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Enterprise Operations Overview & Enterprise Operations Overview & Strategic PlanningStrategic Planning
EGN 5622 Enterprise Systems IntegrationEGN 5622 Enterprise Systems Integration (Professional MSEM) (Professional MSEM)
Fall, 2012 Fall, 2012
Enterprise Operations Overview Enterprise Operations Overview
EGN 5622 Enterprise Systems Integration EGN 5622 Enterprise Systems Integration (Professional MSEM) (Professional MSEM)
Fall, 2012 Fall, 2012
January 2008January 2008
© SAP AG - University Alliances and © SAP AG - University Alliances and The Rushmore Group, LLC 2007. All The Rushmore Group, LLC 2007. All rights reserved.rights reserved. 33
Enterprise Operations Planning
OP Execution
Execution
Detailed OP Planning
High-Level OP Planning
ForecastingSales and Operations
Planning
Demand
ManagementMPS MRP
Sales Information
System
CO/PA
Manufacturing
Execution
Sales
Process
Procurement
Process
Strategy Planning- Vision
- Goals & Objectives
- Strategy
- Product Portfolio and Roadmap
Warehouse
Management
Enterprise Planning ProcessEnterprise Planning Process
Business Process platformBusiness Process platform
Enterprise Planning stages and LevelsEnterprise Planning stages and Levels
Source: Freyburger
Planning Levels
Top Management
Division
Cost Center
Planning Stages Vision,
Goals, & Milestones
Actions & Quantities
(cost, time, & peformance)
Approval & Rejection
Budget Finance Approval
Controlling
Factors which impacts Business Factors which impacts Business PlanningPlanning
Business Planning ProcessBusiness Planning Process
Planning AreasPlanning Areas◦ Finance
◦ Cost center planning◦ Assets planning◦ Profitability planning◦ Liquidity & investiment planning
◦ Demand and Production◦ Marketing & Sales ◦ Maintenance◦ Human Resources◦ Etc.
Linking the Component PlansLinking the Component Plans
Source: Gluchowski, Gabriel, Dittmar
Revenue Plan
Sales Plan
Production Plan
price trend
bill explosion
Financial Plan
Investment Plan
Capacity Plan
Personnel Plan
Procurement Plan
Cost Projection
Overhead Costs
Planned Profit
interest
amortization
machine hourly rate
personnel costs
costs of supply
wo
rk she
du
lera
te o
f tu
rno
ver
Planning Example of Global CompanyPlanning Example of Global Company
Intra-Enterprise Systems IntegrationIntra-Enterprise Systems IntegrationV
ertic
al I
nteg
ratio
n
CorporatePlanning
Accounting
Supplier Management,Production Planning,Cost Planning, …
Sup
plie
rA
ccou
ntin
g
Purchasing Prod. Sales Personnel
War
ehou
seA
ccou
ntin
g
Cus
tom
erIn
voic
es
Em
ploy
eeS
ala
ryAdministration II:Amount-OrientedProcessing
Administration I: Value-OrientedProcessing
Disposition andPlanning
Analysis and Controlling
StrategicEnterpriseManagement
Horizontal IntegrationSource: Mertens, P., Meier, M.: Integrierte Informationsverarbeitung (2009), 1.
Top Management
Middle Management
Lower Management
Enterprise Strategy PlanningEnterprise Strategy Planning
EGN 5622 Enterprise Systems Integration EGN 5622 Enterprise Systems Integration (Professional MSEM) (Professional MSEM)
Fall, 2012 Fall, 2012
Enterprise Strategy PyramidEnterprise Strategy Pyramid
Developing Operations StrategyDeveloping Operations Strategy
Mission & VisionMission & VisionMission & VisionMission & Vision
Business StrategyBusiness StrategyBusiness StrategyBusiness Strategy
Product/Service PlansProduct/Service PlansProduct/Service PlansProduct/Service Plans
Competitive PrioritiesCompetitive PrioritiesCompetitive PrioritiesCompetitive Priorities
Operations StrategyOperations StrategyOperations StrategyOperations Strategy
AssessmentAssessmentof Globalof GlobalBusinessBusiness
ConditionsConditions
AssessmentAssessmentof Globalof GlobalBusinessBusiness
ConditionsConditions
DistinctiveDistinctiveCompetenciesCompetencies
ororWeaknessesWeaknesses
DistinctiveDistinctiveCompetenciesCompetencies
ororWeaknessesWeaknesses
Corporate Mission & VisionCorporate Mission & VisionCorporate Mission & VisionCorporate Mission & Vision
• A corporate mission is a set of long-range goals and including statements about:• the kind of business the company wants to be in• who its customers are• its basic beliefs about business• Its goals of survival, growth, and profitability
• A corporate vision is a description of where the company ought to be in the future (i.e., positioning itself in the future)
Business StrategyBusiness Strategy
• Business strategy is a long-range game plan of an organization and provides a road map of how to achieve the corporate mission (or vision).
• Inputs to the business strategy are• Assessment of global business conditions -
social, economic, political, technological, competitive
• Distinctive competencies or weaknesses - workers, sales force, R&D, technology, management
SWOT: Strategic Planning ToolSWOT: Strategic Planning Tool
Competitive PrioritiesCompetitive Priorities
Competitive PrioritiesCompetitive Priorities
• Low Production Costs• Definition• Unit cost (labor, material, and
overhead) of each product/service
• Some Ways of Creating• Redesign of product/service• New technology• Increase in production rates• Reduction of scrap/waste• Reduction of inventory
Competitive PrioritiesCompetitive Priorities
• Delivery Performance• Definition• a) Fast delivery• b) On-time delivery
• Some Ways of Creating• a) larger finished-goods inventory• b) faster production rates• c) quicker shipping methods• d) more-realistic promises• e) better control of production of orders• f) better information systems
Competitive PrioritiesCompetitive Priorities
• High-Quality Products/Services• Definition• Customers’ perception of degree of
excellence exhibited by products/services
• Some Ways of Creating• Improve product/service’s• Appearance• Performance and function• Wear, endurance ability• After-sales service
Competitive PrioritiesCompetitive Priorities
• Customer Service and Flexibility• Definition• Ability to quickly change production
to other products/services. Customer responsiveness.
• Some Ways of Creating• Change in type of processes used• Use of advanced technologies• Reduction in WIP through lean manufacturing• Increase in capacity
Operations StrategyOperations Strategy
• Operations strategy is a long-range game plan for the production of a company’s products/services, and provides a road map for the production function in helping to achieve the business strategy.
Elements of Operations StrategyElements of Operations Strategy
• Product/service plans• Positioning the production system• Outsourcing plans• Process and technology plans• Strategic allocation of resources• Facility plans:
• capacity, • location, and • layout
Product/Service PlansProduct/Service Plans
As a product is designed, all the detailedAs a product is designed, all the detailedcharacteristics of the product are established.characteristics of the product are established.
Each product characteristic directlyEach product characteristic directly affects how the product can be made.affects how the product can be made.
How the product is made determinesHow the product is made determines
the design of the production system.the design of the production system.
Positioning the Production SystemPositioning the Production System
• Select the type of product design• Standard• Custom
• Select the type of production processing system• Product focused• Process focused
• Select the type of finished-goods inventory policy• Produce-to-stock• Produce-to-order
Stages in a Product’s Life CycleStages in a Product’s Life Cycle
• Introduction- Sales begin, production and marketing are developing, profits are negative.
• Growth - sales grow dramatically, marketing efforts intensify, capacity is expanded, profits begin.
• Maturity - production focuses on high-volume, efficiency, low costs; marketing focuses on competitive sales promotion; profits are at peak.
• Decline - declining sales and profit; product might be dropped or replaced.
Stages of a Product’s Life CycleStages of a Product’s Life Cycle
Introduction Growth Maturity DeclineIntroduction Growth Maturity Decline
B&W TVB&W TV
AutomobileAutomobile
Video RecorderVideo Recorder
CD PlayerCD PlayerColor CopierColor Copier
Cell PhoneCell Phone
Internet RadioInternet Radio
Fax MachineFax MachineDot-MatrixDot-Matrix PrinterPrinter
OutsourcingOutsourcing• Outsourcing refers to hiring out or subcontracting
some of the work that a company needs to do.• This strategy is being used more and more as
companies strive to operate more efficiently.• Outsourcing has many advantages and
disadvantages. • Companies try to determine the best level of out-
sourcing to achieve their operations & business goals.
• More outsourcing requires a company to have less equipment, fewer employees, and a smaller facility.
Outsourcing PlansOutsourcing Plans
• A company might outsource any of the following manufacturing related functions:• Designing the product• Purchasing the basic raw materials• Processing the subcomponents, subassemblies,
major assemblies, and finished product• Distributing the product
Outsourcing PlansOutsourcing Plans
• Many companies even outsource some service functions such as:• Payroll• Billing• Order processing• Developing/maintaining a website• Employee recruitment• Facility maintenance
Process and Technology PlansProcess and Technology Plans
• An essential part of operations strategy is the determination of how products/services will be produced.
• The range of technologies available to produce products/services is great and is continually changing.
Strategic Allocation of ResourcesStrategic Allocation of Resources
• For most companies, the vast majority of the firm’s resources are used in production/operations.
• Some or all of these resources are limited.• The resources must be allocated to
products, services, projects, or profit opportunities in ways that maximize the achievement of the operations objectives.
Facility PlansFacility Plans• How to provide the long-range capacity to
produce the firm’s products/services is a critical strategic decision.
• The location of a new facility may need to be decided.
• The internal arrangement (layout) of workers, equipment, and functional areas within a facility affects the ability to provide the desired volume, quality, and cost of products/services.
Competitive Priorities for ServicesCompetitive Priorities for Services
• The competitive priorities listed earlier for manufacturers apply to service firms as well• Low production costs• Fast and on-time delivery• High-quality products/services• Customer service and flexibility
• Providing all the priorities simultaneously to customers is seldom possible.
Positioning Strategies for ServicesPositioning Strategies for Services
• Type of Service Design• Standard or custom products • Amount of customer contact• Mix of physical goods and intangible services
• Type of Production Process• Quasi manufacturing• Customer-as-participant• Customer-as-product
Positioning Strategies for ServicesPositioning Strategies for Services
• Example: McDonald’s• Highly standardized service design• Low amount of customer contact• Physical goods dominating intangible services• Quasi-manufacturing approach to back-room
production process
Forming Operations StrategiesForming Operations StrategiesForming Operations StrategiesForming Operations Strategies
• Support the product plans and competitive priorities defined in the business strategy.
• Adjust to the evolving positioning strategies.
• Link to the marketing strategies.• Look at alternative operations strategies.
Evolution of Positioning Evolution of Positioning StrategiesStrategies
• The characteristics of production systems tend to evolve as products move through their product life cycles.
• Operations strategies must include plan for modifying production systems to a changing set of competitive priorities as products mature.
• The capital and production technology required to support these changes must be provided.
Evolution of Positioning Evolution of Positioning StrategiesStrategies
VolumeVolumeVeryVeryLowLow
LowLow HighHighVeryVeryHighHigh
Prod modeProd mode ProcessProcess ProcessProcess ProductProduct ProductProduct
Inventory.Inventory. To-OrderTo-Order To-OrderTo-Order To-StockTo-Stock To-StockTo-Stock
BatchBatchSizeSize
VeryVerySmallSmall
SmallSmall LargeLargeVeryVeryLargeLarge
ProductProduct CustomCustomSlightlySlightlyStandardStandard
StandardStandardHighlyHighly
StandardStandard
LifeLifeStageStage
Intro.Intro.EarlyEarly
GrowthGrowthLateLate
GrowthGrowthMaturityMaturity
Linking Operations and Marketing Linking Operations and Marketing StrategiesStrategies
• Operations Strategy• Product-focused• Make-to-stock• Standardized products• High volume
• Marketing Strategy• Low production cost• Fast delivery of products• Quality
• Example: TV sets
Linking Operations and Marketing Linking Operations and Marketing StrategiesStrategies
• Operations Strategy• Product-focused• Make-to-order• Standardized products• Low volume
• Marketing Strategy• Low production cost• Keeping delivery promises• Quality
• Example: School buses
Linking Operations and Marketing Linking Operations and Marketing StrategiesStrategies
• Operations Strategy• Process-focused• Make-to-stock• Custom products• High volume
• Marketing Strategy• Flexibility• Quality• Fast delivery of products
• Example: Medical instruments
Linking Operations and Marketing Linking Operations and Marketing StrategiesStrategies
• Operations Strategy• Process-focused• Make-to-order• Custom products• Low volume
• Marketing Strategy• Keeping delivery promises• Quality• Flexibility
• Example: Large supercomputers
No Single Best StrategyNo Single Best Strategy
• Start-up and Small Manufacturers• Usually prefer positioning strategies with:• Custom products• Process-focused production• Produce-to-order policies• These systems are more flexible and require
less• capital.
No Single Best StrategyNo Single Best Strategy
• Start-up and Small Services• Successfully compete with large corporations
by:• Carving out a specialty niche• Emphasizing close, personal customer service• Developing a loyal customer base
No Single Best StrategyNo Single Best Strategy
• Technology-Intensive Business• Production systems must be capable of
producing new products and services in high volume soon after introduction
• Such companies must have two key strengths:• Highly capable technical people• Sufficient capital
Wrap-Up: World-Class PracticeWrap-Up: World-Class Practice
• Innovation• Customers first• New products/services to market first• High quality• High labor productivity & low production
costs• Little excess inventory• . . . more
Wrap-Up: World-Class PracticeWrap-Up: World-Class Practice
• Global purchasing and selling• Quick technology development & adoption• Lean & flexible organization• Strategic alliances/joint ventures• Sensitive to social/political issues when
setting strategies
Enterprise Strategic Enterprise Strategic PlanningPlanning
SAP Implementation SAP Implementation
EGN 5622 Enterprise Systems Integration EGN 5622 Enterprise Systems Integration (Professional MSEM) (Professional MSEM)
Fall, 2012 Fall, 2012
R/3
SAP Module ViewSAP Module View
Integrated SolutionClient / Server
Open Systems
FinancialAccounting
Controlling
Fixed AssetsMgmt.
ProjectSystem
Workflow
IndustrySolutions
ProductionPlanning
Sales &Distribution
MaterialsMgmt.
PlantManagement
QualityMaintenance
Human Resources
SAP Access NavigationSAP Access Navigation
SAP BPI Client, Userid, Password SAP BPI Client, Userid, Password
SAP R/3 Exercises
Client: 760
Application server: basel.cob.csuchico.eduSystem number: 26System ID: BAS
Userid: bpi-031 to bpi-068Initial password: SAP4US
Enterprise StructureEnterprise Structure
Plant Plant (P 1_ _)(P 1_ _)
Client (760)Client (760)
Chart of Chart of Accounts (1_ _)Accounts (1_ _)
CompanyCompanyCode (1 _ _)Code (1 _ _)
Fiscal YearFiscal YearVariant (K1)Variant (K1)
Credit ControlCredit ControlArea (C1 _ _)Area (C1 _ _)
PurchasingPurchasingOrg. (P1 _ _)Org. (P1 _ _)
Purchasing Purchasing Group (1_ _)Group (1_ _)
Shipping Shipping Point Point
(S 1_ _)(S 1_ _)
SalesSalesOrg. (S1 _ _)Org. (S1 _ _)
Distribution Distribution Channel (RE/WH)Channel (RE/WH)
Division Division (01)(01)
Sales AreaSales Area
Controlling Controlling Area (C1 _ _)Area (C1 _ _)
SL10SL10 SL20SL20
Check Company Code/Chart Check Company Code/Chart Account:Account:
Check company code/Fiscal Check company code/Fiscal Year VariantYear Variant
Check Credit Control AreaCheck Credit Control Area
Check PlantCheck Plant
Check Storage LocationsCheck Storage Locations
Check Purchasing OrganizationCheck Purchasing Organization
Check Purchasing OrganizationCheck Purchasing Organization
Check Financial AccountsCheck Financial Accounts
Check Vendor ListCheck Vendor List
Check Standard Hierarchy of Cost Check Standard Hierarchy of Cost Center Center
Exercises:Exercises:• Draw an enterprise structure to show:
• your company code• fiscal year variant • your credit control area• your plant, storages• your purchase organization, group(s)• vendors• all materials (raw, trading, finished goods, operation supplies), and stocks
in your plant• your financial accounts • sales organization, sales area• shipping point• customers, customer’s discount rate if have • material’s prices• list of bill of materials, and routings for finished goods• capacity of plant• Activity prices