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Flashcards in 7: The Role of Information in Operations Management Deck (17)
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Benefits of information sharing

Supply chain integration.
Business globalisation.
Improved customer satisfaction.
Reduces inventory and other costs.
Increase flexibility.
Reduce lead times.
Improve profitability.
Enhance innovation.
Earlier detection of mistakes.


Downside of information sharing

Automating bad processes simply helps to make mistakes faster.
Wrong tech. strategy adds neither real value nor improves customer satisfaction.
Trust, security, too much information - if a supplier is a competitor/supplies a competitor you don't want to give too much away.


Electronic Data Interchange (EDI)

The electronic movement of specially formatted standard business documents, e.g purchase orders, invoices etc.


Limitations of traditional EDI

Significant initial investment.
Necessitates business process re-engineering (BPR).
High operating costs.
Complex system to use.

The internet provides a much better infrastructure for EDI.


Subcontracting: PROS

Cost reduction.
Easier to manage.
Increased focus.
Increased access.


Subcontracting: CONS

Loss of control.
Compromise quality.
Difficult to coordinate.


Keep-in-house: PROS

Increased control.
Direct customer contact.
Increased opportunity.


Keep-in-house: CONS

Increased cost.
Decreased focus.
Difficult to manage.


Materials Requirement Planning (MRP)

MRP is a solution to not knowing the exact volume and timing of materials to order.
Computerised inventory control and production planning system.
Generates work and purchase orders for components when they are needed - no earlier.
SO: MRP determines future demand for independent items and then calculates requirements for dependent items.


Three types of forecasting

Economic forecasts,
Technological forecasts,
Demand forecasts.


Risks in forecasting

Optimistic forecasts,
Pessimistic forecasts,
Uncertainty - optimistic vs. pessimistic.


Advantages of MRP

Reduced stock levels.
Higher stock turnover.
Increased customer service - fewer delays from shortage of materials.
More reliable and faster quoted delivery times.
Improved utilisation of facilities.
Less time spent dealing with emergency orders.


Problems with MRP

Planning and implementing an MRP system can take years.
MRP is first, capacity is an afterthought.
MRP assumes fixed lead times.
Excessive reporting requirements and problems ensuring data integrity.


Manufacturing Resource Planning (MRPII)

Extension of MRP.
Plans all resources needed for running a business.
Allows forward modelling and 'what if...?' scenario planing.
SO: MRPII ties MRP activities in with other relevant functions.


Enterprise Resource Planning (ERP)

An integrated system consisting of integrated applications with a common database which coordinate business activities and support the flow of information across the enterprise.


Why use ERP?

Provision of a single source of data.
Potential cost reduction (old computer systems can be v. expensive).
Potential gain in business integration when reducing indirect costs


Challenges with ERP

Keeping the implementations on-time and on-budget.
Realisation of benefits takes time and usually requires implementation of advanced modules - some functions may experience a decline in quality for a period.
Massive amounts of testing needed to examine every function, different data combinations and appropriate data load.
Very expensive.