International Journal of Computer and Communication Engineering, Vol. 1, No. 4, November 2012 Teaching Business Processes Integration with ERP In Enterprise Architecture/Systems Courses Ming Wang multidisciplinary scope of enterprise system concepts that requires internal cross-disciplinary coordination. To understand them, students must acquire the concept of business processes integration which is the theme in both operational and analytical systems of ERP. Business process is a list of related activities to produce an outcome. Business processes integration means multiple business processes are inter-related to each other. Fig. 1 illustrates the inter-relationship of the integrated business processes in ERP. Abstract—Information Systems (IS) education is being transformed from the development of applications towards implementation and configuration of the integrated enterprise-wide system software - Enterprise Resource Planning (ERP). Teaching business processes integration has become an important issue in IS education. To meet the challenge, the author presents a comprehensive approach to teach business processes integration with ERP. The paper emphasizes on teaching business processes integration with ERP as the whole process in the Enterprise Architecture and Enterprise Systems courses. SAP ERP is utilized as an ERP software tool for illustration purpose. Index Terms—Business processes, planning, ERP, IS curriculum, SAP. enterprise resource I. INTRODUCTION The wide spread of Enterprise Resource Planning (ERP) technology has made information systems (IS) education shift its focus from applications development to business processes integration. In order to catch the industrial trend, IS educators have made significant changes on IS cores and elective courses in the Information Systems (IS) 2010 Curriculum Guidelines [1]. The Application Development course is no longer included in the core of the IS 2010 Curriculum. Instead, the Enterprise Architecture course has become as a new core and the Enterprise Systems course is recommended as an elective course. To meet the challenge, the author proposes a comprehensive approach of teaching the Enterprise Architecture course and Enterprise Systems course with emphasis on business processes integration based on her years of ERP research and teaching experiences. The paper specifies the course topics, objectives and corresponding ERP hands-on activities and also presents a framework which can be used by students to learn business processes integration. The paper is intended to serve as useful teaching resources for those information systems (IS) educators who are interested in teaching business processes integration using ERP in the two courses. The remaining paper is organized into five sections: 1) ERP Business Processes Integration, 2) ERP Data Integration, 3) Enterprise Architecture Course, 4) Enterprise System Course, and 5) Conclusion. Fig. 1. Business processes integration [2] III. ERP DATA INTEGRATION ERP has the centralized data repository that integrates all the business processes in the enterprise. This section specifies how the organization data shared across different business processes in the enterprise system. Fig. 2 shows how master data occur in major business processes in the value chain. Materials Management Production Planning Warehouse Management Sales & Distribution Customer data Vendor data x Material data x x x x x x x x x Fig. 2. Master data shared in business processes Four types of data in the ERP system are organizational data, master data, situational data and transaction data. • Organizational data are used to represent the structure of an enterprise include client, company, plant and business area data. • Master data represent entities associated with the business processes such as buying materials from vendors and selling materials to customers. Master data are referenced more frequently than others across ERP systems in both operational systems and analytical systems. II. BUSINESS PROCESSES INTEGRATION An ERP system is large and complex and learning curve is steep. Unlike other computer applications, ERP includes the Manuscript received July 22, 2012; revised September 2, 2012. Ming Wang is with the Department of Information Systems, California State University, Los Angeles (e-mail: ming.wang@calstatela.edu). 354 International Journal of Computer and Communication Engineering, Vol. 1, No. 4, November 2012 A. Organization Structure Th he organizatioonal diagram represents thee organizationnal struccture implem mented withinn the ERP P System. The T orgaanizational eleements are thhe same whetther the ER RP Systeem is being implemented i for manufactu uring or serviice relatted industry. The T enterprisee structure can n be representted by an n organizationnal diagram inn Fig. 5, whicch is a model of the relationships r a among variouss ERP system m organizationnal elem ments. • Situationall data are speccific to where and when thee task being execcuted. • Transactionn data are com mbination of organizational o data, master dataa and situationnal data. Transaction data reeflect the consequuences of process executionn. Transactionn data include daates, quantities, prices paym ment and dellivery terms. ws the relationnship betweenn transaction data, Fig. 3 show orrganizational data, master data d and situaational data ass well ass transaction documents d andd post transacttion documennts. Maste er Data Org . Data D Situa ational Data Customer Vendo or Material Client Comp. Code C Plant Who o Whe en Whe ere Transaction Data Dates s Quantities Prices Payment Delivery Terms T Tra ansaction Doc cuments : In nvoices Purch hase orders Pac cking lists After transac ction Document ts : Financial ng accountin Controllin ng Fig. 5. Organizaation diagram. B. Infrastructurre and Compoonents Infrastructure I consists of aapplication modules m that are a acco omplished viaa a very com mprehensive set of busineess process procedurees (BPPs). M Major business processes are a posed of appllication moduules. The appllication modules comp in Fiigure 6 are orgganized into thhe following four f categoriees. • The financiall managementt application modules m incluude Financial Acccounting (FII), Controllin ng (CO), Fixxed Asset Manageement (AM) aand Project Sy ystem (PS). m includde Sales & Diistribution (SD D), • The logistic modules Material Mannagement (MM M), Production n Planning (PP P), Quality Mannagement (QM M) and Plan nt Maintenannce (PM). HR) module supports s hum man • The Human Resources (H capital managgement (HCM M), payroll an nd the planniing and control off personnel acctivities. WF) and Indusstry Solutions (IS) are know wn • Workflow (W as the Comm mon Systems. The remaining modules are a known as primary p appllication mod dules, and WF W integrates the functionality of these appliication modules. Fig. 3. ERP daata integration [2]. Transaction documents record transactiion data durinng the traansaction as the process is being execcuted. Transaaction doocuments are purchase ordeers for vendorrs, packing lissts for shhipping and innvoices. Posst transaction documents reecord daata after the prrocess is finishhed. Post trannsaction docum ments innclude financiial account (F FI) document, controlling (CO) doocument and material docuuments. FI annd CO docum ments reecord the finnancial impacct of processs steps. Acccount reeceivable docuuments are creeated after thee company recceives thhe payment froom the custom mer. Materialss documents reecord m material movem ment from a veendor to a cusstomer. IV V. ENTERPRIISE ARCHITECTTURE The Enterpriise Architecturre course focuuses on concepts at a higher levell of IT Infraastructure absstraction [1]. This Ennterprise Archhitecture coursse explores the design, selecction, im mplementationn and manageement of enterrprise architeccture. ER RP software can help stuudents visuallize the enterrprise innfrastructure, organizationaal structure annd understandd the buusiness proceesses integratiion of enterpprise systems with innter-organizatiional partners such as suppliiers and custom mers. Thhis section specifies s how w to teach business b proccesses inntegration in the Enterprisse Architectuure course. Fig. F 4 illlustrates topiccs, objectives and activities of the enterrprise arrchitecture couurse. IS Core C 2010.3 Topiccs Enterprisse Architecture Enterprise organization structure Enterprise infrastructuree Enterprise data integrattion Enterprise business proocesses integration Fig. 6. BPP Ps Shared across application modu ules [3]. Eaach applicatioon module is a collection of a number of relatted business process p proceddures (BPPs), as illustratedd in Fig. 6. BPPs are the t smallest program units that provide the t a functionality of thhe ERP Systtem. Many off these BPPs are d by more thann one of the aapplication mo odules. Busineess used processes found in the organnization are built b with theese appliication modulles and BPPs. Objectives Students are able a to: Undertand entterprise organization struccture Undertand entterprise infrastructure Undertand entterprise data integration Integrate businness processes A Activities Exploring Enteerprise infrastructure Nevigating ER RP systems Implementing business processes Fig. 4. Enterprisse architecture couurse 355 International Journal of Computer and Communication Engineering, Vol. 1, No. 4, November 2012 integ gration in ER RP re-engineeering and con nfiguration. The T focu us is to teachh students too transforms ERP busineess procedures to orgaanization widde requirementts. Based on the t n business requirements, students will w reengineeer given busin ness processees and configgure a simplee and workabble integ grated enterpriise operationaal system. Students will creaate an en nterprise struccture, financiaal system and relevant master data using ER RP that dem monstrates thee integration of m several m modules, such h as accounnts inforrmation from receiivable, sales, manufacturinng production n, procuremeent, acco ount payable, and a general leedger. Fig. 8 illustrates courrse topiccs, objectivess and class activities of the Enterprise Systeems course. Each core buusiness processs consists of business appliccation modules. Entterprise softw m ware integratess the core bussiness prrocesses foundd in an organnization. The following f bussiness prrocesses can be b used to illlustrate the arrrangements of o the suupply chain management m prrocesses. • Manufactuuring Planningg and Executioon. • Procuremeent (purchasingg). management accounting a andd reporting • Financial/m S Order Management M (ssales) • Customer Sales Fig. 7. Application A modules and business processes p [3] Fig. 8. Enterprise systems. Fig. 7 showss FI and CO application a m modules occurrred in alll the listed buusiness processes. A. Business Proocess Reenginneering (BPR)) Bu usiness Process Reengineerring (BPR) is the analysis and a desig gn of workfloows and proceesses within an a organizatioon. Re-eengineering is the basis for many recent developments d s in manaagement. Thee cross-functional team, fo or example, has h beco ome popular because of the desire to re-en ngineer separaate functional tasks into i completee cross-functiional processes. o, many reccent manageement inform mation system ms Also deveelopments aim m to integratee a wide num mber of busineess processes. Businness Process Reengineerring transform ms d more effectiive orgaanization operrations to entiirely new and busin ness processes. BPR is usuually utilized in the Blueprrint Phasse of ERP Im mplementationn Methodolog gy. BPR is allso know wn as Business Processs Redesign n or Busineess Tran nsformation. There T are num merous BPR appproaches and d they each difffer acco ording to the magnitude off the change and the channge efforrt involved. Selecting S the right model to t teach BPR R is thus a difficult taask. We adoppted the modeel developed by t course. Thhis BPR modeel consists of six s Guhaa et.al. [5] in the phasses: 1) Envisioon new proceesses, 2) Initiaating change, 3) process diagnosis,, 4) process reedesign, 5) recconstruction, and a 6) prrocess monitoring. C. ERPSIM Simulation Gaames The ERPSIIM simulatioon game [4] [ provides the ennvironment for f students to experiennce an integgrated ennterprise systeem. Students are a divided too teams. Each team opperates a makke-to-stock maanufacturing plant p that inteeracts w the suppliiers and custoomers by sendding and receeiving with orrders, deliveriing their prodducts and com mpleting the whole w caash-to-cash cyycle. Students get the oppportunity to make strrategic decisioons for recipe (product desiign), sale forecasts, prroduction impprovements, prroduction releease. At the end of the game, raaw materials and a finished goods g innventory will be b sold out at a reduced pricce. Team mem mbers m renegotiate their bank loan may l with the bank at the end of eaach quarter. Interest I is caalculated quarrterly and wiill be chharged automaatically at the end of a quaarter. Customeers do noot change throoughout the game, hence you may learn from paast their behaaviour. The company c (teaam) displayingg the hiighest equity value (sharehholder capital)) at the end of o the sim mulation winss the game. As a make-too-stock manuffacturing comppany, there aree four off processes thaat must be perrformed (i) thee planning proocess, (iii) the procurem ment process, (iii) the produuction processs, and (ivv) the sales prrocess. Each process p can be decomposedd into traansactions. To T complete the four opeerational proccesses m mentioned above, a total off fourteen traansactions muust be peerformed. Moost of the transactions t i involved in these prrocesses are operational in nature, succh as to purcchase m materials or to deliver d finisheed products. B. ERP Implem mentation Methhodology Accelerated SA AP (ASAP) is a System Deevelopment Life L c to guiide Cyclle (SDLC) meethodology thhat has been created the rapid r implemeentation of thee ERP Enterprrise System. The T Solu ution Managerr is the SAP plaatform that deelivers the ASA AP meth hodology. It is a computer systems anallysis and desiign meth hodology andd tools provvided by SAP S AG. Thhis meth hodology seekks to standarddize and expeedite the typiccal ERP P implementattion. It has pproven to be effective whhen impllementing thee SAP ERP soolution acrosss industries and a diffeerent customerr environmentts. In practice,, ASAP makess it easieer to assign consulting c tassks among diifferent projects effecctively and to provide an inncreased levell of consistenccy. MS V. ENTERPPRISE SYSTEM The Enterprrise Systems course is reccommended by b IS e coursse for 20012 Curriculuum Guidelines [1] as an elective teeaching techniical ERP impplementation and configuraation. Thhis section describes d how w to teach business b proccesses 356 International Journal of Computer and Communication Engineering, Vol. 1, No. 4, November 2012 Fig. 9 illustrates the SAP Implementation Methodology Road Map [3]. contribution of the paper is to provide IS educators a comprehensive approach and a new BPI learning framework for teaching business processes integration with ERP in the Enterprise architecture and Enterprise systems courses recommended in IS 2010 curriculum. The goal is to teach students to understand business-centric information system and be able to implement and configure business processes. Project Preparation Business Blueprint Realization Final Preparation Go Live & Support Fig. 9. SAP implementation methodology phases. • • • • • Project Preparation defines the project’s scope and organizes the team, the vendors and hardware. Business Blueprint defines the business process requirements and discusses configuration and data migration. Realization configures the system, writes middleware interfaces and develops ABAP code. Final Preparation includes testing and training. Go Live begins using the system. Fig. 10. BPI learning framework. C. SAP Configuration ASAP Roadmap and Solution Manager drive ERP configuration. The completed reference model is known as the Enterprise Model when the configuration activities have matched the business requirements to the processing available in the Reference Structure. The Implementation Guide (IMG) is a SAP system tool for actually making the settings that configure the R/3 System to meet a company’s requirements. The SAP IMG is an integral part of the R/3 System that is used in the configuration of the R/3 System. About 80 percent of a typical SAP system installation is handled by the IMG configuration setting. Another 10 percent are enhancement of ABAP tools and appended structure, while 10 percent are customer developed via ABAP tools. A Project IMG is a subset of the Reference IMG that contains the documentation for selected IMG components that are implemented as part of the specific configuration project. The Project IMG facilitates the establishment of the organization arrangement during a company’s configuration by using SAP IMG [6]. The paper intentionally does not specify any ERP software in most context of the paper. Institutions have to make the decision of whether and how to provide students with hands-on use experience with actual ERP software such SAP, JD Edwards, Oracle, PeopleSoft, SSA Global and Microsoft Dynamics (Axapta, Great Plains and Solomon) etc. Enterprise system software is in place in a majority of large organizations and increasing in use in small and medium-sized organizations. ACKNOWLEDGEMENTS The author would like to thank Professor Hayen, Magal, Monk, Wagner and Word for their SAP ERP textbooks. We are also grateful to the SAP University Alliance Program for providing us SAP software, server hosting and high quality SAP laboratory materials. REFERENCES [1] VI. SUMMARY The proposed ERP business processes integration (BPI) learning framework shown in Figure 10 summarizes the important BPI components students supposed to learn from the Enterprise architecture and enterprise Systems courses. It is a good tool to use for teaching business processes integration with ERP in Enterprise Architecture/Systems Courses. Filling out the form can be the benchmark to measure whether students have grasped the six major business processes in the ERP operational system. Students need to this framework in their mind through both courses. ERP systems, by their multi-dimensional integrative nature, offer the depth of functionality and breadth of integration to demonstrate how global operations of organizations are managed. The learning curve is steep. The [2] [3] [4] [5] [6] H. Topi, J. Valacich, S. Wright, and T. Ryan, IS 2010 Curriculum Guidelines for Undergraduate Degree Programs in Information Systems, Association for Computing Machinery (ACM) and Association for Information Systems (AIS). Retrieved from the web site. [Online]. Available: http://www.acm.org/education/curricula/IS%202010%20ACM%20fin al.pdf S. Magal and J. Word, Integrated Processes with ERP Systems, Wiley, 2011. R. Hayen, SAP R/3 Enterprise Software: an Introduction, McGraw-Hill, 2007. ERPsim 2012 Web Site. [Online]. Available: http://erpsim.hec.ca/ S. Guha, W. J. Kettinger, and T. C. Teng, “Business process reengineering: building a comprehensive methodology,” Information Systems Management, Summer, 1993. D. Monk and B. Wagner, “Concepts in enterprise resource planning,” 4th Edition, Course Technology, 2013. Dr. Ming Wang is a professor of Information Systems, California State University, Los Angeles. She is SAP faculty Coordinator, At Cal State LA. She received her Ph. D. from Southern Illinois University in 1993 and taught previously in the Department of Computer Science at Embry-Riddle Aeronautical University, in Daytona Beach, Florida. 357 Journal of Technology Management & Innovation Received December 9, 2010 /Accepted January 3, 2011 J. Technol. Manag. Innov. 2011, Volume 6, Issue 1 Modularity, Integration and IT Personnel Skills Factors in Linking ERP to SCM Systems Sock H. Chung 1, Hung-Lian Tang 2, Imtiaz Ahmad 3 Abstract This study investigates some underlying technological factors for linking enterprise resource planning (ERP) to supply chain management (SCM) systems. ERP systems serve technological requirements across functional areas within a corporate boundary while SCM systems focus on collaborative relationships with partners in the supply chain, emphasizing business process integration and information sharing through IT. In order to facilitate SCM operations for business planning and decision making, an ERP system must be extensible in terms of support for a range of external constituents in the supply chain. The research reported in this paper investigates these linkages and provides a framework for developing and evaluating SCM processes in order to serve enterprise needs in terms of resource management for scalability, implementation costs and operational efficiency for meeting the business objectives. Keywords: IT personnel skills; supply chain management; enterprise resource planning; integration; modularity. Associate Professor -College Of Business, Eastern Michigan University 300 W. Michigan Ave Ypsilanti, MI 48197 U.S.A e-mail: Schung1@emich.edu (Corresponding Author) - Tel. (734)487-1215 2 PhD Professor - College Of Business, Eastern Michigan University, e-mail: hung-lian.tang@emich.edu 3 PhD Professor - College Of Business, Eastern Michigan University, e-mail: sahmad1@emich.edu 1 ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios J. Technol. Manag Innov. 2011,Volume 6, Issue 1 Introduction The importance of both ERP and SCM systems to business organizations and academia is well recognized. Recent surveys found that enterprise systems including ERP and SCM represent IT investment options in the foreseeable future (Wailgum, 2008; Hamerman et. el., 2008; Fontanella and Klein, 2009). Researchers have also been investigating links between ERP and SCM systems for organizations (Akkermans et al., 2003; Bose et. el., 2008, Su and Yang, 2010; Moller, 2005). Because IT has become an integral component in both ERP and SCM, it is worthwhile to explore the underlying IT technological factors in the two major systems for practitioners and academia (Byrd and Davidson, 2003; Davenport and Brooks, 2004; Wieder, Booth, Matolcsy and Ossimitz, 2006; Zeleny, 1986). Firms whose internal operations were only somewhat integrated have been moving to connect their supply chains with their ERP systems in managing the network of all the partners in the business chains (Davenport, 2000; Moller, 2005). Integrating of business information has been a fundamental requirement of the SCM process as well as that of the ERP systems. Integrating and standardizing information flows within the organization has been a major reason many firms implemented ERP systems (Akkermans et al., 2003; Chen 2001). In this context, the information flows for business processes such as purchasing, production and sales in ERP can also be used in SCM between supply chain partners. Even in the early days of ERP systems, a link between ERP and SCM systems was present with information flows in the form of inventory management (Davenport and Brooks, 2004). With ERP system experience firms that also implemented SCM systems perform far better along the supply chain than the ERP firms that do not use additional SCM systems (Wieder, et al., 2006). After the companies strengthened their relationships at inter-organizational level with previously adopted ERP systems, they are now deploying new IT tools to create and sustain competitive advantage by linking with supply chain partners. Davenport and Brooks (2004) suggested that while ERP systems are internally focused for their organizations, the greatest impact is felt on their supply chain. Corporations now want more from their ERP investment for information storage and exchange in order to accommodate rapidly expanding business requirements throughout their supply chains (Dai, 2008). Many of them have been trying to incorporate SCM applications into their existing ERP systems. Recent ERP systems provide a platform for SCM and firms across the supply chain can adopt the extended system functionality offered by major vendors (Davenport and Brooks, 2004; Moller, 2005; Wieder, Booth, Motolcsy and Ossimitz, 2006). ERP offers the potential of serving IT infrastructure in order to facilitate firms in integrating their supply chains (Themistocleous et. al., 2001). The goal of the integrating SCM with ERP has been well recognized as the enabler for cooperative organizational relationships, effective business processes and high levels of information sharing with the partners (Bowersox, Closs and Stank, 1999; Dai, 2008; Mabert, Sonni and Venkataramanan, 2003). Thus, this study investigates underlying technological factors of the IT infrastructure for linking ERP to SCM systems. 2. Motivation for Researching ERP/SCM Linkage ERP has been evolving continuosly in response to growing business requirements and developments in information technology that have broadened the scope of ERP for business operations. The evolution of ERP has, at the same time, involved enterprise application integration (EAI), connecting business applications distributed in an enterprise, often developed using a variety of platforms that facilitated specific needs (Gable, 2002). With the EAI software ERP systems can be linked to the rest of the existing systems within a firm (Wieder et al., 2006), and partners’ systems in their supply chains (Summer, 2005; Loh and Simpson, 2006). However, the EAI applications often had their own specific user interfaces (Wieder et al., 2006). It became necessary to develop an integrated view of the enterprise with a common interface encompassing its distributed units and diverse application platforms. The classical view of an ERP system serving as a backbone for serving the aggregated needs of the enterprise was no longer adequate (Davenport, 2000; Zuckerman, 2005). The enterprise needed to respond to customer requests in a distributed manner, gearing its manufacturing and distribution logistics accordingly. SCM systems emerged for managing this change. SCM could represent a workin-process view of the enterprise i.e. how the enterprise deals with customers in terms of ERP planning capabilities and putting into operations with its resources. In this view, ERP facilitates SCM, and SCM uses and influences ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios 2 J. Technol. Manag Innov. 2011,Volume 6, Issue 1 ERP. ERP allows things to happen in meeting the customer needs and as it meets those needs it may affect ERP view of the enterprise. How well it achieves this goal depends on the connections between ERP and SCM? The findings in this paper demonstrate a strong linkage between ERP and SCM systems with technological factors of modularity, integration, and IT personnel skills. This study primarily takes a view of SCM as the enterprise front-end that accesses the ERP system as the enterprise back-end in serving the supply chain operations. In this view, SCM is the customer of enterprise resources in terms of business data and processes, and ERP is the supplier of those resources. ERP architects and designers may operate with a complementatry perspective. What are some of the underlying concepts for establishing connections? SCM may be viewed as a system with “n” interconnected enterprise resources. In the performance of a task, it may start at a resource and travel over connections for access to other relevant resources. These connections form a network. In a typical network, each point is connected to other points that are considered as its natural cohort in the performance of enterprise tasks. The minimally connected network allows each resource to be connected to only one other resource. What connections are established depends on the enterprise view of the architecture in terms of access to resources. Some key considerations are cohesion and operational performance. The smallest collection of resources required in any task is considered a cohesive unit or module to be developed as a workhorse for uses in one or more instances of business operations. A system may also be built with modules that can be dynamically configured based on task requirements. Keeping in view the preceding paragraphs in this section, this study proposes to investigate ERP/ SCM linkage in terms of the following three key factors: integration, modularity, and knowledge and skills. 3. Methodology and Construct of ERP/SCM Linkage Factors The methodology adopted in this study follows Churchill’s (1979) model for defining the technological factors of ERP and SCM systems. Churchill suggested that a thorough literature review and analysis are imperative when specifying factors. First, this study has identified three factors for further investigations. Second, a set of relevant propositions have been developed from the literature review. Third, sample cases from industries have been used to support the research approach. This methodology has been employed in the process of constructing factors for other IT studies (e.g., Turner and Chung, 2005; Lewis, Snyder & Rainer, 1995). Likewise, the factors of linking ERP and SCM systems have been defined using content analysis of the IT/IS, SCM and organization literature. Some business developments impacting the extended effort for SCM by a firm are globalization and enterprise-wide standardization. Globalization (or internationalization) has provided the impetus for corporations to transform their worldwide operations into a single entrepreneurial enterprise. For example Oracle Corporation has worked hard to standardize and integrate its systems for achieving efficiency and better global coordination (Ghoshal and Gratton, 2002). Standardizing operating processes has also been a powerful integrating device within a firm and among business partners (Ghoshal and Gratton, 2002). It has been suggested that IT makes these business developments possible for organizations along their supply chains (Byrd and Davidson, 2003; Fawcett, Ellram and Ogden, 2007). In particular, a number of recent IT developments such as Internet and EAI technologies have converged around ERP platforms. These technologies leverage the Internet and EAI technologies for access to ERP modules, and to enable the open flow of information between different systems. For example in 2007 SAP introduced Netweaver platform to link SAP and other non-SAP systems (https://www.sdn.sap.com/irj/sdn). Earlier Bowersox et. al. (1999) predicted ERP systems integration over supply chains in the long run. Similarly, Shanks, Seddon and Willcoks (2003) argued that ERP provides the core infrastructure for SCM. The focus of ERP has shifted from internal efficiency to SCM integration (Davenport and Brooks, 2004). The SCM integration has shown that it has evolved with ERP systems from simple inventory management systems of the 1960’s, to material requirements planning (MRP) systems in the 1970’s and manufacturing resource planning (MRPII) systems in the 1980’s (Akkermans et al., 2003; McGaughey and Gunasekaran, 2007; Moller, 2005). The IT infrastructure evolution for ERP and SCM systems has helped many companies to adopt component-based software in which a component refers to an element of software that is clearly defined and separable from the rest of the system (Waquespack and Schlano, 2004). ERP systems have been a major impact on existing information systems extended to SCM systems. For example, SAP’s mySAP.com is an open collaborative system possibly to integrate SAP and ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios 3 J. Technol. Manag Innov. 2011,Volume 6, Issue 1 non-SAP ERP software. SAP also introduced Advanced Planning and Optimizer (APO) in order to support supply chain initiatives (Anderson, 2003; Olson, 2004). SCM systems appear to require more ERP modules and open systems to support integrated business functions across enterprises. Taking advantages of the underlying technological factors, ERP systems can provide a platform for SCM, and firms have adopted the SCM functionality offered by enhanced ERP systems (Moller, 2005; Sarkis and Gunasekaram, 2003). Most companies want their previously implemented ERP systems to help collaborate or share information with their supply chain partners. Table 1 identifies some of the key issues relevant to research reported in this paper. The type information indicates whether the issue most closely relates to integration (1), modularity (2), or knowledge and skills (3). A careful review of the topics in this table serves as a basis for research framework. Reference Relevant text Type Akkermans et al., 2003 the future impact of ERP systems on SCM 1 Anderson, 2003 expanded ERP functionality for SCM 2 Bose, Pal and Ye, 2008 integrate ERP and SCM systems, as they work in a 1 complementary fashion Byrd and Turner, 2001 IT personnel skills affect the IT infrastructure flexibility and 3 competitive position of the organization Byrd and Davidson, 2003 possible antecedents of IT impact on the supply chain and its 1, 3 effect on firm performance Byrd et. al, 2004 a high level of IT personnel knowledge and skills is 3 positively related to both flexible IT infrastructure and the contribution of ERP and SCM systems, and to competitive advantage Chen 2001 standardize information flows within the organization 2 Dai, 2008 information storing and exchanging in order to accommodate 3 rapidly expanding business requirements Davenport and Brooks, 2004 the integration between software modules and business 1, 2 processes has been accomplished with the ERP software implementation Davenport and Brooks, 2004 the Internet has brought about revolution in supply chain 3 thinking Fawcett, Ellram and Ogden, 2007 simplify and automate business processes adaptability to 2 business objectives Ghoshal and Gratton, 2002 standardize and integrate its systems for achieving efficiency 2, 1 and better global coordination. Hernandez et al., 2008 the degree of compatibility positively affects the integration 3 of various IT platforms among organizations Jones and Young, 2006 examine how organization manage their ERP systems 1, 2 Mabert et al., 2003 an enabler for cooperative organizational relationships, 3 effective business processes and high levels of information ISSN: 0718-2724. (http://www.jotmi.org) sharing with the partners Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios Mentzer et al. 2001 managing relationships, information, and materials flow across enterprise borders 4 1 rapidly expanding business requirements Davenport and Brooks, 2004 the integration between software modules and business 1, 2 J. Technol. Manag Innov. 2011,Volume 6, Issue 1 processes has been accomplished with the ERP software implementation Davenport and Brooks, 2004 the Internet has brought about revolution in supply chain 3 thinking Fawcett, Ellram and Ogden, 2007 simplify and automate business processes adaptability to 2 business objectives Ghoshal and Gratton, 2002 standardize and integrate its systems for achieving efficiency 2, 1 and better global coordination. Hernandez et al., 2008 the degree of compatibility positively affects the integration 3 of various IT platforms among organizations Jones and Young, 2006 examine how organization manage their ERP systems 1, 2 Mabert et al., 2003 an enabler for cooperative organizational relationships, 3 effective business processes and high levels of information sharing with the partners Mentzer et al. 2001 managing relationships, information, and materials flow 1 across enterprise borders Moller, 2005 connect their supply chains with their ERP systems 1 Motiwalla and Thompson, 2009 extend their ERP systems into supply chain with third party 1, 2 “bolt on” SCM systems. Olson, 2004 expanded ERP functionality for SCM 2 Sanders, 2005 a firm's SCM objective involves a single enterprise view of 2,3 multiple business functions and the transformation of information into knowledge while integrating the firm's various IT platforms with external suppliers and customers to share a large amount of information. Sarkis and Gunasekaram, 2003 the impact of ERP on supply chain management, a taxonomy 1 of critical factors, and an empirical analysis on ERP implementation Shanks et el, 2003 ERP provides the core infrastructure for SCM 2 Su et. el., 2010 Analyzing the impact of ERP on SCM with information 1 integration Summer, 2005 expanded ERP functionality for SCM with EAI 1, 2 Table 1: Review of ERP/SCM Linkage ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios 5 J. Technol. Manag Innov. 2011,Volume 6, Issue 1 4. Key Areas of Investigations and Propositions This section reports on four key areas of investigations relevant to our research and makes propositions for effective ERP/SCM linkages. SCM implementation strategies fostered information sharing, collaboration and decision making among companies in their supply chains. For example the success of Proctor & Gamble and Wal-Mart relationship is well documented (Davenport and Brooks, 2004). By sharing sales and forecasting data with the SCM system the two companies have effectively managed inventory performance and gained financial benefit. Another frequently quoted successful SCM story is about Dell and IT (e.g., Margretta, 1998). IT has become an integral element in the SCM process (Sanders, 2005). A firm’s SCM objective involves a single enterprise view of multiple business functions and the transformation of information into knowledge while integrating the firm’s various IT platforms with external suppliers and customers to share a large amount of information. The integrated supply chain should consider linking firms, customers, and suppliers through electronic transactions in order to facilitate the exchange of goods, services and information through both electronic and traditional means. Davenport and Brooks (2004) argued that the availability of ERP systems has made the integration easier. Although the task of integration is a huge organizational effort, scores of the software ERP modules and processes based on “best practices” (i.e., SAP’s production module and PeopleSoft’s human resource) in an industry can provide “best” solutions for the firm. In ERP systems a “best practice” is defined as simply the best way to perform a process (Summer, 2005). Firms that initially improved internal processes through ERP have been examining how ERP and other IT solutions can help them improve processes which extend beyond the enterprise to their customers and suppliers (Davenport and Brooks, 2004). For major ERP vendors like SAP and Oracle/ PeopleSoft, integrating entire supply chains has been a long-time goal (Zuckerman, 2005). The interest of this study is in investigating relationships between ERP and SCM systems. Does the ERP implementation link to the SCM solution for organizations across the supply chain? This is a very important question for seeking evidence of ERP/SCM relationship. Thus this study develops a conceptual framework that can be used to investigate the common characteristics of IT infrastructure between ERP and SCM systems with respect to the three technological factors: modularity, integration and IT personnel skills. First, modularity refers to the degree to which a system’s components may be separated and recombined (Schilling, 2000). Duncan (1995) stated that modularity is the ability of the IT infrastructure to add, modify, and remove any software or data components with ease and with no major overall adverse effect. A modular infrastructure allows a wide variety of data, software, and other technologies to be diffused into its overall business structure. It also readily supports the design, development, and implementation of various application functions. Recently the functionality of ERP has been extended to include additional modules to the established core modules for SCM such as customer relationship management, supply chain planning, sales force automation and data warehousing (Dai, 2008; Davenport and Brooks, 2004; Wieder, Booth, Matolcsy and Ossimitz, 2006). Second, Lawrence and Lorsch (1967) defined integration as the process of coordinating the interrelated activities of groups within and outside the organization in order to obtain unity of effort. Both ERP and SCM involve the integration of business processes and information flows among customers and partners as well as internal operations. Byrd and Turner (2001) further illustrated that IT integration consists of two sub-factors, IT connectivity and IT compatibility. Connectivity is the ability of any technology components to attach to any of the other components inside and outside the organizational environment (Duncan, 1995). Compatibility is the ability to share any type of information across any technology component. At one extreme, only simple text messages can be shared, while at the other extreme, any document, process, service, video, image, text, audio, or a combination of these can be used by any other system, regardless of manufacturer, make, or type (Duncan, 1995). The degree of compatibility positively affects the integration of various IT platformes among organizations (Hernandez et al., 2008). Importantly, more integrated IT ogranizations are able to streamline operations and integrate functions with greater efficiency than less integrateted IT organizations (Pinsonneault and Kraemer, 2002). ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios 6 J. Technol. Manag Innov. 2011,Volume 6, Issue 1 Third, the human IT infrastructure includes human and organizational skills, expertise, competencies, knowledge, commitment values, common pratices, and organizational structure (Lee, Truath and Farwell, 1995; Weill and Broadbent, 1998). IT infrastructure progression such as ERP and SCM systems accompanies an increase in demand for a variety of skills and knowledge from IT personnel. Davenport and Linder (1994) stated that a “robust” IT infrastructure defines an organization where employees are unencumbered in the performance of their respective jobs, both in terms of the available technologies, and the technological knowledge and skills. Many organizations have considered the development of flexible IT infrastructures a key management concern. A company with the flexible infrastructure has the potential to modify quickly its IT platform to accommodate ERP and SCM systems implementation. This study advances four propositions for examining the three technological factors of modularity, integration and IT personnel skills in the following sections. First three (P1, P2 and P3) propositions address three identified factors, between ERP and SCM systems and a final encompassing proposition (p4), with discussions leading to some conclusions and directions for further research. Organizations have been utilizing IT platforms to implement their business innovations in order to be responsive to changing environments. Brancheau, Janz and Wetherbe (1996) suggested that an IT platform should support existing applications while adapting to change as a key to long-term enterprise productivity. This IT strategy can provide the firm with tangible benefits and a continuity of business practices. For firms that have already implemented ERP systems, they do not abandon all their existing IT when adopting new systems (Makey, 1998; Themistocleous et al., 2001). While ERP has evolved to be part of SCM solutions, many firms also have attempted to address the supply chain with their existing ERP systems (Davenport and Brooks, 2004; Moller, 2005). ERP and SCM systems have been implemented among many organizations as part of their unified IT infrastructure responsive to the demand of changing business strategies such centralization and standardization of information and processes. Davenport and Linder (1994) further suggested that a good IT infrastructure should be quantified by its flexibility and robustness to enable change. The issue of flexibility is viewed as a critical capability of IT infrastructure, because many business organizations are facing an ever-increasing rate of change in their competitive environments (Byrd and Turner, 2001). A typical ERP system implementataion is facilitated by a group of IT professionals to integrate all of a firm’s internal functions with a set of modules, and share and transfer information (Akkermans et al., 2003; Chen, 2001). Similarly, with the help of IT professionals SCM systems implementation focuses on the integration of various business functions, information and modules for external suppliers and customers. Therefore, this study posits that SCM system solutions have evolved with technological factors of modularity, integration and IT personnel skills. Modularity relates to the degree to which IT software, hardware, and data can either be seamlessly diffused into the IT infrastructure or easily supported by the infrastructure (Duncan, 1995). Pyoun and Choi (1994) suggested that the modularity is the capacity for coping with internal and external change for an organization. Historically, modularity has been the major factor in adopting all ERP application components easily into a firm’s IT infrastructure (Chung and Snyder, 1999). The term “module” delineates functionality and is called a “component” in ERP systems. The modules or components are often quoted as “best practices” by ERP software vendors. Markus and Tanis (1999) argued that the best practices are a powerful reason for firms to adopt ERP systems with modules. For example the design of SAP R/3 is based on business processes such as sales order handling, and material and requirement handling for production. Therefore, not all companies implement all SAP’s R/3 modules. While a company might consider its human resource (HR) department’s operations by choosing only HR modules, the same one without manufacturing operations would not choose the manufacturing modules such as production planning (PP) and material management (MM). Most ERP software modules have the concept of modularity embedded in order to adopt to the needs of many organizations (Jones and Young, 2006; Themistocleous et al., 2001). Each module alone or a set of modules in an ERP system can be implemented as the entire system itself (Waquespack and Schiano, 2004). ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios 7 J. Technol. Manag Innov. 2011,Volume 6, Issue 1 Firms have been able to extend their ERP systems into supply chain with “bolt on” SCM systems (Moller, 2005; Motiwalla and Thompson, 2009). The term “bolt on” is used with ERP and SCM system jargon for connecting third party applications (Olson, 2004). Both ERP and SCM systems likely require the modularity factor to accommodate more than a set of software modules from different vendors. This approach is called “a best of breed” approach in which a firm adopts the best practice modules from different software vendors (Olson, 2004). In this approach, many organizations have implemented logistics modules from SAP (ERP software vendor), financial module from Oracle (ERP software vendor) and demand planning module from Manugistics (SCM software vendor). These separate modules should reflect business modularity (e.g., accounting, production, financial management, sales order processing, and procurement) with technical modularity (e.g., data, networks and applications) for SCM. This discussion leads to the first proposition (P1) as follows: P1) Both ERP and SCM systems are composed of standard software modules to support changing business functionalities of firms across their supply chain. Due to advances in IT and fierce competition, firms engage in significant levels of integration efforts for standardized financial information, distribution and sales, manufacturing and engineering processes across their supply chains (Porter, 2001). A firm’s IT infrastructure for supply chain contributes to the integration on firms’ business strategies, as well as front-end and back-end processes across their supply chains. These IT infrastructural capabilities are the essential foundation for internal and external integration across the supply chain (Byrd and Davidson, 2003; Davenport and Brooks, 2004). The integration factor facilitates a firm’s sharing and reusing of software applications and data across technology platforms (Byrd and Turner, 2001). The integration between software modules and business processes has been accomplished with the ERP software implementation (Davenport and Brooks, 2004). Specifically, the ERP integration also provides IT users with ease of use, consistency, and uniformity to work with other IT components in the firm. A firm’s ERP system represents a major component of IT infrastructure for integration of many different people, technologies and processes across the supply chain in an organization. Mabert, Sonni and Venkatamanan (2003) argued that one of the most important motivations for manufacturing firms to implement ERP has been to improve interactions and communication with suppliers and customers. Each firm has become a loose collection of business partners that collaborate with manufacturers, logistics companies and distribution firms (Kalakota and Robinson, 1999). An SCM system addresses the connection of complex information and business environments. The system helps all companies involved in standardizing their products to order, manufacture and deliver in real time for customers. The integration of this standardization processes helps ERP vendors sell nonERP software such as customer relationship management and SCM applications to their competitors’ customers (Akkermans et al., 2003). Initially, ERP vendors (i.e., SAP and Oracle) focused on financial, manufacturing and human resource applications began introducing additional SCM functionalities like APO to their products whereas SCM vendors (i.e., i2 and Logility) have done. They are now expanding their functionalities like value chain collaboration module to the area handled by the ERP vendors (Davenport and Brooks, 2004). As the vendors of ERP systems and SCM systems are adding more functionality to their original products, the difference between the two systems has been diminishing and the integrated IT solutions for SCM can be reality (Motiwalla and Thompson, 2009). Extending from ERP, the SCM system internally and externally integrates all business processes throughout a firm’s supply chain while maintaining a competitive strategy. This discussion leads to the second proposition (P 2) as follows: P2) While an ERP system integrates application modules for the firm’s internal functionalities, the SCM system uses the ERP system to integrate external suppliers and customers. As the value of IT rose in organizations, the role of IT personnel became crucial in using IT for business success. IT cannot be independent of people, because people with IT knowledge and skills play a critical role to apply IT for business benefits (Zeleny, 1986). In addition to technical skills, IT personnel are increasingly expected to have organizational, functional and managerial skills for their organizations’ business. Byrd and Turner (2001) have claimed that the IT components are bound to IT infrastructure flexibility with high knowledge and skills of IT personnel in the firm. Recent research has ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios 8 J. Technol. Manag Innov. 2011,Volume 6, Issue 1 suggested that softer skills such as managerial, business, and interpersonal skills are fundamental to software developers, systems analysts, database administrators, and other IT personnel in organizations (Byrd et al., 2004; Leitheiser, 1992). Byrd and Turner (2001) found that IT personnel skills affect the IT infrastructure flexibility and competitive position of the organization. The IT personnel factor could also directly affect firm’s performance. Ross, Beath and Goodhue (1996) demonstrated through several examples that a highperforming IT organization was a prime factor in developing long-term competitiveness and superior profits in several industries. IT personnel were involved in planning to implement ERP and SCM systems, and sharing information and strategies for supply chain collaboration. In a similar context, Byrd et. al (2004) suggested that a high level of IT personnel knowledge and skills is positively related to both flexible IT infrastructure and the contribution of ERP and SCM systems, and to competitive advantage. In practice, when IT personnel facilitate an organization in supply chain to manage implementation, change and share knowledge from intra and inter organizational communications, they also create relationships which can influence the effectiveness of the organization. As shown by these examples, in many of today’s organizations across a supply chain, the IT personnel knowledge and skills are regarded as a strategic asset and a direct contributor to the business performance in these companies. Similarly, Byrd and Davidson (2003) found that the quality of IT personnel directly and positively affects the IT impact on the firm’s supply chain. It plays a role in achieving linkage between IT and business functions for the organization. The value of IT personnel knowledge and skills to organizations in the supply chain becomes critically important as the strategic value of ERP and SCM systems has been apparent among firms. This discussion leads to the third proposition (P 3) as follows: P3) IT personnel knowledge and skills for the ERP and SCM systems have a positive effect on business performance on supply chains in organizations. Collectively, the characteristics of modularity, integration and IT personnel skills determine the flexibility of the IT infrastructure. That is, an organization with high integration and high modularity is viewed as having a highly flexible IT infrastructure. It is evident that both ERP and SCM systems have been developed in terms of the implemented for the three underlying technological factors. Figure 1 presents a view of the technological factors in linking ERP with SCM systems. Figure 1Technological Linkage Factors between ERP and SCM ISSN: 0718-2724. (http://www.jotmi.org) Journal of Technology Management & Innovation © Universidad Alberto Hurtado, Facultad de Economía y Negocios 9 J. Technol. Manag Innov. 2011,Volume 6, Issue 1 Finally, this study presents an all encompassing proposition (P4) as follows: P4) The technological factors of Modularity, Integration and IT Personell skills facilitate the implementation of supply chains using an existing ERP system. In summary, the following are the key propositions based on the investigations of ERP/SCM requirements. These propositions are intended as guidelines for ERP/SCM researchers and developers. P1) Both ERP and SCM systems are composed of standard software modules to support changing business functionalities of firms across their supply chain. P2) While an ERP system integrates application modules for the firm’s internal functionalities, the SCM system uses the ERP system to integrate external suppliers and customers. P3) IT personnel knowledge and skills for the ERP and SCM systems have a positive effect on business performance on supply chains in organizations. P4) The technological factors of Modularity, Integration and IT Personnel skills facilitate the implementation of supply chains using an existing ERP system. What are the implications for corporations and software vendors from the findings of this study? Business managers and IT practitioners should be able to utilize the results of this study in order to focus on enhancing their supply chains with existing ERP systems. This study provides a framework for developing and evaluating SCM processes in order to serve enterprise needs in terms of resource management for scalability, implementation costs and operational efficiency for meeting the business objectives. ERP software vendors should develop their products to be more open and modular for customers to integrate functionality into their SCM initiatives. An ERP system must be extensible for supporting a range of external constituents in the supply chain as a firm’s flexible IT infrastructure. Further research is needed for detailed insights on the relationship between ERP and SCM systems in the organizational context. A series of case studies and empirical evidence on firms using ERP and SCM systems is suggested for corporations across the same industry supply chain. Topics to be considered should include the use of ERP platforms implementing SCM for return on investment, outsourcing and organizational structure. More research will validate, amend and elaborate the research questions in greater details explored in this study. 5. Conclusion and Future Research References This study demonstrates linkages between ERP and SCM systems in terms of several IT factors. ERP systems were introduced for managing business resources across many functional areas within a corporation, and are now being enhanced increaseingly to SCM functionality. SCM systems focus on collaborative relationships with partners in the supply chain, emphasizing integration and information sharing through IT. The objectives of SCM in a changing business environment continue to drive the need for extended functionality and openness of ERP modules. It is expected that the functionality differences between ERP and SCM systems will be blurring. 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