THE IMPACT OF ENTERPRISE RESOURCE PLANNING (ERP) SYSTEM ON SUPPLY CHAIN PERFORMANCE: CASE STUDY ON EZZ STEEL GROUP.

• Author: ElKhouly, Sayed Elsayed

INTRODUCTION

The goal for any manufacturing operation, whether a discrete or a process manufacturing business, is to produce quality products at the lowest possible cost while striving to exceed customer expectations. Lately, manufacturers' supply chains are growing enormously complex. With sourcing, manufacturing, engineering and distribution operations spread increasingly across the globe, shorter product life cycles and ever-increasing customer demands, companies large and small have found it ever more difficult to synchronize the pieces (O'Connor, 2004). The solution to these challenges lies in implementing Enterprise Resource Planning (ERP) systems.

An Enterprise Resource Planning (ERP) system is a large-scale standard software package developed to meet the business requirements of several users. Rashid, Hossain, and Patrick, (2002) give the following as some of the core ERP modules that are found in the successful ERP systems: accounting, financial, manufacturing, production, transportation, sales and distribution, human resources, customer relationship and e-business, among others. The five dominating ERP software suppliers are SAP, Oracle, PeopleSoft, Baan and J.D. Edwards.

The most popular reasons that have been given by firms for implementing ERP systems include the need to standardize and improve processes, to improve information quality and to improve systems integration (Jacobs, Chase, & Aquilano, 2009).

The globalization of competition means that apart from ensuring their own successful operation, firms that hope to survive must establish highly responsive supply chains, with upstream, midstream, and downstream partners (Yang, 2009). The Enterprise Resource Planning (ERP) system plays the role of a central nervous system in promoting globalization of enterprise operations and shortening product lifecycle. Therefore, the ERP system has become popular.

Conceptually, many firms have implemented company-wide systems called Enterprise Resource Planning systems, which are designed to integrate and optimize various business processes, such as order entry and production planning, across the entire firm (Mabert et al., 2001). This investment has also made possible the sharing of large amounts of information along the supply chain and has enabled real-time collaboration between supply chain partners, providing organizations with forward visibility, thus improving inventory management and distribution (Mbogori, 2010).

LITERATURE REVIEW

Supply Chain

Supply chain has been defined by numerous authors from different perspectives with different focuses. For example, Bruce, Daly, and Towers (2004) describe supply chain simply as "the flow of products from the initial process in the production up to the ultimate sale to the end customer." Douglas, Stock and Ellram, (1998) also state that "A supply chain is the alignment of firms that bring products or services to market". Besides, Ketchen and Hult (2007) define supply chain as "a series of linked activities amongst companies that contribute to the process of design, manufacture and delivery of products and services." Many more sophisticated definitions have been given to supply chain; this study lists some of them as follows.

Hugos (2018) claims that " Supply chains encompass the companies and the business activities needed to design, make, deliver, and use a product or service." However, this definition focuses more on internal process rather than external process.

Chopra and Meindl (2001) gives a wider perspective. They state that "A supply chain consists of all stages involved, directly or indirectly, in fulfilling a customer request. The supply chain not only includes the manufacturer and suppliers, but also transporters, warehouses, retailers, and customers themselves." Yet, this definition focuses more on tangible elements flow (i.e., product flow) rather than intangible elements flow (i.e., information flow).

Supply Chain Performance

Concentrating only on the own activities and operations of the company is no longer enough. To achieve the desirable outcomes in the contemporary business environment, organization needs to bond its operations with the operations of its suppliers and distributors. Supply chain management has become a main management emphasis and the source of competitive edge for organizations (Anand & Grover, 2015). So, there is a need to measure the performance of the whole process of supply chain as measuring performance is essential to make sure that the actual outcome of supply chain network is consistent with the vision, strategies, and goals of the company. In a contemporary competitive economic context, supply chain performance is one of the most important questions in different industries (Balfaqih et al., 2016).

Despite the significance of supply chain performance, applying performance measurement has always been a difficult task (Anand & Grover, 2015). Beamon (1996) provides four main characteristics that should exist in an effective performance measurement system. These characteristics include inclusiveness (measuring of all relevant aspects), universality (allowing for comparability under different operating circumstances), measurability (employing quantitative data), and consistency (measures should be compatible with organization objectives). According to Neely, Gregory and Platts (2005), performance measurement is the process of quantifying effectiveness and efficiency of action. Effectiveness is the extent to which customers' requirements are met, while efficiency measures how economically a firm's resources are used. Measuring performance of supply chain encourages managers to revise company objectives and reengineer its processes, which in return helps in achieving the desired continuous improvement. However, the assessment of supply chain performance needs to be effective and efficient. The supply chain measurement effectiveness means that the managers of the company make the proper decision for the purpose of achieving the company's predetermined objectives and standards, while the supply chain efficiency measures the degree of how well resources used in achieving those objectives (Gligor, Esmark, & Holcomb, 2015; Neely, Gregory, & Platts 2005).

Enterprise Resource Planning (ERP)

Several definitions have been introduced by several authors, reflecting a distinction in understanding ERP. Davenport (1998, p.122) defines ERP as "a set of software modules which integrate relevant applications of enterprise management and cover the majority of operating procedures." Holland and Light (1999, p. 31) define ERP as "an organizational information system used to improve process efficiency by providing real time data." Klaus, Rosemann and Gable, (2000, p. 141) define ERP as "an integrated package software that combines entire business processes into a single information technology architecture for providing a holistic view of the whole business." Also, in 2000, Al-Mashari and Zairi (p.297) defined ERP as "a technology infrastructure that can assist a company in integrating information from all internal departments with suppliers and customers and can also link all areas of a company's internal functions and processes with the external ones in order to create a close relationship between customers and suppliers." Later Shehab, Sharp, Supramaniam, and Spedding (2004, p. 359) define ERP as "a business management system that comprises integrated sets of comprehensive software, which can be used, when successfully implemented, to manage and integrate all the business functions within an organization."

ERP and Supply Chain Performance

Markets are increasingly becoming more competitive; customers are becoming more demanding, products are becoming more customized and changes in customer needs are increasingly becoming more rapid. Fine (2010) indicated that as well as the business contexts change, supply chain configuration is becoming the main competence. Companies realize that surviving in the worldwide economic environment means needing to improve their inter-organization efficiency, as well as their entire supply chain (Shatat, 2015). The main reason for this is the highly competitive market the companies live in today, which is not just restricted between companies alone, but has also expanded to incorporate their whole supply chains. That's why many companies are forced to stay updated and make great investments in establishing and adopting better technology, such as the ERP systems (Davenport & Brooks, 2004). The adoption of ERP systems is spreading across industry (Su & Yang, 2010). ERP systems are rapidly growing in several industrial sectors, especially in the manufacturing sector (Shatat, 2015).

ERP systems can act as the basis for integrating business operations and functions, including human resources, accounting, finance, production, logistics, and marketing and distribution (Kuo, 2014). Such advanced information systems (ERP) could improve supply chain performance, as well as enhancing decision-making by grounding on more accurate information. In addition, ERP system promotes the association, cooperation, and exchange of information. ERP could enhance the transmission of goods and services to suppliers, customers, and all other parties in the supply chain which could ultimately increase profitability (Wieder...