A Framework to Incorporate Industry 4.0 into SME to Enhance Resource Planning

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School of Innovation, Design and Engineering

A Framework to Incorporate

Industry 4.0 into SME to

Enhance Resource Planning

Master thesis work

30 credits, Advanced level

Product and process development Production and Logistics

Sathvik Ganta

2020

Report code: PPU503

Commissioned by: Husmuttern AB, Torshälla Tutor (Husmuttern): Johan Tjernell

Tutor (Mälardalen University): Antti Salonen Examiner: Antti Salonen

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ABSTRACT

Small and Medium-sized Enterprises (SMEs) have grown steadily in recent years. SMEs generate 59.7 % of value added and 65.5 % of employment in the ‘non-financial business economy’ in Sweden. It's important for the success of the SMEs to be ready to provide high product availability to customers at minimal operation costs. The challenges faced by SMEs are tougher in the global competition. There is a rapid growth in the industrial revolution to deal with the challenges as well as competition. This work mainly focuses on implementing resource planning (RP) and adapting to the latest technologies of Industry 4.0 into SMEs to face the challenges. But incorporating Industry 4.0 in a major struggle in the SMEs.

The thesis provides a view of Resource Planning implementation. The authors describe the resource planning implementation techniques and define the necessary requirements for its successful implementation. Resource Planning (RP) adoption factors have been studied quite

extensively over the years. However, this master thesis tries to investigate upon the less explored area of resource planning. Relatively a smaller amount of research has been conducted,

when it comes to implementation of Industry 4.0 technologies especially in Small and Medium sized Enterprises (SMEs).

Industry 4.0 provides new paradigms for the industrial management of SMEs. Supported by a growing number of new technologies, this concept appears more ﬂexible and less expensive than traditional enterprise information systems. This paper presents a literature review of existing applied research covering different Industry 4.0 issues about SMEs.

Furthermore, the analysis is done to understand the correlation among the identified factors of Industry 4.0 technologies. The research findings indicate that the use of IoT and Cloud computing are major advantages for resource planning in an SME. The results from the analysis are presented in a framework designed for the future adaptation of these technologies. Despite the research limitations the findings show a high advantage. Finally, the author suggests future scope of research.

Keywords: Small and medium Enterprises (SME), Resource planning, Material requirements

planning (MRP), Manufacturing resource planning (MRP II), Enterprise resource planning (ERP), Industry 4.0, Internet of Things (IoT), Cloud computing.

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ACKNOWLEDGEMENTS

I want to express my gratitude to my supervisor Johan Tjernell from Husmuttern AB for the opportunity to conduct this research as well as the company representatives for the discussions to support my work.

I am grateful to my supervisor from Mälardalens HögskolaAntti Salonen for his advice

throughout this research.

I would like to take this opportunity to show my gratitude to my beloved parents, my sister, family and my friends for their support shown during the whole period which was very reassuring.

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LIST OF FIGUERS

Figure 1. Research strategy (Produced by the author) ... 5

Figure 2: MRP System (Amad, 2011) ... 10

Figure 3: Representation of Hustmuttern module (from Husmuttern AB) ... 17

Figure 4: Bill of Material for resource planning ... 20

Figure 5: Factory resource planning ... 21

Figure 6: Module resource planning ... 21

Figure 7: Framework for SME (developed by author) ... 25

Figure 8: Industry 4.0 technologies usage ... 27

List of Tables

Table 1. SME factors (European Commission, 2016……….………...…..1

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vi ABBREVIATIONS

EU European Union

SME Small and Medium Enterprise

RP Resource planning

MRP Material requirement planning

MRP II Manufacturing resource planning

ERP Enterprise resource planning

I 4.0 Fourth Industrial revolution

IoT Internet of Things

CPS Cyber physical systems

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1 1. INTRODUCTION

The first chapter presents the background of the research area. It includes a short introduction of SME’s, resource planning, industrial revolutions and the most important characteristics of Industry 4.0. The author also presents his research questions. Finally, the scope of the thesis is presented.

1.1. Background

Small and medium-sized enterprises (SMEs) are businesses whose personnel numbers fall

below certain limits as mentioned in Table.1. As mentioned in the annual report of European Commission(2016), European SMEs are considered the "backbone" of the economy at EU level, given that: they represent 99 out of each 100 companies in Europe; hold two-thirds of the number of amount of workers and thus the company's net contribution to the economy (net benefit) is 58 cents per euro. In the European Union level, 9 out of 10 SMEs are micro-enterprises. The way forward for SMEs, which are major contributors to most industries and countries (Li et al. 2016), depends mainly on their capacity to retort to their clients’ expectations while at the same time maintaining a competitive advantage on their market. To understand this, SMEs must work to constantly improve their engineering processes, i.e. planning, using resources, controlling production, and measuring and evaluating operational performance (Masood, et al., 2013).

Table 1: SME factors (European Commission, 2016)

Company category Staff headcount Turnover

Medium-sized < 250 ≤ € 50m

Small < 50 ≤ € 10m

Micro < 10 ≤ € 2m

In a very modern-day business, it’s important for the success of the assorted companies to be ready to provide high product availability to customers at minimal operation costs. Many of the businesses have therefore automated the production and inventory management processes to chop back operational costs and meet the customer demands. For an accurate operation of the mentioned inventory management process, companies make use of computerized systems for critical higher operations. This computerized information must be provided precisely if not there is a risk of incurring an inaccuracy occurrence is extremely high. Inaccuracies can have a fatal effect on the movement of the products within a corporation which ends with the shortage of the merchandise to the consumers at the minimal operation cost (Matt, et al., 2016).

Even though RP systems support the organization by sharing data, diminishing costs and improving the management of the processes, many projects fail (Liu & Seddon, 2009). Research has revealed that as many as three-quarters of all ERP implementations that are conducted are unsuccessful (Hong & Kim, 2002). Because of these high rates of failure and also the difficulties the implementation brings to a corporation, more attention to this matter has been given by researchers to raise understanding of this phenomenon (Liu & Seddon, 2009). Industry 4.0 represents a special challenge for businesses generally and for SMEs specifically. The readiness of SME adapted Industry 4.0 concepts added to the organizational capability of SMEs to fulfill this challenge exist only partly. The smaller SMEs are the upper the possibility that they are visiting not be able to like this revolution.

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As stated by Sommer (2015), most European SMEs are conscious about the knowledge in adaptation deficits. This opens the requirement for further research and action plans for preparing SMEs in an exceedingly technical and organizational direction. The introduction of Industry 4.0 often demonstrates the difficulties and leads to headlines such as “most SME production companies are currently not yet ready for Industry 4.0”, “SMEs are missing the trends of the future” or “Industry 4.0 has not found SMEs'' (Brettel, et al., 2014). Today, most SMEs don't seem to be prepared to implement Industry 4.0 concepts (Brettel, et al., 2014; Orzes, et al., 2018). Therefore, unique research and investigations are necessary for the implementation of Industry 4.0 technologies and concepts in SMEs. SMEs will only accomplish Industry 4.0 by following SME-customized implementation strategies and methods and thus realizing SME-adapted concepts and technological solutions. Otherwise, actual effort for sensitization and awareness building among SMEs for Industry 4.0 won't show the expected success and results. In step with this acknowledged gap which considers and investigates the real requirements of SMEs introducing Industry 4.0 and reflects on opportunities and difficulties within the digital transformation of manufacturing, logistics and organizational processes in SMEs.

Resource planning(RP) systems is a data system that manages, through integration of all aspects of business including sales, production, purchasing, accounting, planning, distribution, manufacturing and customer service, which allows seamless integration of data flows and business processes across functional areas within an organisation. They support information sharing along company process flow and help it to realise better productivity and results.

1.2. Problem formulation

From the literature survey it can be concluded that there seems to be an unexplained theories, the SME’s struggle with the implementation of Industry 4.0 technologies into resource planning as there is lack of study done in this topic and resulting in no developments of frameworks for the company to follow. The work presented in this thesis by combining the theory and the empirical data will contribute to new knowledge and contribute to recommendations on how the unexplained theories can be worked with.

1.3. Aim and Research questions

From the literature survey it can be concluded that there seems to be an unexplained theory, the SME’s struggle with the implementation of Industry 4.0 technologies into resource planning. Therefore, the aim of this thesis is to develop a framework for incorporating Industry 4.0 in construction not from the point of view of specific technologies but from the point of view of resource planning.

1. How to use RP in SME?

2. Combining the technologies of Industry 4.0 in SME. How would this affect the RP?

1.4. Scope and limitations

Industry approach to research and implement a bespoke resource planning system, author has taken three steps procedure as a glance methodology. The opening of this research thesis covers the conceptual design of resource planning system for the chosen SME whilst the second step covers the event of resource planning database in MS Access software for the proposed resource planning framework. The last word step involves the implementation of the bespoke MRP II system. A conceptual design of a bespoke resource planning system is proposed by the author after investigating the very best management requirements and manufacturing environment of a SME

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company through private communications and visits. It's then compared with the standard resource planning system which helps within the derivation of a tailor made (bespoke) resource planning system for the before mentioned SME company. Metal processing sector for Industry 4.0 using case study research. Up to the current point, there was no maturity or readiness model available and thus the analysis was conducted basically on a qualitative level.

The very first limit is the size of organization. In adopting a Resource Plan to implement in the organization, the size of the organization matters in various important aspects (Laukkanen, et al., 2007). The focused area is small and medium sized enterprises. Ordinarily, an SME contains up to 250 employees. The resources for an SME are limited when compared to large enterprises. This study will mainly focus on the SME’s and their implementing resource planning while linking with Industry 4.0 technologies implementation. The research results may not be properly fit for other information systems and their implementation.

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4 2. RESEARCH METHOD

This chapter describes the research method used in this study. First, the author explains the chosen research design and how data collection has been performed. The author also presents the delimitations of this master thesis as well as a discussion of the validity of the research.

2.1. Purpose of Research

Many research activities help to categories the categories of research (Zikmund, et al., 2013) and in step with as described by Yin (2003), the aim of research study is going to be distinguished in three categories: exploratory, descriptive, or explanatory. Exploratory research is going to be conducted during the initial stage of this research, it can help the researcher to identify, clarify and understand the matter. The use is to collect information as possible regarding a precise problem (Zikmund, et al., 2013). Exploratory research is typically used when an argument isn't recognized, or the available information is not complete. The procedure that is appropriate for operation when implementing exploratory research is interviews. (Yin, 2003) in step with Zikmund, et al., (2013) good researchers strive for descriptive precision. Descriptive research helps to hunt out the answer of who, what, when, where, and also the way and also to determine the difference, in need, features of subgroups and characteristics.

It is necessary to possess a transparent picture of matters on which you wish to assemble information, before the gathering of knowledge (Saunders et al,2009). Explanatory Research is conducted to help identify causal relations, among variables. during this research, relationships between variables to be explained (Zikmund, et al., 2013) in step with Yin (2003) an explanatory research approach could even be used when the study aims to clarify certain procedures from different perspectives or situations with a given set of events. The research purpose and research questions show that this study is principally descriptive. Somewhat, the research objective is partially explanatory since it has been attempting to explore and find out, by responding to the research questions and drawing conclusions. However, the study is primarily descriptive therefore the objective is to elucidate the globe of research and strive to clarify the collected data. On search out the differences and similarities against theories and frame of reference.

The limitations were mentioned in the previous section (1.4) but for collecting data the limitations faced were the access to data or information as there was lack of research in this field of study and the time available to measure the effects of the research topic. As the study was conducted in an SME during its development state, as this might limit to its experiences which has limited the data collection.

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2.2. Research Process

Figure 1. Research strategy (Produced by the author)

When conducting an analysis, a choice has to be made between two research methods: qualitative and quantitative research. As a qualitative research was conducted in the further study as it is interpretative and subjective. It is not about facts and figures, but about the 'why' and 'how' question. Further, it concerns all types of research aimed at collecting and interpreting multilingual material on the basis of statements to a social phenomenon in reality. The strength of qualitative research is its ability to provide complicated textual descriptions of how people are experiencing a given research issue. Qualitative research focuses on the opinions of people or the meaning that these people give to something (Denzin and Lincoln, 2000).

According to Yin (2003) there are five major research strategies within the social science: experiments, surveys, archival analysis, histories, and case studies. Yin (2003) further adds case studies strategy when “how” or “why” questions are being posed, when researcher has little control over events, and when the most target is on current happening within some world perspective. Gummesson (2000) advocates case research as a useful strategy for studying different processes in companies. Therefore, this study is supported by the use of case studies.

2.2.1. Case Study

A case study could also be a comprehensive description and analysis of a situation (Yin, 2003). The aim for case studies is to seek conformity between the results and hence the speculation. Case studies involve in-depth, contextual analyses of comparable situations in other organizations, where the character of the matter and thus the matter definition happen to be the same because the one experienced within this situation. (Sekaran, 2000) This implies that the speculation helps to identify other similar events to the result (Yin, 2003). Yin (2003) mentions that in qualitative research, the empirical data collection is going to be performed in numerous ways. It depends on the character of research questions, to which extent the researcher has control over behavioural

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events and to which degree the most target is on contemporary events. The aim of this study is to research and describe the role of the online within the expansion strategies adopted by SMEs. As research questions encompass (a) how can the expansion strategies adopted by SMEs be described, and (b) how can the role of the online in specific growth strategies adopted by SMEs be described, therefore, considering how and why kinds of research questions, doing case studies preferred. The selection of case study is further motivated by the particular proven fact that researchers have no control over the behaviour of the themes under study and is handling present-day events. The author of this study has no influence over the way within which study’s participants adopted growth strategies and were using the online. The events investigated were recent, and thus the firm context within which participating firms were using the online was of particular interest. Further, the study is aimed toward gaining a comprehensive view of the phenomena that has detailed information of strategies adopted for growth and use of the online within the context, which points out that nearly all appropriate research strategies are selecting case study.

2.2.2. Data Collection Techniques

According to Yin (2003) data collection for case studies relies on six important sources: documentation, archival records, interviews, direct observation, participant- observation, and physical artefacts. All sources have their strengths and weaknesses and plenty of sources complement each other. A significant advantage of case study data collection is the chance to use many sources of evidence where researchers can obtain multiple measures of the same phenomenon. This contributes to the validity of any scientific study. One in all the foremost important sources of case study is that the interview (Yin, 2003). In qualitative research interviews are taken as ‘open-ended’ inquiries to small samples. The foremost strength of the interview is being insightful & targeted and focused directly on case study topic (Yin, 2003).

However, interviews have their own weaknesses i.e., tendency towards bias due to poorly constructed questionnaires, response bias, inaccuracies, and reflexivity, one in all the forms of an interview is a targeted interview within which the respondent is interviewed for a specified period of it slow e.g., one hour. Interviews are open-ended and within the variability of conversation. More likely interviews are comprised of a certain set of questions derived from the case study protocol. (Yin, 2003) during this study, secondary data was collected from documentation. Major strengths of documentation are being stable, unobtrusive, exact, and broad coverage (Yin, 2003). Weaknesses of documentation are retrievability, biased selectivity, reporting bias, and access. Since the aim of this study is to investigate SMEs for adopting the net in growth strategies, documentation has relevance to this case study. The documentation during this study includes examining each firm’s electronic computer for obtaining and assessing secondary information. This includes each firm’s with a history, goods, brochures, and other relevant information. Focused interviews were held with the sample selected for primary data collection. a bunch of questions that have to be answered on get relevant data for the research work.

The open-ended interviews were used for flexibility that paved the way for accommodating additional information. The selection to conduct interviews was motivated due to the reason that the interview provides thorough information about the firm and allows follow in control questions. The interview guide was constructed with a supported frame of reference that included issues as important and also the research questions that needed to be discussed. The interview guide was reviewed by the supervisor before conducting the actual interviews and adjustments were made to support his comments. The time frame for each interview was set

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between 60 and 90 minutes. Interviews were conducted during December 2019 and January 2020. Interviews were recorded in consent with the respondents, which is in accordance with the suggestion made by Yin (2003). A digital audio player was used during the interview to accurately register the conversation. A recording equipment was also used as a make a duplicate. Notes were also taken during the interview where it needed especially for taking diagrams and charts. Interviews were taken in conference rooms of interviewees’ offices and there were no interruptions during the interview.

Prior to the interviews a preliminary research was carried out on the available databases such as Scopus and Science direct to understand the technology shift in the SME’s. the theory gathered was the work of various authors in this fields by making large contribution to the area of research and have even provides frameworks for implementation process through various studies and critiquing the issues that have been faced. The search for the articles was made using keywords such as Small and medium enterprise (SME), Industry 4.0, Manufacturing Resource planning, Enterprise resource planning, Cloud computing adoption and Internet of Things (IoT)were the used with various combinations where SME being the most constant aspect of search.

2.2.3. Data Analysis

The method used to conduct the interviews were semi-structured interviews. The data collected from interviews were documented in audio as well as transcribed. The questions were classified regarding the topics of research and the present strategy and the future strategy.

The next step of analysis was to organise the data collected from each interview. In the conducted interviews a data patterns of various categories had appeared at an initial stage of the analysis process, which lead to organisation of the data. This is a consistent step to analyse process of gradually elaborating small set of generalised cover in the database where generalised in this context means generalising the findings.

The next step to analysing process is to analyse the empirical data with the use of theoretical framework. The analysis performed shares few attributes with the analysis approach of depending on theoretical propositions as suggested by Yin (2009). To give a practical and value adding dimension of the study, the results of the theoretical framework and the empirical data collected will be combined to form a framework suggesting how to implement Industry 4.0 technologies in resource planning systems in a SME background.

2.4. Validity

Validity seeks to assess the correctitude of the assumptions generated from the research findings (Bryman and Bell, 2011). The criteria validity contains both external and internal validity. External correlates to the possibility to simplify the results. Internal relates to the correctitude of the conclusions (Bryman and Bell, 2011) and whether the correct concepts have been examined for the given purpose.

The constraints of the research, in terms of time and resources, permitted for interviews within case company. This is deemed sufficient to argue that the conclusion of the research, the companies’ overall maturity of Industry 4.0, is possible to generalize. The same conclusion, that maturity is minimal within Swedish manufacturing companies, must hence be the same if picking

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other companies with the same selection criteria. However, the research does not claim to conclude on the Industry 4.0 maturity of any specific Industry, but only for the Industry as whole.

The questionnaire is shared prior to the interview with the employees. This is done due to the fact that a number of questions are during the developing process of the RP system. So, this give time to think about the issues involved. All interviews are, with the permission of the interviewee, recorded which means that the interviews are transcribed afterwards based on the recordings. The anonymity of the respondents is taking into account, so that respondents give honest answers to the questions.

Beyond interviewing employees, it is also tried to analyse internal documents relating to the resource plan implementation. The use of existing materials in firms is an indispensable source of knowledge for a researcher. The advantage is that documents are a direct reflection of what has been decided or said at one time and how something actually takes place in a firm (Kothari, 2004).

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9 3. THEORETIC FRAMEWORK

This chapter will present the theoretical framework that is the foundation of the research. This includes evolution of resource planning and technological transitions, which provides an overview of technology shifts in SME’s. The purpose of this chapter is to illustrate the gap in existing literature.

3.1. Role of Resource planning (RP) for Growth in SME

In the recent years there were efforts implemented to develop solutions that can minimise downtime, adding effectiveness in planning and controlling production operations, as stated by Friend (1992) and Huiskonen (2001). Research has shown that successful implementation of resource planning can bring substantial benefits to manufacturers, namely: improving product quality, reducing lead times, reducing overtime, scrap reduction, reducing safety stock, improving productivity, increasing throughput, better cost estimation, minimizing work-in-process (WIP), and better production scheduling.

Resource planning systems have long been considered crucial for effective information management in larger companies (Franciose, et al., 2009) and also the systems are now being implemented also by SMES because of the way to assist them improve and cut costs (Snider et al., 2009; Dixit and Prakash, 2011). SMES are vital in most economies today, but they're rather like larger companies facing challenges like increased competitive pressure and globalization. Therefore, there is a necessity to "sharpen their business edge by having a secure and reliable data system that gives superior business intelligence, collaboration power, and transactional efficiency" (Upadhyay, Jahanyan & Dan, 2011, p. 140).

An RP system, which constitutes the most important investment made in information technology for several companies (Sommer, 2015), could be a commercial information code that comes with and integrates all parts of a business. The system can during this way support and supply information to any or all functions of a company, like human resources, accounting, marketing sales, distribution, supply chain management and manufacturing (Bingi, et al., 2006; Markus et al., 2000). The systems are modular, and customers can tailor their system with add-on modules to suit their specific needs (Rashid, et al., 2002).

Materials Requirements planning (MRP), is a resource planning system that uses the concept of backward scheduling starts with the date for an order and works backward to figure out the beginning of date for every activity to by using the material requirement using BOM and the inventory status as shown in, figure. 3 (Santin, et al., 2015). MRP is additionally a method to figure out what, when, and therefore the way much component and material are required to satisfy a production plan of end products overtime. MRP is that takes no account of capacity in its calculations. This suggests it'll give results that are impossible to implement because of manpower or machine or supplier capacity constraints (Santin, et al., 2015).

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Figure 2: MRP System (Amad, 2011)

From those drawbacks MRP 2 was developed -Manufacturing Resource Planning (MRP II) is an integrated system utilized by businesses. MRP II has evolved from early Materials Requirement Planning (MRP). MRP II is additionally a system that has manufacturing, finance, marketing, engineering, purchasing, distribution – and positively changes plenty of things for the information processing people (Amad, 2011). MRP II systems as an example in minimizing inventory levels and carrying costs, determining the foremost economical order lot sizes, tracking material requirements, allocating production time among various products and creating safety stock, it is incredibly useful for production planners, purchasing managers, inventory managers and production managers(Amad, 2011).

Enterprise Resource Planning (ERP) - As indicated by Romero and Vernadat (2016), ERP

systems are considered the consequence of the evolution of MRP II and sophistication of inventory management systems during the last sixty years. As a results of this evolution, ERPs emerge, which are systems capable of managing in an integrated way the knowledge and knowledge of all the processes of an organisation, from the foremost primary like, as an example, those associated with accounting, purchasing, sales, production to other secondary (although equally important) like those related to human resources management, cost management, quality etc (Romero & Vernadat, 2016). ERP systems are, a communication platform among all areas of the corporate which could be achieved, through their exploitation, greater productivity. But they're also systems ready to connect with each other and transfer information in an automatic way, with the subsequent way saving of costs, time, errors, and with the availability of online information at any time (Mahmood, et al., 2010).

Resource Planning systems have attracted the SME market after it achieved maturity in large enterprises. Resource Planning system’s vendors now consider large enterprise markets as saturated and this fact has compelled them to develop their space in SME’s (Doom, et al., 2010). Another possible factor is that the successful integration of enormous enterprises by the resource planning system has made it because of serving the SMĖ’s within the identical regard. The potential benefits perceived by SME’s are the implementation of the resource planning which has accelerated their popularity within SME’s (Malhotra & Temponi 2010).

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The studies mentioned above have highlighted the trend of resource planning from large enterprises towards SME’s but at the identical time the researchers indicated certain factors that matter within the overall achievement of the system. There are many known cases within which resource planning implementation didn't deliver the promised results and even caused bankruptcy but 70% of the resource planning projects proved to be successful (Doom et al. 2010). There are certain success factors in implementing a resource planning system in SME’s that bring success or failure. Companies that handle these issues effectively have the following probability of a successful resource planning system (Snider, et al., 2009).

Companies attempt to integrate the resource planning system to link processes and traceability solutions. Horizontal/vertical data integration are, as an example, Enterprise Resource Planning (ERP), a system that has efficiency in Industry 4.0. it's a plan of an interconnected and intelligent factory within the assembly system that communicates directly with the overlying IT systems and value-adding process (Lichtblau et al. 2015; Leyh et al. 2016).

The assembly world realized that the RP system required some essential changes in terms of viewing additional manufacturing resources other than materials planning (Porter et al, 1999). Therefore, within the late 1980’s, major changes were made which led to the evolution of a system approach cited as MRP II (Wong and Kleiner, 2001). Since, an MRP II system is based on number of modules which are linked to one another with feedback response mechanism, therefore an MRP II system indicates three main strategies in terms of developing with and controlling the system of a company; these are described as strategic planning, tactical planning and execution (Rondeau and Litteral, 2001).

ERP was developed gradually in several stages until it become integrated with all business processes as shown in (table 1). ERP is a software package that provides enterprise wide generic solutions to many organizations (Klaus, et al., 2000; Rajapakse & Seddon, 2005). The utilization of ERP is usually associated with improved organization’s competitive advantages (Rajapakse & Seddon, 2005), increase the quality of goods and increase consumer’s satisfaction over offered services. The main objective of ERP implementation is to “coordinate all the resources, information, and activities needed to complete business processes” (Goni, et al., 2011). With the use of ERP organization are able to replace their existing information systems and provide standardize information flow (Yusuf, Gunasekaran, & Abthorpe, 2004).This evolution was concurrent with technological race in all spheres of life to organize, monitor, and control business management electronically instead of traditionally or Legacy systems, which were constituted by the early resource planning systems within organizations. ERP systems add technology aspects to the overall system requirements. These include features such as a client/server distributed architecture and Object- Oriented Programming development practices. ERP systems have developed over time to include other aspects of business such as Customer Relationship Management (CRM), sales and Supply Chain Management (SCM) advance planning and E-commerce.

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Table 2 Evolution of Enterprise Resource Planning (Santin, et al., 2015; Amad, 2011; Romero & Vernadat, 2016)

MRP MRP II ERP MPS x x x BOM x x x Inventory Tracking x x x Demand Forecasting x x Quality Assurance x x General Accounting x x Finance x Customer Relation Management (CMR) x Supply Chain Management (SCM) x Human Resource (HR) x Marketing x Project Management x

Within SME context, the adoption of ERP is not easy, and it is a challenging task. The complexity and non-compatibility of the off-the-shelf ERP systems have made them inappropriate for SMEs functions, and some of these functions weren't used within SMEs area it had been found that the high cost and long implementation time. Adopting ERP within SMEs requires “modifying existing applications and redesigning current business processes to facilitate ERP system implementation”. It was also mentioned that ERP implementation can be unsuccessful if the organization is unable to address employee readiness and financial constraints. ERP adoption among SMEs requires overall assessment on SME internal and external commitments. These internal and external factors can be categorized into organizational, technological and environmental dimensions (Goni, et al., 2011).

Upadhyay et al. (2011) argues that, "ERP provides the mandatory infrastructure that forms the operational and transactional system for a business of any size." However, when ERP systems became common within the early nineties, they were considered too expensive and sophisticated

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for smaller companies, and so an answer mainly for larger companies. The vendors have however, since the end of nineties redirected their attention towards SME’s after the saturation of the market for larger companies and started to develop systems that are both cheaper and better suited for SME’s.

Rolland and Prakash (2001), noted two potential reasons that haven't been highlighted in prior literature, including: (1) requirements analysis components, which include user requirements, system requirements, and business requirements. (2) the use (or the shortage of use or inappropriate use) of systems development methodologies, which are utilized in conjunction with the component requirements to see to be functional requirements (To-Be requirements are those to be satisfied in its future functioning).

Author Amad (2011), concluded by viewing the event of MPC systems with MS Access. The modifications in the MRP II system are possible by performing on the key modules like DM, RCCP, MPS, BOM, MRP, CRP, and SFC. According to many researchers, though advanced systems like ERP are available with more benefits than MRP II but this method is possible to implement with the help of MS Office in small or large companies within acceptable range of resources and in terms of cost effectiveness. However, many SMEs are inhibited from implementing these thanks to factors a bit like the myriads of MRP II systems existing within the marketplace, the high purchase costs and so the ultimate implementation. The case study by Amad (2011), shows that the MRP II System was designed, developed and implemented by one employee over a period of two months, using standard software openly available. The present manufacturing environment of the SME company is going to be handled effectively by the current lean MRP II system, which is controlled through one operator.

Other case studies have compared ERP systems, Stoilov and Stoilova (2008), highlighting the variety of functionality provided by various systems. Baharum et al. (2009) interviewed two Malaysian SMEs about their experience with ERP. The business driver as would be expected was financial benefit, but the ability to customise was also present. Barriers to overcome included database migration, synchronisation of software to company workflow, developing user interfaces and user support, and integration of third-party software.

Snider et al. (2009 ) reported another Canadian study of small business ERP adoption, based on five case studies. All five of these companies reported reasons for adopting an ERP to include the need to integrate legacy systems and to obtain scalable solutions to deal with business growth. While the sample size was quite small (three successful and two unsuccessful implementations), differences that stood out were that the successful projects involved smaller internal teams with frequent interactions, had high levels of documentation.

However, this high cost can be reduced by providing a customizing supported sub-sector rather than on each enterprise individually. Instead they are going to adopt the customized ERP systems that cater to the precise business needs of each sub-sector. Customization (or customization in some works) is understood here because of the change of the ASCII computer file of the ERP system, that is, any modification of the computational pattern of the system delivered by the supplier. Personalization occurs as a result of a call to adopt the system to the organization in resolving a non-adherence between system and company. There are basically three ways to customize an ERP system: customizations, interfaces, or bolt-ons. The customizations are the modifications within the ERP system so it can adapt to a particular organizational situation impossible to be reproduced through existing parameters. Customization can be a tiny low project in itself, and, like every project, requires planning, resource allocation and follow-up (Fitzgerald and Stol, 2017). Interfaces are programs that allow communication between different systems, regardless of whether or not they need the identical technology (Fitzgerald and Stol, 2017). For

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Sykes (2015), the need to form interfaces is conditioned to the modules acquired. If the organization needs a feature not included within the system, there is a requirement to stay up some legacy system or specific software for the exchange of data between systems. It should be mentioned that, although ERP systems have an honest range of functionalities, they're not yet meeting all organizational needs. Finally, bolt-ons solutions are specific systems which can be integrated with ERP systems without specific developments which have functionalities that seek to complement what already exists within the ERP solution. Of the customizations, this may be the tiniest amount problematic, since the suppliers of bolt-ons are, in general, partners of the suppliers of ERP; so, the solutions tend to be synchronized with the version updates of the ERP system in question.

3.2. Roles of Industry 4.0 for SME

The basic outcome is that SMEs at now weren't sure if, when and consequently the manner in which they should start to introduce Industry 4.0 in their firms. Authors. Ganzarain and Errasti (2016) describe the potential of service-based business models for SMEs although many uncertainties and barriers (Müller and Voigt 2016) discourage or limit SMEs from starting an implementation process for Industry 4.0. Later Safar et al. (2018), Müller (2019), and Bolesnikov et al. (2019) describe specific frameworks for introducing new and innovative additionally as digital business models in SMEs.

In 2016, Ganzarain and Errasti (2016) are the main to debate the adoption of maturity models in SMEs to support the implementation of Industry 4.0 in SMEs. Later also, other authors like Wiesner et al. (2018) and Jones et al. (2018) developed a specific maturity and readiness models. Matt et al. (2016) describe an extremely early first attempt at a methodical approach to how SMEs can introduce Industry 4.0. In 2018, they redefined the approach to a five-step methodology for SMEs (Matt et al. 2018). Jørsfeldt and Decker (2017) additionally as well as Jun et al. (2017) promote the concept of digitally enabled platforms generating entrepreneurial opportunities for smart SMEs but up to now such platforms don't really exist. These days, the concepts proposed are still on an extremely rough and abstract level with non-clear and tangible recommendations about the thanks to achieving the proposed goals. In various other papers presented on learning factories and laboratories for Industry 4.0 specific research, training or transferring knowledge to smaller firms (Müller and Hopf 2017; Scheidel et al. 2018).

Similarly, other researchers are acting on the event of Industry 4.0 tool kits and roadmaps so on simplify the introduction of Industry 4.0 in SMEs (Mittal et al. 2018). Moica et al. (2018) address the requirement of Industry 4.0 also for workplace management and the requirement for adapted Manufacturing Execution Systems (MES) for SMEs. The reviewed literature shows that not all the groups of technology related to Industry 4.0 such as Internet of Things, Cloud computing, Big data & analytics, simulation, Cyber- physical systems, and virtual reality are present within the SMEs setting. Cloud Computing and also the Internet of Things are the commonly used technologies to implement Industry 4.0 initiatives.

3.2.1 Internet of Things (IoT)

Several researchers use the IoT which was used together with RFID technology to get production feedback in real time (Huang et al. 2013; MacKerron et al. 2014; Ren et al. 2015; Song et al. 2014). It was presented by using IoT how could it enhance collaboration between SMEs in distributed production networks.

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In this regards, Sena Ferreira et al. (2012) the author presented various indicators to calculate and validate the performance of the collaborative system. They suggested indicators that differentiate various operational performance criteria similarly as global performance indicators for measuring the success of the partner’s network. Many SMEs haven't got valid data. They suggested using the IoT related to RFID technology to manage ﬂows and to facilitate the implementation of Lean Manufacturing and this technique made the information ﬂow reliable and this made it possible to focus on improvement initiatives more quickly Denkena et al. (2014).

The data from the production machines was recovered by IoT devices and then were analysed by their performance and variance Xia et al. (2016). The approach was also related to never-ending improvement programme. The use of an identical approach to collect data from the produced parts Segura Velandia et al. (2016). In both cases, the aim was to use the IoT to obtain data and to assess the performance of the assembly system. It was observed that the IoT gives an excessive amount of data for humans to process. A concept was developed called the concept of JITIR (Just In Time Information Retrieval) consisting of three steps: the analysis of needs through interviews with the staff, the recovery of data, and therefore the periodic review of the employee’s environment to trace a need for change to enhance the standard of decision-making Constantinescu et al. (2015). An observation was made that almost all research focused on using the IoT to enhance automation and ﬂexibility in organisations. A distinct approach was identified that specialize in the man– machine link through connected objects. Utilizing parallel with cloud computing and VR, their approach connects employees with one another to optimise access to expert functions Hao and Helo (2015).

3.2.2. Cloud Computing

Cloud Computing is one of the most used means of implementation of Industry 4.0 practices in SMEs. It is identified that ﬁve forms of utilisation of Cloud Computing: sharing documents, servitization, collaboration, distributed production and resource optimisation. Many operations are performed using with the use of Cloud computing to build a Virtual Enterprises in between SMEs which was supported by the observation made by (Holtewert et al. 2013; Shamsuzzoha et al. 2016) through their study that SMEs do not possess all the knowledge and capacities to satisfy complex client’s needs, few models were proposed to favour the virtual enterprise between SME’s.

Cloud Computing platforms allows the servitization of the products (Ren et al. 2015) and in that way it will be shared within the network of partners. The creation of such a network doesn't only rely upon the supply of a Cloud Computing platform. Hao and Helo (2015) outlined the first steps of building a Virtual Enterprise: find partners so contractualise the commitments and risks. Once these steps are taken, it's then possible to reach collaboration and operational optimisation. Shamsuzzoha et al. (2016) presented an idea of a Cloud Computing platform supported the Net-Challenge Framework responding to the Make to Order and to Engineering to Order strategies. Collaboration between partners is achieved for the specific needs of every customer.

Once the requirement has been satisﬁed, the virtual organisation is dismantled. However, an observation was made that SMEs have internal information systems that don't permit direct reference to Cloud Computing systems (Herdon, et al.,2012). They proposed transferring ERP data to the Cloud Computing platform freed from charge to market the appropriation of their solution by enterprises. (Bonfanti, et al., 2015) showed that Cloud Computing allows Italian artisanal enterprises to supply products and services online. Creating a replacement product for inventory via Web interfaces and Cloud Computing platforms strengthens the SME, while providing access to new markets. Finally, a note that Cloud Computing platforms favour the look and

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utilisation of shared resources, control over processes and therefore the evaluation of performance.

3.2.3. Big data and analytics

This technology can help to optimise decision making in production planning and management. It is used for the evaluation of equipment data to improve the process and quality of production. Not many papers have researched in the aspect of implementing Bigdata and analytics in planning or processing data in SME’s (Bi and Cochran, 2014). The lack of research in this section shows the lack of research and development in SME’s.

3.2.4. Simulation

There are two categories to approach simulation which are operation scheduling and scenario-based simulation. In the ﬁrst category, simulation is mainly used for creating operation schedules on-line. In the second category, simulation models are applied for analysing and modifying actual production systems.

Through the observation made by (Masood, et al.,2013) the planning of SMEs is found to be complicated as it involves various products and different processes. So, they introduced a concept of DPU (Dynamic Producer Unit) aimed to model the ‘role’ of a resource in order to bring out a consistence between employees, machines and information systems. The DPU concept can be used to enable the modiﬁcation of system models by altering only the ‘roles’ involved in the simulation. In this way, it is feasible to simulate different scenarios of production systems and forecasting the behaviours of the future system.

3.2.5. Cyber-physical System

The only found case of implementing cyber-physical systems in SME’s was in the work done by (Givehchi, et al., 2015), for production planning and control. By implementing connectivity, a machine and to make it possible to produce parts by the control of machine and to optimise its operations. These are complex systems and lack competence in SME’s as well as resources to implement them.

3.2.6. Artificial Intelligence (AI)

Sere, et al., (2018), in a discussion about artificial intelligence addressed that the use of this technology has already started in SME’s for low-cost maintenance. Even though there is still research needed in use of AI for SME’s as the use of this technology has even found its way to construction industry to gather data and process for improvements.

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17 4. EMPIRICAL FINDINGS

This chapter introduces the case company in the beginning, then an explanation of the

production units is given, following the introduction is a background to the empirical finding’s direct observation, focus group discussions, and in-depth interviews and the implementation of the work.

4.1. Introduction to the case company (Husmuttern AB)

The thesis presents a case study of a start-up company assembling house modules. The business concept is to produce minimal price standardized temporary modular houses for e.g. schools or living. The market for prefabricated wood houses is growing. On the other hand, the company possess lean and sustainable operations, standardized modules are built into standardized operations by people in need of so called "easy jobs'' adding to social sustainability. This provides high requirements for the protection of apparatus and efficient standardized work. Due to, among other things, a large amount of immigration of people with lower education levels, there has been a rising in need to find "easy jobs" in Sweden. The objective with these jobs is to educate people, improve job skills and Swedish to create an easier system to induce other jobs later. For assembly, quiet operation to be competitive, efficient standardized work and continuous improvement is required. Digitalization and automation are typically said to "take jobs'', but within the hunt to create simple jobs in industry using lean production, support may come from digitalization and automatic quality assurance. Tools like visual work instructions should be in line with the assembly system principles.

As mentioned in the interviews “The company can described as a plant which needs various resources to grow into a tree, all the resource it needs to grow the company are given to it in the residing location which has various industries to collaborate in projects and a university to develop and design the company through research and the high unemployment rate for the company to train people and create jobs.”

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Husmuttern could also be a replacement company with company value stated as: “Be good – Do good - fair deals”. Husmuttern develops a quick buildings production concept around two social challenges in Europe, namely the need of cheap temporary houses (e.g. for kindergartens/schools) and so the necessity for straightforward jobs, particularly for unskilled personnel. The event is currently in pilot production state with concept proof and verification of the standardised production cell with module fixture, tool boards and large screen monitor for visualisations as shown in (figure.3). Personnel used for the concept proofing have various national backgrounds, low education and no previous manufacturing or construction working skills. Each assembly cell should be operated by two assemblers and a support person. Initially operators need a forklift licence.

From a social sustainability point of view, it's most important to succeed with the simple and safe job approach, giving people jobs that are safe and provides new skills in assembly operations. Husmutterns values emphasise on social sustainability. When it involves lean principles, which are not exactly formulated but after interviews with the owner the following statements are used as XPS-principles: Safety first, Easy to know, Teamwork, Quality assurance/poka yoke, be nice and keep it simple. These are paired with XPS principles from Netland, with design parameters and practical implementation. The baseline tool for implementation is standardised work. supported the bill of cloth and so the planning of the house modules, the tactic of assembling the modules is set.

4.2. Problem definition

It is vital for the success of a company to be ready to provide high product availability to customers at minimal operation costs. Many of the companies have therefore automated the inventory management processes to chop back operational costs and meet the customer demands. For an accurate operation of the mentioned inventory management process, companies make use of computerized systems for critical decisions. This computerized information should be provided accurately alternatively a risk of inaccuracy occurrence is extremely high. Inaccuracies can have a fatal effect on the movement of the products within a company which ends within the shortcoming to provide the merchandise to the consumers at the minimal operation cost.

An effective method was required for the planning of all the resources of the company by linking several business functions or modules like business planning, capacity planning, work control, production planning, purchasing, finance and accounting. This leads to planning and controlling the system of a company,which have been described as strategic planning, tactical planning and execution.

The strategic planning (sometimes also called top management planning) covers defining and setting the organisation’s primary aims or objectives and ultimately adopting certain actions to understand those aims, whilst the tactical planning (also called operation management planning) provides guidance to implement the activities specified at the extent of the strategic plan (Boone and Kurtz, 2005). The execution planning (or operation management execution) involves the purchasing and manufacturing plan and also includes the actual demand production, shipping and delivery activities (Voss, 2006). The MRP II system’s modules could also be categorized on the concept of long, medium and short-range planning activities

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4.3. Implementing RP at Husmuttern (creating Framework for RP)

To design and implement a bespoke RP system the author has taken three steps. The three major inputs of an MRP II system are the master production schedule, the merchandise structure records, and thus the inventory status records. Without these basic inputs the MRP system cannot function. To cater to resource problems in relation to accumulated planned orders in manufacturing, the determination of a master production schedule could also be a requirement. The master production schedule (MPS) determines the demand for a particular number and sort of things and time periods once they're scheduled to be available. The data required for an accurate development of an MPS include internal orders, safety stock requirements forecasts and customer orders for end items. MRP II translates this schedule into individual time-phased component requirements. Manufacturing resource planning will determine from the master production schedule and thus the merchandise structure records the gross component requirements; the gross component requirements are visiting be reduced by the available inventory as indicated within the inventory status records.

Another important aspect is that the update of the merchandise structure records (bill of material records) to reflect each engineering change to an end item (manufactured product), so if by change a component is interchanged for a further or completely aloof from the bill of material records (BOM) as shown in figure below, the MRP II isn't visiting order it again. BOM states important information for production of each item, like component number and description, quantity per assembly, quantity per end item, lead times etc. Inventory status records are the third and final major input for MRP II. They include accurate and up-to-date information of inventory status of all items, because their main purpose for MRP II is that they be a specific representation of reality, otherwise the processing of planned orders isn't possible. These records must be preserved up to now, with each receipt, disbursement, or withdrawal documented to require care of record integrity. Lead times for all inventory items should be known and given to the MRP system. Work discipline is critical to create sure that orders are processed in conformity with the established priorities. Another key condition to create a successful and meaningful MRP II implementation is to provide all affected employees with training and education for the given system.

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Figure 4: Bill of Material for resource planning

The MRP process within the studied company works as follows: when the seller deploys the order within the system, it's calculated what proportion material that application will consume. This calculation is completed by the merchandise bill of materials, then the system can check whether the quantities available meet the strain of that request. Purchase requests and buy orders are issued to supply these missing quantities, to satisfy the customer's request. After this purchase process, the material reaches the factory, is produced, billed and delivered to the customer, thus closing the cycle as shown in (figure.5).

Another RP file called factory resource planning was prepared for the module planning file which is resource planning of the factory. It's deployed supported the results of the assembly times of and thus the delivery time to the customer as shown in (figure.6). If the results from the Module Resource plan are suggesting making a spanking new module workshop, then the factory resource planning file is often accustomed to setup a factory.

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Figure 6: Module resource planning

Customer order Products from Bill of Material Stocks Suppliers order Purchase needs Purchase order Supplier Material Receiving Production Invoicing Delivery to customer

Factory Resource planning Customer order Products from Bill of Material Stocks Suppliers order Purchase needs Purchase order Supplier Material Receiving Production Invoicing Delivery to customer Products from Bill of Material Stocks Purchase needs

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4.4. Impact of Industry 4.0 in RP

RP helps to identify the value of setup for various house module construction workshops, additionally as costs of production for brand new products by gathering information from various sources. The deliverables are also identified using the RP, which helps by analysing the material requirements and thus the assembly time by calculating the times required for each step. This RP helps to make cost-based decisions by the management for the acquisition limits of the material required for modules and thus the ultimate order of the customer. This RP even helps to work out the setup of a triggering new workshop for the assembly of modules supported the customer demands and also the data of production times for each module. It helps to work out the inventory for both module construction workshops, additionally because the module construction itself. Considering this size of the company it is not a price effective because of invest within the newest and an expensive RP software and customised its modules for the company but by employing a available application like MS Office effectively it can save the high investments costs and resources to teach or hire new employees.

4.5. Future Planning for RP (Impact of Industry 4.0):

Cloud is often employed in many aspects within the long run to store huge amounts of knowledge and analyse them. This data is often extracted circumstantially. These aspects of cloud are often enhanced by the usage of IOT devices for quality assurance. IOT are often used with precision in scrutiny and scrutiny in quality assurance. This provides a reliable automated system for monitoring additionally. The RFID tags are often employed in managing the inventory. By using the RFIDs with IOT and enabling it with cloud, the re-ordering level is often smoothly levelled. This ensures effective inventory management and also reduces the inventory handling costs. The combined effects of the above-mentioned methods enhances the resource planning. These technologies are often incorporated with other automated technologies because the corporate progresses.

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23 5. ANALYSIS

In the following section an analysis of the literature reviews from section 3. and the empirical findings from section 4. is presented. From the analysis a framework is created followingly to show the acquired outcomes.

5.1. Differentiating the literature study and operational working conditions

Resource planning systems have long been considered crucial for effective information management in larger companies (Franciose et al., 2009) and also the systems are now being implemented also by SMES as the way to assist them improve and cut costs (Snider et al., 2009; Dixit and Prakash, 2011). The unstructured planning in the company caused miscalculation in the lead times. So, a resource plan is needed. The main objective of RP implementation is to “coordinate all the resources, information, and activities needed to complete business processes” (Goni, et al., 2011). The RP systems can be modular, and customers can tailor their system with add-on modules to suit their specific needs (Rashid et al., 2002). Within SME context, the adoption of ERP is not easy, and it is a challenging task. Adopting ERP within SMEs requires modifying existing applications and redesigning current business processes to facilitate ERP system implementation. To conclude with the above authors and their research we have developed a module planning file, this can substantially reduce lead times, overtime, safety stock, and improve product quality in the case company.

Rolland and Prakash (2001), noted two potential reasons: (1) requirements analysis components (2) the use (or the shortage of use or inappropriate use) of systems development methodologies. Author Amad (2011), concluded modifications in the MRP II system are possible by performing on the key modules like MPS, BOM and MRP. However, this high cost can be reduced by providing a customizing supported sub-sector rather than on each enterprise individually. Employing an appropriate resource plan whether or not it's old is cost efficient instead of buying up to date software and customizing it's what was gathered from interviews. But in literature it shows that the RP although it's latest it should be customisable to the companies needs in an inexpensive way. RP Personalization occurs as a result of a call to adopt the system to the organization in resolving a non-adherence between system and company. From this Rp implementation we have developed a customised inventory module, production planning module and finance.

These findings in the study conducted by Bi and Cochran, (2014) author which argues that ERP customization is cost efficient but by the data collected in the case company are contradictory. RP helps to identify the value of setup for various house module construction workshops, additionally as costs of production for brand new products by gathering information from various sources. The deliverables are also identified using the RP, which helps by analysing the material requirements and thus the assembly time by calculating the times required for each step. This RP helps to make cost-based decisions by the management for the acquisition limits of the material required for modules and thus the ultimate order of the customer. This RP even helps to work out the setup of a sparking new workshop for the assembly of modules supported the customer demands and also the data of production times for each module. It helps to work out the inventory for both module construction workshops, additionally because the module construction itself. Considering this size of the company it is not a price effective because of investing within the newest and an expensive RP software and customised its modules for the company but by employing an available application like MS Office effectively it can save the high investments costs and resources to teach or hire new employees.