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Chapter 4
In Chapter 3, we looked at Fitter’s sales order process, and we assumed that Fitter had enough
snack bars in its warehouse to fill a typical order. Like most unintegrated manufacturing operations,
however, Fitter often has problems scheduling production. Consequently, sometimes its warehouse
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is not adequately stocked, and customer orders cannot be filled in a timely fashion—leading to
customer dissatisfaction and lost sales. In this chapter, you will explore Fitter’s supply chain

management problems and learn how ERP can help solve them.

PRODUCTION OVERVIEW
To efficiently meet customer demand, Fitter must develop an estimate of customer
demand, and then develop a production schedule to meet that forecasted demand.
Developing a production plan is a complicated task, but the end result answers two simple
questions:

• How many of each type of snack bar should we produce, and when?
• What quantities of raw materials should we order so we can meet that level of
production, and when should they be ordered?
Developing a good production plan is just the first step: Fitter must also be able to
execute the plan and make adjustments when customer demand does not meet the
forecast. An ERP system is a good tool for developing and executing production plans
because it integrates the functions of production planning, purchasing, materials
management/warehousing, quality management, sales, and accounting. To support even
better supply chain management, companies can connect ERP systems to supplier and
customer information systems as well.
In this chapter, we will use spreadsheet examples to illustrate the logic that Fitter
should be using to plan and schedule production of its NRG bars. First, we will look at
Fitter’s current production process, as well as some of the associated problems that are
due to Fitter’s unintegrated systems. We will use spreadsheets to further explore the
planning and scheduling logic required at each stage of the production planning process,
and then we will examine the SAP ERP screens that implement this logic in an ERP
environment. Throughout the chapter, you will develop a deeper understanding of why
using an integrated information system is superior to using unintegrated systems.
The goal of production planning is to schedule production economically so a company
can ship goods to its customers by the promised delivery dates in the most cost-efficient
manner. There are three general approaches to production:
• Make-to-stock—Items are made for inventory (the “stock”) in anticipation of
sales orders; most consumer products (for example, cameras, canned corn,
and books) are made this way.
• Make-to-order—Items are produced to fill specific customer orders;
companies usually take this approach when producing items that are too
expensive to keep in stock or items that are made or configured to customer

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