A Hybrid MCDM Approach for Solving the ERP System Selection Problem with Application to Steel Industry

A Hybrid MCDM Approach for Solving the ERP System Selection Problem with Application to Steel Industry

Ahmad Jafarnejad (University of Tehran, Iran), Manoucher Ansari (University of Tehran, Iran), Hossein Rahmany Youshanlouei (Young Research Club, Salmas Branch–Islamic Azad University, Iran) and Mohammad Mood (University of Tehran, Iran)
Copyright: © 2012 |Pages: 20
DOI: 10.4018/jeis.2012070104
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Abstract

Selecting a proper system of Enterprise Resource Planning (ERP) is a major challenge for enterprise managers. Heavy expenses of incorrect decisions in selection of ERP systems have made academics and managers consider this phase as highly important. Several research studies proposed different approaches to selecting the ERP and many case studies of organizational experiences have been published. However, there has been less regard for simultaneous use of the findings of academic studies and judgments of industrial experts or organization mangers for making the most appropriate choice. This study proposes a combined multiple-criteria decision-making (MCDM) approach through which both previous studies and judgments of industrial experts or organization managers would be integrated in order to select the proper ERP system. Having studied the literature comprehensively and conducted interviews with experts and managers, this approach will determine the most important criteria in ERP selection using Shannon entropy technique. Then, based on the judgments obtained from experts and using DEMATEL technique, these criteria will be classified into the two groups of “Cause” and “Effect” and the most appropriate choice will be selected using Fuzzy AHP technique. Finally, a case study is conducted to demonstrate and prove the applicability of the proposed approach.
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1. Introduction

IT/IS strategic importance has not diminished because a global trend of information availability to everyone, whenever it is needed, and anywhere (Pita et al., 2010). Furthermore, Internet revolution and its associated technologies have led to fundamental changes and evolutions in structure and processes of the enterprises in a way that they have re-engineered the business processes. ERP systems have recently transformed into a significant tool for this evolution and improvement of competitive advantages of the enterprises. In fact, organizations are mandated by external forces to adopt ERP (Rajendran & Elangovan, 2010). Without ERP software, sharing accurate information with their trading partners is impossible (Srinivasan, 2010).

Once implemented successfully, ERP systems can achieve a competitive advantage within the international markets (Cebeci, 2009). Yet, in spite of its numerous advantages, by implementing these systems, organizations are confronted with serious challenges. There is much evidence which indicates that many implementation projects have not been completed within the time and budget limit assigned (Yusuf et al., 2004). Research shows a growing dissatisfaction with ERP systems arguing that they have failed to deliver the anticipated benefits. ERP systems are found to be difficult to learn and use, very costly, and often require disruptive organizational changes to implement (Mouakket, 2010; Nour & Mouakket, 2011). One issue which leads to failure in implementing ERP is the fact that many managers merely take the technical and financial aspects of the project into account and neglect other aspects. Selection of a proper choice for adopting an extensive system throughout the organization is of crucial importance, since it has an intensive influence on acceptability, usefulness and creating cooperation within the organization (Oliver & Romm, 2008). Therefore, various studies have been implemented and different approaches have been suggested for selecting a proper ERP system. These studies use three major sources to identify the criteria and select the best choice which include: literature review, judgments of academic and industrial experts, and judgments of managers and experts from the organizations under study. Selection of the final choice has been usually done according to the information collected from these three sources and with the aid of different decision-making methods namely mathematical and multi-criteria decision-making procedures. However, selecting the ERP has turned into a complicated problem so that simply relying on one of the information sources or using only one of the decision-making techniques cannot ensure selection of the most appropriate choice. Thus, this study tries to provide a combinational approach in which all the three sources of judgment including organizational managers and experts, industrial and academic experts, and previous studies and experiences could be used based on the proposed techniques. Another necessity for the current research is lack of comprehensive studies in Iran for selecting the ERP system. Indeed, a review of the existing literature reveals that most of the previous researches have focused mainly on American and European businesses and there is a strong need for further studies in order to identify the proper criteria and methods of selecting ERP systems for the Far Eastern and Middle Eastern enterprises (Shehab et al., 2004). Although comprehensive studies have been recently conducted in countries such as Taiwan and Turkey, lack of such researches is still evident in this field. In order to solve this problem and also demonstrate that the suggested approach is practical, a case study of the process of selecting the ERP system at an Iranian company active in steel making industry is presented. In what follows, after a comprehensive review of the literature, the proposed approach is explained in detail and finally a case study is presented.

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