ERP System versus Stand‐Alone Enterprise Applications in the Mitigation of Operational Glitches

Abstract

ABSTRACTBusiness function‐specific stand‐alone enterprise applications (SEAs) are displacing functionally integrated enterprise resource planning (ERP) systems, despite strong empirical support for the business benefits of the latter. This study explores the conditions under which it may be more effective to use a set of SEAs instead of a single‐suite ERP system, and vice versa. Based on Organizational Information Processing Theory, we expect differences in effectiveness to grow in prominence when the uncertainty of the operating environment increases, that is, when operational glitches in production processes become more frequent. Extending the existing literature, we postulate that high functional differentiation is a precondition for SEAs to be more effective than an ERP system, hypothesizing that the level of functional interdependence ultimately determines which type of software is superior for a given production process. We test our hypotheses using data collected from 163 make‐to‐order (MTO) production processes nested within 73 manufacturing plants and seven supply chains of complex, high‐tech machinery. Results show that when functional interdependence is low, the negative effect of operational glitches on delivery performance is effectively mitigated in MTO production processes wherein process‐related information is managed predominantly using SEAs; conversely, when functional interdependence is high, using an ERP system is more effective. Our findings offer practical guidelines as to when to use SEAs versus an ERP system while also integrating and updating the findings of earlier empirical research, in which each has been analyzed separately.