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Evaluating Readiness for ERP Adoption in Manufacturing SMEs

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Utilisation and Evaluation. study 1 2 3 4. ERP impacts - - org. performance ... With the advent of globalisation and the knowledge economy, many SMEs must ... – PowerPoint PPT presentation

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Title: Evaluating Readiness for ERP Adoption in Manufacturing SMEs


1
Evaluating Readiness for ERP Adoption in
Manufacturing SMEs
  • Louis Raymond
  • Suzanne Rivard
  • Danie Jutras

Enterprise Systems Research Workshop, SIG-ES,
IFIP Working Group 8.9, 3gERP Project, Montreal,
2007
2
Studying ERP in the context of SMEs
cost
Potential for risk mitigation
100 
gt 90 
Cost engendered by decisions
Cumulated expenses
lt10 
time
Implementation
Utilisation and Evaluation
Adoption
study 1 2 3
4
ERP impacts - - gt org. performance
ERP readiness ERP adoption process and risk
3
Research Justification
  • With the advent of globalisation and the
    knowledge economy, many SMEs must become
    "world-class" enterprises, especially in the
    manufacturing sector
  • Growing interest of ERP providers for the SME
    market and growing adoption of ERP by these firms
  • But ERP is complex, entailing significant risks
    for the adopting organisation, be it large or
    small and medium-sized
  • Significant differences between SMEs and large
    firms with regard to resources and capabilities,
    and with regard to objectives and constraints of
    ERP adoption
  • Thus a critical issue Is the SME capable of
    adopting ERP, is it ready to implement this
    technology ?

4
Research Questions
  • What constitutes readiness for ERP adoption in
    manufacturing SMEs ?
    (descriptive aim)
  • How can manufacturing SMEs be characterised in
    terms of their readiness to adopt an ERP ?
    (prescriptive aim)

5
Meta-theoretical framework for the study of ERP
adoption in SMEs (adapted from Boudreau et Robey,
1999)
Theoretical content
Form of change
Incremental
Complexity theory
Radical
Institutional theory
Punctuated equilibrium
Organisational change theory
Alternate form
Diffusion of innovation theory
Life cycle
Dialectic
Dialogic
Teleology
Evolution
Motor of change
6
Dialogic in the strategic management of an SME
New value creation
SME
7
Dialogics of ERP adoption in SMEs
ERP
S T A N D A R D I S A T I O N
C U S T O M I S A T I O N
D E T E R M I N I S M
E M E R G E N C E
I N T E G R A T I O N
F L E X I B I L I T Y
SME
8
Technological context
Organisational/Entrepreneurial context
Environmental context
TOE CONTEXTUALISATION OF ERP ADOPTION IN SMEs
Process improvement
  • Reduced costs
  • Strategic decision making improvement
  • Customer responsiveness
  • Multi-site standardisation
  • Need for efficiencies and integration
  • Business restructuring

Common platform
Reduced operating costs
MOTIVATION FOR ERP ADOPTION (adapted from Parr
and Shanks, 2000, Ross and Vitale, 2000)
Data visibility
Infrastructure (technical)
Capability (operational)
Performance (strategic)
9
  • Availability of resources
  • Operational methods
  • Competitive strategy
  • Sophistication of existing IT use
  • Procurement methods

Organisational Context
Readiness of SME for ERP Adoption
External Forces
Business Processes
  • Operational
  • Managerial
  • Integration
  • Business environment
  • Power of customers

Perception of ERP
  • Complexity/Cost
  • Benefits/Strategic advantage
  • Desire to implement

10
Research Method
  • Field study (Stone, 1978) of 11 manufacturing
    SMEs
  • Convenience sample
  • criterion complexity of the organisation and
    business processes such that ERP adoption would
    be possible a priori
  • Semi-structured interviews of top-managers (CEO
    and operations manager)
  • data recorded, transcribed and coded
  • Interview data completed by the interviewees
    answers to a survey instrument for factual data
  • Data analysis
  • evaluation of the sampled SMEs by organising the
    data along the four dimensions of the ERP
    readiness framework
  • cluster analysis to identify ERP readiness
    profiles

11
Field Study Sample
has already implemented the production
management module of an ERP software package
12
Process data synthesis form for enterprise A
13
Common aspects
  • Organisational context
  • subcontracting ISO JIT MRP/MRP II
    (except for firm K)
  • lack information for decision making
  • several competitive strategies, no IT strategy
  • External forces
  • 20 of customers account for 80 of sales
  • pressure from customers to adopt ISO but not to
    adopt ERP
  • Perceptions of ERP
  • highest expectations process, product and
    information quality improvements
  • lowest expectations strategic capability,
    technological infrastructure
  • Business processes
  • relative mastery of operational processes
  • bus. intelligence focusing on competitors and
    technological innovation
  • partial integration of operations (interfaces
    between systems)
  • emphasis on OD and HRM

14
Three ERP readiness profiles
15
Group I The committed adopters (B, F, H, J)
  • Have already committed or are likely to commit to
    ERP adoption, as explained by
  • concern for continuous improvement
  • search for better management practices
  • desire to improve information quality, quantity
    and accessibility
  • Need for real-time information to make better
    decisions (requiring greater systems integration)
  • Perceive their competitors as having deployed ERP
    systems
  • High expectations with regard to potential
    benefits of ERP
  • Lower expectations as to the strategic value of
    ERP

16
Group II The uncommitted adopters (C, D, E, G, I)
  • Focus on operational rather than managerial
    processes, and on information flows as they
    relate to production
  • Expressed need for an improved technological
    infrastructure
  • Interest for more advanced, integrated IT (firm E
    excepted), including HRM
  • Lack of resources

17
Group III The late adopters (A, K)
  • Not considering ERP in the short or medium-term
  • Firm A has a reactive approach to strategic
    issues
  • existing technologies considered effective enough
    to meet its needs
  • investment in ERP is too great, given the firms
    size and market share and the potential ROI
  • Firm K is governed by a board of directors that
    oversees an entire group (issue of
    centralisation/decentralisation)
  • operational and managerial processes must first
    be reviewed
  • still uses traditional (non-computerised)
    operational methods
  • an ERP project was launched the previous year by
    the group but was "put on hold" given the
    conclusion that the group was not ready for ERP

18
Implications and Conclusion
  • No role played by external pressures dimension,
    but
  • No effect of size and industry, but
  • Further study
  • more extensive (as a complement to intensive)
    study of ERP readiness
  • impact of ERP readiness upon the process and
    outcome (implementation risk) of ERP adoption in
    manufacturing SMEs
  • ERP readiness framework as the conceptual and
    methodological core of an ERP implementation
    project

19
  • Establish strategic objectives
  • informational and technological infrastructure
    alignment
  • (integration, flexibility,
    cross-functionality)
  • Assess ERP readiness
  • human, technical, financial resources, and
    training requirements
  • motivations and education requirements
  • processes to be reengineered
  • Plan ERP implementation project
  • scheduling and resource allocation
  • 4. Implement
  • (Evaluate)

EXTERNAL FORCES
ORGANISATIONAL CONTEXT
PERCEPTION OF ERP
BUSINESS PROCESSES
Committed, Uncommited, or Late Adopters
Using the evaluation model to implement ERP in
SMEs
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