Copying or distributing in print or electronic forms without written permission of Idea Group Inc. is prohibited. Information Resources Management Journal, 19(2), 18-36, April-June 2006 19 increased substantially (Seewald, 2002). There is, however, a growing criticism of escalating IT investments (Mears & Dubie, 2002) and their lack of justification (Krochmel, 1999). ERP systems are software systems to support and to automate the business processes, providing timely and accurate enterprise-wide information for decision making. ERP systems have a long history of evolution.
The production scheduling, material ordering, and product shipment systems evolved from manual reorder point systems for material procurement to computerized Materials Requirement Planning (MRP) to Manufacturing Resource Planning (MRP-II) systems that integrated MRP and capacity requirements planning to Manufacturing Execution Systems (MES) that further integrated MRP-II and shop floor and device control systems, and finally to ERP systems. Much of the streamlining of materials procurement process was achieved by MRP and MRP-II. By the late 1980s, tens of thousands of firms were using MRP-II systems (Rondeau & Litteral, 2001).
The SAP R/3 modules and submodules consisting of sales and distribution, materials management, warehouse management, quality management, production planning for process industries, financial accounting, controlling, project system, and office communication were expected to reduce inventories, improve cash management, and cut down operating expenses. Kalling (2003) recently provided a theoretical framework in which resource-based views (RBV) are advanced to understand how ERP can provide sustainable competitive advantage. The RBV is not universally accepted as a final explanation of competitive advantage.
Some believe that dynamic capabilities, not resources, are the source of competitive advantage. It is possible that ERP provides both unique resources as well as dynamic capabilities in the form of improved information and decision making to improve competitive advantage. Enterprise Resource Planning (ERP) Systems To avoid struggling with integrating myriad IT applications, many companies implemented ERP systems that required substantial investment of time, internal resources, and capital, resulting in significant organizational change (Dorien & Wolf, 2002).
Often, ERP system implementation is accompanied by other improvements and enhancements in existing legacy systems. Due to many simultaneous changes that accompany ERP system implementation, it is hard to attribute any performance changes after ERP system installation solely to ERP systems. However, ERP system implementation is, by far, the most criticized aspect of IT investments. ERP systems require outlays ranging from a few million dollars to several hundred million dollars (Mabert et al. , 2001). Despite high expenditures, ERP implementations have resulted in problems.
Rushed software installations and inadequate training are blamed for well-publicized troubles with ERP. In 1999, soon after the rollout of its ERP system, Hershey Food Corp. , in the third quarter of that year, lost $60. 4 million due to problems in customer service, warehousing, order processing, and timely shipments to retailers. ERP implementation problems of Whirlpool Corporation and W. L. Gore & Associates Inc. also have received considerable attention (Collett, 1999). The bankruptcy of FoxMeyer (a drug distribution company) in 1996 is directly attributed by many to flawed implementation of ERP systems.
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