IT enables in the quick access of information and it also accelerates productivity. IT ensures that additional staff may not be necessary when the business grows. For more such innovative content on management studies, join WeSchool PGDM-DLP Program: http://bit.ly/welingkarshybridDlp

1. Welingkar’s Distance Learning Division
I.T. for Management
CHAPTER-14
Role of information technology
in business
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2. Welingkar’s Distance Learning Division
Role of information technology in business
Information technology has become very pervasive & is
therefore touched every aspect of business as well as
our personnel lives.
The inherent characteristics of computer have made a
tremendous impact on every aspect of work which it
has been used.
Much of office work productivity depends on the above
characteristics where human s seen to have short
comings
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3. Welingkar’s Distance Learning Division
Role of information technology in business
How does IT gives productivity advantage?
• Speed of Processing Consider preparing pay slip or
10,000 employee or dividend cheque for 4 lakh
shareholders If done manually imagine amount of time
& number of people required to make it possible ,
Computer can make things faster than ever before.
• On-Line storage Quick access to information is the key to
running business effectively. Thus entire companies
transaction can be accessible in real time
• Dis-Intermediation The possibility of having multi user
systems or by installing a local or wide area network
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4. Welingkar’s Distance Learning Division
Role of information technology in business
Thus to answer one query of an outside party so many
departments get busy. With online ERP systems it is
now possible for sale engineer to view updated data
right on his screen.
The data is kept updated since all departments are
integrated to this ERP
• Replacing Human Labor There is usually cost saving
associated with replacing human labor. Human labor
particularly in developed country is expensive
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5. Welingkar’s Distance Learning Division
Role of information technology in business
Scalability
In many cases existing personnel may not be
actually displaced, However, the need for increasing
the staff to cope with growth in transaction may not
be necessary Computes thus help in making the
organization scalable, This may not cut current
employees but certainly reduce the need to increase
the strength in future
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6. Welingkar’s Distance Learning Division
Role of information technology in business
Email & Communication
The effort, time & cost require in conventional method is
very high as compared to computer based email & other
forms of communication
The biggest impact is speed with which this form of
communication works.
The speed of communication has increased the speed at
which we can do the business
Business at the sped of thought Bill Gates coined this phase
& emphasized on need to construct digital nervous system
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7. Welingkar’s Distance Learning Division
Information for competitive Advantage
Impact of IT can be summarized in the following
manner
• Productivity
• Business Process transform
• Business Network Transform
• Business Scope transform
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8. Welingkar’s Distance Learning Division
Information for competitive Advantage
• Business Process Transform
is the use of IT for significant improving the
business process. Reduction of cycle time for
production from 50 days to 10 days, reducing
time required to process insurance from one
month to one day The reduction in stock from
one month to just in time. all these are enabled
by IT
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9. Welingkar’s Distance Learning Division
Information for competitive Advantage
Business Network Transform
Is the transformation of the Network consisting of
customers, suppliers & other business partner
It is radical change in the way the conducts its business.
The close alliance ,the level of trust
sharing of information& transparency helps in network
as a whole to respond faster & better.
Thus in today’s world competition is not between
singular entities but rather between
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10. Welingkar’s Distance Learning Division
Information for competitive Advantage
• Business Network Transform
On the customer side IT creates a natural lock in for
instance a bank which is offers a terminal to a customer
creates a feeling of direct contact, security &
convenience to customer
The business process transform is the use of IT for
significantly improving the business process
IT can help in dramatically changing the nature of
partnership between the partners in a business network
this is known as
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11. Welingkar’s Distance Learning Division
Information for competitive Advantage
• Business Scope Transform
IT has lead to the growth of several hitherto unheard
businesses and innovative business models
The need for the use huge physical Infrastructure is
become the thing of the past
Websites and Interactive technologies help make e-
Business possible
One can create a globally competitive business with
global reach
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12. Welingkar’s Distance Learning Division
MRP II Process Manufacturing
Applications
Material Requirements Planning (MRP)is a 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 3 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
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13. Welingkar’s Distance Learning Division
MRP II Process Manufacturing
Applications
The scope of MRP in manufacturing
All manufacturing organizations, whatever it is they produce, 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 lose the company
money. A few examples are given below
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14. Welingkar’s Distance Learning Division
MRP II Process Manufacturing
Applications
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. This is a particularly severe problem for
food manufacturers and companies with very short product life cycles.
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 mean
customer deadlines being missed.
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15. Welingkar’s Distance Learning Division
MRP II Process Manufacturing
Applications
MRP is used by many organizations as a tool to deal with these
problems. The questions it provides answers for are: WHAT items
are required, HOW MANY are required and WHEN are they
required by. This applies to items that are bought in and to sub-
assemblies that go into more complex items.
The END ITEM(s) being created (a.k.a. Independent Demand,
Level "O" on BOM)How much is required at a time When the
quantity(s) are required to meet demand Inventory status
records. Records of NET materials AVAILABLE for use already in
stock (on hand) and materials on order from suppliers
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16. Welingkar’s Distance Learning Division
MRP II Process Manufacturing
Applications
Bills of materials. Details of the materials, components
and subassemblies required to make each product.
Planning Data. This includes all the restraints and
directions to produce the end items. This includes such
items as: Routings, Labor and Machine Standards,
Pull/Work Cell and Push commands, Lot sizing
technique(s) (i.e. Fixed Lot Size, Lot-For-Lot, Economic
Order Quantity), Scrap Percentages, and other inputs
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17. Welingkar’s Distance Learning Division
MRP II Process Manufacturing
Applications
Outputs
There are only two (2) 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 the dates that the purchased items should be both received
into the facility AND the date(s) the Purchase orders, or Blanket
Order Release should occur to match the production schedules
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18. Welingkar’s Distance Learning Division
MRP II Process Manufacturing
Applications
Messages and Reports:
Purchase orders. An order to a supplier to provide materials.
Reschedule notices. These RECOMMEND cancel, increase, delay
or speed 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
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19. Welingkar’s Distance Learning Division
MRP II Process Manufacturing Applications
Problems with MRP systems
The major problem with MRP systems is the integrity of the data. If
there are errors in the inventory data, the bill of material (commonly
referred to as 'BOM') data or the master production schedule then the
output will also be incorrect. Most vendors of this type of system
recommend at least 98% 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 ft.
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20. Welingkar’s Distance Learning Division
MRP II Process Manufacturing
Applications
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' stock take done just prior to the
MRP calculations can be a practical solution for a small inventory.
(especially if it is an "open store".)
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21. Welingkar’s Distance Learning Division
MRP II Process Manufacturing
Applications
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
suppler capacity constraints. However this is largely dealt with by
MRP II.
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
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