ERPII – Inter-firm Collaboration

1. ERPII – Inter-firm Collaboration Professor SC Lenny Koh The University of Sheffield Logistics and Supply Chain Management (LSCM) Research Group S.C.L.Koh@sheffield.ac.uk www.sheffield.ac.uk/lscm

2. ERPII – The Concept • ERP II is an evolution from ERP that extendsbusiness processes, opens application architectures, provides vertical-specific functionality and is capable of supporting global enterprise-processing requirements (Zrimsek, 2003). • ERP II is a business strategy and a set of industrydomain-specific applications that build customer and shareholder value by enabling and optimizing enterprise and inter-enterprise, collaborative operational and financial processes (GRG, 2000).

3. The evolution of enterprise systems Adapted from Gartner Research, 2000

4. Drivers for ERPII • The motivation of integration with suppliers to develop a 21st century supplier network via linking ERP system with selected vendors that aimed to enable improved Supply Chain Management (SCM). • The motivation of integration with customers to develop a 21st century customer network via linking ERP system with customers that aimed to enable improved Customer Relationship Management (CRM).

5. ERP vs. ERPII

6. ERP II Core Adapted from Leon, 2003; Moller, 2004

7. The ERPII architecture Source: Loh et al, 2006

8. Current development by implementer Some examples of ERPII software, BISON Solution, CINCOM

9. Reactions to ERPII • Optimistic - new business drivers, speed, adaptability, flexibility, and responsiveness would usher in ERPII. • Major driver of ERP upgrades in the years to come and a critical qualifier for vendor selection with new customers. • C-commerce - Firms whose applications, processes, and data are interoperable and collaborative will be accustomed to a world where demand identified is demand realized, in a matter of nanoseconds.

10. Reactions to ERPII • Zrimsek (2003) advocates vendors to provide products that are neutral regarding language, currency and statutory requirements and further suggest that from the monolithic architectures of ERP, [users] will create ERP II deployment strategies that best fit the needs of the enterprise without relying on a single vendor to deliver all application components. • Other argument centres on one principal theme – standardisation ‘fantasy’, and suggests that ERP does not acknowledge diversity and imposes commonality where it does not make sense, and on this basis, the ERP II reimplementation needs are questioned. • The author contorts the traditional 80:20 rule by suggesting that earlier, the principle advocated that nearly 80 percent of any custom development effort focused on overcoming problems related to core technologies, data access, security, query, and user interface. Only the remaining 20 percent is spent on actually developing the business-end of the solution. ERP II compliant systems reverse this principle so that 80 percent of the development effort can be focused on developing the business solution (Wheller, 2004b).

11. Recommendations for ERPII adopters • Zrimsek (2003) warns that the path to ERPII will be more complicated and involved than that for ERP and suggest the following recommendations: Users seeking to adopt an ERPII strategy should: • Focus application deployment on the management of critical relationships and key performance metrics. • Deploy internal processes and enterprise systems that are capable of connecting with other virtual enterprise participants in a seamless, near-real-time manner. • Combine a business intelligence framework with their transactional systems to manage and monitor various levels of corporate performance. • Again, stress is on collaborating from both a managerial and informational perspective (Step 1 & 2) and using corporate business intelligence systems (Step 3).

12. IFC • Inter-firm collaboration (IFC) is referred to when an alliance or network has formally been agreed to between two or more (autonomous) organisations. The IFC for this purpose can take the shape of either competing organisations that co-operate (Soekijad and Andriessen, 2003) or alliances that consist of suppliers or customers (Huang et al., 2002).

13. Firm benefits through IFC measures

14. IFC classification methods

15. Barriers to IFC • New and Burnes (1997) conducted an empirical study of the benefits gained from such relationships and found the distribution of the costs of improvement activities was biased towards suppliers, rather than customers. • McIvor et al. (2000) present evidence to suggest that procurement personnel have found it difficult to adapt to the new ethos of ‘collaborative’ openness with suppliers. • Benton and Maloni (2005) further find that because trust plays such a vital role in forming IFCs (especially for knowledge and information sharing purposes) other problems emanate. As an example, lack of trust could manifest into fear over the degree of sensitive information sharing such as for pricing, sales promotions and product sales.

16. Barriers to IFC • Systems and process incompatibility of the partners (Johnson and Scholes, 2003) and systems security (McIvor et al., 2003). • Supply chains with customers and suppliers are not homogeneous. Participants often have different communication infrastructures, with language, currency and cultural barriers, and legislative differences. • Lee et al. (2003) summarise that there exists the problem of the forced need of the ‘bandwagon effect’. Thus, the initiating company might even have to extend considerable resources to get everyone ‘on board’.

17. Managing Collaboration • Soekijad and Andriessen (2003) consider effective collaboration to be the resultant of three pre-conditions that firms must either arrive at, or know beforehand: • Organisational characteristics, wherein each organisation must be prepared for receiving added value by opening its ‘informational doors’ for collaborators. • Characteristics of the (mutual) relationship, these include the strength of the tie or relation, and the underlying trust prevalent in the tie. • Characteristics of the knowledge/information shared, tacit knowledge is less easy to exchange than knowledge that is codifiable and hence teachable.

18. Spekman et al (1998)’s IFC approach • Propagate a far more pro-active methodology to manage IFCs based on the temporal stage of the alliance i.e. management functions vary with the life cycle stage of the alliance. • They contend that management in the early stages isvisioning and sponsoring; • Then it involves advocating the alliance to important stakeholders and networking across companies to secure commitment and partnerships. • Management focus finally shifts to micro-managing and mediation as the alliance grows and matures. • They also suggest certain characteristics of alliance managers such as cross-competency and interpersonal skills.

19. Johnson and Scholes (2003)’s IFC approach • IFCs as a function of defining and meeting certain critical success factors (CSFs) such as establishing: • Trust • Senior management support • Defining and meeting performance expectations • Establishing clear goals and organisational arrangements • Allowing the alliance to evolve and change rather than prescribing it too parochially at the outset.

20. Research methodology • A questionnaire survey was administered through easy to read HTML based web pages, sourced from a survey hosting company (http://www.surveymonkey.com). • Respondents were selected from four countries – India, Sri-Lanka, UK, and USA and 44 responses were selected (46 in total, two were rejected for incomplete response). • Of the many sample selection options available under probability and non-probability sampling, the present sample was selected as per the guidelines and requirements of the purposive or judgemental sampling of which the homogeneous sampling strategy (Saunders et al., 2003) was chosen. • ERP (Integrators/ERP Consultants/Software houses were one category – Implementers, functional users from parent companies – Functional (parent) users, functional users from suppliers/subsidiary companies – Suppliers.

21. Respondents profile

22. ERP Initiation responsibility

23. Collaborative information exchange trends

24. Perceived benefits of ERPII implementation Operational, managerial, strategic, IT infrastructure, organisational

25. Frequency distribution for operational benefits

26. ANOVA results for operational benefits Key: * p<0.05

27. F statistic vs. Welch statistic • If the number of cases within groups are unequal, the data for each group needs to have the same variance. The test of homogeneity calculates the Levene statistic to establish difference/similarity in variance. Unfortunately, the test revealed differences in inter-group variances for almost all the sub-questions. • The SPSS software’s help files provided an alternative to the standard F statistic used in ANOVA when this happens. “The Welch statistic is more powerful than the standard F or Brown-Forsythe statistics when sample sizes and variances are unequal” (SPSS help files, 2004). • Thus instead of evaluating the p value associated with the standard F test, the p value from the Welch statistic was used as it is more robust if both the variance and number of inter-group cases are heterogeneous. The variation between the groups is highlighted first (for each logical grouping of sub-questions) before moving on to a detailed analysis for each sub-question.

28. Welch statistics for operational benefits Key: * p<0.05

29. Frequency distribution for managerial benefits

30. ANOVA results for managerial benefits Key: * p<0.05

31. Welch statistics for managerial benefits Key: * p<0.05

32. Frequency distribution for strategic benefits

33. ANOVA results for strategic benefits Key: * p<0.05

34. Welch statistics for strategic benefits Key: * p<0.05

35. Frequency distribution for IT infrastructural benefits

36. ANOVA results for IT infrastructural benefits Key: * p<0.05

37. Welch statistics for IT infrastructural benefits Key: * p<0.05

38. Frequency distribution for organisational benefits

39. ANOVA results for organisational benefits Key: * p<0.05

40. Welch statistics for organisational benefits Key: * p<0.05

41. Perceived impediments to ERPII success Operational, managerial, strategic, financial, technological, organisational, legal

42. Frequency distribution for operational impediments

43. ANOVA results for operational impediments Key: * p<0.05

44. Welch statistics for operational impediments Key: * p<0.05

45. Frequency distribution for managerial impediments

46. ANOVA results for managerial impediments Key: * p<0.05

47. Welch statistics for managerial impediments Key: * p<0.05

48. Frequency distribution for strategic impediments

49. ANOVA results for strategic impediments Key: * p<0.05

50. Welch statistics for strategic impediments Key: * p<0.05