THE INVESTIGATION OF BENEFITS AND RISKS OF INTER-
ORGANISATIONAL INTEGRATION OF ERP IN SOUTH-EAST ASIA
A study submitted in partial fulfillment
of the requirements for the degree of
Master of Science in Information Systems Management
at
THE UNIVERSITY OF SHEFFIELD
by
SHELLY GRETA MELISSA MANURUNG
Reg. No. 100151574
September 2011
ii
Acknowledgments
Writing this dissertation has become the most challenging academic work I have ever
faced. There are many people who have supported, helped and contributed in
different ways to the completion of this research.
First and foremost, I would like to thank the compassionate and gracious God for His
love and faithfulness throughout my life.
My deepest gratitude is to my supervisor, Dr. Guo Chao Peng, for his continuous
supervision, encouragement, knowledge and commitment during the process of this
research despite his busy academic and professional schedule.
My deep appreciation is to all the lecturers who have shared their precious
knowledge for my future career in information technology. And to all the
Information School staff members, I will be forever grateful for the assistance and
support in the academic process, doing so with excellence.
I would like to thank the Ministry of Communication and Information Technology of
the Republic of Indonesia for the scholarship, the materials and moral supports that
has enabled me to complete my master degree successfully.
I am very grateful to my >> High-Performance, Delivered >> managers, colleagues
and clients, who have completed the questionnaires, shared their times for
brainstorming and given many constructive feedbacks on this research.
Last but not least, I would like to thank my family, especially my mother – Linda
Tambunan, for the constant support, care, attention and assistance. To all my
classmates and friends for their friendship, jokes and anything you have done to
make a very wonderful and unforgettable time in Sheffield, I thank you.
iii
Abstract
Bakcgrounds. ERP which was initially designed to integrate the internal functions
within a company now evolves to integrate with the supply chain partners‘ system.
The existing study reveals that the inter-organisational integration possesses many
benefits. However ERP is very rigid and inflexible to fit to the external system which
has caused a very complex integration with numerous inherent risks.
Aims. The research attempts to identify the benefits and the risks incurred from the
inter-organisational integration of ERP and to prioritise the benefits and risks. This
will help the business to focus on the most critical risks.
Methods. The literature review was done to identify 17 benefits and 40 risks of ERP
inter-organisational integrations. The questionnaire as the tool of data collection was
developed from the literature review and then was distributed online to 60 ERP
consultants and users in Indonesia and Singapore yielding 91% response rate.
Results. SPSS and excel software were used to calculate the benefits and risks values
according to certain formulas. Two major results of this research are the benefits and
risks list of ERP inter-organisational integration. The top benefits are the information
definition and process, industry-wide process and shared data standardisation; and
the tangible global IT. While the top three risks are the users‘ reluctance to changes,
the lack of data ownership and the too long integration to respond to business
change.
Conclusions. Although the research has prioritised the benefits and risks, a more
extensive work is suggested to reach wider respondents from different companies
and countries in South-east Asia region and to combine the method with interview or
observations in order to obtain a more representative picture.
iv
Table of contents
Abstract .................................................................................................................. iii
Table of contents ..................................................................................................... iv
List of figures .........................................................................................................vii
List of tables ......................................................................................................... viii
Chapter 1 Introduction .............................................................................................. 1
1.1 Background of the research ................................................................................. 1
1.2 The problem statement .................................................................................... 2
1.3 Research question and research objectives ....................................................... 3
1.4 Research methodology .................................................................................... 3
1.5 Structure of the dissertation ............................................................................. 4
Chapter 2 Literature review ...................................................................................... 5
2.1 Introduction ..................................................................................................... 5
2.2 ERP ................................................................................................................. 5
2.2.1 Evolution of ERP ...................................................................................... 5
2.2.2 ERP and ERP II ........................................................................................ 7
2.2.3 Benefits of ERP ...................................................................................... 11
2.3 Supply chain .................................................................................................. 12
2.3.1 Evolution of supply chain........................................................................ 12
2.3.2 What is supply chain ............................................................................... 13
2.3.3 Technology-enabled supply chain ........................................................... 14
2.4 ERP integration within a supply chain line .................................................... 15
2.5 Conclusion .................................................................................................... 18
Chapter 3 Benefits and risks.................................................................................... 19
3.1 Introduction ................................................................................................... 19
3.2 Benefits ......................................................................................................... 19
v
3.3 Risks ............................................................................................................. 25
3.4 Conclusion .................................................................................................... 34
Chapter 4 Methodology .......................................................................................... 36
4.1 Introduction ................................................................................................... 36
4.2 Research approach ......................................................................................... 36
4.3 Research design ............................................................................................. 37
4.3.1 Data collection ........................................................................................ 38
4.3.2 Questionnaire .......................................................................................... 39
4.3.2.1 Setting .............................................................................................. 39
4.3.2.2 Procedures ........................................................................................ 40
4.3.2.3 Participants ....................................................................................... 40
4.3.3 Data analysis ........................................................................................... 41
4.4 Conclusion .................................................................................................... 41
Chapter 5 Results and Findings ............................................................................... 42
5.1 Introduction ................................................................................................... 42
5.2 Result presentation ........................................................................................ 42
5.2.1 Benefits................................................................................................... 42
5.2.2 Risks ....................................................................................................... 49
5.3 Findings ........................................................................................................ 71
5.3.1 Formula description ................................................................................ 71
5.3.2 Findings presentation .............................................................................. 73
5.3.2.1 Benefits ............................................................................................ 73
5.3.2.2 Risks ................................................................................................ 75
5.4 Conclusion .................................................................................................... 79
Chapter 6 Conclusion.............................................................................................. 81
6.1 Introduction ................................................................................................... 81
6.2 Research review ............................................................................................ 81
vi
6.2.1 The research contribution ........................................................................ 81
6.2.2 The research relation to the research questions and objectives ................. 82
6.2.3 Research implications ............................................................................. 83
6.3 Limitations .................................................................................................... 84
6.4 Recommendations for further research........................................................... 84
Reference ................................................................................................................ ix
Appendix ................................................................................................................ xx
vii
List of figures
Figure 1 General ERP Structures .............................................................................. 8
Figure 2 ERP II Definition framework .................................................................... 10
Figure 3 An integrated model of the supply chain ................................................... 14
Figure 4 Interactions between software agents during configuration ........................ 18
Figure 5 External integration of ERP benefits ontology ........................................... 24
Figure 6 External integration of ERP risks ontology................................................ 35
Figure 7 Methodology Design ................................................................................. 38
viii
List of tables
Table 1 The benefit valuation .................................................................................. 74
Table 2 The most highly perceived benefits ............................................................ 74
Table 3 The benefits list of ERP inter-organisational integration ............................. 75
Table 4 The risk valuation ...................................................................................... 77
Table 5 The most critical risks ................................................................................ 77
Table 6 The risks list of ERP inter-organisational integration .................................. 79
1
Chapter 1 Introduction
1.1 Background of the research
Enterprise resource planning (ERP) was initially designed to focus on internally-
oriented applications integration such as finance, accounting, manufacturing, order
entry and human resources by sharing the database (Jacobs and Weston, 2007;
Berchet and Habchi, 2005). However, as the companies expand, the business
transactions and the complexity increase, the companies cannot focus on the business
itself, they have to integrate their information system with suppliers and customers
effectively to attain a stable long-term relationship. The effective supply chain has
become critical to sustain a business competitive advantage. The companies which
have implemented ERP now move toward the external integration with the supply
chain partners to support the information management and business coordination in
networked companies.
There had been numerous studies on ERP from the internal integration perspective
such as ERP implementation (Berchet and Habchi, 2005; Muscatello et al., 2003;
Chen, 2001), ERP impact on business process performance (Wieder et al., 2006)
ERP failures (Al-Mashari and Zairi, 2000) and ERP lifecycle (Rosemann, 2008);
however studies on ERP from the external integration perspective has emerged in the
late 90‘s. Therefore, the inter-organisational ERP integration is a novel area which
limits the relevant literature searching area.
As ERP has become saturated, ERP adopters are now seeking for the extended
functionalities of ERP, one of which is the integration with the supply chain partners
(Fawcett et al., 2008). Mohamed and Fadlalla (2005) summarised ERP evolution into
four phases; MRP, MRPII, ERP and ERPII, where ERP II is defined as the external
integration. Haug et al. (2010); Themistocleus et al. (2003) listed down the
information which must be shared with the supply chain partners. Daneva and
Wieringa (2006) described the mechanism of aligning application components for
ERP external integration.
2
ERP has tremendous impact on companies. Companies which have integrated with
the supply chain partners‘ ERP system are able to gain the advantages such as
operational and administrative cost reduction, real time reports provision regarding
management‘s decision (Davenport, 1998); stock outs, delivery delays, planning
inaccuracies and inventory level reduction (Gupta, 2000). However, ERP external
integration also imposes dangers. Gupta (2000) highlighted the data errors and the
maintenance difficulty. Gattiker and Goodhue (2005), Akkermans et al. (2002),
Davenport (1998); found that the rigidity/inflexibility of ERP to fit the peculiarities
of business which urges more customisations (rewriting the system codes or building
interfaces) causes more problems whenever major upgrade exists. The more
customised ERP is, the less seamless the communication with the suppliers‘ and
customers‘ system will be.
Given the various advantages and the disadvantages of ERP external integration
toward the supply chain, it is too early to conclude whether the integration of ERP
positively or negatively influences the business‘ performance. Hence, the study on
the benefit and risk identification of ERP inter-organisational integration in the
supply chain is relevant and important both for the management of the companies
which have implemented ERP but haven‘t integrated with their supply chain
partners, but also for the companies which have externally integrated to focus on the
critical risks.
1.2 The problem statement
The literature review has identified several benefits and some inherent risks
associated from the inter-organisational ERP integration. This research is important
to attest that the benefits and risks from the literature review exist in the context of
real business. To represent the real business perceptions, it involves several ERP
users and consultants in Indonesia and Singapore to assess the benefits and risks of
inter-organisational ERP integration. The majority of ERP used by these consultants
and users is SAP. This research is expected to be valuable for the companies‘
management to explore the benefits and to be alert on risks.
3
1.3 Research question and research objectives
What are the benefits and risks incurred from the ERP inter-organisational
integration in the supply chain?
In order to answer the question, the current research will achieve the following
objectives:
1. To identify the benefits and risks associated with the ERP external integration
on the ground of a wide range of literature consultation.
2. To assess the benefits of ERP external integration.
3. To evaluate the probability, the impact and the frequency of occurrence of the
risks identified from the first objective.
4. To prioritise the list of risks based on the evaluation of probability, impact
and the frequency of occurrence.
1.4 Research methodology
The research uses the deductive approach, with the quantitative method of data
collection design as follow:
1. Conduct a review of the literature to identify the benefits and risks incurred
from the external integration of ERP.
2. Carry out quantitative data collection to assess the opinions of the group of
ERP consultants and users on ERP integration perceived benefits and risks by
means of questionnaire.
A questionnaire will be developed from the check list of benefits and risks based on
the literature review. The first section is a list of benefits, where the respondents
assess the degree of a benefit. The second section is a list of events, where the
respondents has to select if it is perceived as a risk or not, the probability of
occurrence, the impact and the frequency of occurrence. The questionnaire is
distributed online to a sample of consultants and users who are knowledgeable on the
external integration of ERP.
4
Upon the collection of completed questionnaires, the data is analysed to prioritise the
benefits and risks. This will be valuable to the businesses as the management can
focus the attention to the most critical risks and to realise the benefits.
1.5 Structure of the dissertation
This dissertation consists of six chapters including the current introduction chapter.
Following is the structure of the chapters:
Chapter 1: Introduction chapter highlights the background of ERP inter-
organisational integration within the supply chain line and the research objectives
which will be accomplished in the subsequent chapters.
Chapter 2: The literature review chapter attempts to build the theoretical foundation
of the overall research. This chapter consists of 3 main parts, the definition of ERP
and its evolution across the time; the theories of supply chain and ERP inter-
organisational integration with the supply chain partners.
Chapter 3: The benefits and risks chapter identify all the benefits and risks of inter-
organisational ERP integration. There are 17 benefits and 40 risks classified on the
benefit and risk ontology.
Chapter 4: The methodology chapter describes the methodology used to conduct this
research. It includes the research approach and research design. Research design
describes the details of data collection, data analysis, and survey procedures.
Chapter 5: The results and findings chapter presents the statistics of the completed
questionnaires by means of pie charts, elaborates the formula used to calculate the
value of each benefit and risk, displays the benefit and risk values and the final check
list of the prioritised benefits and risks of ERP integration with the supply chain
partners. It is a new theory aiming to help the business to focus their attention on the
specific benefits and risks.
Chapter 6: The conclusion chapter closes this research by summarising and showing
the relations of each chapter. This chapter signifies how the results of this research
exactly address the research objectives in the first chapter.
5
Chapter 2 Literature review
2.1 Introduction
Gunasekaran and Ngai (2004) highlighted the importance of information technology
(IT) in the supply chain management, as they claimed that IT is a nerve of supply
chain, by means of virtual enterprises in supply chain management (SCM), business
to business (B2B) e-commerce (EC), information sharing through electronic data
interchange (EDI) and IT strategic planning in SCM. The effectiveness of supply
chain is impossible without IT. The competition nowadays is no longer between
enterprises, but between the supply chains.
ERP, one of IT solutions, was initially aimed to integrate the internal functions
within a company but nowadays it turns to coordinate with the supply chain partners,
such as suppliers and customers. ERP now is prepared for extended organisation
system, which is called ERP II to coordinate with supply chain partners‘ systems
(Beatty and Williams, 2006; Behesthi, 2006; Kelle and Akbulut, 2005; Mohamed
and Fadlalla, 2005; Weston, 2003; Bond et al., 2000).
This chapter attempts to provide the clear background of this research by
understanding the concepts of ERP and supply chain, and how ERP integrates with
other partners‘ ERP within a supply chain. In this research, the terms of inter-
organisational and external integration are used interchangeably, referring to the
integration of ERP with other organisations‘ ERP.
2.2 ERP
2.2.1 Evolution of ERP
In the late 1960‘s, material requirements planning (MRP) application software was
built for future requirements of components projection, creation of master scheduling
and bill of material, procurement and shop floor control. Then, in 1980‘s, MRP II
idea shifted from material requirements planning to manufacturing resource
6
planning, with overall manufacturing planning scope, such as cost reporting, due
date scheduling and procurement (Jacobs and Weston, 2007; Chen, 2001).
The trigger of ERP creation is the businesses demand that inbound and outbound
inventory movement; work in process and finished goods resulting from the
production process and external transactions can be fully reflected on the general
ledgers report (Jacobs and Weston, 2007).
ERP was promoted in the 1980‘s by American Production and Inventory Control
Society (APICS) to integrate the internal functions within an organisation by sharing
the database (Berchet and Habchi, 2005). There were five major ERP vendors; J.D.
Edwards, Oracle, BAAN, PeopleSoft and SAP, however J.D. Edwards, BAAN,
PeopleSoft and Oracle were merged, leaving SAP and Oracle as two major ERP
players.
Siragher (1999) highlighted that ERP in the past primarily focused on the back-office
functions, which did not face customers directly; such as, procurement, warehousing
and payroll. It excluded the front-office functions such as sales, marketing and
customer service due to its discrete and uncertain nature. Since the late 1990s, ERP
vendors have attempted to include the support of internal supply chain for goods
production (Puschmann and Alt, 2005).
Nowadays, most companies have undergone the post-implementation phase and are
seeking more benefits from ERP. The next development of ERP are embedding
functions such as SCM, customer relationship management (CRM), data mining,
demand planning and mobile ERP into the system (Willis and Willis-Brown, 2002).
Davenport and Brooks (2004); Akkermans et al. (2003); Tarn et al. (2002); Scheer
and Habermann (2000); suggested that in the future, ERP cannot remain within the
organisational boundaries and has to expand through e-business. The nature of global
business requires external collaboration to share operational data and extended
transaction with suppliers and customers in the form of collaborative tools for joint
planning (collaborative planning, forecasting and replenishment-CPFR) (Forslund,
2010; Akkermans et al, 2003).
The concept of integration with the suppliers and customers has directed ERP
evolution. Bond et al. (2000) introduced the concept of ERP II on their note ―ERP is
7
dead – long live ERP II‖ which bridges the enterprise with other enterprises with the
functionalities of workflow, project, knowledge and CRM. Mohamed and Fadlalla
(2005) summarised the evolution of ERP as follow:
Period Technology Scope Major
Shortcoming
70‘s MRP Material management task Single-task focus
80‘s MRP II Manufacturing function Single-function focus
90‘s ERP Intra-enterprise of all
functions
Single-enterprise
focus
2000‘s ERP II Inter-enterprise integration Complexity
2.2.2 ERP and ERP II
ERP is an application system integrating functions in a company, such as marketing,
finance, manufacturing and logistics (Helo and Szekely, 2005; Kelle and Akbulut,
2005; Davenport and Brooks, 2004; Axam and Jerome, 2003; Tarn, et al. 2002).
Helo and Szekely (2005) listed down the scope of ERP as shown on Figure 1, they
are (1) the master production schedule (MPS) which relies on sales orders and
forecasts; (2) MPS which generates purchase orders to suppliers when the material
requirements have reached the reorder point according to capacity, bill-of-materials
and inventory records; and (3) inventory statuses which are updates when the raw
materials are delivered by the suppliers, when the production changes the raw
material into work-in progress and finished goods inventory, and when the finished
goods are delivered to the customers. Financial controls in ERP include the receipt
and payment of purchasing invoice from the suppliers, the issuance and collection of
sales invoice to the customers, the tax and bank transactions and other internal
activities to generate the balance sheet and income statement for a fiscal period.
There are three characteristics of ERP; (1) it is generic to fit a range of industries,
that it must be configured before using, (2) it is packaged and tailored to meet the
requirements of specific industry, (3) it has to be installed or implemented following
the configuration (Klaus et al.; 2000). Regarding the generic characteristic of ERP;
Chen (2001); Yusuf et al. (2003) stated that ERP was designed to fit the general
business needs from different industries; hence, most companies have to change the
current business process in order to fulfill ERP requirements.
8
Figure 1 General ERP Structures
[Adapted] From: P. Helo and B. Szekely. (2005). Logistics information systems; An analysis of software solutions for supply chain co-ordination, Industrial Management & Data Systems. 105(1). 5-18
This is one major reason why many ERP implementation projects failed. In most of
IT system implementations, it is the system which needs to meet the company‘s
requirements, instead of the company which conforms to the system. However, this
does not apply to ERP. ERP implementation is not merely setting up a new software
or IT system; it is a fundamental change which impacts the whole organisation, the
9
structure of organisation, the business process, the procedures and the system (Al-
Mashari and Zairi, 2000). Therefore, when the fully functioning system is not aligned
with the readiness of the users and the organisation, the system can be potentially
abandoned (Barki and Pinsonneault, 2002; Chen, 2001).
ERP is constructed from three elements, single central database, transactional
application modules and information generating application modules (Stratman and
Roth, 2002). This structure allows the information flow and sharing across back
office functions and the transaction tracking. When the production schedules show
the lack of materials, it automatically alerts the procurement staff to issue purchase
orders to suppliers as the inventory database is shared by the production and
procurement departments. Upon the issuance of purchase order, the materials are
delivered by the suppliers; the warehouse staff will close the status of purchase order.
Next, the accounting staff receives the invoice based on the completed delivery of
purchase order and settles its payment. Here we can see how the information is
shared and traceable between the production, procurement, warehouse and
accounting functions.
In the past, ERP was an expensive solution which includes of the implementation,
the license purchase and the maintenance (Scheer and Habermann, 2000). It is
supported by Tarn et al. (2002) as they identified many hidden costs from ERP
implementation such as training cost, additional tools of ERP like tax and barcode,
data conversion cost, consulting cost and over budget due to delayed project. Only
companies with huge IT annual budget could afford to implement ERP, leaving no
opportunity to small and medium enterprises (Muscatello et al., 2003; van
Everdingen et al., 2000). However, realising the fact of saturated market, ERP
vendors currently strive to attract more small and medium sized companies, for
example SAP with SAP Business One and Oracle with Oracle‘s JD Edward‘s
Enterprise One applications; offering a package for small and medium sized
company with shorter implementation duration.
Now, most companies implementing ERP have stabilised and look forward to
integrate with the supply chain partners‘ system, which is the underlying concept of
ERP II. The shifting from ERP to ERP II is described on Figure 2. Bond, et al.
(2000) defined ERP II as:
10
―A business strategy and a set of industry-domain-specific applications that build customer and
shareholder value by enabling and optimizing enterprise and inter-enterprise, collaborative-
operational and financial processes‖ (p.2).
While Weston Jr. (2003) interpreted ERP II as the automation of information,
processes and functions characterised by closed-loop, functionally integrated, real
time planning and control system which includes the suppliers, customers and
partners.
ERP ERP II
Enterprise optimization Value chain participation/
collaborative commerce
enablement
Manufacturing and distribution
All sectors/segments
Manufacturing, sales and
distribution and finance process
Cross industry, industry
sector and specific industry processes
Internal, hidden Externally connected
Web-aware, closed,
monolithic Web-based, open,
componentized
Internally-generated and consumed
Internally and externally consumed and published
Figure 2 ERP II Definition framework
[Adapted] From: B. Bond, Y. Genovese, D. Miklovic, N. Wood, B. Zrimsek & N. Rayner. (2000). ERP is dead –
Long Live ERP II
ERP II has more functionality from add-ons such as Web Portals, data warehouse
and customer management system (Beatty and Williams, 2006). ERP II is expected
to overcome ERP major limitation that is the rigidity and the irresponsiveness to
business requirements. Weston Jr. (2003) urged that ERP II must demonstrate better
adaptability, flexibility and responsiveness than ERP. The adaptability refers to a
reconfigurable system based on customer‘s requirements; flexibility refers to the
ability to unite with newly acquired firm, from the technical or business process
Role
Domain
Function
Process
Architecture
Data
11
point of view; while responsiveness means the ability to react upon the
vendor‘s/customer‘s change request (Weston Jr., 2003).
2.2.3 Benefits of ERP
Regardless numerous reports on ERP implementation failure, there are benefits that
the companies have gained. ERP has improved the business process particularly on
production, purchasing and distribution (Scheer and Habermann, 2000); has
ameliorated communications between departments (Akkermans et al., 2003) and has
increased the transparency between functions, as the production can see what sales
do in the market place, the procurement can view the marketing plan, and the
procurement orders exactly what is needed by the production (Davenport and
Brooks, 2004).
ERP enforces standardisation of business process which sustains the management
decision such as activity-based costing, business process reengineering and supply
chain management; it integrates data, information and corporate process; and it also
updates information supporting the real time analysis of key issues on material usage,
costs, quality, customer satisfaction, sales status and financial performances (Ryrie,
1999 cited in Huin et al., 2002).
Helo and Szekely (2005) highlighted ERP functionalities and the benefits as follow:
Functionality Claimed Benefits
Integrated material handlings, human
resources and finance control
Integration and standardisation.
Multi-site, multi languages and multi-user
systems
Sharing responsibility and increasing
information transparency. Olson et al. (2005)
emphasised on data accuracy is at the point
of entry which causes the increasing
responsibility of the subsidiary.
Integration of data storage Cost is reduced as the master data (supplier,
customer, bank, products) is entered once.
Advanced reporting features The transaction tracking enforces more
control to the system and the evaluation of
supplier, customer and product
performances.
12
Standardised and consistent ERP applications program throughout the geographically
distributed enterprises has enabled fast managerial report generation and empowered
the employees to obtain real time information which impacted to improved decision
making (Behesthi, 2006; Huin et al., 2002; Willis and Willis-Brown, 2002). Behesthi
(2006) gave examples of governmental and educational organisations that have been
able to cut the time needed to generate reports from weeks to hours. In addition to
this, Yusuf et al. (2003) mentioned other benefits, such as data clean up, business
process automation and supply chain improvement.
Regarding the financial performance, Davenport and Brooks (2004); Sarkis and
Sundarraj (2003) claimed that ERP has decreased the inventory level by 15% by
linking the sales forecast, production scheduling and procurements. Similar with this
notion, Chen (2001) pointed out about the inventory decline, working capital
reduction, widened information about customer requirements, and the ability to view
and manage extended suppliers and customers as a whole. ERP has been important to
manage day-to-day supply chain activities such as entering orders, tracking product
shipments, scheduling production, generating sales forecast and preparing for
financial reports (Donovan, 1999 cited in Boubekri, 2001).
2.3 Supply chain
2.3.1 Evolution of supply chain
In 1950‘s until 1960‘s most industries were based on mass production, focusing on
quantity to reduce the unit cost of production. This has caused the problems of slow
moving products and high level of inventory. Then, in 1970‘s, the concept of
Manufacturing Resource Planning emerged to avoid excess inventory by careful
planning of demand. In 1980, there was a concept of Just in Time to eliminate entire
finished goods inventory by producing only if there is a demand which emphasises
on the quality as the poor quality materials will slow the lead time (Tan, 2001).
The concept of supply chain emerged in the literature in the mid-1980‘s. At this
stage, the business carried out strategic partnership with customers and suppliers.
Maintaining long term relationship with few partners is better than with multiple
ones with short term contracts, because long term suppliers are more committed to
13
quality and on-time delivery which can eliminate unnecessary inventory. In 1990‘s,
the evolution of supply chain continues, encompassing technology as well as quality
and cost as the critical factors to integrate with buyers and suppliers (Tan, 2001).
The future supply chain development is to achieve interoperability among customers
and suppliers to create highly leveraged value chain with the least human
intervention (Helo and Szekely, 2005; Davenport and Brooks, 2004). It evolves from
the stage of intra to inter-organisational implementation, with the furthest scope from
the initial source (supplier‘s supplier, etc) to final customer (customer‘s customer,
etc) (Cooper et al., 1997). Technology including internet has revolutionised the
supply chain, such as e-procurement, electronic data interchange (EDI), the use of
radio frequency identification (RFID) and different forms of e-business and e-
commerce to improve partnership with suppliers and customers.
2.3.2 What is supply chain
Fawcett et al. (2008); Gunasekaran and Ngai (2004) defined supply chain as the
integration of all value added activities from product design to customers delivery.
While Harland (1996, cited by Tan (2001)) defined supply chain management as
managing business process and relationships (1) internally within a company, (2)
with immediate suppliers, (3) with first and second-tier suppliers and customers and
(4) with the entire supply chain.
The coordination with supply chain partners can be classified into four; logistic
synchronisation, information sharing, incentive alignment and collective learning
(Simatupang et al., 2002). The logistic synchronisation aims to align the logistics to
customer fulfillment; information sharing is to distribute information equally to all
partners; incentive alignment attempts to distribute risks and profit from the
partnership; while collective learning is for diffusing knowledge across borders.
The material and information flow synchronise the supply chain by ensuring the
timely information sharing in order to place the products in the right place, at the
right time, price and condition (Tarn et al., 2002; Premkumar, 2000). Akkermans et
al. (2003) showed the financial, information and material flows in a supply chain on
Figure 3. The materials flow is straightforward, from the suppliers to the
organisation, then to the customers. However, the information flows from and to
14
different directions within the supply chain, for example the initiation of orders to
suppliers, the delivery from the suppliers, the payment to suppliers, the receiving
orders from customers, the logistics information to customers, and receiving payment
from customers. Information flow is more complex than material flow; it involves
not only customers and suppliers, but also banks, retailers, warehouses and agency.
The scope of supply chain management includes customer relationship management,
customer service management, demand management, order fulfillment,
manufacturing flow management, procurement, product development and
commercialisation (Cooper et al., 1997). Min and Zhou (2002) categorised all of
these into two streams; material management (inbound logistics) and physical
distribution (outbound logistics).
Figure 3 An integrated model of the supply chain
[Adapted] From: H. A. Akkermans, P. Bogerd, E. Yucesan & L. N. van Wassenhove. 2002. The impact of ERP on supply chain
management: Exploratory findings from a European Delphi study, European Journal of Operational Research. 146, 284–301
The main objectives of supply chain management are to place the product only when
needed at the least cost, to maintain the low level of inventory while still satisfying
the customer requirements and to reduce cycle times by fulfilling customer orders
with the right timing of productions (Boubekri, 2001).
2.3.3 Technology-enabled supply chain
There are many technology inventions which automate supply chain process. One of
which is electronic data interchange (EDI). EDI is basically sharing data; which used
to be on papers now is online; with partners without reliance on protocols. EDI used
to lock partners which led to higher switching cost (Ranganathan et al., 2004).
15
However, the existence of web-based system has increased EDI flexibility which
simplifies the joint or disjoint with multiple partners.
The idea of EDI which emerged in 1960 leads to the discovery of e-invoicing/e-order
in 2003. The mechanism of e-order is as follow; the enterprise‘s ERP generates an
order in a specific file format (plain text file or XML) which is sent to web-enabled
intermediate service provider; then it is loaded and translated to the supplier‘s web
site (Pramatari, 2007). Broader than EDI and e-order, there is e-procurement; an
internet based solution to accommodate the corporate procurement process (Davila et
al., 2003; Prestutti Jr., 2003).
The latest innovation was radio frequency identification (RFID) which is the use of
radio waves to automatically identify individual items which elevate the ordinary
barcode scanning. The data is stored in an electronic product code (EPC) which can
be shared with the authorised partners in external transactions (Bottani and Rizzi,
2006). RFID records more information and requires no human intervention, unlike
barcode. It has drawbacks on privacy and authentication; however there are ongoing
attempts to address these issues (Juels, 2006).
Literatures still question whether these technologies have improved the supply chain
performance, however Devaraj et al. (2007) argued that that the technology which is
embedded in the production process can improve the productivity rather than the IT
which only collects or stores information.
2.4 ERP integration within a supply chain line
There are many inherent supply chain problems; such as the demand forecast
updating, order batching, price fluctuation and rationing and shortage gaming
(Power, 2005). Information system fragmentation is the primary problem which
causes information delays and distortions along the supply chain (McAfee, 1998
cited by Akkermans et al., 2002). To improve the information flow in the supply
chain, the real time communication and mutual trust are very important, by means of
ERP and internet to transfer the information and technology (Min and Zhou, 2002).
16
Sarkis and Sundarraj (2002) classified the customer-supplier relationship into four:
Fire-fighting relationship which is the quick search for a supplier to meet the
minimum requirement of operation.
Commodity relationship which is based on the best cost.
Alliance relationship which is long term and abided by contract, not based on
the cost consideration only, but also based on organisational and
technological fit.
Virtual enterprise relationship which is an ad-hoc basis.
This ERP inter-organisational integration is only applicable for alliance relationship,
because the costly and complex ERP configuration is intended for the long term
purpose.
Akkermans et al. (2002) highlighted that ERP enforces the information transparency
and standardisation across the supply chain which alters the information speed. They
argued the major trend in the future is further integration of entire chain and
achieving ERP flexibility to deal with the discrete supply chain demands.
The integration can be done on different aspects, sharing sales and promotion
information are suggested for companies which implemented Vendor Management
Inventory (VMI) and Collaborative Planning, Forecasting and Replenishment
(CPFR); while sharing the supplier inventory, capacity constraints and scheduling
information are suitable for Advanced Planning System (APS) implementers
(Meixell and Gargeya, 2005).
As the integration involves several organisations; it can be very complex and
problematic. There is a possibility of information asymmetry or a condition where
the benefit of a dominant party will cause loss to other party, for example supplier
prefers the bulky and infrequent delivery for reducing cost of shipment, while the
buyer‘s expectation is small and frequent delivery for decreasing the inventory (Kelle
and Akbulut, 2005; Premkumar, 2000). It is hard to achieve a win-win solution.
There are factors hampering the external integration, such as; the decision involving
all organisations; the company intention to maximise its own interest causing
difficulties to achieve a common interest; and the difference on infrastructures,
17
business processes, enterprise systems, data semantics and authorisation hierarchies
(Daneva and Wieringa, 2006). Therefore, the decision on business process changes
and data semantics must be accepted by all partners before the integration takes
place. Davenport and Brooks (2004) supported the idea as they stated that it requires
an agreement on information entities and flows, or employ a translation approach of
one‘s system to meet other‘s requirements.
When two systems integrate, the customisation of one partner‘s system is
unavoidable to fit to others. There is a trade-off between the customised and
standardised integration. The more customised (the more flexible, the less rigid) ERP
system fosters the innovation, creativity and process diversity, however it imposes
high costs of customisation, maintenance, testing and risks. On the other hand, the
more standardised ERP can be less costly but it limits the creativity (Daneva and
Wieringa, 2006).
Turowski (2002) described the technicality of interaction between the company‘s
ERP with the supplier‘s ERP in Figure 4 where upon receiving orders from
customers, the manufacturer translated all the required components to the demand
report and passed it to all related suppliers via EDI. The supplier then validates the
availability of the components, and passes back the information of the shipping date,
quantity and prices to manufacturers in order to negotiate. Davenport and Brooks
(2004) suggested other major approach to connect to other companies‘ system which
is through the industry hub in established XML standards.
Themistocleus et al. (2003) argued that the complexity of inter-organisational
integration of information system is due to the different standards, computing
languages, platforms and operating systems, fixed and rigid structures for messages,
interfaces and databases.
18
Figure 4 Interactions between software agents during configuration
[Adapted] From: K. Turowski. 2002. Agent-based e-commerce in case of mass customization, International
Journal of Production Economics. 75. 69-81
2.5 Conclusion
The literature review chapter aims to obtain the firm theoretical foundation of ERP,
supply chain and ERP integration within the supply chain line. The major goal is to
understand that the integration of ERP with the supply chain partners can improve
the competitiveness and other benefits which will be discussed on a later chapter;
however, ERP structure is too rigid that has resulted in complexities and constraints
with many inherent risks which will also be discussed in the next chapter.
19
Chapter 3 Benefits and risks
3.1 Introduction
There are two major parts of this chapter, the benefits and the risks. The benefits
section has identified 17 benefits which are classified into operational, tactical and
strategic benefits as shown on Figure 5, the ERP inter-organisational integration
benefits ontology. While the risks section has identified 40 risks associated with the
ERP inter-organisational integration. They are classified into technical,
organisational and inter-organisational risks, as shown on Figure 6, the ERP inter-
organisational integration risks ontology.
3.2 Benefits
Operational benefits
1. Cost is reduced
The most measureable benefit from the integration is cost reduction (Daneva and
Wieringa, 2006; Kelle and Akbulut, 2005; Barki and Pinsonneault, 2002; Boubekri,
2001). Davenport and Brooks (2004) put Procter & Gamble/Walmart, Reebok,
Hewlett-Packards and Boeing which consolidate the information sharing with the
partners as the example of substantial cost reduction. The major problem of internal
supply chain was the slow turnover yielding to high level of inventory. ERP external
integration can attack the underlying problem that is the inventory reduction of both
customer and supplier. However, Beatty and Williams (2006) argued that to succeed
the funding of ERP II project, the companies cannot make the cost reduction as the
sole motivation; they should consider more about enhanced functionalities embedded
in ERP II.
20
2. Cycle time is reduced
Forslund and Jonsson (2007) listed down the supply chain performance variables,
such as on-time delivery, delivery accuracy, lead time length and inventory service
level. These performance variables can be improved by integrating the information
system (Bagchi et al., 2005; Akkermans et al., 2003; Weston, 2003; Barki and
Pinsonneault, 2002; Boubekri, 2001; Cachon and Fisher, 2000; Gupta, 2000). The
integration has speed up the payment cycle (Kelle and Akbulut, 2005); cut the
customer‘s order and the arrival of shipment time by 15-40% and reduced the overall
lead time by 75% (Davenport and Brooks, 2004).
3. Planning calculation is more accurate and advanced
Daneva and Wieringa (2006) concluded that the integration makes the data visible
between the partners. When the company integrates with the customers, the sales
planning will be more accurate, subsequently, the production planning yielding to
more accurate material requirement planning from the suppliers. ERP can show
clearer effects of the inclusion as many relevant variables as possible on the planning
calculation; for example the effect of price changes to the inventory level (Davenport
and Brooks, 2004).
4. Data complexity is manageable
Daneva and Wieringa (2006) mentioned the notion of ability to handle data
complexity. As the company can view the suppliers‘ and customers‘ planning and
capacity, ERP enables the companies to capture more complex variables to generate
reliable analysis result which will influence their decision.
Tactical benefits
5. Supply chain activities are automated and simplified
There is no more manual process of sales man receiving a customer request and
spends two days to confirm the goods availability (Akkemans et al., 2003). ERP is
not only confirming whether the existing inventory is sufficient, but also whether the
potential order is profitable enough to be fulfilled. Daneva and Wieringa (2006)
pointed out that the agreement between partners on management policies can
substantially reduce unnecessary operation activities requiring intensive human
21
intervention. The free access to supplier‘s production and delivery schedules allows
the partners to identify the bottlenecks in the supply chain (Kelle and Akbulut, 2005).
6. The data is visible between partners
Data visibility is one of the integration benefits (Daneva and Wieringa, 2006; Kelle
and Akbulut, 2005; Gupta, 2000). The suppliers are able to view and analyse the
inventory level, the production planning of the customers, thus they can manage their
own production to deliver the required materials at the right time to the customers.
7. Supply chain partners are able to share information
Data visibility will lead to the ability to share information between partners (Devaraj
et al., 2007; Boubekri, 2001) or organisation transparency (Daneva and Wieringa,
2006). The transparency enforces the ―self-serve‖ practices where suppliers are
responsible for replenishing the low stock level of customers without being notified
before (Daneva and Wieringa, 2006), increases the velocity of information flow and
reduces the information distortions and delays (Akkermans et al., 2002). Davenport
and Brooks (2004) concluded that the more reliable of sales, inventory and
production figures information, the easier is information sharing with other
companies. There is no multiple verification or validation done by the supplier and
customer, as one partner analysis is reliable enough to be used by all related parties.
8. The communications and knowledge sharing between partners are improved
The communication and coordination between partners are improved when their
system integrates (Kelle and Akbulut, 2005; Gunasekaran and Ngai, 2004;
Akkermans et al., 2003). It also enforces the open information sharing culture to
balance top-down control and bottom-up empowerment so that employees
understand their job effects towards the overall supply chain (Daneva and Wieringa,
2006).
9. Customer satisfaction increases
Each partner learns from the interaction with the customers to anticipate the
customer immediate needs and the prediction of future market requirement (Daneva
and Wieringa, 2006) thus increases business responsiveness (Weston, 2003). It will
22
increase customer service quality yielding to customer satisfaction (Boubekri, 2001;
Kelle and Akbulut, 2005).
10. Profitable customers and suppliers are selected
The companies can view their unprofitable customer orders thus they can request for
customer‘s update or discharge (Davenport and Brooks, 2004). The regular analysis
of customer and supplier performance enables the company to make a right decision
on the continuation of the customer-supplier relationship.
11. Standardisation of information definitions and processes
Gunasekaran and Ngai (2004); Akkermans et al. (2003); Barki and Pinsonneault
(2002) found that ERP requires standardisation both in the internal process and the
external process of the supply chain partners. They said that although the partners are
internationally dispersed, they are obliged to the harmonised process and access to
single database allowing the consistent performance measurement. ERP has managed
the creation business practices template in particular industry, such as SAP in oil and
gas industry and Baan in aerospace industry.
Strategic benefits
12. Business competitiveness improves
The partners in the networked organisations will share the common vision, hence
presenting the same corporate identity to final customers (Daneva and Wieringa,
2006). The creation of synergy from the coordination with the partners will increase
business competitiveness (Barki and Pinsonneault, 2002; Boubekri, 2001). As the
supply chain integration will achieve the mutual benefits, each partner can focus on
improving its own operation or its own competitive advantage (Simatupang et al.,
2002).
13. The power structures in the extended supply chain is less dependent on the ERP
of the dominant parties
As the different partners have different systems to achieve shared objectives, the
power structure in the extended supply chain is less dependent on the ERP of the
23
dominant parties (Akkermans et al., 2003). The dominant partner cannot solely rely
on its own ERP, but it has to adapt the system with the partners‘ system.
14. Global IT becomes more tangible
ERP is characterised by the technical architecture (client/server computing) and
multi functionalities (multi-lingual, multi-currency and time zones capabilities)
(Akkermans et al. 2003). The coordination across functions and sites are enabled by
ERP (Daneva and Wieringa, 2006). This benefit of being a global IT can be more
evident if the integration involves geographically distributed partners; hence the
partners can exchange the information without the different language or currency
difficulties.
15. The speed of business execution increases
ERP accommodates the companies to input or update information across functions
and regions, hence the business can be optimised to 24/7 (Weston, 2003). One
transaction in a foreign branch can be reflected real time on the head quarter‘s
system; hence the head quarter can make a better and faster decision.
16. Cost and risk reduction as IT managed by third parties and consortia on a
shared basis
IT applications and infrastructure can be developed and maintained on a shared basis,
rather than individually for each participating company (Markus, 2001). This service
can be provided by a consortium of members of the exchange or a third-party.
17. Standardisation of industry-wide process and shared data
Houlihan (1987) raised a problem of the different product nomenclature across
nations which require translation and the additional lead time by 2.5 weeks for
distributor to adjust the local inventory. However, ERP integration enforces data
standardisation such as a naming convention of descriptions of parts, products and
services to facilitate e-commerce as it had been done in the pharmaceutical industry
(Markus, 2001). Markus (2001) suggested that some companies may collaborate to
gain cooperative advantage from common business process and share data which
enable smaller firms to cooperate to compete with a dominant firm.
24
Level 0 Level 1 Level 2
Figure 5 External integration of ERP benefits ontology
OB1 Cost is reduced
OB2 Cycle time is reduced
OB3 Planning calculation is more accurate and
advanced
OB4 Data complexity is manageable
TB1 Supply chain activities are automated and
simplified
TB2 The data is visible between partners
TB3 Supply chain partners are able to share
information
TB4 The communications and knowledge sharing
between partners are improved
TB5 Customer satisfaction increases
TB6 Profitable customers and suppliers are
selected
TB7 Standardisation of information definitions and
processes
SB1 Business competitiveness improves
SB2 The power structures in the extended supply
chain is less dependent on the ERP of the dominant
parties
SB3 Global IT becomes more tangible
SB4 The speed of business execution increases
SB5 Cost and risk reduction as IT managed by
third parties and consortia on a shared basis
SB6 Standardisation of industry-wide process and
shared data
ERP
external
integration
benefits
Operational
benefits
(OB)
Tactical
benefits
(TB)
Strategic
benefits
(SB)
25
3.3 Risks
Kaplan and Garrick (1980) defined the risk as the possibility of loss or the degree of
probability of such loss. From the literature reviews, there are 40 possible risks
identified from the external integration of ERP with the supply chain partners. These
risks are categorised into three, technical risks, organisational risks and inter-
organisational risks, as shown on Figure 6.
Technical risks (1-18):
1. ERP is inflexible to adapt to changing business models
Akkermans et al. (2003) found that an organisation can have more than one type of
supplier or customer base relationships. Some suppliers may adopt VMI, CPFR or
traditional relations. It is still questionable whether ERP can accommodate the
engagement or disengagement from these models. They also stated that ERP is lack
of web-enabled modularity which cannot allow ―borrowing‖ particular functions
from the supply chain partners.
2. ERP is inflexible to adapt to changing in business processes
During ERP implementation, most of lower level employees were only trained but
were not involved in the decision making, which violates the total quality
management philosophy (Akkemans et al., 2003). The change of business process
which is initially faced by the lower level employees might not be captured by ERP
admin. Just-in-time manufacturing or Kanban control may also fail during and after
ERP implementation (Akkemans et al., 2003).
3. ERP is unable to support the massive volume of unique customer orders
ERP cannot accommodate the massive volume of unique customer orders
particularly for commodity products‘ customers who might need the customised
service instead of the product itself (Akkermans et al., 2003).
4. ERP inability to handle the transactions involving more than two parties
Markus (2001) indicated the inability of ERP to accommodate the transactions
involving more than three parties. He uses Cisco as the example of company who
26
orders the suppliers to deliver the material directly to customers. Cisco relationship
involving more than three organisations where each partner must be able to track its
transactions cannot be accommodated by ERP.
5. Information exchange between parties is underdeveloped
Akkermans et al. (2003) stated that ERP lacks of extended enterprise functionality as
it is designed to accommodate internal functions processing only. Therefore to
enable external integration, the add-ons implementation; such as connectivity
software, processware, data warehousing tools and supply chain execution systems;
is needed. Daneva and Wieringa (2006) listed down all the semantic components that
need to be coordinated by the partners, such as data dictionaries, reporting formats
and semantics, data access permission and common principles of cross-
organisational data management. Considering the complexity of the system
technicality, the underdevelopment of information exchange is a valid issue.
6. Technical compatibility due to heterogeneous IT infrastructure
Premkumar (2000) explained that the client server architecture issues and the use of
more than one tier in the middleware depend on hardware/software and networks.
Irani et al. (2003) indicated that the significant integration problems are due to the
heterogeneous of IT infrastructure which consists of hundreds of incompatible
systems.
7. The integration process is too long to respond to business change
Markus (2001) argued that it is disastrous to have 18 months or more of system
integration or disintegration project when the fact of the business strategy life
nowadays lasts less than six months, as the businesses rapidly connect and
disconnect (merger or spin-off) from each other.
8. Interconnection problems that not all data are suitable for conversion
Many applications use XML as the solution of interconnection problems, however,
much contents used by companies are not well converted to XML; only structured
data containing richly descriptive metadata are suitable for conversion (Plumtree,
2000 cited by Markus, 2001).
27
9. The system changes impose a very high cost
Akkermans et al. (2003) stated that rapid customer changes can result in the high cost
of making changes in the system. Similar to this, Daneva and Wieringa (2006) stated
that the system change costs high due to the customisation cost, testing costs and the
maintenance cost. Beatty and Williams (2006) stated the tendency of over-
customisations is very expensive and consume many internal resources.
10. There are more customisations in the future
Daneva and Wieringa (2006) stated that there is always a probability of future
requirements coming from the internal business itself or from the external parties
which can demand for further customisations. Whenever the new release takes place,
the IT team must carefully check the impact to the core applications (Beatty and
Williams, 2006).
11. Upgrading is complex and difficult
Beatty and Williams (2006) pointed out that each upgrade will take 80% of a
software developer‘s and 66% of business analyst‘s time and efforts. Huifen (2010);
Daneva and Wieringa (2006) stated that ERP upgrade project is deceptively
complex.
12. Technical migration from ERP to ERP II complexity
Gillmann et al. (2002) stated that the migration approach from ERP to ERP II
depends heavily on the quality of 4GL code base and technical measures. If the code
base is too big or too cluttered, the identification of separable interface may fail.
They also added that the preparation of unified J2EE, 4GL runtime environments and
the synchronisation of database operations are very complex to ensure the seamless
flow of information between two sides.
13. Hardware and software crash
Pan (2008) stated no matter how solid the hardware and software is, there is always a
possibility of crash. When this happens, the normal operations relying on the system
will be interrupted.
28
14. The partners concern about the security of placing information in their partners’
database
Faisal et al. (2007) listed down the common information security risks such as
hackers, viruses, worms, spyware, internal employee frauds, natural resources and
terrorist attacks. Above all, Premkumar (2000) highlighted a specific issue regarding
the competitors which can get the access to the database and the confidential
information about its operation. He also added that the problem can be worsened
when the vertical integration takes place.
15. Intellectual property leak
Faisal et al. (2007) expressed the customer fear of losing the uniqueness of the
product/service when the supplier serves the competitors. Bagchi et al. (2005) also
mentioned the fear of loss of core competence such as proprietary technology,
business plans and competitive strategy when the integration takes place.
16. Partner’s user incorrectly inputs the data (lack of data ownership)
Partner‘s user incorrectly input the data which cause the incorrect data analysis of
another partners. This could bring the negative effect, as the data must be corrected
at the very first point of entry. Daneva and Wieringa (2006) suggested the way to
anticipate this by having a contract specifying the data ownership; who are
responsible for data entry and updates. Vosburg and Kumar (2001) also stressed the
importance of data ownership; both master data creator and daily transaction
processor; and the need to conduct audit report on data changes.
17. Lack of shared understanding of data
Functional and IT users might have different perceptions of the same field hence data
accuracy and consistency is very important (Vosburg and Kumar, 2001) In the
context of ERP II, data consistency is very crucial, for example the abbreviation of
product name must be consistent between the company and suppliers. The absence of
this will result in data duplication, because when the administration staffs cannot find
the record they wished, they will request for a new one.
29
18. System contains inaccurate data
Vosburg and Kumar (2001) stated that data migration is always initiated by data
conversion, where data cleansing is a major part of data conversion. They found that
the data is not entirely clean or some data is missing although the data migration was
successful. It is supported by Gupta (2000) as he stated that data errors will be
transmitted through ut the system.
Organisational risks (19-28):
19. Users are reluctant to changes
The external integration will require employee to change the way they do their daily
job (Weston, 2003). Without sufficient training and management communication, the
users may neglect the requirements of integrated ERP and stick to their habitual
practices.
20. The inability to attract and maintain qualified staff
Hakim and Hakim (2009) highlighted the difficulty to attract and maintain the
qualified staff in the context of ERP. This is also a relevant risk in the context of
ERP II as ERP II coverage is wider and more complex than ERP. Qualified staff
keeps the knowledge of system technicalities and the partners‘ behaviour; therefore
the absence of the qualified staff may slow the progress of integration.
21. Systems not felt as helping the business
Iskanius (2009) mentioned that users might feel that ERP does not help the business.
Huifen (2010) emphasised that instead of big-bang ERP implementation, ERP II
evolvement must be through multiple upgrades of existing ERP systems, so that
users undergo the sustained business process and system stability. The long
stabilisation of ERP II can hamper the users to realise the benefits of the integration.
22. Lack of training and education
User involvement and readiness of the new functionalities of the system is very
critical, therefore insufficient training leads to greater resistance (Beatty and
Williams, 2006; Axam and Jerome, 2003). Vorsburg and Kumar (2001)
30
recommended that training is not only on the technicalities of ERP II, but also the
procedural and management issues, for example avoiding inputting dirty data.
23. There is no enough support from the functional areas particularly inbound
(procurement) and outbound (sales)
Premkumar (2000) stated that inter-organisational integration sometimes takes place
of the pressure from the dominant customer or supplier which creates the fear inside
the organisation. It will tend to create the hostile environment within functions in the
company. He later stated that without sufficient support from internal functional
areas particularly from inbound (procurement) and outbound (sales), the business
synergy might not be achieved.
24. The lack of top management support
ERP external integration takes years to stabilise as it involves complex supply chain
networks. Top management support and IT investment are very important
(Gunasekaran and Ngai, 2004; Gupta, 2000). Without the commitment for future,
external integration of ERP can be useless.
25. ERP supplier does not develop the system in the future
Iskanius (2009) mentioned the possibility of the discontinuance of system
development by vendor. This is also relevant in the context of ERP II realising the
fact that ERP has an abundance of modules and adds-on functionalities which are
possibly discontinued when there is a decreasing demand from the market in the
future.
26. The company lays off the employees
The external integration aims to reduce duplicated activities as an activity needs to be
done by one partner only. Boubekri (2001) claimed that the employee lay-off is
probable both in supplier and customer side. The process automation will eliminate
many clerical and administrative jobs such as filling in purchase orders, checking the
material catalogue, sending and receiving documents from partners.
31
27. The warehouses and distribution centers are shut down
Premkumar (2000) argued that the direct information flow from supplier to customer
can endanger the existence of distributor as distributor acts as an agent who takes
advantage of inventory buffer from the uncertain demand. ERP supports the
companies to plan the production precisely, which will enable them to operate at full
capacity, to increase inventory turnover, and to reduce the inventory which impacts
to warehouse and distribution centers shut down (Boubekri, 2001).
28. The logistic vehicles are reduced
Boubekri (2001) considered the reduction of logistic vehicles reduction as a risk. The
data visibility and transparency allows the supplier to access the production planning
which enable them for maximising the delivery hence the idle logistic vehicles are
eliminated.
Inter-organisational risks (29-40):
29. The supplier performance measurement is difficult
Daneva and Wieringa (2006) stated that the absence of target setting and
performance report when the integration takes place has caused the difficulty to
measure the performance of suppliers. Setting the right variables of performance
measurement is important as the partners will act in the business practices that are
advantageous to them (Premkumar, 2000). The performance measurement can be
troublesome when there are different variables measured for different types of
suppliers. Forslund and Jonsson (2010) added that ERP can only generate the general
performance report; sometimes, the staff needs to populate data from ERP and
process it in the spreadsheet and present it on the power point according to the
company‘s requirements.
30. Internal control systems and audit measures for integrated ERP are not very well
developed
Although the mutual agreements and contracts have been made, there has to be
regular audit regarding the security, information exposure risk and fraud
(Premkumar, 2000). This is important to asses and to evaluate the continuity of the
partnership.
32
31. Designing incentive alignment (sharing increase in profit and cost reduction)
scheme is difficult
Incentive refers to the reward or punishment given to the supply chain partners to
align their actions and decisions with the supply chain profitability (Simatupang et
al., 2002). The creation of incentive scheme which clearly demonstrates the equitable
mechanism for sharing the increase in profit or cost reduction is difficult.
32. The length of the relationship is negatively correlated with the performance
measurement
There is a negative correlation between the length of supplier-customer relationship
and the performance measurement, such as total logistic costs, on-time delivery and
rate of return (Bagchi et al., 2005). According to them, generally a relationship of 20
years would impact to decreasing performance. This condition might be due to lack
of innovation and benchmarking with the highest performing supplier in the market.
33. Suppliers are leaving from long term contracts
The heavy reliance on few suppliers can be dangerous if the supplier does not meet
the requirements (Maloni and Benton, 1997). Daneva and Wieringa (2006)
emphasised that there has to be a high control to ensure that the other parties behave
in such a way which is best for everyone, such as the creation of revenues- and risk-
sharing models. However, this rigorous and strict performance monitoring can
threaten the suppliers to break the contract.
34. The partners commitment is not aligned with the long term shared business
strategy
When the company and buyers have agreed to give access to the company‘s
inventory level and to instruct them to replenish at the agreed price, they must be
sure that buyers will not execute bulky purchase during sales promotions
(Premkumar, 2000). Trust issue or agreement violation will occur if the partner
commitment is not aligned with the shared strategy.
33
35. The partner does not share the private information in an optimum way with their
partners
The partner who controls the information might be reluctant to share and use it to
gain more power over another (Barki and Pinsonneault, 2002; Simatupang et al.,
2002). The companies hesitate to increase their coordination efforts beyond order
processing and operational scheduling and the key partners tend to have better access
to planning data than arm‘s-length customers/suppliers (Kemppainen and
Vepsäläinen, 2003).
36. The partner lacks of motivation to align the decision with the mutual goal
Simatupang et al. (2002) stated that a partner does not want to disclose the
knowledge with the partners and use it for their own benefit. They added that there is
a possibility that partners are not focused on the improvement process anymore.
37. The lack of partner’s technical expertise
To achieve an advanced level of integration, the technical expertise at the partners‘
end must be available (Hakim and Hakim, 2009; Premkumar, 2000). Simatupang et
al. (2002) mentioned that each partner must strive to close the knowledge gap and
contribute something unique to maintain the influence in the supply chain.
38. The searching for compatible and trustworthy suppliers can be difficult
Regarding the long term relationship, the suppliers are selected as they are trusted to
fulfill the agreed performance measurement (Forslund and Jonsson, 2010). Now the
partnership is not only based on trust, but also based on the compatibility with the
technicalities of ERP, as Willis and Willis-Brown (2002) said that it is more
preferable to have transactions with suppliers who also implement ERP.
39. The less dominant partners’ innovation and creativity are limited
Daneva and Wieringa (2006) pointed out that the centralisation and standardisation
from the integration can limit the business innovation and creativity. This can be
more evident if the business innovation comes from the less dominant parties.
34
40. The replacement of other partner’s enterprise system
In the case of mergers of acquisition, ERP often forces the integrated partners to
replace their information system in order to conform with a dominant partner‘s
system since ERP is not designed to link each other‘s applications (Markus, 2001).
3.4 Conclusion
There are 17 benefits which are classified as operational, tactical and strategic
benefits and 40 risks which are classified as technical, organisational and inter-
organisational risks occurred from the inter-organisational integration of ERP.
35
Figure 6 External integration of ERP risks ontology
Level 0
Level 1
Level 2
Level 3
TR1.1 ERP is inflexible to adapt to changing business models
TR1.2 ERP is inflexible to adapt to changing business process
TR1.3 ERP is unable to support the massive volume of unique customer orders
TR1.4 ERP inability to handle three or more parties for transactions
TR2.1 Information exchange between parties is underdeveloped
TR2.2 Technical compatibility due to heterogeneous IT infrastructure
TR2.3 Interconnection problems because not all data are suitable for conversion
TR2.4 The integration process is too long to respond to business change
TR4.1 Hardware and software crash
TR3.1 There are more customizations in the future
TR3.2 Upgrading is complex and difficult
TR3.3 The system changes impose a very high cost
TR3.4 Technical migration from ERP to ERP II complexity
TR5.1 The partners concern about the security of placing information in their partners‘ database
TR6.3 System contains inaccurate data
TR6.2 Lack of shared understanding of data
TR6.1 Partner‘s user incorrectly inputs the data (lack of data ownership)
TR5.2 Intellectual property leak
OR1.1 Users are reluctant to changes
OR2.1 There is no enough support from the functional areas particularly inbound
(procurement) and outbound (sales)
OR2.2 The lack of top management support
OR1.4 Systems not felt as helping the business
OR1.3 Lack of training and education
OR1.2 The inability to attract and maintain qualified staff
OR4.3 The logistic vehicles are reduced
OR4.2 The warehouses and distribution centers are shut down
OR4.1 The companies lay off the employees
OR3.1 The system supplier does not develop the system in the future
IR1.1 The supplier performance measurement is difficult
IR1.4 The length of the relationship is negatively correlated with the performance measurement
IR1.3 Designing incentive alignment (sharing increase in profit and cost reduction) scheme is difficult
IR1.2 Internal control systems and audit measures for integrated ERP are not well developed
IR2.3 The partner does not share the private information in an optimum way with their partners
IR2.2 The partners commitment is not aligned with the long term shared business strategy
IR2.4 The partner lacks of motivation to align the decision with the mutual goal
IR2.1 Suppliers are leaving from long term contracts
IR3.1 The lack of partner‘s technical expertise
IR3.2 The searching for compatible and trustworthy suppliers can be difficult
IR3.3 The less dominant partners‘ innovation and creativity are limited
IR3.4 The replacement of other partner‘s enterprise system
ERP inter-
organisational risks
Technical
Risk (TR)
Organisational
Risk (OR)
Inter-
Organisational
Risk (IR)
TR1
System
inflexibility
TR3
System changes
TR5
Security
TR6
Data
TR2
System
integration
TR4 System faults
OR1
Human
Resource
OR2
Management
OR3 Vendors‘ System
OR4 Rationalisation
IR1
Control
IR2 Trust
IR3
Partnership
36
Chapter 4 Methodology
4.1 Introduction
The methodology chapter describes the methodology used to answer the research
question. It aims to provide a brief and complete description of the specific steps to
conduct the research. It includes the research framework, the approach, the strategy
and the design of the research. This chapter discusses more on research design as it
is a dominant part of how this research is carried out.
4.2 Research approach
Prof. P Willett (personal communication 11th
February 2011) defined the deduction
as a statement which its truth or falsity is assumed in advance of observation
(formulated a priori: before experience); therefore, following the testing, a
hypothesis can be accepted or rejected. Bryman (2008) suggested that deductive
theory represents the common view between theory and social research, where the
researcher deduces hypotheses based on theoretical considerations which are then
translated into researchable objects. According to these definitions, this research can
be specified as a deductive research.
Rudestam (2001) described how deductive research takes place; it is initiated by the
conceptual framework, then formulating research question or hypothesis, and
followed by conducting data collection and analysis. This description will guide the
research framework, as this research is initiated by the literature review which is
later tested by individuals who used and implemented the externally integrated ERP
to verify the literatures in the context of real business. It is then followed by the data
analysis to generate a new theory.
The research employs a quantitative approach, where the researcher needs to collect
the numeric data to measure and verify the existing literatures on benefits and risks
37
(Creswell, 2009). Creswell (2009) highlighted that the quantitative research requires
a significant amount of literature to give direction for the study. Therefore, this
research is initiated by the extensive literature review which aims to analyse the
previous studies on ERP, supply chain and the integration of ERP within a supply
chain line; to benchmark different studies and to obtain a positioning and framework
of this research (Creswell, 2009). This will help the readers to comprehend that ERP
integration with the supply chain partners have many positive impacts yet impose a
lot of risks. Then it is followed by rigorous literature review to identify all benefits
and risks associated with the integration of ERP. This literature review results in a
set of benefits and risks which needs to be tested in the survey.
Second, the benefits and risks list is tested by ERP consultants; who developed,
administered and managed the integration with the supply chain partners‘ ERP; and
by ERP users; have who experienced to use the integrated ERP in Indonesia and
Singapore. Those are the participants of the survey.
Finally, the data analysis will result in the check list of the prioritised benefits and
risks. This check list is important for the businesses which have externally integrated
to reap more benefits from the integration and to focus on the critical risks. It is also
relevant for the companies which are planning to move toward ERP II to be
precautious toward the critical risks.
4.3 Research design
The research design is explained on Figure 7. The initial step is the literature review
to obtain a firm theoretical foundation of ERP, supply chain and ERP integration
with the supply chain partner. It discusses the evolution, the ERP-ERP II concepts
and ERP benefits; the supply chain concept, the evolution of supply chain and the IT
enabled supply chain; finally it addresses the issue of ERP integration within the
supply chain line.
The second step is the more rigorous literature review to identify all the benefits and
risks from the integration of ERP with the supply chain partners. The literature
review has resulted in 17 benefits and 40 risks. These benefits are grouped to three
broader classes. The risks are also grouped to several subclasses and then grouped to
38
three broader classes as shown on benefit and risk ontology of Figure 5 and 6 in
chapter 3.
The third step is to organise these benefits and risks in a check list. The check list is
a base to create a questionnaire. Then the forth step is to create questionnaire as a
mean of data collection. The respondents are asked to assess the degree of benefits
and the risks on the questionnaire. The questionnaire is distributed online to 60
respondents who are ERP users and consultants.
Upon the collection of the questionnaires, the data is analysed with SPSS and Excel
to calculate the value of each benefit and risk. The value will be sorted in descending
order to identify the highest perceived benefits and risks. This will be the new theory
of the critical benefits and risks of the ERP integration with the supply chain
partners which is very essential for the business management to solidify their IT
plans on realising more benefits of the integration and to focus their attention on the
critical risks.
Figure 7 Methodology Design
4.3.1 Data collection
The data collection consists of two parts; the literature review and the questionnaire.
It involves searching, summarising and analysing all academic journals and books
on the following topics; ERP, supply chain and the integration of ERP with the
supply chain partners. This has resulted in the theoretical foundation of ERP
integration with the supply chain partners. From the literature review, it can be
observed that in spite of the benefits, the integration embodies many inherent risks.
The literature
review
The benefits
and risks
The benefits
and risk check
list
The risk value
calculation
The
questionnaires
39
Therefore, the subsequent literature review intends to explore all the benefits and
risks occurred due to the external integration of ERP. These benefits and risks are
summarised and categorised in the risk and benefit and ontology.
The second part of data collection is questionnaire. It is designed according to the
risk and benefit and ontology. This questionnaire attempts to capture the perception
of ERP consultants and users toward the benefits and risks of the external
integration.
4.3.2 Questionnaire
According to Kaplan and Duchon (1988), the research tradition in information
system has been laboratory studies and surveys because the use of quantifiable data
and statistical analysis is an objective measure of phenomena. This research employs
a quantitative approach to measure ERP II phenomena where the data is collected
from survey questionnaire which will result in statistical data as a base to conduct
data analysis. Considering the limited research timeline and geographical restriction,
the online questionnaire is the most feasible, effective and economical instrument to
collect data of respondents perception on ERP external integration benefits and risks.
The questionnaire was developed from the intensive literature review, to be tested by
ERP consultants and users.
4.3.2.1 Setting
Although the ERP market of big-scale enterprises have saturated in South-east Asia,
there is an increasing demand from the medium-scale enterprises and governmental
organisations. Several multi-national enterprises in Indonesia and Singapore attempt
to integrate their ERP system with the supply chain partners. For this reason, this
survey is conducted in these two countries.
The questionnaire consists of two sections. The first section is the benefit, where the
respondent needs to indicate their perception on every statement of the benefits by
selecting one value from 1 (strongly disagree) to 5 (strongly agree). The use of five-
point scale is aligned with Likert scale to measure intensity of respondents feeling,
without limitation of having an exact positive or negative response (Likert, 1932
cited by Clason and Dormody, 1993; Bryman, 2008)
40
The second section is the risk. According to Kaplan and Garrick (1980), there are
several variables need to be included to quantify the value of risk; they are the
probability/likelihood of occurrence, the impact/consequence/magnitude and the
frequency. This concept will underlie the risk valuation. The respondents are given a
list of events. They need to identify each event whether it is considered as a risk or
not; to select the probability of occurrence from high, medium to low; to justify the
impact of an event, whether it is high, medium or low; and to select one value from
1 (very rarely) to 5 (very frequently) regarding the frequency of occurrence.
The online questionnaire is created and distributed to the respondents in Indonesia
and Singapore. The survey is cross-sectional with the data collected ten days after
the distribution of the questionnaire.
4.3.2.2 Procedures
Sampling is an effective way to get the information from a population and a study
proved that the sampling result can be more reliable than a complete census, as
census has more possibilities of non sampling errors (Yu and Cooper, 1983). There
are two methods of sampling, probability-based and non-probability-based.
Probability-based sampling emphasises on selection by mechanical procedures by
using the lists of random numbers, while the non-probability is the selection
involving some element of judgments (Doherty, 1994).
The population of this research is all externally integrated ERP consultants and users
in South-east Asia. Due to the limited research timeline, this research takes a sample
of two countries, Indonesia and Singapore; with 60 ERP users and consultants based
on the probability method.
The survey was distributed online to 60 respondents, and ten days after, the
questionnaire results were collected. There were 55 completed questionnaire used in
the data analysis.
4.3.2.3 Participants
The participants of the research are ERP users and consultants of multinational
enterprises located in Indonesia and Singapore. ERP consultants refer to the
consultants and managers of multinational IT consulting enterprises who developed
and managed the ERP integration with the supply chain partner‘s system. While
41
ERP users refer to the employees who perform the supply chain activities through
the externally integrated SAP in several companies. Most of the users were used to
be consultants.
The selection of the participants is based on the circumstances that ERP users are
knowledgeable about the business implications of automated and integrated supply
chain activities; while ERP consultants are experienced on the system technicalities
of the integration. The inclusion of two types of respondents will balance the
business and IT technical point of view on risks and benefits.
4.3.3 Data analysis
Upon the collection of questionnaire data from the respondents, the data is analysed
by means of SPSS and Excel. The software helps to calculate the value of each
benefit and risk according to a certain formula. These values can be interpreted as
the degree of the benefit or risk which will be sorted in descending order. The
highest value represents the most highly perceived benefit and risk. Finally, the
sorted list of benefits and risks will help the readers, particularly the business
managements to explore more benefits from the integration and to be alert on the
high risks.
4.4 Conclusion
This chapter describes the methodology to conduct the research, which includes the
research approach, research design and research strategy. The research employs the
deductive approach with the questionnaire as the main instrument to collect data.
The questionnaire is targeted to 60 respondents yielding 92% response rate.
42
Chapter 5 Results and Findings
5.1 Introduction
The previous chapter has briefly explained the methodology employed in this
research. Upon the distribution of 60 questionnaires, the completed and returned
questionnaire is 55 representing 92% response rate. These returned questionnaires
will be the data source that will be analysed further in this chapter.
There are two sections of the questionnaire. On the first section, each benefit is
valued according to the respondents‘ perception. On the second section, each event
needs to be identified, whether it is perceived as risk or not. Afterwards, there are
different aspects of risk which needs to be investigated; the probability, impact and
frequency of occurrence. Two major sections of this chapter are result and finding
presentation. Result presentation is a description of the statistics of each benefit and
risk by means of pie chart. Finding section will show the most critical benefits and
risks according to the values derived from the formula calculation.
5.2 Result presentation
5.2.1 Benefits
Following is the respondents‘ perceptions on the benefits.
1. Cost is reduced
Many studies support for cost reduction, however Beatty and Williams (2006)
argued that the cost reduction cannot be the primary motivation to succeed ERP
5, 9%
19, 34%29, 53%
2, 4% Strongly disagreeDisagree
Neutral
Agree
Strongly agree
43
external integration. It is substantiated by the statistics that although most
respondents (53%) agree, there are 34% of respondents who are neutral and 9%
disagree with this notion.
2. Cycle time is reduced
Cycle time reduction (delivery time, customer order time, payment cycle and
shipment time) (Kelle and Akbulut, 2005; Davenport and Brooks, 2004) is
experienced by the respondents, as 63% and 20% of respondents agree and strongly
agree on this notion.
3. Planning calculation is more accurate and advanced
Most respondents (80%) encounter that the ERP integration has helped them to
obtain more accurate and advanced planning calculation, as ERP can include as
more relevant variables to show clearer effects (Davenport and Brooks, 2004).
However, 18% are neutral on this idea.
4. Data complexity is manageable
The ability of ERP to manage data complexity (Daneva and Wieringa, 2006) is
evidenced by the respondents as 54% of them express their agreement and 22%
stated their strong agreement.
2, 4%
7, 13%
35, 63%
11, 20%Strongly disagreeDisagree
Neutral
Agree
Strongly agree
1, 2%
10, 18%
31, 56%
13, 24%
Strongly disagreeDisagree
Neutral
Agree
Strongly agree
44
5. Supply chain activities are automated and simplified
76% of respondents undergo the supply chain activities automation and
simplification, the reduction of manual process and human intervention and the
elimination of supply chain bottlenecks through the integrated ERP. However, 20%
of them are not fully benefited by this integration.
6. The data is visible between partners
Although 69% of respondents agreed that the integration has enabled the partners to
view and analyse data each other as stated by Daneva and Wieringa (2006); Kelle
and Akbulut (2005), 22% of them are not able to fully reap this benefit.
2, 4%
11, 20%
30, 54%
12, 22%
Strongly disagreeDisagree
Neutral
Agree
Strongly agree
1, 2%
12, 22%
32, 58%
10, 18%Strongly disagreeDisagree
Neutral
Agree
Strongly agree
5, 9%
12, 22%
31, 56%
7, 13%Strongly disagreeDisagree
Neutral
Agree
Strongly agree
45
7. Supply chain partners are able to share information
The integration has increased the information transparency which enables the
information sharing between partners (Devaraj et al., 2007; Boubekri, 2001). This is
reflected on the survey, as 65% respondents agree on this. However, 31% of them
are not completely profited by the external integration.
8. The communications and knowledge sharing between partners are improved
The study reveals that the system integration has enforced the communication,
coordination, and the open information sharing culture (Daneva and Wieringa, 2006;
Gunasekaran and Ngai, 2004; Akkermans et al., 2003). This is not fully implicit on
the survey, as 30% of respondents are neutral and 9% disagree, although the rest of
respondents agree on this notion.
9. Customer satisfaction increases
2, 4%
17, 31%
30, 54%
6, 11%Strongly disagreeDisagree
Neutral
Agree
Strongly agree
5, 9%
16, 29%
29, 53%
5, 9%Strongly disagreeDisagree
Neutral
Agree
Strongly agree
2, 3%
18, 33%
33, 60%
2, 4% Strongly disagreeDisagree
Neutral
Agree
Strongly agree
46
ERP external integration increases customer service quality and better understanding
of future market requirement (Daneva and Wieringa, 2006; Kelle and Akbulut,
2005; Boubekri, 2001). It is supported by 64% of respondents, however, 33% of
them neither agree nor disagree with this notion.
10. Profitable customers and suppliers are selected
The ability of ERP to view the customers and suppliers performance is experienced
by 62% of respondents. However, 27% of them do not experience this and 11% get
the adverse impact.
11. Standardisation of information definitions and processes
ERP external integration has enforced the supply chain partners‘ internal and
external processes standardisation (Gunasekaran and Ngai, 2004; Akkermans et al.,
2003; Barki and Pinsonneault, 2002). This benefit is fully supported by most of all
respondents. 51% express their agreement and 42% showed their strong agreement.
12. Business competitiveness improves
The majority of respondents (78%) agree that the synergy from the coordination
increases the business competitiveness (Barki and Pinsonneault, 2002; Boubekri,
2001). However, 20% of them neither agree nor disagree with this notion.
6, 11%
15, 27%32, 58%
2, 4% Strongly disagreeDisagree
Neutral
Agree
Strongly agree
2, 3%2, 4%
28, 51%
23, 42%
Strongly disagreeDisagree
Neutral
Agree
Strongly agree
47
13. The power structure in the extended supply chain is less dependent on the ERP
of the dominant parties
Akkermans et al. (2003) stated that the power structure in the supply chain is less
dependent on the dominant parties‘ ERP. This idea is not fully substantiated by the
survey context as 58% of respondents express their neutrality and only 33% who
agree with this.
14. Global IT becomes more tangible
ERP enables the business coordination across nations as ERP is characterised by the
multi functionality (multi-lingual, multi-currency and time zones capabilities)
(Daneva and Wieringa, 2006; Akkermans et al., 2003). This is fully supported by
most respondents as 31 and 16 out of 55 respondents agree and strongly agree with
this idea.
1, 2%
11, 20%
33, 60%
10, 18%Strongly disagreeDisagree
Neutral
Agree
Strongly agree
3, 5%
32, 58%
18, 33%
2, 4% Strongly disagreeDisagree
Neutral
Agree
Strongly agree
1, 2% 1, 2%
6, 11%
31, 56%
16, 29%
Strongly disagreeDisagree
Neutral
Agree
Strongly agree
48
15. The speed of business execution increases
The majority of respondents (86%) agree and strongly agree with ERP ability to
accommodate the increasing speed of business (Weston, 2003). However, 14% of
them are neutral on this issue.
16. Cost and risk reduction as IT managed by third parties and consortia on a shared
basis
IT applications and infrastructure development and maintenance can be done by a
consortium of members or a third-party (Markus, 2001). This is not substantiated by
the survey as this benefit is experienced by only 36% of respondents, while 56% of
respondents express their neutrality.
17. Standardisation of industry-wide process and shared data
8, 14%
39, 71%
8, 15%Strongly disagreeDisagree
Neutral
Agree
Strongly agree
1, 2% 2, 4%
31, 56%
20, 36%
1, 2%Strongly disagreeDisagree
Neutral
Agree
Strongly agree
1, 2%
7, 13%
32, 58%
15, 27%
Strongly disagreeDisagree
Neutral
Agree
Strongly agree
49
ERP integration enforces data standardisation to facilitate e-commerce as it has been
done by the pharmaceutical industry (Markus, 2001). This is supported by the survey
as most respondents (58%) agreed that they have gained the benefit and 27%
strongly agree.
5.2.2 Risks
1. ERP is inflexible to adapt to changing business models
ERP ability to accommodate the engagement or disengagement from different
business model is doubtful (Akkermans et al., 2003). This is supported by the
respondents as 69% of respondents perceive this as a risk, 40% and 49% perceive
the high and moderate impact respectively. However, in terms of probability and
frequency, this risk is considered low. 51% and 45 % select the medium‖ and ―low‖
probability, 66% consider the low frequency of occurrence.
2. ERP is inflexible to adapt to changing in business processes
ERP is too rigid to adapt to changing in business process (Akkermans et al. 2003).
This idea is reflected on the survey as 75% of respondents believe that this event is a
risk, however this risk implication is considered moderate as 58% perceive the
medium probability, 53% medium impact and 43% medium frequency of
occurrence.
38, 69%
17, 31%
Is it a risk?
Yes
No
25, 45%28,
51%
2, 4%
Probability
Low
Medium
High
6, 11%
27, 49%
22, 40%
Impact
Low
Medium
High
13, 24%
23, 42%
16, 29%
3, 5%Frequency
1
2
3
4
5
50
3. ERP is unable to support the massive volume of unique customer orders
ERP inability to accommodate the massive volume of unique customer orders; stated
by Akkermans et al. (2003); is supported by 73% of respondents who perceive it as
risk and its impact is considered high by 23 respondents (42%). However, in terms
of probability, it is considered medium (49%) and; in terms of frequency, it is
infrequently to occur (57%).
4. ERP inability to handle the transactions involving more than two parties
ERP drawback to accommodate the transactions involving more than three parties
(Markus, 2001) is not fully reflected on the survey in terms of all aspects. More than
a half of respondents (53%) do not perceive this event as a risk, 53% consider it to
41, 75%
14, 25%
Is it a risk?
Yes
No
17, 31%
32, 58%
6, 11%
Probability
Low
Medium
High
7, 13%
29, 53%
19, 34%
Impact
Low
Medium
High
7, 13%
16, 29%
24, 43%
7, 13% 1, 2%
Frequency 1
2
3
4
5
40, 73%
15, 27%
Is it a risk?
Yes
No
21, 38%
27, 49%
7, 13%
Probability
Low
Medium
High
11, 20%
21, 38%
23, 42%
Impact
Low
Medium
High
13, 24%
18, 33%
12, 22%
9, 16%
3, 5% Frequency 1
2
3
4
5
51
be low probability, 51% assume the low frequency and 53% consider the moderate
impact.
5. Information exchange between parties is underdeveloped
ERP lack of extended enterprise functionality which has caused underdevelopment
of information exchange between partners (Akkermans et al., 2003) is considered as
medium risk in this survey. Most respondents (62%) regard this event as a risk. It is
perceived to be low probability of occurrence (53%) and low or moderate impact
(90% shares the selection between low and medium). The frequency of occurrence is
perceived to be low by 61%.
26, 47%
29, 53%
Is it a risk?
Yes
No29,
53%21,
38%
5, 9%
Probability
Low
Medium
High
20, 36%
29, 53%
6, 11%
Impact
Low
Medium
High
19, 35%
9, 16%
18, 33%
6, 11%
3, 5%
Frequency 1
2
3
4
5
34, 62%
21, 38%
Is it a risk?
Yes
No29,
53%21,
38%
5, 9%
Probability
Low
Medium
High
25, 46%25,
45%
5, 9%
Impact
Low
Medium
High
14, 25%
20, 36%
16, 29%
2, 4%3, 6%
Frequency 1
2
3
4
5
52
6. Technical compatibility due to heterogeneous IT infrastructure
The implication of the heterogeneous IT infrastructure which consists of many
incompatible systems is considered moderate in this survey. Although 82%
respondents perceive this event as a risk, around 60% believe that the probability of
occurrence and the impact is moderate. The frequency is considered to be moderate
too by 40% of respondents.
7. The integration process is too long to respond to business change
Markus (2001) opinion of the too long integration process which is irresponsive to
the fast pace of business change is fully reflected on this survey as the majority of
respondents (84%) perceive this event as a risk and 46% perceive its impact to be
45, 82%
10, 18%
Is it a risk?
Yes
No
10, 18%
33, 60%
12, 22%
Probability
Low
Medium
High
9, 16%
35, 64%
11, 20%
Impact
Low
Medium
High
6, 11%
10, 18%
22, 40%
13, 24%
4, 7%Frequency 1
2
3
4
5
46, 84%
9, 16%
Is it a risk?
Yes
No
14, 26%
32, 58%
9, 16%
Probability
Low
Medium
High
10, 18%
20, 36%
25, 46%
Impact
Low
Medium
High
10, 18%
17, 31%
20, 36%
7, 13% 1, 2%
Frequency 1
2
3
4
5
53
high. The probability of occurrence is considered medium and the frequency of
occurrence is low by 32 and by 27 respondents respectively.
8. Interconnection problems that not all data are suitable for conversion
The interconnection problem due to the unsuitable contents/data for conversion is
supported by the respondents although the implications are considered moderate.
The majority of respondents (84%) perceive this as risk, however the probability of
occurrence is assessed as medium by 47%; the impact is considered to be moderate
by 45% and the frequency is low by 46% of respondents.
9. The system changes impose a very high cost
47, 85%
8, 15%
Is it a risk?
Yes
No
20, 37%
26, 47%
9, 16%
Probability
Low
Medium
High
19, 35%
25, 45%
11, 20%
Impact
Low
Medium
High
12, 22%
13, 24%
19, 34%
10, 18%
1, 2%
Frequency 1
2
3
4
5
40, 73%
15, 27%
Is it a risk?
Yes
No
18, 33%
24, 43%
13, 24%
Probability
Low
Medium
High
10, 18%
25, 46%
20, 36%
Impact
Low
Medium
High
10, 18%
24, 44%
15, 27%
3, 6%3, 5%
Frequency 1
2
3
4
5
54
Although the respondents believe that high cost of making changes in the system can
be a risk, the implication is considered moderate. 73% of respondents believe that
this event is a risk, however 43% of them perceive the probability to be medium; the
impact is considered to be moderate (46%) or high (36%) and the frequency of
occurrence is believed to be low by 62% of respodents.
10. There are more customisations in the future
The future requirements from the internal business or the external parties will
demand for further customisations (Daneva and Wieringa, 2006). It is approved by
the majority of respondents (65%) as they believe that this event is a risk and the
frequency is high (35%). The probability and the impact are perceived to be
moderate by 38% and 64% of respondents respectively.
11. Upgrading is complex and difficult
There are many studies that indicate the deceptively complex ERP upgrade (Huifen,
2010; Beatty and Williams, 2006; Daneva and Wieringa, 2006). This is experienced
by the respondents with moderate implications as the majority of respondents (71%)
believe that this event is a risk, however in terms of probability, impact and
frequency, it is considered medium by 49%, 53% and 49% of respondents
respectively.
36, 65%
19, 35%
Is it a risk?
Yes
No
16, 29%
21, 38%
18, 33%
Probability
Low
Medium
High
10, 18%
35, 64%
10, 18%
Impact
Low
Medium
High
6, 11%
10, 18%
17, 31%
19, 35%
3, 5%Frequency 1
2
3
4
5
55
12. Technical migration from ERP to ERP II complexity
The majority of respondents (73%) perceive the event of technical migration from
ERP to ERP II complexity as a risk with a medium implication in terms of
probability and impact. The charts display 51% proportion of medium probability
and impact, 66% of low frequency of occurrence.
13. Hardware and software crash
Pan‘s (2008) argument on hardware and software crash which will interrupt the
normal operation is fully reflected on this survey as most respondents (85%) believe
that this event is a risk and the impact is high (51%). However, in terms of
39, 71%
16, 29%
Is it a risk?
Yes
No
18, 33%
27, 49%
10, 18%
Probability
Low
Medium
High
9, 16%
29, 53%
17, 31%
Impact
Low
Medium
High
7, 13%
20, 36%17,
31%
5, 9%
6, 11%
Frequency 1
2
3
4
5
40, 73%
15, 27%
Is it a risk?
Yes
No
22, 40%
28, 51%
5, 9%
Probability
Low
Medium
High
11, 20%
28, 51%
16, 29%
Impact
Low
Medium
High
18, 33%
20, 36%
14, 25%
2, 4% 1, 2%Frequency 1
2
3
4
5
56
probability and frequency, it is considered low as assessed by 58% and 72% of
respondents.
14. The partners concern about the security of placing information in their partners‘
database
In this survey, the issue of information security is important with medium
implications. The majority of respondents (73%) believe that this event is a risk.
Around half of respondents perceive that both the probability of occurrence and the
impact are moderate. 60% of respondents consider that the frequency of occurrence
will be low.
47, 85%
8, 15%
Is it a risk?
Yes
No 32, 58%
20, 36%
3, 6%
Probability
Low
Medium
High
11, 20%
16, 29%
28, 51%
Impact
Low
Medium
High27,
49%13, 23%
13, 24%
1, 2%1, 2%
Frequency 1
2
3
4
5
40, 73%
15, 27%
Is it a risk?
Yes
No
19, 35%
28, 51%
8, 14%
Probability
Low
Medium
High
18, 33%
30, 54%
7, 13%
Impact
Low
Medium
High
16, 29%
17, 31%
16, 29%
5, 9% 1, 2%Frequency 1
2
3
4
5
57
15. Intellectual property leak
The fear of losing intellectual property is increasing when the integration takes place
(Faisal et al. 2007). This is supported by most respondents (64%) as they believe that
this event is a risk, however the implication is perceived to be low. The probability
is assessed to be medium or low by 47%, the impact is low by 40% and the
frequency is low by 58% of respondents.
16. Partner‘s user incorrectly inputs the data (lack of data ownership)
Most respondents (89%) perceive that incorrect data input done by the partner‘s user
is a risk. Vosburg and Kumar (2001) emphasised the importance of data ownership
and the audit conduct on data changes. However, it is not fully reflected on the
35, 64%
20, 36%
Is it a risk?
Yes
No
25, 46%
26, 47%
4, 7%
Probability
Low
Medium
High
22, 40%
20, 36%
13, 24%
Impact
Low
Medium
High
18, 33%
14, 25%
18, 33%
5, 9%
Frequency 1
2
3
4
5
49, 89%
6, 11%
Is it a risk?
Yes
No
20, 36%
22, 40%
13, 24%
Probability
Low
Medium
High
11, 20%
25, 45%
19, 35%
Impact
Low
Medium
High
4, 7%
20, 36%
17, 31%
8, 15%
6, 11%
Frequency 1
2
3
4
5
58
statistics, as 40% of respondents believe that the probability is moderate and so is
the impact. Moreover, 43% of them believe that the frequency is low.
17. Lack of shared understanding of data
The majority of respondents (69%) perceive that a lack of shared data understanding
is a risk. The data accuracy and consistency between functional and IT users are
very important (Vosburg and Kumar, 2001). This is moderately supported by the
respondents as the probability is perceived to be low (45%) while the impact is
moderate (42%). The frequency of occurrence is considered to be low (47%).
18. System contains inaccurate data
38, 69%
17, 31%
Is it a risk?
Yes
No
25, 45%
22, 40%
8, 15%
Probability
Low
Medium
High
20, 36%
23, 42%
12, 22%
Impact
Low
Medium
High
9, 16%
17, 31%18,
33%
8, 15%
3, 5%
Frequency 1
2
3
4
5
42, 76%
13, 24%
Is it a risk?
Yes
No
20, 36%
18, 33%
17, 31%
Probability
Low
Medium
High
10, 18%
21, 38%
24, 44%
Impact
Low
Medium
High
8, 14%
13, 24%
18, 33%
11, 20%
5, 9%
Frequency 1
2
3
4
5
59
The majority of respondents perceive that inaccurate data in a system is a risk
(76%). The data is not entirely clean or some data is missing although the data
migration was successful (Vosburg and Kumar, 2001). It is fully supported in this
survey as the probability of occurrence is assessed to be high by 31% of
respondents. The impact is considered to be high (44%) and the frequency is
believed to be medium (33%).
19. Users are reluctant to changes
Weston (2003) stated that the external integration requires the employee to change
the way they perform their job. It is fully reflected on the survey. The majority of
respondents (87%) agree that this event as risk according to their experience. The
probability and impact are considered to be moderate (between 47%-49%). The
frequency is perceived to be medium (42%) or high (31%).
20. The inability to attract and maintain qualified staff
More than a half of respondents (60%) perceive that the difficulty to attract and
maintain the qualified staff is a risk with a moderate probability of occurrence (51%)
and impact (53%). The frequency is believed to be low or medium (each has 42%
proportion).
48, 87%
7, 13%
Is it a risk?
Yes
No
12, 22%
27, 49%
16, 29%
Probability
Low
Medium
High
13, 24%
26, 47%
16, 29%
Impact
Low
Medium
High
5, 9%10,
18%
23, 42%
9, 16%
8, 15%
Frequency 1
2
3
4
5
60
21. Systems not felt as helping the business
Iskanius (2009) stated that the users might feel that ERP does not help the business.
This is aligned with the survey with a moderate implication, as most respondents
(65%) believe that this event is a risk. The probability of occurrence is believed to be
low (42%) or medium (45%). The impact is considered moderate (55%) and the
frequency is perceived to be low (45%) or medium (35%).
22. Lack of training and education
Axam and Jerome (2003) argued that insufficient training and education will cause
the greater resistance. This is moderately aligned with the survey results as the
majority of respondents (78%) perceive this event as a risk, with the medium (58%)
33, 60%
22, 40%
Is it a risk?
Yes
No
20, 36%
28, 51%
7, 13%
Probability
Low
Medium
High
18, 33%
29, 53%
8, 14%
Impact
Low
Medium
High
11, 20%
12, 22%23,
42%
8, 14%
1, 2%Frequency 1
2
3
4
5
36, 65%
19, 35%
Is it a risk?
Yes
No
23, 42%
25, 45%
7, 13%
Probability
Low
Medium
High
11, 20%
30, 55%
14, 25%
Impact
Low
Medium
High
11, 20%
14, 25%19,
35%
9, 16%
2, 4%Frequency 1
2
3
4
5
61
probability of occurrence. Most of them also believe that it imposes medium impact
(67%) with the medium frequency of occurrence (56%).
23. There is no enough support from the functional areas particularly inbound
(procurement) and outbound (sales)
Premkumar (2000) stated that the insufficient support from inbound (procurement)
and outbound (sales) will damage the business synergy. It is reflected on this survey
with mild implication. Most respondents (64%) perceive that this event as a risk
although they assume that the probability is low (51%). They believe that the impact
is low (35%) or medium (40%). Most of them believe (64%) that the frequency of
occurrence is low.
43, 78%
12, 22%
Is it a risk?
Yes
No
16, 29%
32, 58%
7, 13%
Probability
Low
Medium
High
11, 20%
37, 67%
7, 13%
Impact
Low
Medium
High
5, 9%
11, 20%
31, 56%
7, 13%
1, 2%
Frequency 1
2
3
4
5
35, 64%
20, 36%
Is it a risk?
Yes
No
28, 51%
23, 42%
4, 7%
Probability
Low
Medium
High
19, 35%
22, 40%
14, 25%
Impact
Low
Medium
High
17, 31%
18, 33%
15, 27%
5, 9%
Frequency 1
2
3
4
62
24. The lack of top management support
Top management support and IT investment are very important in the external
integration of ERP as it takes years to stabilise. This risk is fully acknowledged by
the respondents of this survey as 71% of them believe that this event is a risk and
44% perceive that its impact is high. However, in terms of probability and frequency
they are considered moderate with a proportion of 42% and 47% respectively.
25. ERP supplier does not develop the system in the future
There is a possibility that the ERP vendor will discontinue the system development
(Iskanius, 2009). This risk is fully realised by the respondents as 71% of them
believe that this event is a risk and the impact will be high (40%). However, in terms
39, 71%
16, 29%
Is it a risk?
Yes
No
20, 36%
23, 42%
12, 22%
Probability
Low
Medium
High
11, 20%
20, 36%
24, 44%
Impact
Low
Medium
High
12, 22%
9, 16%26,
47%
7, 13% 1, 2%
Frequency 1
2
3
4
5
39, 71%
16, 29%
Is it a risk?
Yes
No 34, 62%
15, 27%
6, 11%
Probability
Low
Medium
High
15, 27%
18, 33%
22, 40%
Impact
Low
Medium
High
22, 40%
18, 33%
13, 23%
1, 2% 1, 2%
Frequency 1
2
3
4
5
63
of probability and frequency, it is considered low with the proportion of 62% and
73% respectively.
26. The company lays off the employees
Boubekri (2001) stated that the employee lay-off can happen in both sides of supply
chain. However, this opinion is not fully reflected on this research result, as only
53% of respondents who believe that this event is a risk. Moreover, most
respondents assume that the probability, the impact and the frequency of occurrence
are low with the proportion of 56%, 51% and 69% respectively.
27. The warehouses and distribution centers are shut down
29, 53%
26, 47%
Is it a risk?
Yes
No31,
56%
22, 40%
2, 4%
Probability
Low
Medium
High
28, 51%
20, 36%
7, 13%
Impact
Low
Medium
High
23, 42%
15, 27%
16, 29%
1, 2%
Frequency 1
2
3
4
24, 44%31,
56%
Is it a risk?
Yes
No37,
67%
12, 22%
6, 11%
Probability
Low
Medium
High
26, 47%
20, 37%
9, 16%
Impact
Low
Medium
High
26, 47%16,
29%
12, 22%
1, 2%
Frequency
1
2
3
4
64
Premkumar (2002) argued that the integration with the supply chain partners can
eliminate the existence of distributors or agents. This opinion does not represent the
situation of this research, as 56% do not believe that this event is a risk. The majority
of respondents (67%) also perceive that this event is very unlikely to happen. The
low impact and frequency are indicated by 47% and 76% of respondents.
28. The logistic vehicles are reduced
The majority of respondents (65%) do not believe that the reduction of logistic
vehicles is a risk. They perceive that the probability of occurrence, the impact and
the frequency of occurrence are low as showed on the 60%, 53% and 70%
proportion accordingly.
29. The supplier performance measurement is difficult
The idea of suppliers‘ performance measurement difficulty is not fully substantiated
by the result of this research. 49% of respondents do not believe that this event is a
risk. In terms of probability, impact and frequency, this risk is considerably low as
indicated by the proportion of 58%, 53% and 64% respectively.
19, 35%
36, 65%
Is it a risk?
Yes
No 33, 60%
19, 35%
3, 5%
Probability
Low
Medium
High
29, 53%
22, 40%
4, 7%
Impact
Low
Medium
High
19, 35%
19, 35%
14, 25%
3, 5%
Frequency1
2
3
4
65
30. Internal control systems and audit measures for integrated ERP are not very well
developed
The integration requires the regular audit on the security, information exposure risk
and fraud (Premkumar, 2000). This notion is supported by 62% of respondents who
believe that the poor development of internal control and audit measure is a risk. The
probability, the impact and the frequency are believed to be medium as indicated by
the proportion of 56%, 58% and 40% respectively.
28, 51%
27, 49%
Is it a risk?
Yes
No 32, 58%
21, 38%
2, 4%
Probability
Low
Medium
High
29, 53%
24, 43%
2, 4%
Impact
Low
Medium
High
18, 33%
17, 31%
15, 27%
4, 7% 1, 2%Frequency
1
2
3
4
5
34, 62%
21, 38%
Is it a risk?
Yes
No
19, 35%
31, 56%
5, 9%
Probability
Low
Medium
High
15, 27%
32, 58%
8, 15%
Impact
Low
Medium
High
10, 18%
14, 25%22,
40%
8, 15%
1, 2%
Frequency1
2
3
4
5
66
31. Designing incentive alignment (sharing increase in profit and cost reduction)
scheme is difficult
More than a half respondents (56%) do not perceive that the difficult design of
incentive alignment scheme is a risk. They also assume that the probability and the
impact are moderate indicated by the proportion of 51% and 56% accordingly, while
the frequency is considerably low (58%).
32. The length of the relationship is negatively correlated with the performance
measurement
24, 44%31,
56%
Is it a risk?
Yes
No
22, 40%
28, 51%
5, 9%
Probability
Low
Medium
High
19, 35%
31, 56%
5, 9%
Impact
Low
Medium
High
15, 27%
17, 31%
18, 33%
4, 7%1, 2%
Frequency 1
2
3
4
5
25, 45%30,
55%
Is it a risk?
Yes
No38,
69%
17, 31%
Probability
Low
Medium
High
32, 58%
21, 38%
2, 4%
Impact
Low
Medium
High
26, 47%
15, 27%
13, 24%
1, 2%
Frequency
1
2
3
4
67
Bagchi et al. (2005) stated that there is a negative correlation between the length of
supplier-customer relationship and the performance measurement. However, it is not
substantiated by the statistics as 55% of respondents disagree with this idea.
Moreover, the criticality of this risk is considerably low in terms of probability,
impact and frequency indicated by the proportion of 69%, 58% and 74%
respectively.
33. Suppliers are leaving from long term contracts
The breach of long term contracts by the suppliers is not fully substantiated by the
respondents as only 51% of respondents who confirm that it is a risk. They also
consider that the probability, impact and frequency of occurrence are low, referring
to the proportion of 62%, 40% and 69% of respondents accordingly.
34. The partners commitment is not aligned with the long term shared business
strategy
65% of respondents believe that the partner commitment is not aligned with the
shared strategy is a risk. However, the probability and the impact are assessed to be
moderate by the respondents with the proportion of 49% and 45% respectively. The
frequency is perceived low by 71% of respondents.
28, 51%
27, 49%
Is it a risk?
Yes
No 34, 62%
20, 36%
1, 2%
Probability
Low
Medium
High
22, 40%
18, 33%
15, 27%
Impact
Low
Medium
High
19, 34%
19, 35%
13, 24%
4, 7%Frequency
1
2
3
4
68
35. The partner does not share the private information in an optimum way with their
partners
65% of respondents believe that the unwillingness of partner to share private
information in an optimum way is a risk. However, the probability, the impact and
the frequency are assessed to be low by the respondents with the proportion of 51%,
47% and 51% respectively.
36. The partner lacks of motivation to align the decision with the mutual goal
Simatupang et al. (2002) stated that there is a possibility that partners are not
focused on the improvement process anymore. It is considered as risk by 60% of
respondents. However, the probability and the impact are assessed to be moderate
36, 65%
19, 35%
Is it a risk?
Yes
No
26, 47%27,
49%
2, 4%
Probability
Low
Medium
High
18, 33%
25, 45%
12, 22%
Impact
Low
Medium
High
14, 26%
25, 45%
15, 27%
1, 2%
Frequency
1
2
3
4
36, 65%
19, 35%
Is it a risk?
Yes
No
28, 51%20,
36%
7, 13%
Probability
Low
Medium
High
26, 47%
24, 44%
5, 9%
Impact
Low
Medium
High
16, 29%
12, 22%
18, 33%
7, 13%
2, 3%Frequency
1
2
3
4
5
69
with the proportion of 56% and 49% respectively. The frequency is perceived to be
low by 53%.
37. The lack of partner‘s technical expertise
60% of respondents believe that the lack of partner‘s technical expertise is a risk.
However, the probability, the impact and the frequency are assessed to be low by the
respondents with the proportion of 44%, 49% and 58% respectively.
38. The searching for compatible and trustworthy suppliers can be difficult
The long term commitment can only work for trustworthy partners (Forslund and
Jonsson, 2010). Only 58% of respondents who believe that the searching for
trustworthy partners is difficult. The implication of this risk in terms of probability,
33, 60%
22, 40%
Is it a risk?
Yes
No
20, 37%
31, 56%
4, 7%
Probability
Low
Medium
High
18, 33%
27, 49%
10, 18%
Impact
Low
Medium
High
12, 22%
17, 31%
21, 38%
5, 9%
Frequency
1
2
3
4
33, 60%
22, 40%
Is it a risk?
Yes
No
24, 44%
22, 40%
9, 16%
Probability
Low
Medium
High
27, 49%18,
33%
10, 18%
Impact
Low
Medium
High
31%
27%
36%
4% 2%
Frequency1
2
3
4
5
70
impact and frequency are low or medium as indicated by the proportion of 42%,
40% and 55% respectively.
39. The less dominant partners‘ innovation and creativity are limited
The centralisation and standardisation of integration can limit the business
innovation and creativity (Daneva and Wieringa, 2006). However, this is not
reflected on the questionnaire result. 62% of respondents believe that this event is a
risk. The implication of this event is also low in terms of the probability, the impact
and the frequency indicated by the proportion of 58%, 60% and 54% accordingly.
32, 58%
23, 42%
Is it a risk?
Yes
No
23, 42%
29, 53%
3, 5%
Probability
Low
Medium
High
22, 40%
22, 40%
11, 20%
Impact
Low
Medium
High
13, 24%
17, 31%
22, 40%
3, 5%Frequency
1
2
3
4
21, 38%
34, 62%
Is it a risk?
Yes
No 32, 58%
21, 38%
2, 4%
Probability
Low
Medium
High
33, 60%
20, 36%
2, 4%
Impact
Low
Medium
High
15, 27%
15, 27%
18, 33%
7, 13%
Frequency
1
2
3
4
71
40. The replacement of other partner‘s enterprise system
Markus (2001) argued that the integration can force the less dominant partners to
replace their information system. This is considered as risk by 65% of respondents.
The probability and the frequency are perceived to be low, indicated by 58% and
65% respectively. However, the impact is assessed as low or high by 36%-37% of
respondents.
5.3 Findings
Upon the collection and processing data, the highly perceived benefits and risks
occurred from the ERP external integration will be identified. First of all, a formula
is employed to obtain the value of each benefit and risk. Upon the calculation of
benefits and risks value, the values are then sorted in descending order. These sorted
values demonstrate the highly perceived benefits and risks which is the new theory
that is applicable for businesses which have integrated or plan to integrate with their
supply chain partners.
5.3.1 Formula description
The values of each benefit and risk need to be obtained in order to find the most
critical ones. Following is the formula employed to calculate the benefit:
Benefit value = ∑ Degree value
37, 67%
18, 33%
Is it a risk?
Yes
No 32, 58%
22, 40%
1, 2%
Probability
Low
Medium
High
20, 37%
15, 27%
20, 36%
Impact
Low
Medium
High
22, 40%
14, 25%
17, 31%
1, 2% 1, 2%
Frequency1
2
3
4
5
55
n=1
72
The degree value is ranging from 1 to 5 with following order, strongly disagree
option values ―1‖, disagree option values ―2‖, neither agree nor disagree option
values ―3‖, agree option values ―4‖, and strongly agree option values ―5‖. The final
benefit value is the total of 55 values which is derived from the number of
completed questionnaires.
The benefit value varies from 0 to 275. The higher the value is, the higher is the
perceived benefit. To clarify the classification of the benefit, there has to be the
lower limit of the highest benefit, and the upper limit of the lowest benefit. If 80% of
respondents select ―strongly agree‖, the lower limit of highest benefit will be 220
(80% * number of respondents * strongly agree value = 80% * 55 * 5). If 80% of
respondents select ―disagree‖, the upper limit of the lowest benefits will be 88 (80%
* number of respondents * disagree value = 80% *55 * 2). In other words, the
benefits which value above 220 are categorised as high benefits and those which
value below 88 are low benefits.
0 88 220 275
The second formula is used to calculate the value of risk, as follow:
Risk value = ∑ Risk determinant value * (Probability value + impact value +
frequency value)
There are three steps to calculate the risk value, first is to sum the probability value,
impact value and frequency value, second is to multiply the value with the risk
determinant value and finally is to sum all 55 respondent values. Each step is
detailed down as follow.
The first step is to sum the three dimensions which establish the risk; they are the
probability, the impact and the frequency. There is no strong reason to justify which
dimension is more dominant than others; therefore, each dimension will have the
same range of values, from ―2‖ to ―0.5‖. There are three levels of probability of
occurrence dimension, low level values ―0.5‖, medium level values ―1‖ and high
level values ―2‖. The same valuation pattern is also applicable for impact. It has
three levels from low, medium and high with the value of ―0.5‖, ―1‖ and ―2‖
55
n=1
Low benefits High benefits
73
respectively. While the frequency consists of 5 level, very rarely, rarely,
occasionally, frequently and very frequently, which values from ―0.5‖, ―0.75‖, ―1‖,
―1.5‖ and ―2‖ accordingly.
The second step is to multiply the value obtained from the first step with the risk
determinant value. The risk determinant value is ―1‖ if the respondent perceives an
event as a risk, or ―0‖ if the respondent does not perceive it as risk. Therefore, the
value of risk from an individual respondent will be ―0‖ if they do not consider it as
risk.
The final step is to sum up all the individual values from 55 respondents. This final
value is the base to determine the criticality of the risks. The risk value range is from
0 to 330. The higher the value is, the more critical the risk is and vice versa.
To clarify the classification of the risk, there has to be the lower limit of the highest
risks, and the upper limit of the lowest risk. If 45% of respondents select ―yes‖ for
the perceived risk, ―high‖ for the probability and the impact, and ―frequently‖ for the
frequency, the lower limit of the highest risks will be 148.5 (45% * number of
respondents * [―high‖ value of impact + ―high‖ value of probability + ―frequently‖
value of frequency] = 45% * 55 * [2+2+2]). However, if 90% of respondents select
―yes‖ for the for the perceived risk, ―low‖ for the probability and the impact, and
―very rarely‖ for the frequency, the upper limit of lowest risk will be 74.25 (90% *
number of respondents * [―low‖ value of impact + ―low‖ value of probability +
―very rarely‖ value of frequency] = 90% * 55 * [0.5+0.5+0.5]). In other words, the
events which value above 148.5 are categorised as high risks and those which value
below 74.25 are low risks.
0 74.25 148.5 330
5.3.2 Findings presentation
5.3.2.1 Benefits
The following table displays the value and the order of each benefit as it has been
calculated according to the formula presented in the previous section.
Low risks High risks
74
No. Benefit Value Rank
1. Cost is reduced 193 15
2. Cycle time is reduced 220 4
3. Planning calculation is more accurate and advanced 220 5
4. Data complexity is manageable 217 7
5. Supply chain activities are automated and simplified 216 9
6. The data is visible between partners 205 10
7. Supply chain partners are able to share information 205 11
8. The communications and knowledge sharing between
partners are improved 199 13
9. Customer satisfaction increases 200 12
10. Profitable customers and suppliers are selected 195 14
11. Standardisation of information definitions and processes 237 1
12. Business competitiveness improves 217 8
13. The power structures in the extended supply chain is less
dependent on the ERP of the dominant parties 184 16
14. Global IT becomes more tangible 225 3
15. The speed of business execution increases 220 6
16. Cost and risk reduction as IT managed by third parties and
consortia on a shared basis 183 17
17. Standardisation of industry-wide process and shared data 226 2
Table 1 The benefit valuation
According to the table above, it can be identified the highly perceived benefits which
values above 220 are as follow:
No. Most highly perceived benefits
1. Standardisation of information definitions and processes
2. Standardisation of industry-wide process and shared data
3. Global IT becomes more tangible
Table 2 The most highly perceived benefits
There is no benefit which values less than 74.25 indicating there is no low perceived
benefit. However, the lowest three on the list are ―cost is reduced‖, ―the power
structures in the extended supply chain is less dependent on the ERP of the dominant
parties‖ and ―cost and risk reduction as IT managed by third parties and consortia on
a shared basis‖. After sorting the values of benefits in descending order, a new ERP
inter-organisational integration benefit check list is developed as follow:
75
No. Benefit
1. Standardisation of information definitions and processes
2. Standardisation of industry-wide process and shared data
3. Global IT becomes more tangible
4. Cycle time is reduced
5. Planning calculation is more accurate and advanced
6. The speed of business execution increases
7. Data complexity is manageable
8. Business competitiveness improves
9. Supply chain activities are automated and simplified
10. The data is visible between partners
11. Supply chain partners are able to share information
12. Customer satisfaction increases
13. The communications and knowledge sharing between partners are improved
14. Profitable customers and suppliers are selected
15. Cost is reduced
16. The power structures in the extended supply chain is less dependent on the ERP of
the dominant parties
17. Cost and risk reduction as IT managed by third parties and consortia on a shared
basis
Table 3 The benefits list of ERP inter-organisational integration
The table above contributes to the existing literatures on the ERP integration with
supply chain partners to demonstrate the benefits that the businesses fully
experience.
5.3.2.2 Risks
The following table displays the value and the order of each risk as it has been
calculated according to the formula that has been presented in the previous section.
No. Risk event Value Rank
1. ERP is inflexible to adapt to changing business models 127 19
2. ERP is inflexible to adapt to changing in business
processes 144 12
3. ERP is unable to support the massive volume of unique customer orders
149.75 7
4. ERP inability to handle three or more parties for
transactions 92 33
5. Information exchange between parties is 106.5 31
76
No. Risk event Value Rank
underdeveloped
6. Technical compatibility due to heterogeneous IT
infrastructure 166.25 5
7. The integration process is too long to respond to business change
168.75 3
8. Interconnection problems that not all data are suitable
for conversion 150.25 6
9. The system changes impose a very high cost 148.75 8
10. There are more customisations in the future 144 13
11. Upgrading is complex and difficult 147 11
12. Technical migration from ERP to ERP II complexity 130.5 16
13. Hardware and software crash 147.25 9
14. The partners concern about the security of placing
information in their partners‘ database 129.5 17
15. Intellectual property leak 115 25
16. Partner‘s user incorrectly inputs the data (lack of data
ownership) 174.75 2
17. Lack of shared understanding of data 133.25 15
18. System contains inaccurate data 167.25 4
19. Users are reluctant to changes 181 1
20. The inability to attract and maintain qualified staff 116.25 24
21. Systems not felt as helping the business 126.5 20
22. Lack of training and education 143.25 14
23. There is no enough support from the functional areas
particularly inbound (procurement) and outbound
(sales) 119.75 22
24. The lack of top management support 147.25 10
25. ERP supplier does not develop the system in the future 129 18
26. The company lays off the employees 88.25 34
27. The warehouses and distribution centers are shut down 79.5 37
28. The logistic vehicles are reduced 62.5 40
29. The supplier performance measurement is difficult 81 36
30. Internal control systems and audit measures for
integrated ERP are not very well developed 120.5 21
31. Designing incentive alignment (sharing increase in profit and cost reduction) scheme is difficult
82 35
32. The length of the relationship is negatively correlated
with the performance measurement 66.25 38
33. Suppliers are leaving from long term contracts 94.25 32
34. The partners commitment is not aligned with the long term shared business strategy
112 28
35. The partner does not share the private information in 114.25 26
77
No. Risk event Value Rank
an optimum way with their partners
36. The partner lacks of motivation to align the decision
with the mutual goal 111.75 29
37. The lack of partner‘s technical expertise 114 27
38. The searching for compatible and trustworthy suppliers can be difficult
108 30
39. The less dominant partners‘ innovation and creativity
are limited 65 39
40. The replacement of other partner‘s enterprise system 119.25 23
Table 4 The risk valuation
Following are the risks with values more than 148.5 which represent the most
critical risks of ERP inter-organisational integration in South-east Asia:
No. Most critical risks
1. Users are reluctant to changes
2. Partner‘s user incorrectly inputs the data (lack of data ownership)
3. The integration process is too long to respond to business change
4. System contains inaccurate data
5. Technical compatibility due to heterogeneous IT infrastructure
6. Interconnection problems that not all data are suitable for conversion
7. ERP is unable to support the massive volume of unique customer orders
8. The system changes impose a very high cost
Table 5 The most critical risks
Apart from the most critical risks, there are also several events which value less than
74.25, they are ―the length of the relationship is negatively correlated with the
performance measurement‖, ―the less dominant partners‘ innovation and creativity
are limited‖ and ―the logistic vehicles are reduced‖. There is no strong argument to
justify whether those events are risks, as the percentage of respondents who do not
believe them as risks is more than the percentage of respondents who believe.
There are new risks or issues identified from this research. One respondent stated
that the system automatically updates the creditors/debtors balance, therefore, a
wrong allocation will require complex corrections and sometimes the confirmation
from a particular party can be very slow. The wrong correction also results in dirty
data. This issue can be classified as the lack of data ownership risk. Other
respondent highlights the issue of an automated accounting data recording and
moving transaction which cannot be mapped to the supporting physical accounting
78
documents as required by financial auditors. There is also a concern about the
automatic calculation can be possibly against the regulations which require the
manual adjustments.
After sorting the risk values in descending order, a new inter-organisational
integration of ERP risks check list is developed as follow:
No. Risk Event
1. Users are reluctant to changes
2. Partner‘s user incorrectly inputs the data (lack of data ownership)
3. The integration process is too long to respond to business change
4. System contains inaccurate data
5. Technical compatibility due to heterogeneous IT infrastructure
6. Interconnection problems that not all data are suitable for conversion
7. ERP is unable to support the massive volume of unique customer orders
8. The system changes impose a very high cost
9. Hardware and software crash
10. The lack of top management support
11. Upgrading is complex and difficult
12. ERP is inflexible to adapt to changing in business processes
13. There are more customisations in the future
14. Lack of training and education
15. Lack of shared understanding of data
16. Technical migration from ERP to ERP II complexity
17. The partners concern about the security of placing information in their partners‘
database
18. ERP supplier does not develop the system in the future
19. ERP is inflexible to adapt to changing business models
20. Systems not felt as helping the business
21. Internal control systems and audit measures for integrated ERP are not very well
developed
22. There is no enough support from the functional areas particularly inbound
(procurement) and outbound (sales)
23. The replacement of other partner‘s enterprise system
24. The inability to attract and maintain qualified staff
25. Intellectual property leak
79
No. Risk Event
26. The partner does not share the private information in an optimum way with their
partners
27. The lack of partner‘s technical expertise
28. The partners commitment is not aligned with the long term shared business strategy
29. The partner lacks of motivation to align the decision with the mutual goal
30. The searching for compatible and trustworthy suppliers can be difficult
31. Information exchange between parties is underdeveloped
32. Suppliers are leaving from long term contracts
33. ERP inability to handle three or more parties for transactions
34. The company lays off the employees
35. Designing incentive alignment (sharing increase in profit and cost reduction) scheme
is difficult
36. The supplier performance measurement is difficult
37. The warehouses and distribution centers are shut down
38. The length of the relationship is negatively correlated with the performance
measurement
39. The less dominant partners‘ innovation and creativity are limited
40. The logistic vehicles are reduced
Table 6 The risks list of ERP inter-organisational integration
The table above representing the risks occurred from the ERP integration with the
supply chain partners. It contributes to the existing literature which can be important
for the business management to focus their attention on the most critical risks.
5.4 Conclusion
This chapter consists of two major parts; the result and the finding presentation. The
result section elaborates the statistics of the questionnaire, which are the percentage
of respondents‘ perception on each benefit and the percentage of risk determination,
probability, impact and frequency. The finding section defines the formula, which is
a mechanism to calculate the value of each benefit and risk; and the background of
giving certain weight on certain indicators. The result presentation displays the
sorted benefits and the risks in descending orders based on the values obtained from
employing the formula.
80
This chapter is the most critical part of this research as it indicates the most highly
perceived benefits and risks from ERP integration with the supply chain partners in
Indonesia and Singapore. The highly perceived benefits are information definitions
and processes, industry-wide process and shared data standardisation and the
tangible global IT. While the top three critical risks are users‘ reluctance, the lack of
data ownership and the too long integration which makes it irresponsive to business
change. These results are relevant and important for the literature of ERP II and for
the business in South-east Asia in a broader scope.
81
Chapter 6 Conclusion
6.1 Introduction
This chapter finalises a series of chapter describing the whole research of ERP inter-
organisational integration. As the previous chapter deduced the most highly
perceived benefits and risks of ERP integration with the supply chain partners in
Indonesia and Singapore, this chapter will review how these findings correlate with
the research objectives which have been stated in the very beginning chapter. It is
important to understand whether the objectives have been achieved and how this
research can contribute to business which concerned with the integration of ERP
with the supply chain partners. Finally, it indicates the limitations and the future
research suggestions.
6.2 Research review
This section reviews the correlation of each completed chapters.
6.2.1 The research contribution
The objective of this research is to discover the benefits and the risks occurred from
ERP integration with the supply chain partners. Considering the limited timeline and
resources, this study is conducted by taking a sample of ERP consultants and users
in Indonesia and Singapore. The major contribution of this research is to develop the
benefits and risks check list of ERP integration with the supply chain partners.
This research has initiated from the literature review of all relevant academic
journals and books in order to build a firm theoretical foundation of ERP, supply
chain and inter-organisational ERP integration. The literature review generates the
complete list of benefits and risks without indicating the significance of each benefit
and risk. Therefore, the questionnaire was developed to assess ERP users‘
perceptions of ERP inter-organisational integration benefits and risks in the context
of businesses in Indonesia and Singapore. Upon the collection of questionnaires
82
results, the formula is employed to calculate the value of benefits and risks. These
values are then sorted in descending order to identify the most highly perceived
benefits and the most critical risks. It will tell the readers how significant each
benefit or risk toward the business.
This research has achieved two main results, first is the perceived benefits check list
and the risk check list of inter-organisational ERP integration within a supply chain
line.
6.2.2 The research relation to the research questions and objectives
The research question is:
What are the benefits and risks incurred from the ERP inter-organisational
integration in the supply chain?
This research question underlies the following objectives:
1. To identify the benefits and risks associated with the ERP external
integration on the ground of a wide range of literature consultation.
2. To assess the benefits of ERP external integration.
3. To evaluate the probability, the impact and the frequency of occurrence of
the risks identified from the first objective.
4. To prioritise the list of benefits and the risks based on the evaluation of
probability, impact and frequency of occurrence.
The first objective has been achieved in benefits and risks chapter, as the literature
review has identified 17 benefits and 40 risks which are classified into different
groups as displayed on Figure 5, the ERP external integration benefit ontology and
Figure 6, ERP external integration risk ontology.
The second and third objectives are fulfilled when the questionnaire of benefits and
risks are collected from ERP consultants and users in Indonesia and Singapore. The
second objective of the benefits assessment is as follow. There are 23, 16 and 15
among 55 respondents who strongly agree with ―the information definitions and
processes standardisation‖, ―the more tangible global IT‖ and the standardisation of
industry wide process and shared data‖ accordingly. The third objective of the risk
83
evaluation is demonstrated by the highest number of responses as follow. There are
49, 48 and 47 respondents who perceive ―the lack of data ownership‖, ―users‘
reluctance to changes‖ and ―hardware and software crash‖ as risks respectively. The
top three of high probability of occurrence are ―there are more customisations in the
future‖, ―system contains inaccurate data‖ and ―users are reluctant to changes‖ with
18, 17 and 16 responses respectively. The top three of high impact are ―hardware
and software crash‖, ―the integration is too long to respond to business change‖ and
―system contains inaccurate data‖ with 28, 25 and 24 respondents accordingly. The
top three of high frequency are ―technical compatibility due to heterogeneous IT
infrastructure‖ and ―users are reluctant to changes‖ with 17 responses; and ―system
contains inaccurate data‖ with 16 responses.
The final objective is answered in finding chapter, where the benefits and risks
values are sorted in descending order according to a defined formula. The top
benefits are the standardisation of information definitions, processes, industry-wide
process and shares data; and the more tangible global IT. The most critical risks are
users‘ reluctance, the lack of data ownership (incorrect data input by the partner
user) and the too long integration which is irresponsive to business change.
6.2.3 Research implications
Realising the fact that the information technology evolves faster nowadays than in
the past; this research is potentially relevant in a short period of time. The idea of
ERP II can possibly grow to a broader idea which might introduce other benefits and
risks. The IT history records that technology obsolescence is unavoidable; MRP was
replaced by ERP, ERP is now moving to ERP II. It is conceivable that the idea of
ERP II will be obsolete in the future.
The respondents are consultants from several multinational IT consulting firms and
users in the multinational enterprises in Indonesia and Singapore. Therefore, it is
believed that this research can reflect the business situation in South-east Asia and
can be relevant for businesses in other regions as well.
84
6.3 Limitations
There are several limitations of this research. First, ERP inter-organisational
integration or so-called ERP II is a novel topic; therefore the relevant academic
journals are very limited. To build a comprehensive risk and technology, the
researchers can not focus on ERP literatures only, but also different kinds of
enterprise information system. Second, the duration of conducting this research has
limited the scope of the respondents, which is 60 respondents selected randomly
from several IT consulting companies and enterprises in Indonesia and Singapore.
This number is obviously too small to represent the population of business with ERP
II experience in Indonesia and Singapore which possibly decrease the quality of the
research finding. Finally, as IT evolves rapidly, this research can be valid for short
period of time.
6.4 Recommendations for further research
Due to the limited duration, this research takes sample of few ERP consultants and
users in several enterprises in Indonesia and Singapore. To obtain a more
representative result, it will be better to conduct further research with bigger sample,
with the equal proportions of ERP users and developers in more countries. It is also
recommended to employ a mixed methodology, with interviews or observations to
complement the survey, to understand the background of why particular benefits and
risks are highly perceived. The inclusion of the supply chain partners (the suppliers
or customers) of enterprises in the scope of research can increase the quality of
research as the readers are able to view ERP II in an end to end point of view.
Word Count: 19,391
ix
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Appendix
2011 Survey of ERP inter-organisational integration benefits and risks
Questionnaire The questionnaire takes 25 minutes to complete
There are two parts of the questionnaire
A. Benefits (Benefit is the positive impact of ERP integration with supply chain partners‘ ERP <suppliers/customers> toward the company)
B. Risks (Risk is the event that may result in loss of the company; the importance of risk can be examined by analysing the probability of occurrence, impact
and frequency of occurrence of the risk)
A. Benefits
Here are the benefits that the companies gain from the integration of ERP with suppliers and customers. For each item, please indicate your perception on it.
No. Items Strongly
disagree Disagree
Neither
disagree
nor agree
Agree Strongly
agree
1. Cost is reduced
2. Cycle time is reduced
3. Planning calculation is more accurate and advanced
4. Data complexity is manageable
5. Supply chain activities are automated and simplified
6. The data is visible between partners
7. Supply chain partners are able to share information
8. The communications and knowledge sharing between partners are improved
9. Customer satisfaction is increased
10. Profitable customers and suppliers are selected
xxi
No. Items Strongly
disagree Disagree
Neither
disagree
nor agree
Agree Strongly
agree
11. Standardization of information definitions and processes
12. Business competitiveness is improved
13. The power structures in the extended supply chain is less dependent on the ERP of
the dominant parties
14. Global IT becomes more tangible
15. The speed of business execution increases
16. IT (costs & benefits) managed by third parties and consortia on a shared basis
17. Standardization of industry-wide process standard and shared data (i.e. naming
conventions of parts/materials/products)
B. Risks
Here are some events that company may encounter due to the inter-organisational integration (integration with suppliers/customers) of ERP. For each event, please
indicate:
1. Do you perceive this event is a risk that can impact to the company? Please select ‗Yes‘ (Y) or ‗No‘ (N).
2. How likely does this risk occur in your company? Please select ‗Low‘ (L), ‗Medium‘ (M) or ‗High‘ (H).
3. If this risk occurs, what level of impact may it cause to the company? Please select ‗Low‘ (L), ‗Medium‘ (M) or ‗High‘ (H).
4. How often may this risk occur in your company? Please select Very rarely, rarely, occasionally, frequently or very frequently
xxii
No. Event
Is it a
risk?
Prob. of
occurrence
Impact Frequency of
occurrence
Yes
No
Lo
w
Med
ium
Hig
h
Lo
w
Med
ium
Hig
h
Very
rarely
Rarely
Occasio
nally
Very
Freq
uen
tly
Freq
uen
tly
1. ERP is inflexible to adapt to changing business models
2. ERP is inflexible to adapt to changing in business processes
3. ERP is unable to support the massive volume of unique customer orders
4.
ERP inability to handle the transactions involving more than three partners (i.e.
the company orders the materials from the supplier and the supplier delivers directly to customers)
5. Information exchange between parties is underdeveloped
6. Technical compatibility due to heterogeneous IT infrastructure
7. Interconnection problems because not all data are suitable for conversion
8. The integration process is too long to respond to business change
9. There are more customizations in the future
10. Upgrading is complex and difficult
11. The system changes impose a very high cost
12. Technical migration from ERP to ERP II complexity
13. Hardware and software crash
14. The partners concern about the security of placing information in their
partners‘ database
xxiii
No. Event
Is it a
risk?
Prob. of
occurrence
Impact Frequency of
occurrence
Yes
No
Lo
w
Med
ium
Hig
h
Lo
w
Med
ium
Hig
h
Very
rarely
Rarely
Occasio
nally
Very
Freq
uen
tly
Freq
uen
tly
15. Intellectual property leak
16. Partner‘s user incorrectly inputs the data (lack of data ownership)
17. Lack of shared understanding of data
18. System contains inaccurate data
19. Users are reluctant to changes
20. The inability to attract and maintain qualified staff
21. Lack of ERP training and education
22. Systems not felt as helping the business
23. There is no enough support from the functional areas particularly inbound
(procurement) and outbound (sales)
24. The lack of top management support
25. ERP supplier does not develop the system in the future
26. The company lays off the employees
27. The warehouses and distribution centers are shut down
28. The logistic vehicles are reduced
xxiv
No. Event
Is it a
risk?
Prob. of
occurrence
Impact Frequency of
occurrence
Yes
No
Lo
w
Med
ium
Hig
h
Lo
w
Med
ium
Hig
h
Very
rarely
Rarely
Occasio
nally
Very
Freq
uen
tly
Freq
uen
tly
29. The supplier performance measurement is difficult
30. Internal control systems and audit measures for integrated ERP are not well
developed
31. Designing incentive alignment (sharing increase in profit and cost reduction
with partners) scheme is difficult
32. The length of the relationship is negatively correlated with the performance
measurement
33. Suppliers are leaving from long term contracts
34. The partners commitment is not aligned with the long term shared business
strategy
35. The partner does not share the private information in an optimum way with
their partners
36. The partner lacks of motivation to align the decision with the mutual goal
37. The lack of partner‘s technical expertise
38. The searching for compatible and trustworthy suppliers can be difficult
39. The less dominant partners‘ innovation and creativity are limited
40. The replacement of other partner‘s enterprise system
The survey link: http://www.surveymonkey.com/s/YHBTMWN
