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

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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