A Multi-Level Approach to Measuring the Benefits of an Erp System in Manufacturing Firms

ith the growing proliferation of enterprise resource planning (ERP) systems, including among midsize companies, it becomes critical to address why and under what circumstances one can realize the benefits of an ERP system. In contrast to previous research, this study examines how managers (president, CFO, production VP, etc.) assess ERP success in specific modules (e.g., suppliers and purchase orders, customers and sales) as contrasted with their assessment of the entire ERP portfolio as one entity. Data collected in 270 manufacturing organizations that implemented initial ERP systems (without additional models such as CRM) show that the benefit from investment in ERP is explained better by organizational business characteristics when examined at a specific ERP module level. To meet organizational needs, computerized information systems in manufacturing firms have evolved over the past 40 years from accounting and simple inventory control, through MRP (material requirement planning) and MRP II (manufacturing resource planning), to today’s focus on ERP systems (Sarkis and Gunasekaran, 2003). ERP systems are software packages that manage and integrate all the enterprise’s data, and provide information based on this data on a real-time basis. ERP systems can provide the organization with competitive advantage through improved business performance (Hitt et al., 2002; Kalling, 2003) by, among other things, integrating supply-chain management, receiving, inventory management, customer orders management, production planning and managing, shipping, accounting, human resource management, and all other activities that take place in a modern business (Gefen and Ridings, 2002; Hong and Kim, 2002; Kalling, 2003). Yet the cost of implementing an ERP software package is substantial, ranging from $200,000 for small companies with annual sales approximating $10M, through $600,000 to $800,000 for midsize companies with annual sales approximating $50M to $80M, and up to several million dollars for larger companies. This refers to the manufacturing management aspects of the ERP W ENTERPRISE SYSTEMS