Enterprise
Resource
Planning
systems:
An
assessment
of
applicability
to
Make-To-Order
companies
Bulut
Aslan
*
,
Mark
Stevenson
1,
Linda
C.
Hendry
2DepartmentofManagementScience,LancasterUniversityManagementSchool,LancasterUniversity,LA14YX,UK
1. Introduction
When implementedeffectively,EnterpriseResourcePlanning
(ERP)systemscanprovidebusinessbenefitssuchasreal-timedata
availability,improvedvisibility,andincreasedtaskautomation[1–
3].ManyERPvendorsclaimthatsuchbenefitscanbeaccruedby
anyorganisation,astheirsystemsaregeneric,i.e.configurableto
meettheneedsofanybusiness,whatevertheproductorservice
offering.Butthe literaturesuggeststhat Make-To-Order (MTO)
companies, which produce high-variety and bespoke products,
presentparticularchallenges[e.g.4–6].Thus,despitetheclaimsof
ERPvendors,itremainsunclearwhetherERPcancatersufficiently
fortheneedsofMTOcompanies.Thispapertakesa
contingency-based perspective [7] to assess the alignment between the
functionality of contemporary ERP software modules and the
requirementsofMTOcompanies.
ThealignmentofERPsolutionswithoperationalneedshasbeen
studied previously by [8]. The authors showed that overall
performance/satisfaction becomes weaker if the operational
strategy(context)ismisalignedwiththeERPadoptionstrategy.
However, no further in-depth studies have been conducted to
identifywhichmoduleswithinERPsolutionsshowadequatefit
withwhichoperationalneeds.Inaddition,fewreviewsofplanning
and control concepts or information systems have focussed
specificallyontheneedsofMTOcompanies.Oneexceptionwas
providedbyBertrandandMuntslag[4]whopresentedareviewof
theapplicabilityofMRP-IItobespokeproductionenvironments,
specifically the Engineer-To-Order (ETO) sector; however, an
update of this work is required. A second was provided by
Stevenson etal. [5] whosuggested that ERPmaybea suitable
solutionforMTOcompaniesbutthatfurtherresearchisrequired.
Thepaperreviewedandassesseda widerangeofconceptsand,
therefore,didnotgointogreatdepthonanyoneconcept.More
recently,Deepetal.[6]conductedacasestudyinvestigationofthe
factorsaffectingtheselectionofanERPsystembyaMTOcompany.
Theauthorsdemonstratedthatmoreresearchisrequiredtowards
assistingfirmsindeterminingtheapplicabilityofERP.Thepaper
itselfdidnotprovideasufficientlycomprehensivereviewofthe
available literatureor considerthefull rangeof MTOcompany
A R T I C L E I N F O Articlehistory:
Received16August2011 Accepted7May2012 Availableonline27June2012 Keywords:
EnterpriseResourcePlanning(ERP) Make-To-Order(MTO)
Applicability Literaturereview
A B S T R A C T
Many vendors of Enterprise Resource Planning (ERP) systems claim their products are widely applicable–configurabletomeettheneedsofanybusiness,whatevertheproductorserviceoffering.But Make-To-Order(MTO)companies,whichproducehigh-varietyandbespokeproducts,haveparticularly challengingdecisionsupportrequirementsanditremainsunclearwhetherERPsystemscanmeettheir needs.Thispapertakesacontingency-basedperspectiveofERPadoption,assessingthefitoralignment betweenERPfunctionalityandaMTOproductionstrategy.MTOfeaturesconsideredinclude:decision supportrequirementsatcriticalProductionPlanningandControl(PPC)stages,idiosyncratic market-relatedfeatures,typicalcompanysizeandsupplychainpositioning,andshopfloorconfiguration.Itfinds asubstantialgapormisalignmentbetween ERPfunctionalityandMTOrequirements;forexample, between decision support provided by ERP systems and the decision support required by MTO companiesatthecustomerenquiryanddesign&engineeringstages.Aresearchagendaforimproving alignmentisoutlined,withimplicationsforacademics,MTOmanagersandERPsoftwaredevelopers. This includes: developing decision support tools that reflect the customer enquiry management activities of MTO companies; embedding MTO-relevant PPC concepts within ERP systems; and, conductinganin-depthempiricalstudyintoapplicationsofERPsystemsinMTOcompanies,assessing theirperformanceimpact.
ß2012PublishedbyElsevierB.V.
*Correspondingauthor.Tel.:+905365127990. E-mailaddresses:[email protected](B.Aslan),
[email protected](M.Stevenson),[email protected]
(L.C.Hendry).
1
Tel.:+441524593847.
2
Tel.:+441524593841.
ContentslistsavailableatSciVerseScienceDirect
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characteristicsthatarelikelytoaffectERPadoption.Otherreviews
whichfocusspecificallyonERPincludethosebyEstevesandPastor
[9],Al-Masharietal.[10],JacobsandWeston[11],andMoon[12].
Whilethesestudiesprovidegreaterdepth,theydonoteither:take
a contingency approach based on production strategy; seek to
assesstheapplicabilityofERPsystems;orgivesufficientattention
to recent developments in this fast-moving industry (e.g. the
emergence of ERP add-ons for supply chain and customer
relationshipmanagement).
Therefore,acontemporaryassessment oftheapplicabilityof
ERP to the MTO industry is required. In response, this paper
contributes by assessing this fit with the aim of conceptually,
identifyingMTOdecisionsupportrequirements,thefunctionality
ofwidelyavailable ERPmodules,and gapsbetween thetwo.A
systematicliteraturereviewassiststhisassessmentandaresearch
agenda is proposed. We do not seek to focus on broad
implementationissuesortoprovideadetailedhistorical
descrip-tion of the evolution of ERP systems. For an overview of
implementation issues, see Umble et al. [13]; for a detailed
historicalperspectiveonERP,seeRashidetal.[14]andJacobsand
Weston[11].
Theremainderofthispaperisorganisedasfollows.Section2
explainsthemethodologyfollowedtosystematicallyselectpapers
toreview and toassess theapplicability. Section3 defines the
characteristics and decision support requirements of MTO
companies before Section 4 provides an overview of the
functionalityofERPsystems,includingrecentextensionstotheir
core functionality. Section 5 assesses the fit between the
requirements ofMTOcompaniesand thefunctionalityof these
systems. Section 6 identifies gaps in the literature in need of
furtherresearchbeforethepaperconcludesinSection7.
2. Methodology
The research methodology described below consists of two
parts. Section 2.1 explains the process used to systematically
identify literature on ERP functionality and MTO requirements
before Section 2.2 describes how the fit between the two is
assessed.
2.1. Systematicreviewprocess
Theprinciplesofconductingasystematicliteraturereviewhave
been followed in selecting papers [15,16]. International
peer-reviewed journal articles were sourced from the ABI/Inform
(ProQuest),Business SourcePremier(EBSCO)and ScienceDirect
(Elsevier)academicdatabases.Noconstraintwasappliedonthe
date or journal of publications. The use of search strings
‘‘EnterpriseResourcePlanning’’and‘‘Make-To-Order’’(limitedto
titles, keywords and abstracts) separately revealed more than
10,000hitsforeach.Thetwophraseswerealsosearchedtogether
and combined with several sub-category phrases such as
‘‘Advanced Planning and Scheduling’’and ‘‘Engineer-To-Order’’;
which helped to narrow down the results but the number of
articleswasstill unmanageable.We furtherdecreased thistoa
finallistof144studiesusingsystematicsearchcriteria[15].We
excludedstudieswithnoparticularfocusonthecontingencyfactor
ofproductionstrategyoncriticalsuccessfactorsandtransactional
functionalityofERPsystems(e.g.accountingorfinancialcontrol);
andfocusedinsteadonstudieswithahighcitationindexwhich
focusonMTO-specificneedsanddecisionmakingstagesthrough
casestudies;surveys;mathematicalorconceptualmodels.
Thefinal144articlesareclassifiedinTable1.Atahighlevel,
theyaregroupedintothosethatfocusonERPresearch,thosethat
focusonMTOdecisionrequirements,andthosethataddressboth
topics. There are 9 papers in the third category,for which the
primary topic is one of review and assessment and, hence,no
further subcategoriesweredetermined.Thestudiesfocusingon
ERPresearchwerefurtherdividedintothosethatreviewedand
classifiedERPresearch;andthosethatlookedat:futureconcepts;
ERPextensions,ERPsuchasSupplyChainManagement(SCM)and
AdvancedPlanningandScheduling(APS)(asdefinedinSection4);
Table1
Listofliteraturereviewedinthispaper.
Categories References
ERPResearch
ReviewandClassification Davenport[2];Gupta[115];Klausetal.[116];EstevesandPastor[9];Mabertetal.[68];Rashidetal.[14];Shehabetal.
[117];Botta-Genoulazetal.[72];JacobsandWeston[11];Moon[12]
FutureConcepts Davenport[71];Markusetal.[118];Chen[88];Rashidetal.[14];Al-Mashari[10];JacobsandBendoly[119];Davenport andHarris[120];JacobsandWeston[11];Kohetal.[3]
ExtendedERP(SCM,APS,CRMandothers) Davenport[71];Stratman[121];Bose[86];Rigbyetal.[122];StadtlerandKilger[78];Tarnetal.[123];Wiers[124]; Akkermansetal.[76];FleischmannandMeyr[80];Kova´csandPaganelli[125];PtakandSchragenheim[126];Addison
[127];DavenportandBrooks[73];RigbyandLedingham[128];deBu´rcaetal.[129];Møller[91];Stadtler[97]; Hendricksetal.[77];Wattsetal.[130];Leeetal.[131];Ou-YangandHon[132];Hicks[93];HvolbyandSteger-Jensen
[133];
NationalandCulturalPerspectives AdamandO’Doherty[134];Mabertetal.[107];OlhagerandSelldin[69];BakiandCakar[135];KohandSimpson[136]; Morabitoetal.[108];Leeetal.[137];Argyropoulouetal.[110];Chienetal.[138];Laukkanenetal.[109];Ketikidisetal.
[139];Snideretal.[70];Bayraktaretal.[140]
SMEERPAdoption VanEverdingenetal.[141];Mabertetal.[107];Muscatelloetal.[142];Buonannoetal.[113];deBu´rcaetal.[129];Koh andSimpson[136];OlsenandSætrea[60];RaymondandUwizeyemungu[106];Kohetal.[143]
Sector/IndustryApplication Wiers[124];Davidetal.[99];Davidetal.[84]
MTOResearch
CustomerEnquiry Tobinetal.[102];HendryandKingsman[33];HendryandKingsman[144];Hill[145];HendryandKingsman[20]; Kingsmanetal.[146];Kingsmanetal.[21];EastonandMoodie[147]Moodie[22];CakravastiaandNakamura[23]; Olhager[148];Stevensonetal.[5];StevensonandHendry[39];Hendryetal.[114];StevensonandSilva[149];Zorzini etal.[26];Hendry[105]
Design&engineering Wortmann[30];LampelandMintzberg[150];Amaroetal.[56];SpringandDalrymple[151];RudbergandWikner[32]; Hvametal.[152]
JobEntry,JobReleaseandDispatching HendryandKingsman[33];BertrandandMuntslag[4];Enns[47];Oostermanetal.[48];Kingsman[42];Kingsmanand Hendry[27];McKayandWiers[153];Stevensonetal.[5];Hendryetal.[114];StevensonandSilva[149];Soepenberg etal.[154];BoulaksilandFransoo[155];Olhager[156]
Non-PPC MudaandHendry[104];WiknerandRudberg[157];Dekkers[158]
ERPandMTOResearch
ReviewandAssessment BertrandandMuntslag[4];Wortmann[30];JonssonandMattsson[103];Stevensonetal.[5];KohandSimpson[112]; OlsenandSætrea[60];OlsenandSætreb[94];Deepetal.[6];HicksandMcGovern[93]
national and culturalperspectives; ERP adoption by Small and
Medium sized Enterprises (SMEs); and, specific sector/industry
applications.ThemajorityofthepapersfocusingonMTOdecision
requirementsare sub-dividedaccording toProductionPlanning
and Control (PPC) stages, i.e. customer enquiry; design &
engineering,job entry/job release and dispatching.In addition,
threepapersthataddressbroader,strategicMTOissuesarealso
included–thesearelabelled‘‘Non-PPC’’inTable1.
FromTable1,itcanbeseenthatthemajorityofpaperslookat
ERPsystems or MTOcompanies in isolation, withfew articles
addressingERPissuesinaMTOcontext.Thiscorroboratestheneed
forfurtherresearchwhichtakesacontingency-basedperspective
asfurtherdescribedbelow.
2.2. Assessmentoffitorapplicability
Toassessapplicability,werelateERPsoftwareprovisiontoMTO
DecisionSupportRequirements(DSR)viathematching(alsocalled
selection)conceptoffit[17,18]whichisconceptualisedwithinthe
contingencytheoryliterature[7].
Two prominent classifications of fit have been proposed by
DrazinandvandeVen[18]andVenkatraman[17]basedonthe
configurationoftherelationshipsbetweencontextual(or
contin-gency),responseandperformancevariables.Briefly,acontextual
variablerepresentssituationalcharacteristicswhich,inthisstudy,
correspondtotherequirementsofamanufacturerduetoitsMTO
productionstrategy. Aresponse variable istheorganisationalor
managerial actionstaken in response to current or anticipated
contingencyfactors,whichisrepresentedbycertainERP
mecha-nismsandsolutionsdevelopedinresponsetotheserequirements
asthe anticipated contingency factors. Finally, theperformance
variables are the dependent measures and represent specific
aspectsof effectivenessthat are appropriatetoevaluate thefit
between contextual variables and response variables for the
situationunderconsideration.
As reviewed by Sousa and Voss [7] in the context of OM
research, these prominent classifications of fit include a form
referredtoastheselection(ormatching)form,wherefitissought
between contextand response withoutreference toa criterion
(performance) variable. This means that we focus on aligning
contextandresponse;andcanassumethat,ifthisisdonewell,
thenperformancewillimprove.Inthisstudy,theassessmentoffit
takesplaceasaconceptualmatchasshowninFig.1.Namely,a
singlecontext/singleresponsefitisexamined;thus,noadditional
responses(e.g.qualitymanagement)orperformanceoutput(e.g.
on-timedelivery)areconsidered.However,asthedecisionsupport
requirementsofaMTOcompanyareaffectedbyitscharacteristics,
thesingleMTOcontextisitselfcomplexandincludes
consider-ationoffactorssuchascompanysizeandsupplychainpositioning.
Toinvestigatethefit,thecontextandresponsevariables are
definedandexaminedconceptuallyusingtheliterature.Toachieve
this,thedecisionsupportrequirementsofMTOcompaniesandof
widely available ERP systems are defined in Sections 3 and 4,
respectively (and summarised in Table 2) before Section 5
examinesthefit(see,e.g.Table4).
3. DecisionsupportrequirementsoftheMTOsector
There are various definitions of the diverse production
strategies presented in the literature. This paper focuses on
MTObutdefinesitinabroadsense.Inourdefinition,seealso[19,p.
379], MTO is an ‘umbrella term’ referring to companies that
producebespokeandcustomisedproductstoparticularcustomer
specificationsbutnotrepeatedonaregularbasisorinapredictable
manner.Therefore,thetermincludesEngineer-To-Order(ETO)but
excludes Make-To-Stock (MTS) and Assemble-To-Order (ATO).
While we incorporate ETOwithin our definitionof MTO, if an
author uses the term ‘‘ETO’’ we retain this distinction when
reviewing theliterature.The following subsectionsidentifythe
Context: Make-To-Order Decision Support Requirements
(DSR)
Response: ERP Systems
Decision Support Provision
Fit?
Fig.1.Theselection(matching)theoreticalframeworkusedinthisstudy.
Table2
Summaryofcontext(MTOdecisionsupportrequirements)andresponse(ERPsystemstosupport).
Context:SummaryofMTODSRs Response:ERPSystemProvision
1.PlanningandControlStages Thefullrangeofplanningandcontrolstagesisimportant forMTOproduction:
Supportforquoting,design&engineering,jobentry,shop floorscheduling:
Customerenquirymanagement:Generatingduedateand pricingalternativesinresponsetocustomerenquiries
Available/Capable-To-PromiseandtheCEMmodule Design&engineeringFlexibilityindesign&engineering
JobEntry:Capacityplanningandcontrolforconfirmed orders,includingmaterialspurchasing
ProductconfiguratorandProductLifecycleManagement, MaterialRequirementsPlanningandAdvancedPlanning andScheduling
JobRelease:Introducingajobreleasestageforshopfloor control
– Dispatching:Compatibilitywithhumandecisionmaking
ontheshopfloorscheduling.
Finiteschedulingfunctionalityontheshopfloor
2.ShopFloorConfiguration Jobshopconfigurationrequiressystemflexibilitytohandle suchacomplexmanufacturingsetting.
–
3.TheSupplyChain ManyMTOsarepositionedmidandupstreaminsupply chains,thusrushordersareprominent.
Web-enabledsupplychaininformationsharing Sharingup-to-dateinformationacrossthesupplychainis
critical.
Co-ordinationfunctionality
4.CompanySize AsignificantproportionareSMEs,thushavingrelatively simpleorganisationalstructuresandlimitedITbudgets
Manyclaimedtobeforallbusinesssizes Avarietyofpricingandlicencesavailable
5.MarketCharacteristics Managingcustomerrelationstoincreaserepeatbusiness. CustomerRelationshipManagementsoftwareisknownas the‘industrystandard’insomesectors.
characteristicsandrequirementsofMTOcompaniestoaidinour
assessmentofERPapplicability.ItbeginsbyexaminingthePPC
stagesofrelevancetoMTOcompaniesbeforeinvestigatingfurther
importantfactors:shopfloorconfiguration,supplychain
position-ing,companysize,andmarketfeatures.
3.1. PlanningandcontrolstagesofMTOcompanies
ThefollowingPPC stages arecritical totheorderprocessing
cycleinMTOcompanies:
CustomerEnquiryStage:whereacustomerprovidesan
invita-tion-to-tenderorrequestforquotationforaparticularproductto
prospectivesuppliers,requiringthedeterminationofapriceand
duedate.Thesedecisionsrequire:theestimationofleadtimes;
thearchivingandretrieval ofproductdata; theassessmentof
availabledesign/productionskillsandfacilities;theestimation
ofcosts/profitmargins;andeffectivecoordinationand
commu-nicationbetweenalldepartmentsinvolvedintheactivitieslisted
above[20–26].ForMTOcompanies,PPCmustbeginhereaseach
order may be different and decisions made here affect
subsequentstages[27].Thismaybecomplexasthereareoften
outstandingbidsawaitingconfirmationandcapacity planning
musttakethispotentialfutureloadintoaccount.Inaddition,Bill
ofMaterial(BoM)structuresarenotalwaysfullyavailableduring
this earlyplanningstage,and only graduallybecome certain,
especiallyforETOcompanies[4–6,28].Therefore,corresponding
ITsolutionsneedtobeflexibletoenableappropriatecapacity
planninggivenBoMuncertainty.
Design & Engineering Stage: where more detailed design &
engineeringplanningtakesplaceforacceptedorders.Thisstage
isofparticularrelevanceforanETOstrategybutlittleresearch
hasbeenconductedintothedesign&engineeringstage,despite
its impact on the total lead time [29]. Wortmann [30]
contributedbycomparingtheinformationsystemrequirements
of MTS and ETO companies. In a MTS context, complete,
consistent and up-to-datebasic product information is more
likelytobeavailableastheproductislikelytohavebeenmade
before.Theauthorhighlightedanabilitytobeabletodocument
aspectsofproductdevelopmentthroughouttheorderprocessing
cycleasakeyfeatureofanETO-compliantsystem.Bertrandand
Sridharan [31] suggested that, together with assembly, the
design &engineeringstagecanbethebottleneckoperationin
aggregateplanning;however,theauthors’studywaslimitedto
subcontractmanufacturers.RudbergandWikner[32]proposeda
frameworkfortheMTOorder-promiseprocess,indicatingthat
forecastingandorderfulfilmentmechanismsareneededforthe
design and specification functionsas well as the production
functions.
JobEntryStage:wheretheproductionofaconfirmedorderis
planned, including material requirements, purchasing and
shopfloorrouting.FourparticularlyimportantMTOplanning
requirementsareidentifiedfromtheliterature.Firstly,theIT
solutionneeds toallowfor specificationchangeability,given
thatBoM structuresareoftenonly plannedatthisstageand
onlygraduallybecome certain[4–6,28].Secondly,theability
toskilfullyincorporatetheeffectofforecastsonactualplansis
essential, consideringthatmanyMTOcompaniesdealwitha
mix of repeat and one-off orders [6,33,34]. Thirdly, it is
essential to plan capacity, taking into account any capacity
constraints. This is essential to ensure that due dates are
feasible,andaidsindeterminingwhetheritisnecessaryto
re-negotiateduedateswithcustomers—thismaybeparticularly
important whenthere hasbeen a long delay between a bid
being madeandanenquirybeingconfirmed[5].Finally,ETO
firmscansometimesrequire projectmanagementtechniques
andrelevantITsupport,whenamajorityofordersareforlarge
projects[4,28,34].
Job Release Stage: a decoupling phase, where the company
decideswhentostartproducingaparticularjobbycontrollingits
releaseontotheshopfloor.Theneedtocontrolthejobrelease
stage was identified by Wight [35] in order to avoid the
‘untimely’releaseofjobs,whichcanresultina‘viciouscycle’of
work-in-process accumulation known as the‘‘lead time
syn-drome’’ [36]. This stage (in isolation) has received far more
attentionintheliteraturethantheprecedingstages[see37,38];
however,itisarguablytheentireintegratedPPC processfrom
enquirytodeliverywhichdeterminestheperformanceofaMTO
company.Attheorderreleasestage,furtherPPCmaybeneeded
to ensure sufficient capacity is available to allowjobs to be
releasedin timeforthemtomeettheir duedates.Thus,MTO
companiesrequirethisplanningstageaspartofahierarchical
system[39].
ShopFloorDispatchingStage:wheredetailedshopfloor
schedul-ingisdeterminedandjobsaresequencedontheshopfloor,e.g.
via jobprioritisation. This is a well-studied researcharea for
whichmanyalgorithmshavebeendevelopedandmanyreviews
published[e.g.40–42].However,someauthorshavearguedthat
simplemechanisms(e.g.first-in–first-out)maybepreferredina
MTOcontext, withcontrol leftto highly skilledlabour ifthe
precedinghierarchical planningstages are appropriately
con-trolled[43].
Thus,thedecisionsupportrequirementsofaMTOfirminclude
specificsupportateachoftheabovestages,whichsuggeststhatan
appropriateITsolutionshouldincludethefollowingfundamental
features:effectivemechanismstogeneratealternativepricingand
due date plans to deal with customer enquiries, including
aggregateplanningandcontrolthattakesunconfirmedbidsinto
consideration;flexibilitytobeabletodocumentaspectsofproduct
developmentthroughouttheorderprocessingcycle,whichbegins
atthedesign&engineeringstage;effectivecapacityplanningand
control when a job is confirmed at the job entry stage;
incorporation of a job release decision point in planning; and,
compatibilitywithhumandecisionmakingwhenschedulingon
theshopfloor(i.e.dispatching).Inaddition,thesolutionneedsto
enableahighlevelofcoordinationamongstdepartmentsplayinga
criticalroleintheMTOplanningstages[33].
3.2. ShopfloorconfigurationofMTOcompanies
CommonshopfloorconfigurationsarePureFlowShop(PFS),
GeneralFlowShop(GFS),GeneralJobShop(GJS)andPureJobShop
(PJS),differingintermsofflowdirectionandprocessingflexibility
[44,45].InaPFS,alljobsfollowthesamesequenceofoperations;in
aGFS,alljobsflowinthesamedirectionbutcanvisitasubsetof
machines.InaPJS,jobscanstartandfinishatanyworkcentreand
nodominantflowdirectiondominates;inaGJS,routingsare
multi-directionalbutadominantflowexists.Jobshopconfigurationsare
suitable in customised production contexts, such as the MTO
industry[5,46]butleadtocomplexplanningproblemsgiven,for
example,thatloadbalancingcanbemoredifficult.PFSandGFS
configurations are more suitable for continuous processes or
assembly linemanufacturing(i.e.MTSorATO).Authorssuchas
Enns [47] and Oosterman et al. [48] have highlighted the
importanceof takingworkflowdirectionontheshop floorinto
consideration when choosing appropriate job release and shop
floorschedulingrules.
Therefore,giventhatthejobshop(i.e.PJSandGJS)isatypical
configurationontheshopfloorofMTOcompanies,thedecision
supportrequirementsofsuchcompaniesincludetheflexibilityto
schedulingcanbeinappropriateasitmaybedifficulttopredictthe
arrival times of jobs at particular machines, and so a more
aggregate,dynamicplanningapproachisneeded.
3.3. MTOcompaniesandthesupplychain
MTOcompaniesareoftenpositionedtowardstheupstreamend
andmidstreamofsupplychains,servinglarge,powerfulcustomers
[49,50]. Given this position, information about end-customer
demandislimitedand customersoftenoutsourceworktotheir
upstreamsuppliersatshortnotice;hence,rush(i.e.short-noticeor
urgent) orders are commonplace. Stevenson et al. [5] and
StevensonandHendry[51]explainedthat thepresenceof rush
ordersislikely toaffectthetype ofPPCsolutionappropriateto
MTOcompanies and highlighted the importanceof web-based
practicesthatpromoteinformationandknowledgesharingwithin
supplychains.
It is also acknowledged that some supply chains consist
exclusivelyofMTOcompanies,i.e.‘‘MTOsupplychains’’–capital
goodsmanufacturingisacommonexample[e.g.52,53].Sahinand
Robinson[53]highlightedthevalueof informationsharingand
coordinationinMTOsupplychains;similarresultsarepresented
byRobinsonetal.[54]andconfirmthevalueofusingweb-based
practices.Hence,developingbuyer–supplierrelationshipsbuilton
informationsharingandcoordinationcanbeanimportantpartof
an effective supply chain. Information sharing within supply
chainscanleadtoseveralbenefitsforMTOcompanies:Sahinand
Robinson[53]statedthatinformation sharingandcoordination
alongthesupplychaincanfacilitatecostreductionandimproved
due date adherence in MTO supply chains. Regarding ETO
companies, Hicks et al. [52], found that effective knowledge
sharinginsupplychainscanbeacompetitiveadvantage.Finally,
JahnukainenandLahti[55]arguedthatpurchasingasapercentage
ofthetotalcostishigherforMTOthanMTScompanies;hence,
relations and information sharing by MTO companies with
supplierscanbehighlysignificantandthis,inturn,hasaneffect
onafirm’sabilitytosatisfyitscustomers.
Toconclude,insupplychainscontainingMTOsupplierseither
entirelyorpartially,informationsharingisofparamount
impor-tanceforcoordination.
3.4. MTOcompanysize
Many MTO companies are SMEs [5,56]. SMEs are a major
contributortosupply chains andtothe EUand UKeconomies,
representing99%and99.9%ofallenterprises,respectively[57,58].
AccordingtotheEUCommission[59],amedium-sizedcompany
haslessthan250employeesoraturnoveroflessthan
s
50million(and/oranannualbalancesheettotaloflessthan
s
43million);asmall-sizedcompanyhaslessthan50employeesoraturnoverof
lessthan
s
10million(and/oranannualbalancesheettotaloflessthan
s
10million);whileamicro-sizedcompanyhaslessthan10employeesoraturnoveroflessthan
s
2million(and/oranannualbalancesheettotaloflessthan
s
2million).Micro-sizedcompaniesarearguedtobetoosmalltorequiretheimplementationofanERP
systemandarethereforenotconsideredfurtherinthispaper.
As many MTO companies are SMEs, some important
SME-relatedERPadoptionissues mayberelevantinthiscontext.For
example,limitedITbudgetsandalackofpermanentITemployees
couldbearguedtoinfluencetheapplicabilityofsomeERPsystems
[60].
3.5. MTOmarketcharacteristics
Thecurrentmarketdemandforcustomisedproductsisargued
tobegreaterthaneverbefore.Thisgrowingmarketresultsinshort
productlifecyclesandrequiresacompanytohaveawideproduct
range [61]. Product specifications are often unpredictable and
demand can be uncertain. MTO companies have to perform a
continuoussearchfornewbusinesswhilesimultaneously
satisfy-ing existing customers. The volatility of the MTO market is
demonstrated by the strike rate, i.e. thepercentage of tenders
whichbecomefirmorders,whichforMTOcompaniescanbevery
low(e.g.%15inthecasein25).
Amaroetal.[56]definetwotypesofMTOcompanies(Repeat
BusinessCustomisers—RBC,andVersatileManufacturing
Compa-nies—VMC)inrelationtocontracttypewhichhasadirectimpact
on market strategy. A RBCprovides customised products on a
continuous basis over the length of a contract while a VMC
manufacturesa highvarietyofproducts but competesforeach
order separately. Therefore, the RBC is able to establish more
stability by enticing customers into a more predictable and
committed relationship [51]. In terms of their supply chain
position, RBCsare generallylocatedupstreaminsupply chains,
whileVMCsoperateinalllevelsofsupplychains.
ItisespeciallyimportantforRBCstoretainexistingcustomers,
whileitcanbecrucialforVMCstoexplorenewmarkets.Dealing
with high numbers of existing and potential customers may
requiresoftwaresupporttomanage dataand promote salesto
achievetheseaims.
3.6. Implicationsfordecisionsupportrequirements
KeycharacteristicsofcompaniesemployingaMTOproduction
strategy have been identified above and the decision support
requirementsforeachhavebeendiscussedaccordingly.Overall,
amongsttheidentifiedproductionplanningandcontrolstages,the
customerenquirystagecanbeconsideredtobethemostcriticalas
it deeply affects the subsequent stages (e.g. order entry and
release).Thedesign&engineeringstageisalsoespeciallycritical
forETOcompanies,whilethejobentrystageisakeypointatwhich
capacity planningis undertakenas jobsareconfirmed.The job
releasestage,adecisionpointbeforethereleaseofjobsontothe
shop floor, can be a beneficial phase to improve control over
activitiesontheshopfloorandenableskilledshopfloorpersonnel
toemploysimplifiedandautonomousdispatching.
Additionally, these companies are mostly SMEs requiring
affordable solutions. Job shop configuration is a typicalsetting
and,hence,thecorrespondingsoftwareneedstobeflexibleenough
tosupportactivitiesin this type ofcomplexshop floorsetting.
Thesecompaniesaremostlypositionedmidstreamandupstream
insupplychains,andthismakesMTOcompaniesproneto(and
mostaffectedby)anychangesthattheircustomersmaymaketo
their production plans. Therefore, software needs to enable
successful and up-to-date information sharing. Finally, MTO
companiesneedtoconstantlyenticenewcustomers,ortoconvert
one-offjobsintorepeatbusiness,duetocompetitiveandvolatile
market conditions.Information systems have becomean
indis-pensible partof manufacturing but a good fit is needed.Thus,
software solutions applicable to this idiosyncratic production
strategyareessential.Thenextsectionprovidesastate-of-the-art
reviewofcontemporaryERPfunctionalitybeforethefitbetween
thetwoisexaminedinSection5.
4. FunctionalityofmodernERPsystems
Davenportet al.[62]defined anERPsystemasa ‘‘packaged
softwareapplicationthatconnectsandmanagesinformationflows
withinandacrossacomplexorganisation,allowingmanagersto
makedecisionsbasedoninformationthattrulyreflectsthecurrent
stateoftheirbusiness’’.AsERPsystemsstemfromtheMaterial
Planning(MRP-II)systemsofthe1970sand1980s,the
functional-ityoftheseelementsarefirstdescribedbriefly.
BasicMRPmechanisms,asdevelopedbyPlosslandWight[63],
determinepurchasingandproductionrequirementsfromagiven
BoM, but can be overly simplistic leading to extreme ‘system
nervousness’[64].However‘ClosedLoopMRP’providesa
three-tieredhierarchicalstructure,incorporatinglong-,mid-and
short-termcapacityplanningphasesfromforecastingtoschedulingand
dispatch[65].Finiteschedulingandinfiniteloadingarecommonly
available capacity tools [34]. In addition, Available-To-Promise
(ATP)functionalityisanimportantelementwithinthisstructure,
definedas amethodof checkingtheavailabilityofproducts in
responsetoacustomerenquiry.Balletal.[66]describedATPasa
businessfunctionwhichisbecomingincreasinglyimportantwith
theadventofe-business,MTOstrategiesandhigh-varietyproduct
offerings.AdvancedATP(AATP),amoresophisticatedversionof
ATP,isanincreasinglyimportantconceptintheeraofSCMandwill
bedescribedinSection4.2.MRPII[67]integratesprimarybusiness
functions(such asmarketing,humanresources, accountingand
finance),andthedatasupportingthesefunctions,usingasingle,
centraliseddatabase.However,mostMRP-IIpackagesdonotfully
integratealltheprocessesofatypicalmanufacturingcompany;for
example,featuresmissingincludetransportationanddistribution
planninganddynamicschedulingofproductionresourcesin
real-time.
AkeyfeatureofERPisitsapplicabilitytovarioussectors,e.g.
healthcare, banking and education, although authors such as
JacobsandWeston[11]havesuggestedincreasingthenumberof
pre-configuredsectorandindustry-specificpackages.ERPs
wide-spreadintroductionintocompanieswasaccelerated,forexample,
bythebenefitsofautomatingmanualtasks,integrating
fragmen-ted organisational structures after large-scale mergers and
acquisitions, and concerns over the year 2000(Y2K) and euro
currency compliancy of legacy systems. Typically, the most
implementedmoduleswithinthecore structureofERPsystems
are financial accounting and control, purchasing, sales and
distribution,materialsmanagement,productionplanning,human
resources,andqualitymanagement[68–70].
ThefunctionalityofERPsystemshascontinuedtogrowand
their scope has begun to extend from internal processes (e.g.
transactionautomationand internalplanning)tocollective and
externalprocessesinthewidernetwork[71].Thistrendhasledto
theterm‘‘ExtendedERP’’or‘‘ERP-II’’[14,72],referringtoadd-ons
to the core internally facing ERP system and a shift from
transaction-oriented systems to more analytical systems. ERP
adopters, havingrealised the benefitsof ERP, are beginning to
exploreextensionstocoreERPfunctionality[12];suchextensions
areexploredinthefollowingsubsections.
4.1. Supplychainmanagement(SCM)software
SCMsoftware facilitatesinformation integrationwithsupply
chain partners, aiding cost reduction and improved efficiency,
serviceandrelationshipswithcustomers[73].Earlyexamplesof
SCM software supported logistics functions and aided the
management of inventory in the supply chain but were not
well-integratedwithERP[73].Bowersoxetal.[74]suggestedthe
main reason to bethe insufficientscope and flexibility of ERP
systemstosupportsupplychainfunctionality.
Over thelast decade, ERPhasbeen considered the
process-orientedtransactionbackboneforintra-andinter-companySCM
software[75].Yet,Akkermansetal.[76]questionedthepractical
valueofcombiningERPwithSCM.TheauthorsconductedaDelphi
studywith23executivesfromvariousindustriesandconcluded
thatERPsystemshaveaninappropriatestructureandaretoorigid
to support SCM activities. Given advancements in technology,
future research should reapply the Delphi or another method
adoptedbyAkkermansetal.[76]andassesswhetherthecriticisms
remainvalid.
Hendricksetal.[77]studiedtheimpactofSCM,CRMandERP
investments on the long term stock price performance and
profitabilityoffirms.Theauthorsfoundevidencetosupportthe
claimthatERPcanimproveprofitabilitybutnotstockprice.SCM
systems,onaverage,ledtoimprovementsinbothstockpriceand
profitability. While valuable, the study explored each system
independently.Exploringtheimpactonperformanceoftheuseof
theSCMsoftwareasanintegralpartofERPwouldalsobevaluable.
4.2. Advancedplanningandscheduling(APS)software
APSsoftwareisdevelopedtoaddressmanufacturingplanning
andschedulingproblemsbasedonhierarchicalplanningprinciples
[78].Thus,itisacompany-widesoftwaresystemmakinguseof
analyticalapproachestoaddresscompany-wideandsupplychain
planning problems.APS hassimilarities with theplanning and
scheduling functionalityin MRP-II, e.g. interms of hierarchical
planningandcapacity-constrainedstructure;the‘‘advanced’’part
ofAPScomesfromaddressingthedecisionsupportinsufficiencyof
ERP[79].
Available-to-Promise (ATP) and Capable-to-Promise (CTP)
functionality is also incorporated within APS systems. While
ATP referstodeterminingtheavailabilityofany‘uncommitted’
finishedgoodsinventory,CTPindicatesremainingslackcapacity
afteravailablecapacityhasbeenmatchedwithcommittedorders
[66]. Akkermans et al. [76] anticipated an advanced futuristic
functionofATP/CTPsystems,suggestingthatitwillnotonlyhelp
companieschecktheabilitytomeetcustomerorders (basedon
availabilityor capability),but willalsooffertobuilda ‘specific
supplychain’fortheincomingcustomerenquiry.Fleischmannand
Meyr[80]andKilgerandSchneeweiss[81]stressedtheinfluence
oftheorderpenetrationpointontheapplicabilityofATP.
‘Advanced’ATP(AATP)broadensthefunctionalityandscopeof
ATP from production capacity planning and support for order
quotationactivitiestoalsoincluderawmaterialanddistribution
capabilities[82].ERPandAPSsystemssupportbothAATPandCTP
since it is important to consider both quantity and due date
quotationissuesbasedontheresourcesofthewholesupplychain
ratherthanonthefinishedgoodsinventoryofanindividualfirm
[83].
TheavailableliteratureonAPSsystemsisscarce[e.g.75,78,84].
While valuable, these contributions lack sufficient details on
several aspects of the APS concept. A much greater body of
literature,e.g.ontheinner-workingsofAPSsystemsandonthe
applicationofAPSinpractice,isrequired.
4.3. Customerrelationshipmanagement(CRM)software
Conceptually, CRM is a business practice centred around
customerneeds[85].CRMsoftware,developedtoaddressthese
needs,isusedtocompiledataoncustomersandanalyseitinorder
tosellmoregoodsorservices,andtodosomoreefficiently[86].
CRMcanbeimplementedandutilisedwithoutERP;however,
ERPisthoughttobeasupportivestructureforthegrowingneedsof
CRM. Chen and Popovich [87] stressed that ERP’s back-office
functionality(i.e.manufacturing,inventoryandfinancial
applica-tions) is a significant feature to support CRM’s front-office
functionality(i.e.SalesandDistributionandServiceapplications).
Asaresult,manyERPvendorshaveinvestedinCRMadd-onsand
arenowalsomajorCRMvendors[88].
While Hendrickset al.[77]foundthat SCMsystems leadto
improvementsin both stock priceand profitabilityon average,
measures.Again,thestudyexploredCRM’sbenefits
independent-ly;examiningtheimpactonperformanceofusingCRMsoftwarein
conjunctionwithERPwouldalsobevaluable.
4.4. OthersoftwareextensionstoERP
InadditiontothethreekeyextensionstoERPdescribedabove,
thefollowing arealso reportedin theliteratureand maybeof
relevancetoMTOcompanies:
Customer Enquiry Management (CEM) Module: focuses on due
date and price estimations. SAP R/3, for example, is said to
contain a CEM-like component within its order management
module[34,89]. Itis alsoreportedly used forautomating job
entry,processingcustomerordersandtrackingorderstatus.
Product Configurator (PC) (or ‘Variant Generator’) Software: an
increasingly used add-onto ERP.Evenmany small-sized ERP
vendors now provide this via the Internet [90]. The typical
example is a computer retailer’s website being used as an
interfacebetweentheend-customerandsuppliers;thecustomer
selectsthecomponentstheywouldlikeandthesuppliersreceive
theordersimultaneously[e.g.thecomputerassemblycase in
80].
ProductLifecycleManagement(PLM)Software:enablesacompany
to bring innovativeproducts to market effectively [91]. PLM
incorporates: Product Design Support (PDS), including cost
estimation,productdevelopment,andprototyping;and,Product
Data Management (PDM), enabling a company to manage
product-related information more effectively throughout the
lifecycleofaproduct[92,93].
Fig. 2 illustrates the evolution of ERP from MRP and
incorporatesextensionslikeSCMsoftwareand smalleradd-ons
suchasPLMsoftware.
4.5. ImplicationsforERPdecisionsupportfunctionalities
Insummary,whileavastamountofliteratureexistsonERPand
itspredecessors,literatureisonlynowbeginningtoemergewhich
explores extensions to ERP. More research is required which
explores combining ERP with the various add-ons and which
focuses on particular industry sectors. Table 2 summarises the
decision support requirements of MTO companies (context
variable)andliststhewidelyavailablefunctionalityprovidedby
ERP systems (response variable), thus making a preliminary
assessmentofpotentialmatches.Theliteratureevidenceregarding
theeffectivenessofthesematchesisdiscussedbelow.
5. AssessingthefitbetweenERPandtheMTOsector
Thissectionseekstoassessthefitbetweenthefunctionalityof
ERPsystemsandtherequirementsofMTOcompanies,structured
aroundthelattercontextvariable.InSections5.1–5.4,thematchis
examinedbetweentherequirementsatthecriticalplanningstages
ofMTOcompanies,asidentifiedinSection3.Similarly,thismatch
isexaminedforthesupplychainoperationsandcustomerrelations
ofthesectorinSections5.5and5.6,respectively.Finally,giventhat
manyMTOcompaniesareSMEs,Section5.7exploresaspectsoffit
that may be affected by company size. Note that shop floor
configurationisnotdiscussedexplicitlyinthissection,butisan
importantconsiderationatvariousplanningstages.
5.1. ERPsupportatthecustomerenquirystage
As previouslydescribed, customerenquirymanagement is a
keyplanningandcontrolphaseforMTOcompanies—ifduedates
are tobe adheredto, it is important that theyare determined
appropriately. The major analytical tool contained within ERP
systemstosupportcustomerenquirymanagementisATP/CTP.In
fact,ATPisusedtohandleMTSorderpromisingissueswitha
‘yes-or-noanswer’;but,CTPandAATPareespeciallyimportantinMTO
orderpromising[81].FleischmannandMeyr[80]andPibernik[83]
stress the necessity of detailed production planningand order
promisingintegrationinacomplexMTOcasebutnoattemptto
explore this match in detail was provided in either study.
Therefore,there isa needtoexploretheeffectivenessofAATP/
CTPinpracticeandPibernik[83]claimedthatsuchresearchshould
considertheeffectofproductionstrategyinthedesignofATP/CTP
systems.
MRPisanothertoolusedatthisstage.However,Stevensonetal.
[5] argued that MRP does not provide sufficient support for
managingcustomerenquiriesinaMTOcontext.Amoreobvious
toolforthisstageistheCEMtoolandmanyMTOcompaniesare
reported to utilise the CEM functionality of ERP systems for
enteringordersintothesystemandtheir transactional
automa-tion,butnotfordecisionsupport[89].Finally,coordinationacross
departments has been argued to be essential for dealing with
customerenquiries[33].ThisisarequirementwhichERPsystems
areabletosupportgiventhecommondatabaseusedacrossan
organisation[6].
Insummary,thereisevidenceofuseofERPsystemsattheCEM
stagetoautomateexistingprocesses,butlittleliteratureevidence
ofimproveddecisionsupportusingexistingERPfunctionality,and
hencemoreresearchisrequired.
5.2. ERPsupportatthedesign&engineeringstage
Thedesign&engineeringstageisespeciallyimportantforETO
and design-to-order companies, which are incorporatedin the
broaddefinitionofMTOusedinthispaper.Theimportanceofthis
stagehasbeendescribedintheliteraturebutlittleresearchhas
been conducted to explore this phenomenon or to explicitly
incorporate design & engineering within planning and control
structures.RudbergandWikner[32]providedararecontribution,
proposing a framework to forecast the lead time required for
design & engineering activities using a database of historical
activitiesandbyconsideringthecurrentworkload.Whilevaluable,
discussionoftheframeworkislimited;thereisinsufficientdetail
forotherstoapplythemethodinpractice.Anothercontribution
was made by Olsen and Sætre [94] who conducted an action
researchprojectinagrowingETOcompanywhichwas
experienc-ingtypicalproblemsofbespokeproduction(e.g.setting reliable
prices, determining realistic due dates, coping with increasing
demand,andaccommodatingthecustomisationrequirementsof
eachorder).ThecompanyconsideredanumberofERPsystemsbut
wasunabletofindasystemsuitableforthissetofproblems.In
particular,aninabilitytocopewithproductcustomisationatthe
design&engineeringstagewasnoted.ERPimplementationinthe
companywasunsuccessful–thevendorofferedtobuilda‘product
configurator’butthiswasconsideredunsuitableandthecompany
developeditsownin-housedesign&engineeringsolution.
ThecasestudyreportedbyDeepetal.[6]alsoexplainedthat
thecasecompany’s ‘ERPsystemselection committee’originally
decidedtoimplementa productconfigurator forrepeat orders.
However, a significant proportion of the company’s work was
bespokeandETO;hence,theproductconfiguratordidnotprovide
aneffectivesolutionforthefullrangeofmanufacturingactivities
performedbythefirm.Othercompaniesarealsolikelytofollowa
mixofstrategies(ETO,MTO,MTS,etc.);therefore,thispresentsa
significantchallenge.ThissuggeststhattheavailableERPsystem
productconfigurators provideinsufficientsupportforMTOand
ETOproductionstrategies.
Hicks and McGovern [93] conducted a recent study on the
potentialfunctionalityof PLMforETOcompanies.Somespecific
modulesofPLM(e.g.designchangecontrolandcapabilitymaturity
models)were foundtoshow particularpromiseforhelpingETO
companiesmanagetheproductlifecycle.However,whilecertain
functionalities such as cost estimation and concurrent product
developmentcanbeusefulforMTOcompanies,itisunclearwhether
thePLMsoftwareextensionstoERPsystemswouldaddvaluewhen
lifecyclesareshort;furtherresearchisrequiredwhichexploresthis
ingreaterdepth.Thecostandcomplexityofthisadd-onmayalso
exceedthebudgetlimitations/requirementsofSMEs,thusfurther
researchtoassessitseffectivenessforMTOSMEsisrequired.
5.3. ERPsupportatthejobentrystage
Where ERP relies purely on an MRP-driven replenishment
strategy,thisisquiteunsuitableforMTOproduction.Leadtimes
foreach component areassumed tobe deterministic,which in
manycontextsisunrealistic.Moreover,processesareassumedto
beindependent ofeach otherwhichis likely tobeimpractical,
especiallyforindustriesemployingconfigurationsotherthanan
assemblylineoramassproductionstrategy[95,96].
APSsoftwarecansupportcollectiveplanningthroughplanning
andoptimizingthesupplychain[80].Someauthorssuggestthat
APS systems are broadly applicable packages that provide
company-wide planning and scheduling, especially at the job
entrystage[97,98].However, fewauthorshaveresearchedinto
industry- and sector-specificAPS solutions; notable exceptions
includeDeepetal.[6]andDavidetal.[84,99].Deepetal.[6]found
APStoberelevanttoasingleMTOcasecompanyduetoitscapacity
management structure and analytical planning functionality;
however,thedetailedrequirements atthejobentrystagewere
notinvestigated.Davidetal.[84]exploredtheapplicabilityofERP
and APS systems for managing production in the aluminium
conversionindustry.Bothstudiesfoundmajorlimitationsinthefit
with the aluminium conversion industry; consequently, the
expectedbenefitswerenotfullyrealisedineithercase.Therefore,
furtherstudiesonthefitbetweenAPSandtherequirementsofthe
MTOsectoratthejobentrystageneedtobeconducted,comparing
theplanningandschedulingrequirementsofthesectorwiththe
functionalityofAPSsystems.
5.4. ERPsupportatthejobreleaseanddispatchingstages
Breithauptetal.[100]reportedthatthejobreleasemechanism
of load-oriented manufacturing control, a particular Workload
Control methodology developed in Hanover and described by
Bechte[101],waspreviouslyincludedintheSAPR/2systemand
thesystemsofotherlocalERPvendorsinGermany.However,to
thebestofourknowledge,contemporaryERPsystems(including
thoseprovidedbySAPtoday)donotcontainthismechanismor
othervariantsofWorkloadControlandnofurtherinformationon
this issueisavailableintheliterature.Moreresearchshouldbe
conducted to understand how thejob release mechanism was
embeddedintoSAPR/2andwhyitisnolonger available.Ifthe
function was removed due to poor performance, this may be
explainedbytheuseofjobreleaseindependentofothertiersof
hierarchicalWorkloadControlmethodologies(e.g.atthecustomer
enquirystage).
Thedispatchingphasecanbeconsideredtheleastimportant
stageintheplanningandcontrolhierarchyforMTOcompanies,if
sufficientcontrolisprovidedatthehigherlevels.Severalauthors
havestressedthis,suggestingthat withjobrelease,dispatching
canbedecentralisedtotheshopfloorsupervisor[39,102].Jonsson
andMattsson[103]agreedthatthisisasuitablemethodforMTO
companiesbut alsosuggested implementinga ‘dispatchinglist’
method, where advised priorities are given to the shop floor.
Meanwhile,Kingsman[43]suggestedasimpleprioritisationrule
like first-come–first-servedis sufficient. Althoughthe
effective-ness of these policies may vary, providing a sophisticated
dispatching mechanism –such asa finitescheduling system –
within an ERP system is arguably not necessary for MTO
productionifthepriorstagesarecontrolled.
5.5. ExtendedERPandMTOsupplychains
Asaresultofthetypicalsupplychainpositioning(andleverage)
ofMTOcompanies,short-noticerequestsarecommonplace.This
requiresresponsivesupplychainpractices,includingin
purchas-ing,andaPPCsystemcapableofhandlingrushorders.Stevenson
etal.[5]andStevensonandHendry[51]stressedtheimportanceof
web-basedSCMpracticestoenablethis.Furthermore,information
integrationisamajorfeatureofSCMsoftware,whichcanplayan
important role in employing responsive and concurrentsupply
chain practices. For example, regarding the importance of
informationsharingandintegrationtoMTOsupplychains,arare
contributiontotheliteraturewasmadebyJahnukainenandLahti
[55].TheyclaimedthattheoverallperformanceofaMTOsupply
chainmaysufferifsupplychaincontrolpracticesandinformation
management are inadequate, even if firm-levelperformance is
‘good’. Subsequent findings appear to support this view. For
example, Sahin and Robinson [53] and Robinson et al. [54]
performed simulation studies which showed significant cost
reduction (47.6%) for the MTO supply chain as a result of
informationsharing,coordinationande-replenishment.Although
these studies did not explicitly refer to ERP, they imply that
aligningthecoreERPsystemofanorganisationwithsoftwarefor
SCMmaybebeneficial. However, further researchisneededto
assesstheeffectivenessoftheSCMERPextensioninaMTOcontext
inpractice.
5.6. CustomerrelationshipmanagementinaMTOcontext
TwotypesofMTOcompanydefinedbyAmaroetal.[56]arethe
Repeat Business Customiser (RBC) and Versatile Manufacturing
Company(VMC),asoutlinedinSection3.5.ForRBCs,developing
long-termrelationshipswithcustomerscanbeimportant.Muda
and Hendry [104] stated that RBCs usually aim to establish
contractswhichrunlongenoughforthemtotakeadvantageof
someoftheefficienciesgainedbyMTScompanies, whileVMCs
maywanttoincreaserepeat businessopportunities[105].Both
negotiatingnewcontractswithneworexistingcustomers.Itcould
bearguedthatCRMapplicationsmayhelptoconvertVMCsinto
RBCsthroughfacilitatingstableandlongtermrelationshipsandto
increasethestrikerateofMTOcompanies.However,thereisno
literatureevidenceontheeffectivenessofCRMadd-onsforthese
purposes,andhencethereisaneedtoconductresearchtogainan
understanding of the fit between this ERP extension and the
marketcharacteristicsoftheMTOsector.
5.7. ERPadoptioninSMEs
Companysizeisafactorinfluencingawiderangeofissuesand
hasbeenexploredinmanydifferentstreamsoftheOMliterature
[106].InthecontextofERPadoptionandcompanysize,studies
havebeenconductedinseveraldifferentcountries withsimilar
results.For example,Mabertet al. [107]studiedthe impactof
companysizeonERPadoptioninNorthAmericancompaniesand
found evidence that: large firms tend to employ more of the
functionalityofferedbyERPsystemsandcustomisethesoftware
morethansmallerfirms;and,largefirmsthinkmorestrategically
aboutERPadoption thansmallfirms,which havemoretactical
concerns.ThefindingsofMorabitoetal.’s[108]surveyofItalian
SMEsareconsistentwiththesefindings. Similarly, ina Finnish
context,Laukkanenetal.[109]foundthattheexpectedimpactof
ERPonintra-firmprocessesishighforallfirmsbutthatmidsize
andlargeorganisationsexpectmorefromERPintermsofexternal
processesthansmallfirms.Argyropoulouetal.[110]surveyedthe
importanceoftheoperational requirements,logisticsfulfilment
and financial capabilitiesof Greek SMEson ERP adoption with
manysimilaritieswiththestudyofFinnishSMEsbyLaukkanen
etal.[109].Snideretal.[70]identifiedsomeSME-specificcritical
success factors by comparing successful and unsuccessful ERP
implementationsinfiveCanadianSMEs.Part-timededicationof
theemployeetotheimplementationproject,thelackofaformal
implementationstrategy, a low levelof softwarecustomisation
andpoorcommunicationamongstteammemberswereidentified
asdistinctive factorsseenin SMEcase companiescompared to
largefirms.Thusthereisagrowingbodyofliteraturethatsuggests
thatcompanysizeisasignificantfactortoconsiderwhenassessing
theapplicabilityofERP.
Inadditiontohighlightingtheimpactofcompanysize,some
ERPrelated studies have also uncovered cultural and national
issuespreviouslyover-lookedintheliterature.OlhagerandSelldin
[69] report that, unlike in some other countries, Swedish
companiesgenerally preferEuropean and SwedishERPvendors
overhugeglobalvendors.Sheuetal.[111]conductedastudyon
nationaldifferencesinERPadoptionthroughcasestudyresearchof
companiesusing ERPsystems provided by global vendors.The
authorsfoundthatERPadoptioncanbemoredifficultinEurope
thaninNorth Americadue tocomplexEuropean corporateand
national cultures. Hence, it seems that universal solutions
providedby globalERPvendorshave created additional
imple-mentationproblems.ThissuggeststhatthereasonwhyOlhager
andSelldin[69]foundthatSwedishfirmsprefertochooselocal
vendorsisthat,bydoingso,thesefirmsseektoavoidthesecultural
andnationalobstacles.Tothebestofourknowledge,thereisno
researchwhichexploresERPadoptioninUKSMEs;whileKohand
Simpson[112]questionedthesuitabilityofERPforUKSMEs,the
surveyandinterviewsconductedbytheauthorshaveadifferent
focus-diagnosing uncertaintyinSMEsusingERP.Developinga
greaterbody ofknowledgefromdifferentnationalperspectives,
includingtheUK,wouldhelptofurtherourunderstandingofthe
impactofcompanysizeandbothculturalandnationaldifferences
onERPadoption.
Nostudiesidentifiedintheliteraturefocusspecificallyonthe
issueofcompanysizewithinaMTOcontext.However,Buonanno
etal.[113]consideredthe‘levelofdiversification’(whetherafirm
considers diversificationas a sourceofcompetitive advantage).
Althoughtheydescribedthisasanindicatorofmarketstrategy,it
couldalso bearguedtobe linkedtoproduction strategy. They
investigated the relationships between business complexities,
organisationalchangeandERPadoptionbysurveying366firms
andexploredtheimpactofsevenfactors(includingcompanysize
andthelevelofdiversification)onERPadoption.Theauthorsfound
company size to be the only significant factor affecting ERP
adoption.Previousresearchhadalsofoundthelevelof
diversifi-cationtohaveasignificanteffectonthecomplexityofinformation
flows,thereby affectingERPadoption;however,theauthorsdid
notfindthisintheirstudy.Thiscontradictioncouldbeasaresult,
for example, of further national or cultural issues or due to
differencesinquestionnairedesign.
Insummary,companysizehasrecentlybeenrecognisedasa
factoraffectingERPadoption.Thisisatopicalareaofresearch,
given that ERP vendors have begun to market their products
towardsSMEs.Atpresent,thefitbetweenERPandSMEsappears
inconclusive. Company size influences the structure of many
company-wide activities, affecting a company’s internal and
externaldynamics;therefore,itisunderstandablethatthisisan
importantfactorintheadoptionofintegratingmechanismssuch
as an ERP system. Although there have been several recent
studies on the relationship between company size and ERP
adoption,mosthaveignoredtheimpactofproductionstrategy.
However,theorderpenetrationpointhasasubstantialimpacton
planningat the firm andsupply chainlevel [80]. Itwould be
valuabletorevisitthedatacollectedinthestudiesreviewedin
this subsection and acquire further information from the
respondents on the order penetration point and production
strategyofthecompaniesinordertoprovidearicherinsightinto
thistopicforMTOSMEs.
Toconcludethediscussionabove,Tables3and4,respectively,
provideasummaryof:thekeystudieswhichpartiallyexploreERP
adoptioninaMTOcontext;and,theassessmentofthefitbetween
thecontextvariable(decisionsupportrequirementsoftheMTO
sector)andtheresponsevariable(thefunctionalityofERPandits
add-onsorextensions).
Table3demonstratesthatconsiderationoftheMTOcontextis
anemergingareabutthatagreaterbodyofknowledgeshouldbe
developed.Table4showsthatmostofthewidelyavailableERP
features conceptually fail to match the requirements of
manufacturers employing the MTO production strategy. For
example,widelyavailable modulesforCEM appeartoprovide
supportfor automatingtheentry andprocessingof ordersbut
lack sufficient support for CEM planning and pricing. New
modules andadd-ons suchas PLM, productconfigurator, APS,
SCMandCRMare seenaspotentiallyhelpfultoolsatdifferent
stagesofplanning.However,itremainsunclearwhethertheyare
applicable to MTO purposes and would result in improved
performancesincelimitedresearchhasbeenconductedsofar.
While basic ERP system planning tools(e.g. MRP) are mostly
suitable forthe MTS production strategy, the majority of the
potentially‘good’extensionsareofferedasextrasolutionswhich
may betoo expensive for companies withlimited IT budgets.
Therefore, MTO-specific IT solutions need to become more
widelyavailableaswellasMTS-compatibleERPsystems.Thekey
gaps in the literature that emerge from this discussion are
summarisedinSection6.
6. Gapsintheliterature—improvingalignment
Sevenkeyareasinneedoffurtherresearchemergefromthe
above discussion in order to improve alignment between ERP
Table4
AnassessmentoftheapplicabilityofERPsystemstoMTOcompanies. Contextvariable(DSR) Responsevariable
(ERPfunctionality)
Fit
Customerenquiry management(CEM)
ERPCEMfunctionality, ATP,AATPandCTP
AlackofsufficientsupportfortheCEMstage;providesautomationinenteringordersratherthan decisionsupport.
InabilityofATPtosupportMTOduedatedeterminationswhiletheeffectivenessofusingAATPandCTP mechanismsinaMTOcontextremainsunclear.
Design&engineering(D&E) ProductConfigurator SoftwaremayberelevanttocompanieswithamixofproductionstrategiesandtoMTOcompanies employingastrategyclosetoATOproduction.
Functionalityallowsbuyerstocustomiseproductsoveronlyalimitedrange;hence,haslimited relevance,especiallyforproductswhereD&Eisbespoke,e.g.ETOfirms.
ProductLifecycle Management(PLM)
CostestimationandproductdatamanagementfunctionalityforthecustomerenquiryandD&Estages. TheeffectivenessofPLMsystemsinMTOcontext,whereproductlifecyclesmayvarygreatly,remains unclear;
ImplementingPLM,canbeanexpensiveandhigh-riskstrategyforMTOSMEs. Jobentry MaterialReq.Planning(MRP) MRP-drivenreplenishmentstrategyunsuitableforjobshopproduction.
AdvancedPlanningand Scheduling
APSpromisesvariousplanningandschedulingsolutions.Yet,theeffectivenessofAPSsystemsfor planningandschedulinginaMTOcontextremainsunclear;
ImplementingAPS,canbeanexpensiveandhigh-riskstrategyforMTOSMEs. Jobreleaseanddispatching RelevantERPmodules JobreleasestagesupportnolongeravailablewithinERPsystems.
Variousdispatchingpoliciesavailable,yetsimpleandflexibleinworkingsimultaneouslywiththe manualschedulingofshopflooremployeescanbepreferredifpriorstagesarecontrolled. MTOsupplychains SupplyChain
Management
Internet-enabledSCinformationsharingandcoordinationmayimproveabilitytocopewithrush orders.
ImplementingSCMcanbeanexpensiveandhigh-riskstrategyforMTOSMEs. CustomerRelationship
inMTOcontext
CustomerRelationship Management
CRMsoftwarecanhelptobuildstableandlongtermrelationshipswiththerightcustomers;thismay alsoincreasethestrikerateofMTOcompanies.
ImplementingCRMcanbeanexpensiveandahigh-riskstrategyforMTOSMEs.
Other EnterpriseResource
Planning
Wideavailability;Departmentalintegration;E-businesscapabilities. TheneedfordepartmentalintegrationinaSMEislimited. Table3
SummaryofkeyERPstudiesofrelevancetoaMTOcontext.
Study Topic Firmsize Manufacturing
strategyof thefirm(s)
Researchmethodology Summary
Method Data Size
BertrandandMuntslag[4] PPC N/A ETO Conceptual N/A N/A AssessmentofMRP-IIsuitabilitytoETO
firmsandaproposedframework.
Wortmann[30] IS N/A ETO Conceptual N/A N/A IScomparisonforETOandMTS
production,andanETOdata-structure proposition.
JonssonandMattsson[103] PPC Various Various Conceptual,Survey Q 84 AssessmentofPPCapplicabilityto differentproductionenvironments. Mabertetal.[107] ERP Various Various CaseStudy,Survey I,Q 12,482 Investigationoftheimpactof
organisationsizeonERPadoption.
Stevensonetal.[5] PPC N/A MTO Review N/A N/A ReviewandassessmentofPPC
applicabilitytoMTOproduction.
Buonannoetal.[113] ERP SME Various Survey Q 366 InvestigationoffactorsinfluencingERP
adoptioninSMEscomparedtolarge companies.
KohandSimpson[112] PPC,ERP Various Various Survey Q 108 DiagnosisofuncertaintiesinSMEs
usingERPsystems.
OlsenandSætre[60] ERP SME ETO Conceptual,CaseStudy I 1 Propositionofanalternativein-house
company-widesoftwareframeworkfor SMEs.
OlsenandSætre[94] ERP SME ETO/MTO CaseStudy,ActionRes. I,M 2,2 Propositionofproprietary company-widesoftwarebasedonfourcase studiesfornichecompanies
Deepetal.[6] ERP SME MTO CaseStudy,ActionRes. I,M 1 InvestigationoffactorsinfluencingERP
selectionbyaMTOSMEs.
HicksandMcGovern[93] PLM Various ETO Conceptual N/A N/A Identificationofdesign&engineering
needsinETOfirmstomanagethe productlifecycle.
Topic:ERP–EnterpriseResourcePlanning;SCM–SupplyChainManagement;PPC–ProductionPlanningandControl;IS–InformationSystem;PLM–ProductLifecycle Management.
Firmsize:SME–SmallandMediumsizedEnterprises;Various–SMEstolargeorganisations. Compt.strategy:SC–Supplychain;Various–fromMTStoETO
MTO-SpecificCEMToolforERPEmbedment:Thevalueofavailable
AATP and CTP mechanisms for supporting customer enquiry
managementintheMTOsectorhasbeenquestioned.Thisisa
growing fieldofresearchbuttheavailablesimple techniques,
such as ATP, are best suited to a MTS production strategy.
Furthermore, there is no evidence in the literature on the
effectiveness of AATP and CTP in practice,and hence further
researchisneededtoexplorethis.However,itissuggestedthatit
maybenecessarytodevelopaMTO-specificCEMtool,whichcan
be embedded within an ERP systemto support decisions on
pricing,duedatesettingandcapacityplanning.
Support for the Design & engineering Stage: The design &
engineeringstage,ofhighimportancetoproducersofbespoke
products,hasreceivedlittleattentionintheliterature.Further
researchisrequiredtodevelopdesign &engineeringplanning
tools.PLMadd-onsmaycontainsomefunctionalityinthisarea
but no conceptual or empirical evidence in support of its
effectivenesshasbeenpresentedintheliteraturetodate.
APSApplicabilitytotheMTOSector:WhileanAPSsystemisseenas
a potentiallyhelpfultool forMTOcompanies, theliteratureis
scarce. An empirical study of APS in the MTO sector, which
exploresidiosyncraticsectorandindustry-specificissuesinits
adoption,shouldbeconducted.
ManagingCustomerRelationshipsintheMTOSector:CRMisan
emergingareabutisinneedoffurtherresearch,bothforMTO
companiesingeneralandSMEsinparticular.CRMsystemsthat
help MTO companiesto turn one-off customers into
repeat-purchasers(whereappropriate)arerequired.
MTO Supply Chain Management: MTO-specific supply chain
research is quite limited. Furthermore, the literature lacks
studiesontheuseofERPandSCMsystemsinMTOsupplychains
andonsuppliermanagementinaMTOcontext.
NationalPerspectivesonSMEAdoption ofERP:ERPadoptionby
SMEs is anincreasingly populararea of researchat thepre-,
actual- and post-implementation phases. Local and national
issues affectthis process; hence,further researchis required
which conducts comparative analysis of ERP adoption in
different countries. Tothe best ofour knowledge,no studies
on ERP adoptionby SMEsin theUK, forexample, havebeen
conducted.
Embed a MTO-Relevant PPC Concept in an ERP System: PPC
conceptsofrelevancetoMTOcompaniesshouldbeembedded
withinERPsystems.TheWorkloadControlmethodofPPChas
beenarguedtobehighlysuitablefortheMTOsector[5,114]and
shouldbe(re-)embeddedandtestedinanERPsystem.
7. Conclusion
AlthoughvendorsofcommercialisedERPsystemshaveclaimed
that their software is widely applicable, the literature has
questioned applicability to MTO companies. Drawing on key
literature,thispaperhasadoptedacontingency-basedapproachto
assessthefit betweenthedecision supportfunctionalityof ERP
systemsandthedecision supportrequirementsofMTO
compa-nies.AlthoughERPcouldprovidebenefitstoMTOcompanies,itis
alsoclearthatthereisamisalignmentinsomekeyareas,suchas
betweenthedecision supportprovidedbyERPsystemsand the
decision support required by MTO companiesat thecustomer
enquiry and design & engineering stages. Building on this, a
research agenda has been outlined to improve the alignment
between ERP systems and the needs of MTO companies. This
includes: developing decision support tools that reflect the
customer enquiry management activities of MTO companies;
and,embeddingMTO-relevantPPCconceptswithinERPsystems.
Theagendahasclearimplicationsforresearchers,aswellasfor
developersofERPsoftware,andisalsoofrelevancetomanagersin
MTOcompanies.Forexample,addressingtheseresearchgapswill
increase the applicability of ERP systems to the MTO sector,
improving: information management, competitiveness and the
abilitytoalignplanningandcontroldecisionswiththosemadeby
firmsinthewidersupplychain.
In addition to the seven research areas described in the
preceding section, future research could also build on the
assessment conducted in this paper. For example, we have
focused on assessing ERP as a generic software solution but
researchcouldalsoanalyseparticularpackages,e.g.large-scale
solutionsofferedbySAPorscaleddownsolutionsaimedatthe
mid-market.Theassessmentcouldalsoberevisitedintime:given
therateatwhichsoftwareisdeveloped,itmaybeimportantto
re-evaluateourconclusionsinthefuture.Empiricaldatacouldalso
becollectedtovalidateourconclusions,e.g.tostaticallytestfit
and impact by collecting data via a survey on performance
variablesinadditiontothecontextandresponsevariablesusedin
thisstudy.
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