Title: Production and Operation Management.

Course Code: AIS:5105

Chapter: Three (Enterprise Resource Planning)

Md. Nazmul Huda

Lecturer, Department of AIS

Email:nazmuliu07@gmail.com

Mobile:01734209836
Enterprise Resources Planning
 Enterprise Resource Planning
• ERP stands for “Enterprise Resource Management”, the
consolidated process of gathering and organizing business
data through an integrated software suite.
• ERP software contains applications which automates
business functions like production, sales quoting, accounting,
and more.
 Characteristics OF ERP
ERP systems typically include the following characteristics:
1. An integrated system
2. Operates in (or near) real time
3. A common database that supports all the applications
4. A consistent look and feel across module
5. Installation of the system with elaborate application/data
integration by the Information Technology (IT) department,
provided the implementation is not done in small steps.
6. Deployment options include: on-premises, cloud hosted, or SaaS
 Advantages of ERP
The most fundamental advantage of ERP is that the integration of a myriad of business processes saves
time and expense. Management can make decisions faster and with fewer errors. Data becomes visible
across the organization. Tasks that benefit from this integration include:
1. Sales forecasting, which allows inventory optimization.
2. Chronological history of every transaction through relevant data compilation in every area of
operation.
3. Order tracking, from acceptance through fulfillment
4. Revenue tracking, from invoice through cash receipt
5. Matching purchase orders (what was ordered), inventory receipts (what arrived),
and costing (what the vendor invoiced)

ERP systems centralize business data, which:

1. Eliminates the need to synchronize changes between multiple systems—consolidation of finance,
marketing, sales, human resource, and manufacturing applications.
2. Brings legitimacy and transparency to each bit of statistical data
3. Facilitates standard product naming/coding
4. Provides a comprehensive enterprise view (no "islands of information"), making real–time
information available to management anywhere, anytime to make proper decisions
5. Protects sensitive data by consolidating multiple security systems into a single structure.
 Disadvantages of ERP
• 1. The cost of ERP Software, planning, customization, configuration, testing, implementation, etc. is too high.
• 2. highly time-consuming – projects may take 1-3 years (or more) to get completed and fully functional.
• 3. 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.
• 4. The cost savings/payback may not be realized immediately after the ERP implementation & it is quite
difficult to measure the same.
• 5. 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).
• 6. There maybe additional indirect costs due to ERP implementation – like new IT infrastructure, upgrading
the WAN links, etc.
• 7. 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.
• 8. ERP implementations are difficult to achieve in decentralized organizations with disparate business
processes and systems.
• 9. 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.
• 10. 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
 Disadvantages of ERP are:
1. The installation of the ERP system is costly. ERP consultants are very expensive take approximately 60% of
the budget.
2. The success depends on the skills and experience of the workforce, including education and how to make
the system work properly.
3. Resistance in sharing internal information between departments can reduce the efficiency of the software.
4. The systems can be difficult to use.
5. Change of staff, companies can employ administrators who are not trained to manage the ERP system of
the employing company, proposing changes in business practices that are not synchronized with the
system.
6. Having an ERP system has many advantages, but does not guarantee the total success of the company.
Organizational culture, know how to involve staff and anticipate changes that will suffer the organization
using this system of administration, are important elements for the completion of the implementation.
7. The effectiveness of the ERP system may decrease if there is resistance to share information between
business units or departments. Due to strong changes that implementation of the ERP system brings in the
culture of work, there may be poorly trained or disinterested in making use of the same staff...
8. The benefits of having an ERP system are not presented immediately with the implementation of the
software, they will be evident long after the system is running.
9. The culmination of the implementation depends on the ability and skill of the workforce, also involves
education and training, to make the system is correctly applied.
 Plant layout
Plant layout refers to the physical arrangement of production facilities.
It is the configuration of departments, work centers and equipment in
the conversion process. It is a floor plan of the physical facilities, which
are used in production.

• According to Moore “Plant layout is a plan of an optimum

arrangement of facilities including personnel, operating equipment,
storage space, material handling equipment and all other
supporting services along with the design of best structure to
contain all these facilities”
 Features of a good Plant layout
1. Efficient space utilization
2. Flexibility
3. Accessibility
4. Economy in handling
5. Minimum movement
6. Ensuring Co-ordination
7. Visibility
8. Reduced discomfort
9. Adherence to statutory regulations
10. Preservation of materials and equipment
 Factors affecting plant lay out
• The eight factors affecting plant layout are as follows:
1. Man Factor
2. Material Factor
3. Machinery Factor
4. Movement Factor
5. Waiting Factor
6. Service Factor
7. Building Factor
8. Flexibility Factor.
 Man Factor
Main considerations are as follows:

(i) Safety and working conditions.

(ii) Man power requirements-skill level of workers, their number

required and their training program.

(iii) Man power utilization in the plant.

(iv) Human relations.

 Material Factor
It includes the various input materials like raw materials, semi-finished parts
and materials in process scrap, finished products, packing materials, tools and
other services
The main considerations are:
(i) Design and specifications of the product to be manufactured.
(ii) Quantity and variety of products and materials.
(iii) Physical and chemical characteristics of various input materials.
(iv) Component parts or material and their sequence of operations i.e.
how they go together to generate the final product.
 Machinery Factor
The operating machinery is also one of the most important factors therefore
all the information’s regarding equipment and the tools are necessary for
inspection, processing and maintenance etc.

(i) The processes and methods should be standardized first.

(ii) Proper machinery and other supporting, equipment should be selected on
the basis of volume of production.
(iii) Machines should be utilized to their optimum levels of speed, feed and
depth of cut.
(iv) Machinery requirement is mostly based on the process/method.
(v) Maintenance of machines and replacement of parts is also important.
 Movement Factor
It mainly deals with the movement of men and materials. A good
layout should ensure short moves and should always tend towards
completion of product.
It also includes interdepartmental movements and material handling
equipment. This includes the flow pattern reduction of unnecessary
handling, space for movement and analysis of handling methods.
 Waiting Factor
Whenever material or men is stopped, waiting occurs which costs
money. Waiting includes handling cost in waiting area, money tied up
with idle material etc.
Waiting may occur at the receiving point, materials in process, between
the operations etc.
The important considerations in this case are:
(a) Location of storage or delay points.
(b) Method of storing
(c) Space for waiting.
(d) Safeguard equipment for storing and avoiding delay.
 Re-layout
Plants cannot be laid out once for all. The modernization of an obsolete
plant calls for re-layout as carefully planned and executed as the original
layout which is referred as re-layout.
 Reasons for re-layout:
Re-layout becomes necessary for one or more of the following reasons:
1. Product design change
2. New product added in the product line
3. Inaccuracies in original planning,
4. Mushroom growth into improper layouts,
5. Lack of efforts towards work simplification ,
6. The development of new products or equipment,
7. Improvements in the techniques of plant layout engineering.
8. Cost of product reductions
 Plant Maintenance
Plant maintenance is defined as a set of activities that are
necessary to keep machinery, parts & types of equipment in
good operating conditions to avoid production stoppage and
loss
Objectives of maintenance management.
• Minimizing the loss of production time due to equipment failure
• To reduce loss due to the production stoppage.
• To keep all productive assets in good working conditions
• Improve the quality of the product and to improve productivity
• Helps to reduce the total maintenance cost of repair, preventive
maintenance & inventory carrying a cost due to a spare part
inventory.
 Type of Maintenance
1.Breakdown Maintenance
This is also called corrective maintenance it occurs when work gets stopped because
of a machine breakdown. In this sense, maintenance becomes repair work. Repairs
are made after the equipment is out of order
For example -A electric motor will not start if the conveyor belt is ripped or shaft
has broken. In this case, the maintenance department checks into difficulty and
makes the necessary repairs
2.Preventive Maintenance
In contrast to corrective maintenance, preventive maintenance is undertaken before
the need arises and aims to minimize the possibility of un-anticipated production
interruptions or a major breakdown, preventive maintenance consists of,
a) Proper design and installation of equipment.
b) periodic inspection of plant & equipment.
c) Repetitive servicing of types of machinery.
d)Adequate lubrication, cleaning, and painting of the building.
3. Predictive Maintenance
One of the new type of maintenance that may be anticipated to gain increasing attention. In
this sensitive instrument are used to predicting trouble conditions can be measured on a
continuous basis and this enables the maintenance of people to plan for an overhaul.
4. Routine Maintenance
This includes activities such as periodic inspection cleaning, lubrication& repair of
production equipment. This can be classified into two types,
i) Running maintenance
In this, the maintenance work is carried out while the equipment is in the operating
conditions.
ii) Shutdown maintenance
Here the maintenance work is carried out when the machine or equipment is out of service.
5.Planned Maintenace
The breakdown of a machine does not occur in a planned manner but maintenance work can
be planned well in advance. Planned maintenance is also known as scheduled maintenance
it involves inspection of all plants & equipment, machinery, building according to a
predetermined schedule.
 Problem-1
• From the following information you are required to calculate the
replacement time of the machine whose purchase price is TK. 11000.

Year 1 2 3 4 5 6 7 8
Maintenan 1000 1200 1500 1900 2400 2900 3600 4300
ce cost
Resale 5500 4200 2200 500 300 300 250 250
price
 Solution
Cumulative
Maintena
Year Maintenance Resale Price Depreciation Total Cost Average cost
nce cost
cost
Col-5=(PP-Col- Col-6 Col-7
Col-1 Col-2 Col-3 Col-4
4) (Col.3+Col.5) (Col.6/Col.1)
1 1000 1000 5500 5500 6500 6500
2 1200 2200 4200 6800 9000 4500
3 1500 3700 2200 8800 12500 4167
4 1900 5600 500 10500 16100 4025
5 2400 8000 300 10700 18700 3740
6 2900 10900 300 10700 21600 3600
7 3600 14500 250 10750 25250 3607
8 4300 18800 250 10750 29550 3694
 Problem-2
The cost of a new machine is Tk. 50000 which
estimated useful life is 10 years. The maintenance cost
of the machine during the year is given by
mn=Tk.5000(n-1), where n= 1,2,3,4,5……... How many
years the machine should be replaced?
 Cumulatative
Maintenance
Year Maintenance Depreciation Total Cost Average cost
cost
cost
Col-6 Col-7
Col-1 Col-2 Col-3 Col-5
(Col.3+Col.5) (Col.6/Col.1)
1 0 0 50000 50000 50000
2 5000 5000 50000 55000 27500
3 10000 15000 50000 65000 21667
4 15000 30000 50000 80000 20000
5 20000 50000 50000 100000 20000
6 25000 75000 50000 125000 20833
7 30000 105000 50000 155000 22143
8 35000 140000 50000 190000 23750
9 40000 180000 50000 230000 25556
10 45000 225000 50000 275000 27500