take decision
which will affect all departments at all levels within the company.

Depending on the set up chosen CAPM systems can be based on a mini-computer or micro-computer
hardware base. System choice will depend on the level of investment taking place as well as the number
of users required.

The system described in this section is called MICROSS. This is a proprietary marketed micro-
computer-based CAPM system which can be purchased in a modular fashion. The main advantage of
such a system is that as it is gradually introduced then, when confidence in the use of a new module is
gained, plans can be developed for the next stage of system evolution and the next module purchased and
implemented. This provides the opportunity for gradual CAPM system installation at a pace which suits
the company’s priorities and budgetary considerations.

MICROSS can be purchased in a number of different modules as shown in Figure 22 [17]. The two base
modules are ‘Stock Control’ and WIP and Scheduling’ both of which can be implemented
independently.

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FIGURE 22 - 'MICROSS' CAPM SYSTEM MODULES [17]

It can be linked with CAD/CAM, commercial and database management systems and can supply output
data in the form of computer ASCII files for analysis or transfer to other manufacturing packages.

A distributed network can be set up linking up to 300 IBM compatible micro-computers utilising data
storage facilities on a central network server (Figure 23). Data can be split and managed by department
or function and levels of responsibility for updating can be controlled via a series of passwords.

FIGURE 23 - 'MICROSS' NETWORKING [17]

It is also possible to link the PC network into other computer system networks (eg DECNET_ using
proprietary software.

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5.1 Summary Description of MICROSS Modules [17]

This section only provides a brief description of the many MICROSS modules which exist. Other
optional modules are also available to help enhance the operation of the standard modules described.

Stock Control
This is a foundation module on which various other modules depend. It records all stock movements,
allocations and inventory adjustments. These files are central to the material control process and all other
material control modules require this information in order to operate.

The stock control data can also be automatically updated by one of several other MICROSS modules, eg
MRP stock allocations, purchase orders receipts, etc.

Bill of Materials
Bill of materials provides a mechanism for creating and updating product structures, which in turn is used
at the MRP stage for exploding requirements and enabling sot build-ups. Standard and calculated cost
comparisons for new products are also possible.

Reference text can be associated with an item for special printing on material requisitions and orders.

Materials Requirements Planning

This operates in the manner outlined previously and explodes the bill of material information against the
Master Production Schedule (MPS) to determine order requirements and schedules. This is run as a
simulation, providing a list of suggested actions. Facilities exist for updating the MPS and calculating net
or gross requirements, triggering orders a re-order level or zero stock, combining re-order quantities,
setting the schedule horizon and sensitivity, etc.

Purchase Order Printing and Processing

By accessing the stock control database and the suggested requirements from the MRP run a purchase
order, once approved, can be printed in a pre-determined format utilising any special text instructions
specified by the Procurement Department.

Goods received notes can also be printed and a wide range of progressing reports area available for
progressing outstanding orders.

Sales Order Processing

Sales order processing is the commercial entry point to manufacturing control and provides the bridge to
the company’s financial control system. It maintains status information on current customer orders and
processes orders from system entry to completion automatically generating any relevant paperwork such
as shipping notes, invoices, etc.

A wide range of system reports are also available.

Works Order Processing

This provides a single entry of works order details updating all relevant modules. It provides the
facilities to allocate materials against a new order, to block the material issue, carry out shortage
reporting and receive finished WIP into stock. Material requisitions can be produced for each order as
well as picking lists for assembly items.

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When Production Control, Job Costing and Shop Floor Documentation are implemented entering a works
order also ensures that the WIP is properly scheduled and labour costs calculated.

Job Costing and Shop Floor Performance Monitoring

This module interacts directly with WIP data to provide detailed analysis on planned costs against actual
costs, sales costs, labour performance, work centre performance, scrap, non-productive costs, data for
estimating costs and standard costing.

Shop floor booking can either be made directly into the costing module or can be made via optional links
to other modules, eg shop floor data collection terminals, bar code readers, ‘swipe’ cards.

The main benefits of such a module are fast, up-to-date management reporting and automatic updating of
WIP and job status.

Shop Floor Documentation

This module provides the necessary facilities to print a complete set of shop floor paperwork, ie a route
card or traveller, operation card, final inspection card, etc. The format of these can be customised by the
user.

Estimating
The estimating system is a simple estimating process planning system which enables production
engineers to determine accurate time estimates for part process planning sequences. These can then be
transferred into MICROSS to update the job libraries file. Cost estimates can also be carried using a
suite of menu driven programs which use an estimating database set up entirely by the system user. The
system can also be used to prepare customer quotations.

Work in Progress and Scheduling

The Production Control System consists of routing libraries, WIP and scheduling.

Manufacturing resources are updated by the user in terms of availability in hours.

Works orders are entered directly and the routing is recalled from the routing library. The priority of
each works order is calculated and a work centre priority sequence scheduled and calculated to finite
capacity.

‘Work-to’ lists and capacity planning load charts are provided for resource management (Figure 24). The
progress of all jobs is monitored by the system, showing partial completions, outstanding operations and
performance through enquiries and reports such as job status, overdue jobs and delivery profiles.

The application of such a module should lead to lower WIP levels, closer adherence to delivery
schedules, improved utilisation of resources, better feedback on facility performance and improved
information management.

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FIGURE 24 - MICROSS 'WORK TO' LIST AND CAPACITY

PLANNING CHART [17]

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6.0 Enterprise Resource Planning

6.1 What is ERP?
Enterprise Resource Planning (ERP): an enterprise-wide strategy involving the application and
implementation of a computerised information system. This will be looked on as an umbrella for all the
internal and external business processes within a manufacturing organisation; attempting to integrate all
of the associated business activities. It should provide comprehensive management of all of these, for
example: finance, manufacturing, sales, distribution and human resources with a view to integrating the
associated data requirements and information processes, usually on a single ERP computer system. At the
centre of this is integrated information, an avoidance of duplication of data as well as a clear recognition
of data dependency and responsibility; all with a view to facilitating transparent information and
associated functional integration. This should enable various departments and functions to easily share
information and communicate with one other.

6.2 The Evolution of ERP (from [9, 11]

ERP evolved from MRP in the following stages:
• MRP - no capacity constraints;
• MRP - with capacity constraints (‘closed loop’); mainly rough cut;
• MRP/CRP (‘capacity resource planning’);
• MRP II: integrated inventory / resources planning;
• ERP: resource planning across the enterprise
- multi-functional;
- integrated;
- from centralised mainframe to decentralised PC-based ‘client-server’
systems;
- maximise asset utilisation;
- not only manufacturing companies;
- not simply an inventory management system.

6.2 Why is there a need for ERP?

Increasingly, corporations are recognising the strategic role of the operation function. They are
discovering that a focus on customer needs is effective only if the operations function is designed and
managed both across departments and across the enterprise. Manufacturers seeking to improve supply
chain management or the internal aspects of their order-to-delivery process should be looking at ERP as a
possible solution. Indeed, all organisations, particularly large ones, need an ERP system of some kind to
help ensure the effective and competitive use of their information systems, as well as the control,
consistency, reliability, accuracy and timeliness of their business data and processes.

In today’s dynamic and competitive business environment, there is a strong need for the organisation to
become globally competitive. This demands the need to be closer to the customer and deliver value added
products and services in the shortest possible time. Therefore, the enterprise must be closely linked to
both suppliers and customers in order to achieve improved delivery performance, decreased lead times
within the enterprise and improved efficiency and effectiveness. Manufacturers need to have effective
planning and control systems that enable good synchronisation and planning throughout all of the
processes within the organisation. ERP is now seen by many as the ideal strategic tool for all these
problems and for the enterprise to gain a competitive edge in the business world.

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6.3 ERP ‘Growth Circles’

Enterprise Resource Planning (ERP) is a software-driven system. The main software suppliers are
companies such as SAP, Baan, Oracle, J.D.Edwards. The global market for ERP software in the year
2000 was estimated at some $20.3bn with a growth rate in late 1990s of around 30%/annum and in the
early 2000s 10-20%/annum. It is now nearing saturation among large corporations and its use is now
diffusing down industrial hierarchy. The system evolves from its basic MRP level until it overlaps other
users' systems in the supply chain; see Figure 25 [11] below illustrating ERP growth circles.

ERP

MRPI

Closed Loop
MRP

MRP

ERP ‘Growth
BOM Circles’
Processor

FIGURE 25 - THE ERP GROWTH CIRCLE [11]

ERP Issues
One of the key ERP issues that companies have to face is the choice between applying an integrated
software system or using a collection of ‘best-of-breed’ packages (a horses for courses approach).
The integrated ERP option (Figure 26 [11]) gives, hopefully, seamless integration with few interfacing
problems and it is easier to co-ordinate across supply chain as well as embodying industry ‘best-practice’.

The ‘best of breed’ option is usually easier to customise because as a company you have the best software
fit for you in the supply chain and greater functionality at sub-system level as well as a greater flexibility
to exploit competitive advantage by linking into other firms’ systems. This is one important aspect to
consider when specifying ERP systems, particularly if you are a supplier to a number of companies.

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FIGURE 26 - INTEGRATED ERP GROWTH CIRCLES [11]

With regard to ERP implementation, on average, implementation costs equal software costs and
modifying the ‘source code’ can take 6-12 months.

There is a need to adopt enterprise resource management as well and people must be educated and trained
to understand what the system is providing for the company as well as being involved in the detailed
implementation process.

‘People fail to understand that it is not enough just to buy an ERP package. Your whole business has to
change around it’
(O.Pettiford, Plaut AG [18])

‘SAP does not sell software - it sells best-practice business processes’

(C. Deacon, Computer Sciences Corporation [18])
Some quoted benefits of ERP are that it:
- cuts production and inventory costs;
- improves customer service;
- plans and forecasts product demand;
- improves cost allocation;
- measures and accounts for product waste;
- ensures the required materials are available when needed.

Examples of some major ERP vendors are SAP, BAAN, ORACLE, People-soft, J.D.Edwards, Microsoft,
etc. Information can be found out about these on the Internet [18].

With regard to the benefits of ERP, one example:

Hylsa ($ 1.5bn steel manufacturer) [18]

Implemented SAP with Advanced Planner and Optimiser (APO):
• Supply planning process: 3 days → 2 hours
• OTIF (on time in full) deliveries: increased from 70% to 90%
• Sales forecasting accuracy: up from 40% to 80%
• Inventory saving: $850K in 6 months
(= cost of SAP installation → ‘rapid payback’)

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ERP basically evolved from MRP II so that supply-chain management, e-commerce and global operation
could be incorporated as well as the nature of globalised modern businesses. MRPII concentrates on
internal operations whilst ERP focuses across the whole organisation, both internally and externally, e.g.
in non-manufacturing areas such as distribution, supply chains, quality management, product support and
maintenance management, distribution, marketing and supplier management. In addition, they can
usually be tailored to allow easy external access anywhere in the world and provide the ability to access
and integrate with the ERP systems of other companies. So they give a much more comprehensive view
of manufacturing and supply information that MRP II systems typically do not. ERP allows customers
access to manufacturing schedules and inventories previously done through Electronic Data Interchange
(EDI) systems.

Unlike MRP and MRPII, ERP can be implemented in almost all types of organisations irrespective of
their mode and spread of operation, e.g. aerospace & defence, the automotive industry, banking and
insurance, chemical and pharmaceutical industries, consumer goods, healthcare, high-technology and
electronics, mechanical engineering and heavy construction, oil & gas, project oriented manufacturing,
public administration and education, retail, telecommunications, utilities, etc.

The success of an ERP solution depends on how quickly benefits can be gained. Companies often
implement ERP too fast and over a short period of time; ending up with lower than expected benefits or
even huge losses. The application of this philosophy involves huge change within an organisation, both
with regard to systems and culture; poor installations will incur losses rather than profits. Managers must
also understand that substantial internal and external Business Process Re-engineering (BPR) will also be
required before implementing an ERP system [19].

Many of the key problems associated with ERP are similar to those already mentioned under MRP and
MRPII. ERP implementation is not something that should be approached without a great deal of careful
planning. Some other reasons for poor results are [19]:
- Operating strategy did not drive business process design and deployment.
- The implementation took much longer than expected.
- Pre-implementation preparation activities were done poorly.
- People were not well prepared to accept and operate with new system.
- People had high expectations of, what is, an inherently complex system.
- Budget overruns, the cost to implement was much greater than anticipated.
- High level commitment required but not forthcoming.

PA Consulting Group survey [19]:

• 92% of companies ‘dissatisfied’ with results of ERP;
• gap between expectations and achievement especially in staff productivity and customer
service.

Some important points to be kept in mind while evaluating an ERP software include:
- functional fit with the company’s business processes;
- the degree of integration between the various components of the ERP system;
- the degree of integration between the various components of other companies' ERP system;
- its flexibility, modularity and scalability;
- complexity;
- user friendliness;
- quick implementation, shortened ROI period;
- the ability to support multi-site planning and control;
- technology; client/server capabilities, database independence, securities;

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- availability of regular upgrades;

- the amount of customisation required;
- local support infrastructure;
- availability of reference sites;
- total costs, including costs of license, training, implementation, support, etc.

The table below shows one way as to how implementation of ERP should be approached [11].
Implementation Approach
Phase Tasks Deliverables
Detailed Discussions Project Initialisation Accepted norms &
Evaluation of current Conditions
processes, business practices, Project Organisation Chart
requirements Identify Work Teams
Set-Up Project Organisation
Design & Customisation Map Organisation Organisation Structure
Map Business Processes Design Specification
Define Functions and Process Flow Diagram
Processes Function Model
ERP S/w Configuration Configuration Recording
Build ERP System Systems Modification
Modifications
Implementation / Prepare to Create Go-Live Plan & Testing Environment report
Go Live Documentation Customisation Test Report
Integrate Applications Implementation Report
Test the ERP Customisation
Train User
Production / Go Live Run Trial Production Reconciliation Reports
Maintain Systems Conversion Plan Execution

The Future of ERP Systems

The Internet is the next major evolution of technology that will enable rapid supply chain management
between multiple operations and trading partners; especially in virtual organisations. Most ERP systems
are enhancing their products to become “WWW enabled” such that customers world-wide can have a
direct connection to the supplier’s ERP system. ERP systems are also building in workflow management
functionally which provides a mechanism to manage and control the flow of work by monitoring
logistical aspects like workload, capacity throughout times, work queue lengths and processing times.

Recognising the need to go beyond the MRP II and ERP, vendors are busy adding to their product
portfolio. BANN for example has already introduced concepts like IRP (Intelligence Resource Planning),
its version of MRP III (Money Resource Planning) and has acquired companies for strategic technologies
like visual/virtual product configuration, product data management and finite scheduling.

Interfaces will change over the next 10 years whereby much more intuitive, visual forms of information
handling and management will apply to ERP systems. Being able to visually view and participate in the
internal and external supply chains of a company as well as the processes will become a reality in the
virtual world and display, modelling and tracking technologies advance.

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REFERENCES AND RECOMMENDED READING

1. ‘AUTOMATION, PRODUCTION SYSTEMS AND COMPUTER INTEGRATED MANUFACTURE’
Mikell P Groover
Prentice-Hall International Edition (1987)
2. 'MATERIALS REQUIREMENTS PLANNING'
J. Orlicky
McGraw-Hill (1975)
3. ‘PRODUCTION MANAGEMENT SYSTEMS – A CIM PERSPECTIVE’
Jimmie Browne, John Harken, James Shivnan
Addison-Wesley (1988)
4. ‘A GUIDE TO CAPM’
Dennis K Corke
The Institution of Production Engineers (1988)
5. ‘PRODUCTION AND OPERATIONS MANAGEMENT'
Norman Gaither and Greg Frazier
South Western (1998)
6. 'OPERATIONS MANAGEMENT: STRATEGY AND ANALYSIS'
Lee J. Krajewski and Larry P. Ritzman
5TH Edition, Addison Wesley (1999)
7. 'A MODEL FOR MRP IMPLEMENTATION'
Thomas E Callerman and Jeff E Heyal
International Journal of Operations and Production Management
Volume 6, Number 5, 1986
8. 'PARAMETERS AFFECTING THE EFFECTIVENESS OF MRP SYSTEMS'
J.H.Y. Yeung, W.C.K. Wong and L. Ma
International Journal of Production Research
Volume 36, Number 2 (1998)
9. ERP FANS AND USER FORUM - http://www.erpfans.com/ (Accessed July 2007)
10. THE INTEGRATION OF ERP INTO A LOGISTICS CURRICULUM: APPLYING A SYSTEMS APPROACH
R.F. Boykin and W.B. Martz Jr,
Journal of Enterprise Information Management,
Volume 17, Number 1, pp. 45-55, # Emerald Group Publishing Limited (2004), ISSN: 1741-0398
11. 'ERP: TOOLS, TECHNIQUES AND APPLICATIONS FOR INTEGRATING THE SUPPLY CHAIN'
C.A. Ptak, Schragenheim,
St. Lucie Press, London (2000)
12. 'CADCAM: PRINCIPLES, PRACTICE AND MANUFACTURING MANAGEMENT’
C. McMahon, J. Browne,
Addison-Wesley (1998)
13. 'THE EXECUTIVE’S GUIDE TO SUCCESSFUL MRPII’
O. Wight,
John Wiley and Sons (1995)
14. 'KISS WITH KANBANS’
P. Mason, M. Parks,
Journal of Logistics Focus (Now Journal of Logistics and Transport Focus), March 1999, pp 12-16, ISSN
1466-836X.
15. 'FUNDAMENTALS OF PRODUCTION/OPERATIONS MANAGEMENT’
W.A. Ruch, H.E. Fearon, C.D. Wieters,
5th Edition, West Publishing Company (1992)
16. 'JUST-IN-TIME MANUFACTURING IN PERSPECTIVE’
A. Harrison,
Prentice-Hall (1992)
17. 'MICROSS Product Management System Manuals’
MICROSS Ltd., (1990)
18. WWW.MYSAP.COM, (Accessed July 2002).
19. 'ERP: TOOLS, TECHNIQUES AND APPLICATIONS FOR INTEGRATING THE SUPPLY CHAIN’
C.A. Ptak, E. Schragenheim,
St. Lucie (1999)

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