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Today's global business environments are characterized by numerous competitive pressures and sophisticated customers demanding speedy solutions. Understanding and improving business processes are a cornerstone of success in these fast-changing environments. To alter how they conduct business, companies around the world are taking advantage of a variety of packaged information technology systems. In the past five years, hundreds of manufacturing firms worldwide have embraced packaged enterprise resource planning (ERP) systems as a basis for business process management integration across business functions.
ERP is based on the concept of identifying and implementing the set of best practices, procedures, and tools that different functions of a firm can employ to achieve total organizational excellence through integration. Recently a number of vendors have marketed package software that provides organizations with useful ERP tools. Market leaders such as SAP, Baan, and PeopleSoft provide a set of standardized business procedures and processes for enterprise management, and promote these products as systems to effectively improve business performance.
This article reports a recently completed survey of U.S. manufacturing firms concerning their use or intended implementation of packaged ERP systems. This study was supported by Indiana University and APICS.* Our objective was to determine the extent of packaged ERP system use in manufacturing firms, the motivation to pursue such an application, the implementation experience, and benefits obtained.
THE ERP MARKET
Growth in package ERP applications has been significant in the past decade. In 1990 the industry was about $1 billion. AMR Research estimates that by 2002 the annual sales of software and service will exceed $84 billion [3]. This rapid growth suggests that the importance of packaged ERP systems to business is significant, as these programs are not cheap. Installing a full ERP system in a large Fortune 500 company can result in software license fees in the $10s of millions with consulting expenses five times the level of software expense. Training and hardware expenses are also involved.
Besides being expensive, ERP systems can be difficult to implement and they need to deliver on the promised improvement that motivated their purchase. A META Group study of 63 firms indicates that many firms experience a negative return for their ERP investment [4]. Anecdotal evidence to date suggests that implementing a packaged ERP system has...