The Role of ERP in Managing Organization Supply Chain Performance
ENTERPRISE RESOURCE PLANNING 9
TheRole of ERP in Managing Organization Supply Chain Performance
TheRole of ERP in Managing Organization Supply Chain Performance
Businessenterprises in the modern era face desolate reality: predict,respond, and react to the rising demands of the marketplace, orperish. In ferociously competitive atmosphere, business strategy notonly informs decisions that determine success, but it also governsenterprise survival (Kuei et al., 2002).In the modern corporateworld, effective business strategy circumnavigates around aggressiveand efficient application of information technology. An enterpriseresource planning (ERP) system is a packaged business software systemthat enables businesses to manage human and material resourcesefficiently by offering a completely, integrated answer for thefirm’s information processing needs. It supports and maintains aprocess-oriented view of the organization as well as enterpriseprocesses standardized across the organization (Mabert et al., 2000).
Theacademic research community has been vibrant in contributing to thefield of ERP systems in numerous ways. A distinctive way of achievingthis fete is to throw in useful information to the field is bypublishing archival journals paper for the benefit of the public.This paper shall provide a review of the literature on ERP from fivemain journals (Akkermans, 2003), ( Huseyin, 2013), (Su & Yang,2009), (Adaileh & Abu-alganam, 2010) and (Huseyin et al, 2013) onhow ERP system can improve the performance of the supply chain.
Thearticle’ The impact of ERP on supply chain management: Exploratoryfindings from a European Delphi study’ by Akkermans (2003) isimportant to this particular review as it offers results carried outin 23 Dutch regarding the duties of ERP in supply chain managementsystems. Tenkorang and Helo review regarding ERP indicates theemerging issues in the field of ERP. In their article the ‘EnterpriseResource Planning (ERP): A Review Literature Report’ the authorshighly underscore the duties which ERP plays in supply chainmanagement. Their review is useful forboth businesses and researchers because it seeks to bring to lightthe contemporary unrequited but justified research inquiries raisedin research work for development purposes. The article ‘the role ofERP in supply chain integration’ by Muhammad and Abu-alganam in theInternational Journal of Computer Science and Network SecurityMuhammad is also relevant to this study because it provideexemplifies the reasons why many firms deploy ERP systems in theirsupply chain management. The author embarks on a study to establishhow firms apply ERP systems and the critical factors that can affectthe application of ERP systems effectively.
Anecdotaldescriptions of the role of ERP system in the supply chain managementare common in the popular press, but many of these reviews providescant information beyond commentaries. This is explainable given thesheer involvedness and universal nature of ERP systems. After twodecades of striving to align internal operation, improving plantproductivity, augmenting product quality and lowering operationscosts, firms are now focusing on supply chain stratagems as the nextcutting edge in organization excellence. A good number of academicresearchers confirm that there is a positive link between enterpriseresource planning and performance of supply chain.
Akkermanset al. (2002) indicates the relationship existing between ERP and SCMperformance. It is clear that, ERP was viewed as offeringcontributions to only four of the top 12 future supply chainsaspects. This include additional customization of products as well asservices, increased standardized information and processes, theimportance of a global information telecommunication system, andincreased levels of transparency in the marketplace.
Yangand Su (2009) established that, the area of supply chain is getting a notable competency, and the ERP system is foreseen to be animportant part of supply chain management. Nonetheless, it is evidentthat, installation of an effective ERP system is not only expensivebut also risky. Yang and Su (2009) study investigated impacts of ERPsystem on SCM and the findings were that there are strategic,operational and managerial benefits of ERP for the SCM competencies,but not the information technology framework and organizationsbenefits as significant predictors of them. ERP was reported to offerbenefits to the operational process of the supply chain management.Operational process involves the methods that facilitate orderdischarge as well as replenishment across the supply chain. It isclear that effective order fulfillment requires coordination withina company and among supply chain partners. Within the operationprocess, firm competencies encompass things such as internalintegration, supplier integration, and customer integration. ERP is acollection of application components that can connect back-office tofront-office operations, as well as internal and external supplychains (McAfee, 2002). In this vein since ERP systems can automatebusiness processes and allow process alterations, one wouldanticipate them to improve the SCM competencies in operationalprocess and significantly improve customer responsiveness andsatisfaction (Crumbly & Fryling, 2012).
Tenkorang& Helo (2011) and Akkermans et al. (2002) all support Yang &Su findings that the operation benefits of enterprise resourceplanning positively affects the operational process of the supplychain and that the efficiency conferred by ERP in the managerialprocess positively affects the operational process of the supplychain. ERP system has momentous impacts on the planning and controlprocess of the supply chain. The term planning and control processdenotes the design, coordination and application of information toenhance manufacturing, resource planning, purchasing and customerorder fulfillment. The competency encompasses access o database thatsupport exchange of apt information among supply chain participants(Vemuri & Shailendra, 2006).
ERPsystems are built by centralizing the database and creating dataanalysis capabilities. ERP shall help process production orders,facilitate resource allocation, inventory management, and productionplanning. ERP system can thus help firms create value such asallowing simultaneous access to same data for planning and control,eliminating information asymmetries and providing real-timeinformation. Hashem et al. (2013), and Muhammad and Abu-alganam(2010) states that ERP facilitate inter and intra-organizationcommunication, and hence it plays a huge role in fostering supplychain coordination. Relationship integration competency allows firmsto share a mentality with suppliers and customers regardinginterdependence and principle of collaboration.
Itis evident that there exists no analytical framework for measuringthe effects of ERP systems on supply chain management competencies.Even though Yang and Su (2009) has examined how the antecedents,information technology department technical quality, it planutilization and top level management of IT positively impacts thesupply chain, it cannot be established with sound authority that inreality these benefits can be attained across the board. It is alsoquintessence to observe that, even though the literature given bythese authors indicates that, the operational, strategic and tacticalbenefits of enterprise resources planning for the organizationperformance of SCM in both external and internal business processes,cost management as well as customer service are not importantpredictors of the supply chain management performance in the externalbusiness process- except for strategic benefits. In addition, thisreviews shows that ERP implementation in one firm has considerableeffects on other firms’ both small and medium –sized within theglobal supply chain.
Itis important to state that ERP should not be viewed from only oneangle the benefits it confers to an enterprise but also and moreimportantly as a requisite for maintaining future competitivenessedge. This view is pegged on the notion that an ERP system is notmerely an instrument that offers a single output, but rather aninfrastructure that ropes the aptitude of all the other informationtools and processes used by a company. As mentioned by the authors itis true that an ERP system offers decisive functionality byincorporating information technologies applicable throughout theventure. But more importantly the authors fail to mention that ERPsystem installation and execution coerces organizations to augmenttheir understanding of their core capabilities and make requiredadjustments to operational processes that may otherwise have beenoverlooked. Su and Yang`s literature indicate that only three of thefive benefits of ERP have a positive effects on the supply chainmanagement competencies.But their literature is consistent with thatprovided Akkermans (2003), Huseyin (2013), Adaileh & Abu-alganam(2010) and Huseyin et al. (2013) who indicate that ERP cansuccessfully become the backbone of a firm operation in the moderneconomic environment.
Allthe literature developed by the authors of measuring the effects androle of ERP in the supply chain management are based on thecompetencies model. This means that it is difficult to conductvalidity and reliability checks on the measurements and as such moremeasurements for enterprise competencies drawn from the ERP system,rather than a self-reporting style y the firms would be more accurateand convincing. It is apparent most of the literature is based onreports from consultant firms who might not have accurately evaluatedthe performance of the supply chain after the installation of an ERPsystem.
Futureresearch should be pegged on comparative analysis of the effects onperformance of adoption of an ERP system. It is important thatinformation is gathered from different firms in different parts ofthe globe to arrive at reliable findings. In additional futurestudies should adopt longitudinal data instead of cross-sectionaldata to eliminate bias and sampling generalization.
Eventhough ERP system can confer immense benefits to the supply chainmanagement, a review of literature from articles (Akkermans, 2003), (Huseyin, 2013), (Su & Yang, 2009), (Adaileh & Abu-alganam,2010) and (Huseyin et al, 2013) shows that unless implementedeffectively it is difficult to reap all the benefits of an ERPsystem. Case study from various firms located in different parts ofthe globe indicated a close relationship existing between ERP and SCMperformance. ERP was seen as offering a positive input to only fourof the top 12 future supply chains aspects indicated above. ERPsystems can automate business processes and allow processalterations, one would anticipate them to improve the SCMcompetencies in operational process and significantly improvecustomer responsiveness. Nonetheless, future research should bepegged on comparative analysis of the effects on performance ofadoption of an ERP system. It is important that information isgathered from different firms in different parts of the globe toarrive at a reliable finding.
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