Identifying the drivers of enterprise resource planning and assessing its impacts on supply chain performances

Abstract

Purpose – Enterprise resource planning (ERP) is intended to integrate all facets of a company’s business operations encompassing production planning, material purchasing, inventory control, logistics, accounting, finance, marketing, and human resource management by creating a single depository of the database that can be shared by the entire organization and its trading partners. Through an empirical study, the purpose of this paper is to identify a multitude of drivers that facilitate or hinder the implementation of ERP in business environments. Also, this paper determines its role in supply chain operations and assesses its impact on supply chain performances. Design/methodology/approach – To examine which factors drive the ERP adoption and gauge the level of the ERP success, the authors develop a research framework based on two well-known theories in the strategy literature: a contingency theory; and a resource-based view of the firm. This research framework allowed us to develop a series of hypotheses regarding the use of ERP for strategic sourcing. To test hypotheses, the authors carried out the study in three phases: a pre-pilot; a pilot; and a large-scale questionnaire survey. In the pre-pilot phase, the authors generated potential survey items through theory development and a literature review. In the pilot phase, the authors develop a structural equation model along with the identification of valid constructs based on structural interviews and the Q-sort method. At the last stage, the authors conducted a large-scale survey via mail questionnaires primarily targeting the Korean industry comprised of manufacturers and their suppliers and customers. Findings – The firm’s ERP adoption and implementation decision is mainly affected by its internal environment. Defying the conventional wisdom, the firm’s external environment has little influence on its decision to adopt and implement ERP. However, through the mediating role of an internal environment, an external environment still indirectly influences the ERP adoption and ERP implementation decision. Also, the authors found that ERP could enhance the ERP adopter’s organizational capability and supplier capability. Originality/value – This study is one of a few attempts to investigate the role of ERP in the supply chain and identify important determinants influencing the ERP adoption and implementation decisions. Especially, in contrast with the previous literature which often gauged the benefits of ERP from an ERP adopter’s standpoint, this paper is one of the few to assess the benefits of ERP from the ERP adopter’s supply chain partners standpoints. Also, it is one of the first to assess the impact of ERP on supplier capability, organizational capability, and customer value.