Enterprise System in the German Manufacturing Mittelstand

Enterprise System in the German Manufacturing Mittelstand

Tobias Schoenherr (Michigan State University, USA), Ditmar Hilpert (Reutlingen University, Germany), Ashok K. Soni (Indiana University, USA), M.A. Venkataramanan (Indiana University, USA) and Vincent A. Mabert (Indiana University, USA)
Copyright: © 2009 |Pages: 17
DOI: 10.4018/978-1-59904-859-8.ch015
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Abstract

Although the research on integrated enterprise systems (ES) is proliferating, the knowledge base about ES implementations, usage and experiences outside the United States is still small. This is also true for Germany, despite the crucial importance of ES in the country, and the potential uniqueness of its ES environment. Most ES research to date has also been focusing on larger corporations, neglecting the challenges and issues that small and medium sized enterprises (SMEs) have been experiencing. Collectively often referred to as the Mittelstand, German SMEs form the backbone of the German economy. This chapter brings attention to these areas by describing observations obtained from eight SMEs in the German manufacturing sector. These findings about ES implementation, usage, and experiences are reported and summarized along nine points of interest.
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Literature Review

Experiences with integrated ES (ERP systems) were first published in practitioner journals (Mecham, 1998) and the popular press (Kirkpatrick, 1998; Diederich, 1998). Shortly afterwards first academic research reports appeared (Davenport, 1998), fuelling interest and excitement among academics. Up to date a multitude of articles have appeared dealing with both the positive (Bradford, Mayfield, and Toney, 2001) and negative (Sumner, 2000) effects of ES implementations, as well as their associated considerable cost (Mabert, Soni, and Venkataramanan, 2000). Mabert (2007) and Jacobs and Weston (2007) provide a comprehensive chronology of the historical development and evolution of these systems.

Key Terms in this Chapter

Standard Packages, modifications, and In-house Developed Applications: This sixth focus area in our chapter reports on whether standard packages supplied by providers were chosen, and if yes, whether and to what extent modifications were carried out. If in-house developed applications were preferred, benefits and challenges, as well as integration possibilities, were discussed. Rationales behind each choice were explored.

ES Implementation and Usage: In our chapter we describe the experiences companies made when implementing and using enterprise systems. Four of our case study firms were in either of these two phases. Crucial preceding stages include the decision and planning phase. Without those two additional phases implementation and usage would not be possible, or only in a very haphazard way. In our chapter we therefore describe experiences of our companies in all of these stages, as illustrated in Figure 1 of the paper. A similar implementation and usage timeline was suggested by Markus and Tanis (2000).

Power of Final Decision: This is the second of our nine issues that we focus on, which deals with who was responsible for the final decision to modify or replace the current ES infrastructure. Change agents can include top management, the owner of the firm, or IT personnel.

Upgrades After Implementation: This final area of investigation in our chapter deals with how upgrades and new releases after the implementation were handled. These upgrades can be quite time-consuming, and usually not every new release is implemented.

Order of Implementation: The fifth of our nine areas we focus on in the chapter. Here we deal with the order in which the different modules or components of the ES were implemented in the company, and the rationale behind the sequence.

System and Provider Selection: The third of our nine focus areas deals with the process or approach taken to select the system and its provider(s). Possible influencing factors include the availability of solutions with good fit, the sustainability of the provider, the capabilities of the system, the preferences of the company, and its internal processes.

Involvement of Employees and Training: With this seventh area of investigation we examine the level of employee involvement and training, and how these tasks were approached. Costs associated were also discussed.

Time Spent in System Selection, Planning and Implementation: In this fourth area of investigation we report on the time spent for selecting the system, planning the implementation, and then finally implementing the ES. The time taken and required can be quite long at times, which however often ensures a sound and thorough process.

German Mittelstand (German SMEs): The German Mittelstand refers to small and medium sized enterprises (SMEs) in Germany, which form the backbone of the country’s economy. Numbering over one million companies, the Mittelstand employs over 20 million people, is responsible for almost 40 percent of total German gross investments and accounts for 30 percent of the exports (Hauser 2000). These enterprises are often highly innovative and entrepreneurial, and are frequently very competitive international market leaders. The primary focus of these German SMEs is usually on highly customized and specialized products and services, resulting in information systems becoming a key competitive weapon (Taylor, 1999; Voigt, 2001). The companies can rely on a highly skilled and flexible work force, which is supplied by Germany’s exceptional vocational training system. This leads to a very loyal and stable workforce, with a turnover rate of only about 3 percent. Overall, German SMEs provide a unique setting to study the design and complexity of enterprise systems. The Mittelstand companies in our sample ranged in size between 593 and 1,200 employees, with annual revenues between 64 and 378 million Euros.

Impetus for a New System: One of our nine areas of investigation reported in the chapter. Here we explore who or what was the driving force behind the ES implementation, i.e. what ultimately led the company to their current or future system. This can include functional departments, but also changes in the marketplace, increased competition, changing demands by customers, etc.

Implementation Success and Satisfaction: In this eighth issue we investigate in our chapter we describe the success and satisfaction companies reported with their ES planning, implementation and usage. While it can be difficult to quantify hard performance measures, also intangible benefits are realized.

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