Measuring system performance of an ERP-based supply chain

Abstract

Metrics, the process for capturing, measuring, reporting, and assessing performance of activities, has received attention recently. The development of a metric approach to identifying potential operational problems has become very important, especially for popular enterprise systems. The purpose of this paper is to propose an integrated method, total related cost measurement, to evaluate the performance of a three-echelon enterprise resource planning (ERP) based supply chain system. To establish the validity of this integrated method, a base simulation experiment is conducted to see whether this total cost approach is responsive to such variations in operating environments as lead time variation or cost structure differentiation. Furthermore, separate sets of validation experiments are also conducted to see how sensitive the results are as obtained by the base experiment responding to changes in such parameters as the configuration of a logistics network. Both sets of simulation results are analyzed using Analysis of Variance. Research results show that an integrated approach should be considered to evaluate an ERP-based supply chain. Also, the performance of an ERP-based supply chain is significantly affected by the lot-sizing rule selected. If ordering costs can be effectively reduced, the lot-for-lot lot-sizing rule should be considered to reduce the total related cost. Otherwise, the Silver and Meal rule can be a cost-effective lot-sizing rule in various operating environments. We provide a general guideline to establish such an integrated performance measurement for ERP-based supply chain operators to better capture the system performance attributed to the use of ERP.

Impact of Supply Chain Management on the Relationship between Enterprise Resource Planning System and Organizational Performance

“…Furthermore, these researches have attempted to determine the way different ERP modules can be integrated into SCM for planning, execution and control of items, materials, operations, and resources (Ho, 2007;Koh et al, 2006). In line with the previous studies, this research focuses on the relationship between ERP and SCM performance in the Malaysian context.…”

Impact of an ERP system’s capabilities upon the realisation of its business value: a resource-based perspective

“…[2,46,52,59,96,107]). The third category is composed of studies proposing models, frameworks or methods for measuring the contribution of an ERP system to organisational performance [22,25,26,27,51,79,110]. Hence the present study pertains to the second group, as it uses the RBV as a frame of reference to understand the extent to which different ERP capabilities contribute to organisational performance.…”

Why are enterprise resource planning systems indispensable to supply chain management?

“…Moreover, determining how to integrate various ERP modules into SCM, for planning, control and execution of materials, resources and operations has recently become important (Koh et al, 2006;Samaranayake and Toncich, 2007;Ho, 2007). Research focusing on the relationship between ERP benefits and SCM competencies is limited and inconclusive (Hsu et al, 2009).…”