ERP Implementation in Job Shop Manufacturing Using the case study attached:write 3-4 paragraphs on why it was or was not a success in terms of cost, schedu

ERP Implementation in Job Shop Manufacturing Using the case study attached:write 3-4 paragraphs on why it was or was not a success in terms of cost, schedule, quality, and performance (this is important – don’t forget it!) The Impact of Enterprise Resource Planning
on Job Shop Manufacturing
Supply Chain Management
Jean C Essila*
Job shop manufacturing processes have been reluctant to adopt Enterprise Resource Planning Systems (ERPs)
for enhancing logistics performance. The cost of adopting and deploying ERPs is a high-entry barrier. Prior
research has claimed that performance can be enhanced by improving logistics planning using technology such
as ERPs. Most past research has examined the effect of ERPs on logistics performance in production processes
other than job shops, which seems to suggest that in small-scale production processes the cost of ERPs makes
it irrelevant. Are manufacturing job shop production processes the exception that proves the rule? Using both
a t-test two sample for means and a Kolmogorov-Simonov (KS) test, this study tested whether or not ERPs can
improve supply chain logistics performance in job shop manufacturing processes. The results might lead to a
positive social change in the adoption or non-adoption of ERPs in job shop manufacturing.
In today’s highly competitive environment, companies that have not mastered the
logistics dimension of the operations and strategic management will disappear. This
statement is proven by the fact that 230 of the 500 leading companies in the world have
disappeared in the past 10 years. Therefore, when it comes to the need to adapt over time,
every organization is concerned and none is invincible; companies that do not control the
logistic managerial dimension of their management will disappear.
High-stake operations require high-performing logistics systems to set them up for
success. Enterprise Resource Planning Systems (ERPs) can be a powerful tool for
enhancing performance (Sun et al., 2015). However, Supply Chain Management (SCM)
tools are the last mover among various industries (Kim and Kwon, 2015). De Burca et al.
(2005) found that the cost of adopting and deploying ERPs is a high-entry barrier and,
to some extent, a leading reason for whether or not to adopt ERPs in job shops. The
average total cost of an ERP ownership is $15 mn, the lowest $400,000 and the highest
$300 mn (Meta Group, 2011; and Stevenson, 2018). In addition, several hidden costs exist
such as training, integration, testing, data conversion, data analysis, consultant fees, and
post-ERP depression (Deloitte Consulting, 2010). The slam-dunk, franchising (phased),
and big bang approaches are commonly used for implementing ERP systems.
Ph.D. and Doctor of Engineering, Assistant Professor, College of Business, Northern Michigan University,
1401 Presque Isle Ave, Marquette, MI 49855, USA. E-mail:
© 2018 IUP. All Rights Reserved.
The IUP Journal of Supply Chain Management, Vol. XV, No. 3, 2018
According to Aslan et al. (2012), by providing real-time data availability, ERPs can be
useful for make-to-order organizations’, manufacturing companies. It should be noted that
job shops are among make-to-order organizations. However, several studies conducted by
Kumar et al. (2008) considering potential benefits of packaging American hospitals’ supply
chains, failed to identify any significant benefits. A very small hospital (clinic) logistics
system is in some ways similar to that of a manufacturing job shop. A job shop system is
a small type of production system in which a low volume of high-variety goods or services
is produced. Processing is, therefore, intermittent (Stevenson, 2018). Kumar et al. (2009)
studies reinforced the assumption that ERPs are not suitable or efficient for job shop
manufacturing productions systems.
This paper depicts a study conducted by the author and his research team. In this
empirical study, direct observations and tests were conducted at a small US company that
makes use of a job shop manufacturing process. The study’s purpose was to test the
effectiveness of ERPs on a job shop manufacturing process. In fact, from the system
approach, every business function is vital for the achievement of the company’s overall
goals, which include leveraging resources in a cost-effective way to sustain the company’s
growth and, thus, to increase stakeholders’ value.
The company under study designs and builds hand-tufted carpets for the airline
industry. The company’s production system is a job shop type, that is, a business operating
on a relatively small-scale. Today, its supply chain consists of a network of dying houses
and carpet manufacturers located around the world. In 2012, its lead time was more than
three times the average in the industry, leading to a significant decline of market shares.
The situation forced the company to lay off more than half its workforce. New supply
chain partnerships were developed in an attempt to reduce the lead-time and improve the
overall logistics system, but without success. Consequently, the firm was losing more
customers. Two business audits pointed out logistics planning as the leading cause of the
firm’s poor performance. Many companies were facing (others are certainly experiencing)
similar logistics-related issues. Prior research has claimed that performance can be
enhanced by improving logistics planning using technology such as ERPs. However, were
manufacturing job shop production processes the exception that proves the rule? The
study tested whether even in job shop manufacturing, ERPs can improve logistics
Today’s Market Logistics Challenges: In today’s market, being able to deliver materials
and products to manufacturers and end-users quickly and efficiently is crucial for keeping
market shares and maximizing profits. The wide range of materials adds another layer of
challenge to the logistics function. In fact, companies are now involved not only in the
supply of raw materials, planning, and production of resources, tools, and spare parts, but
also in the production of semi-finished, finished, and trading goods. Companies are also
required to supply manufacturers with parts, maintenance assemblies, and operating
supplies, as well as empties and returning packaging. Improving the quality and
The Impact of Enterprise Resource Planning on Job Shop Manufacturing Supply Chain Management
effectiveness of a company’s logistics, therefore, is an important area to invest in.
Production, as a result, can focus on determining the most effective bill of capacity, labor,
resources, and operation to produce high quality products.
Distribution of Goods in a Globalized Economy: In general, companies are confronted with
numerous problems, among which one of the most detrimental is their inability to position
people, materials, and products where internal and external customers need them, primarily
for the purpose of delivering quality products in the required quantity to the required place,
not only at the lowest cost possible, but also by providing the level of predetermined service.
Strategic leaders refer to this series of issues as logistical problems. The most visible point
is the subcontract of activities such as packaging, labeling, storing, transporting, material
handling in processing centers, and physically distributing the products.
Logistics effectiveness is not always at its highest potential, even when the logistics
contracts are defined clearly with a higher level of precision. The logistics effectiveness
can remain low, considering the broad scope of operations that firms generate to meet
customers’ needs. The situation has become more complex with the globalization of the
economy; customers are now more demanding in terms of price, short delays, and quality
products. Although countries have traded with each other for thousands of years,
globalization’s impact is greater today than ever before (Murphy and Wood, 2011). In
today’s economy, the demand for quality goods and services is coming from all over the
world, and firms must at least meet customers’ needs to survive; the best companies gain
and sustain a competitive advantage over their rivals.
The Need for High-Performing Logistics Systems: A high-performing logistics system
provides effective customer service by delivering the product or service in the best
condition, to the needed location, at a specific time, for the lowest possible cost. An
effective logistics system should prevent stock outs and build customers’ trust by
developing the flexibility and ability to obtain internal or external resources that are
necessary to adapt to changes in customers’ preferences, needs, and demand, as well as the
firm’s chain of supply. In today’s highly competitive environment, companies that would
not have mastered the logistics dimension of operations and strategic management will
disappear. High-stake operations require high-performing logistics systems to set them up
for success.
Why Is the United States Logistics Performance Low? Both domestic and international
Logistics Performance Indexes (LPIs) are among the most credible international measures
of a country’s overall logistics performance. The World Bank monitors and administers the
LPI. According to the World Bank (2018), the LPI consists of both qualitative and
quantitative measures and helps build profiles of logistics for countries. It measures
performance along the logistics supply chain within a country and offers two different
perspectives: international and domestic. The LPI 2018 allows for comparisons across 160
countries. As depicted in Figure 1, the US ranked 14th, lagging behind countries such as
Belgium, Japan and China.
The IUP Journal of Supply Chain Management, Vol. XV, No. 3, 2018
Figure 1: The 2018 Logistics Performance Index (LPI)
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2018 LPI Score
In the US, in particular, companies operate in an environment with very sophisticated
logistic infrastructures—roads are well-maintained so that goods can flow within a city
and across state lines. There is consistent electricity, internet access, telephone access, and
a nearby airport. The question remains then: Why do firms miss delivery times even when
uncontrollable variables such as, the weather, government decisions, competitors’
decisions, and support infrastructures do not constitute obstacles preventing them from
achieving their logistic goals?
Based on managerial experience from many companies and discussions with other
managers around the world, the logistical system’s planning seems to play an important
role in the success of supply chains, as does the logistical system’s delivery component.
However, the question is: Does improving the planning of the logistical systems using
ERPs affect logistics effectiveness in a job shop setting?
Literature Review
This section presents a review of the literature related to the effectiveness of logistics
management. First, the state of research on the effectiveness of logistics is introduced.
Second, effective management practices are examined. Third, one basic function of effective
logistics management—logistics planning—is examined and the integration of effective
logistics within and across the entire supply chain is discussed. A brief definitions of the
terminology suggests by various researchers is provided in Appendix 1.
Although numerous studies have been conducted on logistics management and ERPs’
impact on logistics performance, little research has addressed the effectiveness of logistics
The Impact of Enterprise Resource Planning on Job Shop Manufacturing Supply Chain Management
management as its relates to ERPs in job shop manufacturing processes. Most of the
studies focused primarily either on logistics performance or ERPs’ implementation
effectiveness in medium-size businesses and large enterprises but not in small-scale
environments such as a job shop. In addition, no study was found on the impact of ERPs
on job shop logistics performance.
Business Research on Effective Logistics
Logistics migration to business through marketing: The term logistics migrated to the
business sector through marketing (Russell, 2000). In 1948, the American Marketing
Association defined logistics as the movement and handling of goods from the point of
production to the point of consumption or use (Robeson and Copacino, 1994). This
application of logistics in the business sector represented a move to apply military
principles to the distribution of goods (Russell, 2000). Consequently, a new academic
field—business logistics—emerged.
Business logistics and studies in the field: The conceptual model of business logistics
refers to the construct as material management and physical distribution (Murphy and
Wood, 2011). Nevertheless, in his research, Russell (2000) views effective logistics in a
broader sense. He explains that effective business logistics include the planning and
management of supply sources, inventories, transportation, distribution networks, and
related activities, and supporting information to meet customers’ requirements. The
definition provides more details about business logistics than Murphy and Wood’s
Logistics capabilities: Logistics capabilities include physical assets such as buildings,
plants, factories, manufacturing centers, processing centers, distribution centers, and
warehouses; utilities; human resources; computers and transportation vehicles, including,
cars, trucks, trains, aircrafts, and ships; materials and goods; and supporting information.
Logistics protocols: The most perceivable activities of a logistics protocol is the sequence
of its deployment. Protocols include operational plans, methods, logic networks, data
systems, strategies for running effective logistics, logistics decision-making processes and
techniques, outsourcing strategies, and design and implementation of contingency plans
for forward and reverse logistics (Russell, 2000).
Logistics as a science: Russell concluded his study by affirming that logistics is a science,
the science of developing and managing the capabilities and protocols responsive to
customer-driven service requirements.
The Concept of Management and Studies on Logistics Effectiveness
According to Robbins and Coulter (2017), the first published research on management
was The Wealth of Nations by Adam Smith in 1776. Smith promoted the economic
advantages that organizations and nations could gain by using the division of labor, also
known as job specialization. During the Industrial Revolution, which began in 1750,
The IUP Journal of Supply Chain Management, Vol. XV, No. 3, 2018
innovative technology such as machine power substituted for human power, increasing
productivity. Production moved from homes to factories. New technologies triggered the
emergence of large, efficient factories that needed people who could efficiently and
effectively forecast the demand for goods as well as plan and distribute goods. However,
formal theories were needed to guide managers in running the new large organizations
(factories) generated by the new technology. The first studies appeared in the early 1900s
(Robbins and Coulter, 2017). It should be noted that before formal management theory
existed, thought and practice emerged with a certain degree of formality.
Logistics management and its performance: The Council of Supply Chain Management
Professionals (CSCMP) defines logistics management as the part of SCM that plans,
implements, and controls the efficient and effective forward and reverse flow and storage
of goods, services, and related information between the point of origin and the point of
consumption in order to meet customers’ expectations and needs. Logistics management
includes material management, which is defined as the movement and storage of materials
into a firm (Murphy and Wood, 2011). Material handling is considered the short distance
movement of materials between two or more points. Physical distribution is movement
from the firm’s warehouses to processing and distribution centers, retailers, and end users.
A wide range of literature exists on logistics, but little on logistics management. At this
point, to the author’s knowledge, no specific study on the effectiveness of logistics
management exists.
ERPs Integration with Supply Chain Management and Logistics
ERPs, the third generation of Enterprise Systems (ESs), began with Material
Requirements Planning (MRP) in 1964. This was followed by Manufacturing Resource
Planning (MRP II) in 1983. ERPs are currently the most complex version of ESs to
integrate both the functional and cross-functional processes in the organization. ERPs
have MRP as their core system. ERPs support all business function operations and
transactions, linking them in a uniform platform to make information available in realtime across the organization’s entire supply chain. ERPs track the information within
and across organizations. The Internet provides broad visibility for the information.
Supply chain managers utilize information provided by ERPs as the basis for making
informed decisions.
A close look at an ES application suite reveals the need to integrate ERPs with SCM
software. As depicted in Figure 2, the five basic components of a simple ES are the Product
Lifecycle Management (PLM), the Supplier Relationship Management (SRM), the ERP,
the SCM, and the Customer Relationship Management (CRM). ERPs are the epicenter
of ESs because they integrate and connect the other ES components.
ERP systems are configurable ESs designed to integrate processes and information
within and across organizations (Kumar and Van, 2000). ERPs allow organizations to
automate repetitive tasks, underlining transactions and processes. If properly used, SCM
The Impact of Enterprise Resource Planning on Job Shop Manufacturing Supply Chain Management
Figure 2: Enterprise Application Suite in the Supply Chain
(Tier 1)
(Tier 1)
Source: Essila (2018)
can be improved by integrating ERPs. The organizations best placed to succeed have
implemented an adequate business infrastructure utilizing ERP capabilities (Srinivasan,
2010). ERPs help to increase velocity in the supply chain fulfillment process.
ERP Systems’ Effectiveness on Logistics Performance
A study by Ali and Miller (2017) supported the findings that approximately 66 to 70%
of ERP systems projects failed to deliver on the objectives (Lewis, 2001; Carlo, 2002;
Shores, 2005; Ward et al., 2005; Zabject et al., 2009; Sun et al., 2015; and Ali and Miller,
2017). The literature on ERP systems effectiveness can be classified into seven areas
(Powell, 2013). These areas include ERPs as enablers for competitive advantage, their
modes of implementation, the support functionality, their role and value of
information, the supply chain integration, the development of Kanban, and the role
of Internet. This study falls into the supply chain integration as it pertains to the
logistics performance. In fact, the integration of ERPs into SCM is related to the role
and value of the information for logistics performance. Based on a random sample of
186 ERPs implementations, a study by Hendricks et al. (2007) found significant
statistical evidence supporting the hypothesis that ERPs improve performance and
profitability in medium-size business and large enterprises by replacing ineffective
manual interfaces between systems with cross-functional transaction automation.
ERPs enable order c…
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