The Framework for Analyzing ERP Systems

The Framework for Analyzing ERP Systems

Hua-Yang Lin*, Ping-Yu Hsu*, Jun-Der Leu*, Wen-Hsien Tsai*, Julian Cheng*, Yi-Wen Fan**,

Chih - Hao Weng ***, Chen-Hao Huang*** * Department of Business Administration, National Central University

** Department of Information Management, National Central University *** Graduate Institute of Industrial Management, National Central University

Jung-Li, Taiwan Email: [email protected]

Abstract

ERP systems are information systems that support the value-added process of a business in an integrated manner. Based on the concept of modular structures and centralized databases, numerous ERP systems have been developed in the market. The proliferation of ERP systems has naturally leads to an intrigue question of production classification. Are all ERP systems the same? If not, what are the major differences? Answers to these questions are interested to both academy and business. However, before any answers can be made to these questions, a framework to analyze and distinguish ERP systems is needed. In this paper, a framework for such a purpose is proposed. This framework includes functionality of finance and production that can be included in an ERP system, as well as the various IT infrastructures that can be incorporated in the n-tiers architecture. There are six ERP products surveyed in this research which providing by international and local ERP vendors. By using cluster analysis, the different groups of ERP systems can be classified. The results of this study may be useful for ERP vendors to improve their products strategy. The companies can use the results to evaluate different ERP products and choose the most suitable ERP products to satisfy their requirements.

Keywords: Enterprise Resource Planning (ERP) 1. Introduction

ERP systems are integrated information systems that support the value-added process of enterprises. Based on the concept of modular structure and centralized database the information flows refer to manufacturing, finance, sales and distribution as well as human resources in the business can be organized in an integrated manner so that the enterprise resources use is not necessary to be limited in a functional orientation way.

Currently many ERP systems are available in the market. Their ERP products may differ from each other or have some common characteristics. Some of the ERP products provide more functions to support the requirements of large-scale enterprises. But for small and medium enterprise, the local ERP product could be the suitable choice. To support the business in their ERP systems choice, this paper submits an analysis framework of ERP products.

Because the characteristics of ERP systems are quite different from that of other information systems, the available classification methodology for MIS systems may not be certainly suitable for the case of ERP systems. Since ERP systems are process-oriented systems, and the production logistics plays a significant role in the value-added process of manufacturing industries, this paper will survey the ERP systems on the following aspects:

• Information technology • Production • Finance In the aspect of information technology the IT related attributes are evaluated. In the aspect of

production and finance, the capability of ERP systems for support the production logistics as well as the financial accounting related business processes will be evaluated.

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2. Methodology

The research involves four following major steps to analyze ERP systems: (1) Identification of the simplified ERP analysis framework. It includes collection of attributes

and functions for developing the analysis framework. The research includes information technology attributes, production functions and finance functions currently. Then the simplified ERP analysis framework of ERP systems showing the IT infrastructure, ERP modules and interface to external systems will be presented.

(2) Identification of ERP vendors from the Market Intelligence Center (MIC) of Information Industry Institute (III) in Taiwan and the Internet search. For it, the ERP software vendors, products, and descriptions will be identified and only some not all ERP products will be surveyed in this research. The ERP vendors must have branch offices in Taiwan and the Mainland China at the same time. These vendors include international and local ERP vendors.

(3) Development of ERP questionnaire based on the ERP analysis framework. Identification of ERP systems that support attributes and functions from analysis framework by e-mail the questionnaire to selected ERP vendors. After getting replies from ERP vendors, we check the answer of questionnaire again by calling the consultants to validate the results.

(4) Identification and analysis of the attributes and functions contained in the ERP products. Each key function and attribute has a variety of sub-features or capabilities. These functions and attributes of different ERP products were identified and analyzed. By evaluating the relationship between the aggregations of ERP functions and attributes, we will study if the processes of ERP system differentiation might be identified and described.

3. A framework for analyzing ERP

Information systems are generally defined either in terms of their function or attribute. The first definition focuses on what the system does, and the second one pays more attention to the component of the system [1]. Here, the functions are defined as the available functions of ERP systems to support the business processes, and attribute as the information technology characteristic of ERP systems.

Because ERP systems are continuously evolving in terms of technology and functionality [2], in this paper both function and attribute are used to be as the taxonomic characters to classify ERP systems. To it, three different types of functions and attributes are included:

• Information technology: ERP systems are information systems [3][4], so the information technological attributes should be considered.

• Production: Historically, ERP systems were evolved from MRP and MRP II systems [5][6], the first-generation ERP applications software were beginning to appear in the manufacturing industry [2], and manufacturing related industries have highest penetration rates to implement ERP systems by European midsize companies [7]. So, it is reasonable to include some production functions.

• Finance: According to some definition of ERP, it’s belongs to a kind of accounting and financial system [8], and most companies implement financial module first when they implemented ERP systems. Hence, the aspect of financial functions is included.

A simplified framework for analysis ERP systems shows the IT infrastructure, major ERP

modules, and their relationships with some external systems by interfaces as shown in Figure 1. In this research, the focus will be on IT infrastructure that supported the ERP system operation, and the most important modules of ERP system as mentioned previous. 3.1 IT attributes

IT attribute is the technology infrastructure to support the execution of ERP systems. The ERP systems transform the value chain methodology into reality by applying software systems to links activities (functional areas) in a mainframe or client/server architectural environment [8]. In the viewpoint of IT infrastructure ERP systems have three components: client/server system, enterprise-wide database as well as the application modules [9]. In the client/server architecture three components should be included [10][11]:

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• Hardware: The computers, mainframes, minicomputers, workstations or PC servers installed to be as database server or application server.

• OS: Operating systems for ERP systems. • System architecture: Number of tiers of the client/server architecture, and the capability of the

servers to support the load-balancing function. • DBMS: It concerns the database control access of ERP systems.

Figure 1: The framework for analysis ERP systems

User interface is one characteristic of the client/server model [12], which is typically a graphic user interface (GUI). Owing to the development of mobile technology, the mobile devices can be used to access information systems [13] so that the browser/web-based architecture is the trend of ERP products. Users may connect to ERP systems by browsers and mobile devices so that the ERP systems can be integrated to the supply chain management (SCM) system, customer relationship management (CRM) system, and so on. From above the IT attributes will be studied under the framework given by the Figure 2.

Figure 2: The framework of IT attributes

3.2 Production functions

Advanced manufacturing technology (AMT) is quite widely used in the industry. It enables the production automation and requires the IT support in production organization. Brandyberry et al. [14] give a taxonomy of advanced manufacturing technology, and Scheer [15] gives an integrated information model in terms of Computer Integrated Manufacturing (CIM) wherein some reference models are given. In this

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paper the ERP systems will be classified by considering their capability to support the business processes refer to production.

However, the production logistics of different type of manufacturing systems are not certainly the same. In addition, the production logistics of a manufacturing system is organized in the level of strategy, planning, operations as well as integration respectively. In this way the framework considers the production logistics in the scopes of production strategy, production planning and control, shop-floor control as well as integration. Figure 3 shows the framework.

Figure 3: The framework of production functions

3.3 Finance functions

An efficient computerized financial information system should basically support the enterprise in financial reporting, financial controlling as well as in investment management. In the aspect of financial reporting normally a business follows the generally accepted accounting principles (GAAP). In it, the basic functions in the accounting process are considered, they are the Documentation and Auditing function, the Journal function as well as the Account function [16].

To the financial controlling, normally the companies apply the ERP systems to support their business processes refer to cost analysis and control. Therefore, the submitted classification framework will distinguish the financial controlling capability of ERP systems basically by their controlling methods available.

The Investment management refers to the long-term capital budgeting wherein the enterprise requires information support in economic analysis as well as in cross business process in terms of finance, such as asset management and cash flow management. The framework for finance function is given by Figure 4.

Figure 4: The framework of finance functions

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4. Analysis of ERP systems 4.1 Data collection

A total of 60 ERP software vendors were identified from the MIC and Internet. A total of 29 ERP vendors were selected for this research, because these ERP vendors have branch offices both in Taiwan and the Mainland China by searching their Web sites. After collecting the selected ERP vendors, we called these vendors to make sure that they willing to fill out the questionnaire. After calling these vendors, there were 25 ERP vendors willing to help the survey and the others refused the survey directly.

The ERP survey questionnaire was sent to 25 selected ERP vendors by e-mail, only 7 vendors replied the questionnaires after one month. During this month, we pushed these ERP vendors to reply the questionnaire as soon as possible by calling and e-mail the contact persons. After getting replies from 7 ERP vendors, we check the answer of questionnaire again by calling the consultants to validate the results.

Among the 7 ERP vendors, the Peoplesoft was excluded form this research, because the questionnaire of Peoplesoft’s ERP products has too many unanswered items especially in the part of production functions. So, this research includes 6 different ERP products for analyzing as shown in Table 1. The table presents ERP products name, version, software vendors, web sites and abbreviations for these 6 ERP systems.

Table 1: ERP systems: products and vendors information No. Abbreviation Product Version Vendor Web site 1 DSC Workflow ERP 3.1 Data Systems Consulting www.dsc.com.tw 2 GT Genesis ERP O8.1 Genesis Technology www.genesis.com.tw 3 ORA Oracle E-Business Suit 11.5.8 Oracle www.oracle.com 4 PBIS eProERP 8.0 Proyoung Business

Information System www.proyoung.com.tw

5 SAP mySAP.com 4.6D SAP www.sap.com 6 VT APEX ERP 6.0 Var Tech. www.var.com.tw 4.2 Analysis of ERP systems 4.2.1 IT attributes

The features associated with the IT attributes for all the 6 ERP products are shown in table 2. The values of each column mean that the number of features for each ERP products supported. The number contained by parentheses is the total number of features surveyed for each IT attribute.

Table 2: Features associated with the IT attributes

There are total 54 features that categorized as 5 IT attributes including client, web server, application server, database server and system architecture. For client attribute, the SAP supports the most number of features except for not supporting OS/2 front-end operating system environment. For web server attribute, there are three local ERP products do not support web architecture. At the same time, there is only one international ERP product (SAP) supporting all the features of web server function.

For application server attribute, only the Oracle supports all the features of application server function. For database server function, the PBIS supports the most number of features. For system architecture function, there is one international (SAP) ERP product supporting all the three levels of system architecture.

IT Attributes DSC GT ORA PBIS SAP VT Client (14) 6 12 12 5 13 6 Web server (6) 0 1 5 0 6 0 Application server (21) 14 9 21 17 19 6 Database server (10) 4 1 5 8 6 2 System architecture (3) 1 2 1 2 3 1

Total (54) 25 25 44 32 47 15

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Combined the total IT attributes, the SAP supports the most number of features for IT attributes. For local ERP products, the PBIS supports the most number of features for IT attributes. There is no huge difference among the three international ERP products about IT attributes. But for the four local ERP products, they have bigger differences among them. The comparisons of 6 ERP products for all the five IT attributes are shown in figure 5.

Figure 5: The comparisons of 6 ERP products for 5 IT attributes

0

5

10

15

20

25

IT attributes

Number of IT features

DSCGT ORA PBISSAPVT

Client Web server AP server DB server System architecture

4.2.2 Production functions

The features associated with the production functions for all the 6 ERP products are shown in table 3.

Table 3: Features associated with the production functions Production functions DSC GT ORA PBIS SAP VT

Production type (7) 4 4 7 4 7 6 Demand planning (5) 2 3 5 3 5 3 Orders management (11) 8 9 10 6 11 11 Master planning (7) 1 4 6 1 6 6 Production planning (10) 4 7 9 5 9 10 MRP (8) 8 3 8 5 8 7 Inventory management (4) 3 3 4 2 4 4 Quality control (3) 3 3 2 1 3 2 Shop-floor control (6) 1 6 6 3 6 6 Factory report (4) 4 4 4 3 4 4 Performance analysis (1) 1 1 1 0 1 1 Production cost control (1) 1 1 1 1 1 1

Total (67) 40 48 63 34 65 61

There are total 67 features that categorized as 12 production functions including production type, demand planning, orders management, master planning, production planning, MRP, inventory management, quality control, shop-floor control, factory report, performance analysis and production cost control.

For production type function, the two international ERP products support all the features of production type. For demand planning function, the two international ERP products support all the features of production type, but no any local ERP product supports all the features. For orders management function, one international (SAP) and one local (VT) ERP products support all the features. For master planning function, there is no any ERP product supporting all the features. For production planning function, there is only local ERP (VT) product supporting all the features.

There are more than half of 6 ERP products supporting all the features for MRP, inventory management, quality control, shop-floor control and factory report functions. All the 6 ERP products

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support performance analysis and production cost control function except for the PBIS not supporting performance analysis.

Combined the total production functions, the SAP supports the most features of production functions. For local ERP products, the VT supports the most features. There is almost no difference between the two international ERP products about production functions. But for the four local ERP products, they have many differences among them. The comparisons of 6 ERP products for all the twelve production functions are shown in figure 6.

Figure 6: The comparisons of 6 ERP products for 12 production functions

0

2

4

6

8

10

12

Production functions

Number of production features

DSC GT ORA PBISSAP VT

Production

type

Demand

planning

Orders

management

Master

planning

Production

planning

MRP Inventory

manageme

nt

Quality

control

Shop-floor

control

Factory

report

Performance

analysis

Production

cost

control

4.2.3 Finance functions

The features associated with the finance functions for all the 6 ERP products are shown in table 4.

Table 4: Features associated with the finance functions Finance functions DSC GT ORA PBIS SAP VT

Financial reporting (14) 6 10 13 7 12 11 Financial planning and controlling (22)

13 10 17 13 22 13

Budgeting (4) 2 1 2 0 4 1 Investment management (7) 1 1 0 0 5 0

Total (47) 22 22 32 20 43 25

There are total 47 features that categorized as 4 finance functions including financial reporting, financial planning and controlling, budgeting, and investment management.

For financial reporting, the Oracle supports the most features. For financial planning and controlling functions, The SAP supports the most features. Compared these two functions, the international ERP products support more features than local ERP products. For budgeting function, there is one ERP products support all the features, but there is also one ERP product (PBIS) does not support budgeting function. Most of the ERP products do not support investment management function. The SAP supports the most number of features for inventory management.

Combined the total finance functions, there is no any ERP products all the features. The SAP supports the most number of features for production functions. For local ERP products, the VT supports the most number of features for production function. There are some differences between the two international ERP products about finance functions. But for the four local ERP products, there is no huge difference apparently. The comparisons of 6 ERP products for all the four finance functions are shown in figure 7.

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Figure 7: The comparisons of 6 ERP products for 4 finance functions

0

5

10

15

20

25

Finance functions

Number of finance features

DSC GT ORA PBIS SAP VT

Financial reporting Financial planning and

controlling

Budgeting Investment management

4.2.4 Summarized analysis

The features associated with the IT attributes, production functions and finance functions for all the 6 ERP products are shown in table 5.

Table5: Features associated with the IT attributes, production functions and finance functions

Attributes and functions DSC GT ORA PBIS SAP VT IT attributes (54) 25 25 44 32 47 15 Production functions (67) 40 48 63 34 65 61 Finance functions (47) 22 22 32 20 43 25

Total (168) 87 95 139 86 155 101 There are total 168 features for analyzing the ERP products in this research. These features are

categorizing as IT attributes, production functions and finance functions. The SAP supports the most number of features for IT attributes, production functions and finance

functions. The PBIS supports the most number of features for IT attributes and the VT supports the most number of features for production functions and finance functions among local ERP products.

Combined all the three parts, the SAP supports the most number of features among all the 6 ERP products. For local ERP products, the VT supports more features than the others. The complete comparisons of 6 ERP products based on IT attributes, production functions and finance functions are shown in figure 8.

Figure 8: The complete comparisons of 6 ERP products

0

10

20

30

40

50

60

70

ERP attributes and functions

Number of features

DSCGT ORA PBISSAPVT

IT attributes Production functions Finance functions

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4.3 Cluster analysis

The different ERP systems can be placed to dissimilar clusters by using the cluster analysis. The goal of cluster analysis is to classify the ERP systems into clusters. In such a way, the ERP systems with similar number of attributes or functions are placed in the same cluster.

In this research, the agglomerative hierarchical clustering is used to analyze the IT, production and finance parts of ERP systems separately. All the surveyed results are analyzed by SPSS 10.0 software and used complete-linkage algorithm. The following three figures showed the results of cluster analysis for six ERP systems.

Figure 8: The cluster analysis of ERP systems based on IT attributes

Figure 9: The cluster analysis of ERP systems based on production functions

Figure 10: The cluster analysis of ERP systems based on finance functions

5. Conclusions

There are many ERP systems available in Taiwan, and many enterprises have already implemented ERP systems for their operations. However, no one known, what’s function a ERP system must include, how many functions a ERP system must have, or what’s the ERP functions and attributes a enterprise need. After checking some local and several renowned ERP software products, we will find out the similarities and dissimilarities of ERP systems. Moreover, the software vendors can use the results to improve their ERP products strategy. On the other hand, for the ERP user companies, this classification framework will support them in choosing suitable ERP products considering their requirement. 6. References 1. Phillip Ein-Dor and Eli Segev, A Classification of Information Systems: Analysis and Interpretation,

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