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Pros and Cons of Enterprise Resource Planning (ERP)

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Scenario:
Manychip, Inc., is a specialty memory chip manufacturer located in Southern California with manufacturing plants located in the United States, Europe, Singapore, and Japan. Additionally, Manychip has branch sales offices located in major metropolitan areas across the globe. The market for Manychip's six key products included original equipment manufacturers of personal computers, cellular telephone manufacturers, electronics distributors, and government organizations. The market environment for Manychip's products is extremely volatile, with fluctuating demand and rapidly changing prices. The company uses short term contracts (less than one month) and spot pricing for irregular customers. Internally, the operation is capital-intensive, with depreciation running approximately $1.2 million per day (depreciation has an impact on revenue streams). The six key products had further specialized components, making the possible line mix total 24 distinct products. Further, the manufacturing process required high manufacturing lead times and various product yields. In the high technology memory arena, product life cycles were dramatically shortened because of rapid obsolescence. To coordinate the manufacturing activity, Manychip has an established process and system that helped optimize resource utilization, improve shop floor efficiencies, and manage customer demand.

Manychip is experiencing 10-15% growth in revenues and volume, primarily tied to increased worldwide demand, product type, and market variables. Most significantly, the company received a major pre-order for a new cellular phone memory chip that's schedule to come out in three months. This pre-order is scaled for up to 10 million units and management is concerned the existing process and system may not be suitably optimized for this order. Additionally, the forecast in sales figures for all six key product lines is higher than it has been in the past. With the increase in volume, management is concerned about the quality management process as well-can the existing processes maintain the highest degree of quality needed?

As a new member of the Production Planning Management staff, you'll be expected to help develop strategies to support the expanded growth plans. Your team faces several fundamental issues. First, are the individual plant layouts conducive to the expanded growth expected by the company? Second, are individual plant layouts optimized for the most efficient performance and lowest cost? Third, is the existing supply chain interaction among all the various components optimized in the same manner individual layouts are expected to be optimized? Finally, your group must consider capacity planning and workflow to ensure the company can meet its contractual obligations with the maximum revenue and profitability.Manychip currently uses information systems developed by the company to conduct production planning. You believe that a fully integrated enterprise resource planning tool or specific production planning software would better suit the company in light of its upcoming increase in production.

Using course materials and other resources, research and identify potential software applications with consideration for the following:

1) Should Manychip use an ERP package or specific manufacturing production planning utilities?
2) What are the advantages and disadvantages of each course of action?
3) Identify the candidate pool of software you considered for selection, select a single product, and justify your reasoning.

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Solution Preview

Using course materials and other resources, research and identify potential software applications with consideration for the following:

1) Should Manychip use an ERP package or specific manufacturing production planning utilities?
2) What are the advantages and disadvantages of each course of action?
3) Identify the candidate pool of software you considered for selection, select a single product, and justify your reasoning.

This is an area of operations management, let us first understand the basics of operations management.

MEANING OF OPERATIONS MANAGEMENT
Operations management is an area of business that is concerned with the production of goods and services, and involves the responsibility of ensuring that business operations are efficient and effective. It also is the management of resources and the distribution of goods and services to customers.
Thus, Operations management is concerned with the efficient and effective transformation of inputs into "desired outputs".

1) Should Manychip use an ERP package or specific manufacturing production planning utilities?

Manychip should use these tools because the operations environment of the new millennium have to contend with:-

1. Turbulent markets that change rapidly and unpredictably
2. Highly fragmented 'niche' markets instead of mass markets
3. Ever greater rates of technological innovation in products and processes
4. Shorter product life-cycles
5. Growing demand for tailored products - 'mass customization'
6. The delivery of complete 'solutions' to customers, comprising products and services.

And all of the above to be achieved at less cost! Therefore the world of manufacturing is becoming ever more global. In the search for lower costs, greater flexibility and reduction of local risk, operations managers are increasingly looking for efficient software and production planning utility.

USE OF ERP
Enterprise Resource Planning is the ...

Solution Summary

This explains the Pros and Cons of ERP

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