(d) Committee organization: In today’s complex business world, each activity taken out by any department affects the work of other departments. A slight change in production policy will affect the sales department. Similarly, change in the dales policy or a new sales policy, cannot be followed by the sales managers, without consulting the finance department or the production department.

It should therefore be well understood that important policy decisions, which affect other departments should not be taken by the in-charge of the department alone, but they should be referred to a committee consisting of the managers of the affecting departments. For example, a blinds company, who is selling vertical blinds and roman shades products online, if production department stop a particular size production than they should inform the marketing departments.  It ensures co-operation and better co-ordination. Thus committee organization is extensively used to solve the multifaceted problems of large and complex business units. Committee is a group of individuals especially designated to take the decision in matters referred to it through free interchange of ideas among its members.

Management
Management can be seen as a function, a process, a profession or a class of people. And along with material, capital and labor, management is considered as a resource. It refers to the kind of tasks and activities that are performed by managers. The specific natures of activities are determined by such managerial functions as planning, organizing, directing and controlling. In fact, management is a process of achieving an organization’s goals and objectives by making the fullest use of available resources like men, materials, machines, money, methods etc. for example, An Instant life insurance rates company, who is selling life insurance quotes online, the role of manager is more important than anyone else in the business.

Although the type of organization would largely depend on the size and nature of the enterprise, yet there are 4 common forms of organizational structure, namely

(a)              line organization

(b)              functional organization

(c)              line and staff organization

(d)              committee organization

(a)             Functional organization : As the name suggests, under this type of organizational structure, all activities in the organization are grouped together according to basic functions like production, marketing, finance, human resource etc. Each function is put under the charge of a specialist who is fully responsible for carrying out the function for the entire enterprise. The authority flows functionally to the divisional heads. The divisional heads report to one specialist with reference to one functional and to another, for another function.

(b)             Line and staff Organization : This type of organization has been evolved to achieve the advantages of the two forms of the organizational structures mentioned above. While the line organization insists too much on the unity of command, the functional organizational emphasizes too much on the decentralization of control. In order to strike a balance, line and staff organization structure has been evolved. In this form of organization, the structure is basically that of the line organization but functional experts are provided to advise line authorities in he performance of their duties.

Organizations are formal social units devoted to the attainment of specific goals. Organizations use certain resources to produce outputs and thus meet their goals. For example, a business firm that produces natural wood blinds, vertical blinds, roller shades etc. consumes certain resources (money, materials, labor, machinery and information) and aims to meet certain financial objectives. In hospitality business like motels in California suppose to give their best service and hospitality to their customer. To attain their target they need to organize their resources and infrastructure.

Although the type of organization would largely depend on the size and nature of the enterprise, yet there are 4 common forms of organizational structure, namely  

(a)              line organization

(b)              functional organization

(c)              line and staff organization

(d)              committee organization 

Line organization : This is one of the oldest and simplest form of organizational structures and is also known as scalar organization, military organization, vertical organization or departmental organization. Under this organization structure, the line of authority flows vertically from the top most executive to the lowest subordinate. The authority concentrates in the hands of the topmost executive to the lowest subordinates and so on. Thus the authority reduces at each successive level down the organization. The line organization is thus based on the superior-subordinate relationship. For example in a term life insurance rates business or term life insurance agent, they do have agents and associate relationship. This relationship is very much important. Associates are working under agents. The line organization does exist.

We will discuss on functional organization, line and staff organization and committee organization in our next post.

Today we continue our talk on Material Requirements Planning. Still today we have discussed already Material Requirements Planning in briefly and also discussed the Outputs of Material Requirements Planning. We are discussing on Problems with Material Requirements Planning system.

Production may be in progress for some part, whose design gets changed, with customer orders in the system for both the old design, and the new one, concurrently. The overall ERP system needs to have a system of coding parts such that the MRP will correctly calculate needs and tracking for both versions. Parts must be booked into and out of stores more regularly than the MRP calculations take place.  Generally, MRP II refers to a system with integrated financials. An MRP II system can include finite / infinite capacity planning. But, to be considered a true MRP II system must also include financials.

In the MRP II (or MRP2) concept, fluctuations in forecast data are taken into account by including simulation of the master production schedule, thus creating a long-term control. A more general feature of MRP2 is its extension to purchasing, to marketing and to finance (integration of all the function of the company), ERP has been the next step.

This means that other systems in the enterprise need to work properly both before implementing an MRP system, and into the future. For example systems like variety reduction and engineering which makes sure that product comes out right first time (without defects) must be in place. A blinds manufacturing company need to manufacture vertical blinds and roman shades in time without any defects other with it be wastage of money. 

Production may be in progress for some part, whose design gets changed, with customer orders in the system for both the old design, and the new one, concurrently. The overall ERP system needs to have a system of coding parts such that the MRP will correctly calculate needs and tracking for both versions. Parts must be booked into and out of stores more regularly than the MRP calculations take place.  Note, these other systems can well be manual systems, but must interface to the MRP. For example, a ‘walk around’ stocktake done just prior to the MRP calculations can be a practical solution for a small inventory (especially if it is an “open store”). The other major drawback of MRP is that takes no account of capacity in its calculations. This means it will give results that are impossible to implement due to manpower or machine or supplier capacity constraints. However this is largely dealt with by MRP II.

The major problem with MRP systems is the integrity of the data. If there are any errors in the inventory data, the bill of materials (commonly referred to as ‘BOM’) data, or the master production schedule, then the outputted data will also be incorrect. Most vendors of this type of system recommend at least 99% data integrity for the system to give useful results.

Another major problem with MRP systems is the requirement that the user specify how long it will take a factory to make a product from its component parts (assuming they are all available). Additionally, the system design also assumes that this “lead time” in manufacturing will be the same each time the item is made, without regard to quantity being made, or other items being made simultaneously in the factory.

A manufacturer may have factories in different cities or even countries.

It is no good for an MRP system to say that we do not need to order some material because we have plenty thousands of miles away. The overall ERP system needs to be able to organize inventory and needs by individual factory, and intercommunicate needs in order to enable each factory to redistribute components in order to serve the overall enterprise.

There are two outputs and a variety of messages/reports:

• Output 1 is the “Recommended Production Schedule” which lays out a detailed schedule of the required minimum start and completion dates, with quantities, for each step of the Routing and Bill Of Material required to satisfy the demand from the MPS.
• Output 2 is the “Recommended Purchasing Schedule”. This lays out both the dates that the purchased items should be received into the facility AND the dates that the Purchase orders, or Blanket Order Release should occur to match the production schedules.

Messages and Reports:

• Purchase orders. An order to a supplier to provide materials. For any online business like blinds, roller shades, woven wood blinds Purchase order is must to execute purchase.
• Reschedule notices. These recommend canceling, increasing, delaying or speeding up existing orders.

Note that the outputs are recommended. Due to a variety of changing conditions in companies, since the last MRP / ERP system Re-Generation, the recommended outputs need to be reviewed by trained people to group orders for benefits in set-up or freight savings. These actions are beyond the linear calculations of the MRP computer software.

Material Requirements Planning (MRP) which is also important factor of the ERP-Enterprise Resource Planning. Material Requirements Planning (MRP) is software based production planning and inventory control system used to manage manufacturing processes. Although it is not common nowadays, it is possible to conduct MRP by hand as well.

The data that must be considered include: 

1. The end item (or items) being created. This is sometimes called Independent Demand or Level “0 on BOM (Bill of materials).
2. How much is required at a time.
3. When the quantities are required to meet demand.
4. Shelf life of stored materials.
5. Inventory status records. Records of net materials available for use already in stock (on hand) and materials on order from suppliers.
6. Bills of materials. Details of the materials, components and subassemblies required to make each product.
7. Planning Data. This includes all the restraints and directions to produce the end items. This includes such items as: Routings, Labor and Machine Standards, Quality and Testing Standards, Pull/Work Cell and Push commands, Lot sizing techniques (i.e. Fixed Lot Size, Lot-For-Lot, and Economic Order Quantity), Scrap Percentages, and other inputs.

Companies need to control the types and quantities of materials they purchase, plan which products are to be produced and in what quantities and ensure that they are able to meet current and future customer demand, all at the lowest possible cost. Making a bad decision in any of these areas will make the company lose money.

A few examples are given below:

A blinds company who manufacture roller shades and woven wood shades. If a company purchases insufficient quantities of an item used in manufacturing, or the wrong item, they may be unable to meet contracts to supply products by the agreed date. If a company purchases excessive quantities of an item, money is being wasted – the excess quantity ties up cash while it remains as stock and may never even be used at all. Blinds company either produce more products of roller shades and woven wood shades or less products of roller shades and woven wood shades products.  However, some purchased items will have a minimum quantity that must be met, therefore, purchasing excess is necessary.

Beginning production of an order at the wrong time can cause customer deadlines to be missed.

MRP is a tool to deal with these problems. It provides answers for several questions:

1. What items are required?
2. How many are required?
3. When are they required?

MRP can be applied both to items that are purchased from outside suppliers and to sub-assemblies, produced internally, that are components of more complex items.

Today we are going to discuss on Material Requirements Planning (MRP) which is also important factor of the ERP-Enterprise Resource Planning. Material Requirements Planning (MRP) is software based production planning and inventory control system used to manage manufacturing processes. Although it is not common nowadays, it is possible to conduct MRP by hand as well.

An MRP system is intended to simultaneously meet three objectives:

Ensure materials and products are available for production and delivery to customers. Maintain the lowest possible level of inventory.

Plan manufacturing activities, delivery schedules and purchasing activities.

Manufacturing organizations, whatever their products, face the same daily practical problem – that customers want products to be available in a shorter time than it takes to make them. This means that some level of planning is required. Companies need to control the types and quantities of materials they purchase, plan which products are to be produced and in what quantities and ensure that they are able to meet current and future customer demand, all at the lowest possible cost. Making a bad decision in any of these areas will make the company lose money.