Aligning Supply Chain Logistics Costs via ERP Coordination

Aligning Supply Chain Logistics Costs via ERP Coordination

Joseph R. Muscatello (Business Management and Technology, Kent State University, Burton, USA), Diane H. Parente (Penn State Erie, Behrend College, Erie, USA) and Matthew Swinarski (MIS, Penn State Erie, Behrend College, Erie, USA)
Copyright: © 2018 |Pages: 20
DOI: 10.4018/IJISMD.2018040102

Abstract

Enterprise resource planning (ERP) systems address the problem of disparate information in an organization and coordinates mechanisms to eliminate supply chain sub-optimization. Logistics costs are a substantial part of an operation and this research provides insights into the relationship between ERP implementations and logistics costs. The research uses a two-step approach, conducting a confirmatory factor analysis (CFA) to assess the psychometric properties of our measures and then conducting an independent sample t-test between two groups, one which experienced decreased logistic costs and the second which experienced the same or increasing logistic costs. By examining the effects of ERP implementations on a specific area of the firm, logistics costs, this research has provided insight into the areas of ERP implementation and firm impact.
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1. Introduction

There is growing interest from industry and academic disciplines regarding coordination in supply chains, particularly addressing coordination mechanisms available to eliminate sub‐optimization within supply chains (Fugate, Sahin & Mentzer, 2011). Enterprise wide software solutions address the problems of disparate information in business organizations and the coordination of every area open to sub-optimization (Ugochukwu, P. 2012; Muscatello & Chen, 2008; Themistocleous, Zahir, & Love, 2004). ERP is the starting point for information capture and dissemination via a variety of qualitative and quantitative models that continue to grow as technology innovation grows. These systems matured and serve as the platform of choice for manufacturing and service firms. ERP has shown a level of maturity where simple issues related to implementations are known by vendors and businesses, and we are now looking at the sub-optimization within the system (Muscatello and Chen, 2012; Han, Swanner and Yan., 2010; Capaldo and Rippa, 2009; Jacobs & Weston, 2007). ERP implementations frequently come with new software and hardware systems and business processes that may substantially alter workflow and jobs (Monk and Wagner, 2013; Boudreau & Robey, 2005; Soh & Sia, 2005). When implementing a new ERP system or simply upgrading your current one, questions arise as to what approach best meets your organization’s business requirements. While solutions and factors vary greatly from one scenario to the next, three common themes in the industry have been identified as high-level strategies for ERP system implementations: vanilla, customized, and configured (Tholen, 2014). Whichever is chosen requires alterations, change processes, job responsibilities and often lead to major training and other organizational initiatives. Significantly higher value is achieved if the most appropriate types of information sharing are used (Jonsson & Mattsson, 2013). Enterprise resource planning (ERP) systems have been used in integrating information and accelerating its distribution across functions and departments with the aim to increase organizations’ operational performance. ERP system performance must be measured on its impact to critical performance of an organization (Shen et al., 2015).

Successful implementation of ERP systems, including new software and business processes, report positive benefits including greater efficiency and effectiveness at the individual employee and organizational levels (Muscatello & Chen, 2008; Olson et al., 2005; Venkatesh, 2008). Research also shows that a firm’s profitability increases after full implementation of an ERP system (Hendricks, Singhal, & Stratman, 2007).

ERP implementations challenge the status quo and require major changes and extensive management commitment (Amid & Kohansal, 2014; Muscatello & Chen, 2008). It is a very challenging endeavor that causes major change and disruption for an extended period of time in the implementing firm (Boudreau & Robey, 2005; Soh & Sia, 2005). More than half of all ERP systems fail, despit billions of dollars of investment (Han, Swanner, & Yang, 2010) and such failures have been observed even in highly successful organizations, such as Hershey and Nike (Koch, 2002, 2004). ERP systems have the reputation of being notoriously over-sold and under-delivered (Millman, 2004). Major Operational disruptions at Dell, Hewlett Packard, Whirlpool, FoxMeyer Drugs and Hershey Foods have been caused by poor ERP implementations (Becerra-Fernandez et al., 2004). Therefore, a firm must be diligent and prudent in their implementation of an ERP system.

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