Manufacturing Environments and Integration with Other Functions
Written By: Dr. Scott Hamilton
Published On: July 6 2005
Design Factors Shaping System Usage in Manufacturing Environments
In addition to the factors mentioned in Part One for distribution environments, the major factors shaping system usage in manufacturing environments include the definition of product structure, variations in production strategy, and lean manufacturing practices.
Definition of Product Structure Information. Master bills and master routings define product and process design, with optional bill and routing versions. Their identifiers are assigned to relevant manufactured items and specified on production orders. Planned engineering changes are identified using date effectivity for each bill and routing version; date effectivity can also be identified for material components. The master bill and routing information provide the basis for costing and planning calculations. Routing information is optional, and some firms coordinate production activities without it.
The order-dependent bill and routing for a production order initially reflect the assigned master bill and routing, and can be manually maintained to identify a custom configuration. The system models a multilevel custom product configuration using order-dependent bills and multiple linked production orders tied to the sales order.
Variations in Production Strategy. Selling stocked product involves a make-to-stock production strategy, where sales forecasts typically drive end-item replenishment. A make-to-order production strategy often requires stocked components, where replenishment may be driven by component forecasts. The production order for a make-to-order product is typically linked to a sales order. A make-to-order product may have make-to-order components, so that multiple linked production orders are tied to the sales order. The linked production order(s) can be generated during sales order entry, by planning calculations, or by manual assignment.
Lean Manufacturing Practices. Lean manufacturers often require auto-deduction of material and resources, bin replenishment of floor stock material, order-less reporting of production, or constraint-based scheduling of manufacturing cells.
This is Part Two of a two-part article reprinted from Managing Your Supply Chain Using Microsoft Navision.
Part One covered design factors related to the user interface, customization capabilities, and distribution environments.
TEC previously reprinted a chapter on "Sales and Operations Planning".
This excerpt of the "Summary" chapter is presented in two parts.
The book can be ordered on amazon.com or books.mcgraw-hill.com.
Integration with Warehouse Management
Integrated warehouse management functionality is already included, thereby avoiding the need for a supplemental application. It supports both order- and document-based approaches to warehouse management, and a natural growth path to more advanced functionality. For example, suggested put-aways can account for item characteristics (such as weight or cold storage requirements) as well as bin characteristics (such as weight limitations or cold storage capabilities).
Integration with E-commerce
E-commerce builds on the natural design of an ERP system since it provides electronic communication of basic transactions. Integrated e-commerce functionality is supported in several ways, including Biztalk transactions, reverse auctions, commerce portals, and user portals.
Biztalk Transactions for Sales and Purchasing. The symmetry of sales and purchasing functionality is reflected in Biztalk transactions, as shown in the following figure. For example, an outbound Biztalk sales quote and sales order confirmation can be sent to a customer. Conversely, an inbound Biztalk purchase quote and purchase order confirmation can be received from a vendor. Each inbound transaction can have an optional e-mail notification sent to the internally responsible person.
E-Commerce Sourcing via Reverse Auctions. A reverse auction provides an electronic approach to sourcing a purchase. It includes sending a request for quote to multiple vendors, obtaining vendor responses on a web site, reviewing the quotes, communicating to vendors whether their quote was accepted or rejected, and creating a purchase order from the quote.
Commerce Portal and User Portal. Supply chain activities often require interaction with remote users and external personnel. The commerce portal supports creation of web pages for electronic access to information, such as handling requests for quotes and sending quotes. The user portal supports information retrieval and task performance by remote users, such as sales tasks to create new quotes, sales orders, and customers.
Integration with Relationship Management
The ability to manage relationships with customers, vendors, and others is fully integrated with standardized functionality for supply chain management. This level of integration contrasts sharply with add-on functionality such as a third-party customer relationship management (CRM) application. Illustrations of integrated functionality include the following:
- Contact interactions reflecting supply chain activities. The system automatically records contact interactions involving sales and purchase documents. For example, an interaction may represent sending a document for a sales quote or invoice, or a purchase quote or order. Each document is treated as an interaction.
- Contact interactions reflecting outgoing calls, e-mails, and cover letters. The system automatically records contact interactions involving outgoing communications initiated from within Navision, such as originating a phone call. Outgoing e-mail becomes an attachment to the interaction. Incoming e-mails can also be automatically recorded as a contact interaction and attached to the interaction.
- Contacts. You can create contacts from existing information about customers and vendors (and vice versa), and automatically create contacts when adding customers and vendors.
- Create sales quotes and orders for an opportunity. A sales quote can be defined for an opportunity (where the opportunity represents a potential sale to a contact) and converted to a sales order.
- Contacts and commerce portals. Business with a contact can be conducted through a commerce portal.
Other relationship management capabilities go beyond these integration features. As part of generating and qualifying leads, for example, you can create a campaign, assign a subset of contacts to the campaign, define a template for sending information (such as mailings or e-mail) or making phone calls, and track responses for the campaign. The system automatically records the sent information and responses as contact interactions. Contact interactions can be manually added, and contacts can include banks, accountants, lawyers, travel agencies, government authorities, press, and others. The system supports the identification and tracking of opportunities within user-defined sales cycles, and recording the related contact interactions. Contact information can also serve other purposes, such as printing labels or exporting data for external telemarketing.
Integration with Service Management
Service management typically involves maintenance and repair of products either in the field or at internal repair shops. Firms involved in service management may work on products they have sold, or products manufactured and sold by others. A typical example involves an equipment manufacturer that also performs installation services, maintenance on installed units, or repairs on returned units. Each unit is termed a service item. Integration of service management with other supply chain functionality is illustrated below.
- Linkage between a service item and shipped product. The shipment transaction automatically creates a service item for each item shipped to a customer, with information about the serial number (if applicable), warranty period, and ship-to location. Service items can also be manually added, which is especially important when working on products not recorded as shipped.
- Material and resource requirements for a service order. A service order can be created with one or more line items identifying the service items to be repaired. Material and resource requirements can be specified for repairing individual line items or for the entire service order. The product's original assembly list can be used to identify needed materials, and the system retains the latest configuration of the repaired unit. Loaners can be sent and received.
Other service management capabilities go beyond these integration features. For example, resource requirements can be identified by skill level and location, which is especially helpful in scheduling field service personnel using the dispatch board capabilities. The system supports service quotes (which can be converted to service orders) and service contracts, troubleshooting diagnostic capabilities, and the identification of faults, symptoms and resolution related to a service item.
Integration with Accounting Applications
The integrated accounting applications include payables, receivables, general ledger, and fixed assets. Integration of these accounting applications with other supply chain functionality is illustrated below.
Payables. The purchase order receipt transaction can also be used to enter the vendor invoice information. It may have accompanied the incoming material or the receipt itself represents the invoice. The system handles vendor returns and the associated credit memo information, and customer returns can even spawn vendor returns. Actual costing methods are based on posting the vendor invoice.
Receivables. The sales order shipment transaction can also generate a sales invoice, typically because the invoice must accompany the shipment. The system handles customer returns and the associated credit memo information. The pricing and discount information for sales orders also applies to manually entered invoices and credit memos.
General Ledger. The system provides an audit trail to every supply chain activity that impacts the general ledger. It also supports analysis by analytic dimensions related to items, customers, vendors, and other entities.
Fixed Assets. The fixed assets application is integrated with purchase order and sales order processing. A fixed asset purchase can represent the acquisition or maintenance of a fixed asset, where the line item indicates the fixed asset identifier. Additional information must be indicated on the purchase order line item for an acquisition, and the receipt transaction updates information in the fixed assets application. A fixed asset can also be sold, where the sale order line indicates the identifier for a fixed asset and the sales price, and the shipment transaction updates information in the fixed assets application.
When reviewing or learning any ERP software package, it is important to understand its underlying design philosophies and how it is targeted towards different manufacturing and distribution environments. It is easy to get bogged down in the details. Some of the key design factors that differentiate Microsoft Navision have been summarized above. These design factors influence how the system fits together to run a business, especially the key business processes for managing supply chain activities in manufacturing and distribution.
About the Author
Dr. Scott Hamilton, as a consultant, developer, user, and researcher, has specialized in information systems for manufacturing and distribution for three decades. Scott has consulted worldwide with over a thousand firms, conducted several hundred executive seminars, and helped design several influential ERP packages. He previously co-authored the APICS CIRM textbook on How Information Systems Impact Organizational Strategy and recently authored Maximizing Your ERP System. Scott is currently working closely with Microsoft partners involved with manufacturing and distribution, and can be reached at ScottHamiltonPhD@aol.com or (612) 963-1163.