4.2. Operations planning

Question 1

Define enterprise resource planning (ERP)

Answer 1

a software system that a system that helps businesses integrate and manage their often complex financial, supply chain, manufacturing, operations, reporting, and human resource systems.

Question 2

Advantages of ERP (6)

Answer 2

• Supply only according to demand - lean production that avoids waste and helps move the business towards achieving sustainability in operations
• Just-in-time ordering of stocks
• Reduces costs at all stages of the supply chain - materials and products are electronically tracked at all stages
• Improved delivery times and better customer service
• Departments linked more closely together by the single database - this results in better coordination between them and less waste
• Management of information increased - data from all stages of the production process and all of the supporting departments will be available to senior management via the computer system. This may help future decision making

Question 3

Disadvantages of ERP (7)

Answer 3

• The cost of ERP Software, planning, customization, configuration, testing, implementation, etc. is too high.
• ERP deployments are highly time-consuming – projects may take 1-3 years (or more) to get completed and fully functional.
• Too little customization may not integrate the ERP system with the business process & too much customization may slow down the project and make it difficult to upgrade.
• The cost savings/payback may not be realized immediately after the ERP implementation & it is quite difficult to measure the same.
• The participation of users is very important for successful implementation of ERP projects – hence, exhaustive user training and simple user interface might be critical. But ERP systems are generally difficult to learn (and use).
• There maybe additional indirect costs due to ERP implementation – like new IT infrastructure, upgrading the WAN links, etc.
• Migration of existing data to the new ERP systems is difficult (or impossible) to achieve. Integrating ERP systems with other stand alone software systems is equally difficult (if possible). These activities may consume a lot of time, money & resources, if attempted.
• ERP implementations are difficult to achieve in decentralized organizations with disparate business processes and systems.
• Once an ERP systems is implemented it becomes a single vendor lock-in for further upgrades, customizations etc. Companies are at the discretion of a single vendor and may not be able to negotiate effectively for their services.
• Evaluation prior to implementation of ERP system is critical. If this step is not done properly and experienced technical/business resources are not available while evaluating, ERP implementations can (and have) become a failure.

Question 4

Factors affecting the choice of method of production (4)

Answer 4

• Amount of capital available: a purpose built flow production line is difficult and expensive to construct. Job production requires skilled expertise meaning high wages must be offered. Small firms, thus, are unlikely to afford this type of investment
• Availability of other resources: flow production often requires a supply of relatively large, flat land area whereas job production requires skilled crafts people. If any of these resources are unavailable or limited, production methods will not be able to carried out smoothly or efficiently
• Size of the market: if market is small, such as for designer clothes => job production. Flow production is most efficiently adopted when the market for similar/identical products is very large and consistent throughout the year. However, even in market for mass produced items, there may be niche markets that will allow smaller manufacturers to survive by making identical products before changing the design or customise it according to consumer’s demand/taste
• Market demand exists for products adapted to specific customer requirements: if firms want the cost advantages of high volumes combined with the ability to make slightly different products => mass customisation