ERP Software Selection Processes: A Case Study in

the Metal Transformation Sector

Antonio Hidalgo 1 , José Albors 2 , Luis Gómez 3
1
Department of Business Administration, Universidad Politécnica de Madrid, Madrid, Spain
2
Department of Business Administration, Universidad Politécnica de Valencia, Valencia, Spain
3
EMVS, S.A., Madrid, Spain
E-mail: ahidalgo@etsii. upm. es, jalbors@omp. upv. es, gomezl@emvs. es

Abstract

When a firm decides to implement ERP softwares, the resulting consequences can pervade all levéis, includ-
ing organization, process, control and available information. Therefore, the first decisión to be made is which
ERP solution must be adopted from a wide range of offers and vendors. To this end, this paper describes a
methodology based on multi-criteria factors that directly affects the process to help managers make this de-
cisión. This methodology has been applied to a medium-size company in the Spanish metal transformation
sector which is interested in updating its IT capabilities in order to obtain greater control of and better infor-
mation about business, thus achieving a competitive advantage. The paper proposes a decisión matrix which
takes into account all critical factors in ERP selection.

Keywords: ERP, Information Technologies, Metal Transformation Sector, Business Processes,

Reengineering Processes

1. Introduction their own resources.

The implementation of an ERP means removing barri-
In our research Enterprise Resource Planning (ERP) re- ers between persons, business processes, information and
fere to software suites that intégrate data and applications, locations. The benefits associated with ERP systems are
the information flow, and the business processes used in both tangible and intangible [4] and can be shown in all
the company, in order to have a fully integrated datábase, dimensions of a business. When ERP is implemented
ensuring unique results for all the different queries [1]. successfully, it can reduce development time of business
These suites have developed complete modules for each transactions, facilitate better management and enable
standard functional área (finance, operations, purchasing, e-commerce integration [5].
sales, projects, human resources, etc) in a standard en- Researchers have found that ERP implementation has
terprise, in a standard market, although they sometimes become the largest information system project investment
require some customization to be adapted to the specific in companies worldwide and this investment is expected
problems of each enterprise or market. to continué for the coming years [6]. Compared to other
These solutions are reshaping business structures be- business solutions, ERP implementation solutions are
cause they promise to solve the challenges posed by preferred because of their quicker implementation and
portfolios of supposedly uncoordinated business applica- development process than in-house developed software.
tions, which are also related to business process innova- External exclusive development also offers a high quality
tion [2,3]. The aim of these kinds of software develop- system, but with its own problems, such as acquisition
ments is to intégrate a process-oriented organization and uncertainty and hidden costs in implementation [7].
information flow into the enterprise to help management As these ideas reveal an important issue for enterprises,
be closer to accurate online information with an intelli- the fact that fhree quarters of the ERP projects have been
gent analysis of business data. Because the data available judged unsuccessful by the ERP implementing firms [8]
is the same for each person working within the company, becomes a major problem or that one half of ERP im-
software suites will also help organizations to manage plementations are judged to be failures [9] with serious
consequences, including bankruptcy [2,10]. The reasons • ERP strategy and implementation methodology.
could be due to the differences in interests between cus- • Training and education.
tomers, who want a unique solution especially adapted to • ERP vendors.
their enterprise [11], and vendors who prefer generic With these reviews of the most common problems cited
solutions applicable to a broad market. by literature, we must note that not all ERP software has
Before ERP implementation can take place, the or- the same scope, neither has it the same process orientation
ganization must be reengineered as part of the total proj ect or specialty. Each developer has designed the software
in order to adapt the enterprise to the stronger process- with his own view of a standard enterprise in mind, and it
oriented way of work facilitated by the ERP. Several is possible to find ERP designed for small or medium-size
streams of literature have proposed foundational theories firms oriented to hundreds of movements per year and
for ERP implementation. One of them focuses on the others for large firms for thousands or hundreds of thou-
interaction between ERP and organizations [12], identi- sand movements per year. Therefore, it does not mean that
fying ERP implementation with organizational factors the software cannot work in either size company, but
such as different types of organizations which require rather that the hardware requirements, the internal proc-
distinct organization fitting processes [13] as well as con- esses, and the data have been created for and optimized
tingent approaches [14]. Another stream focuses on risk with these quantities.
factors, identifying key risk factors in each implementa- You can also find different types of ERP vendors and
tion phase [10], and another investigates the key factors in types of licenses. License type should represent a long
process fit and user fit [15]. Finally some authors have term commitment to a technology or with a specific
outlined cultural aspects [16] and those problems related vendor. We identified at least three major types of li-
with ERP integration in SMEs [17]. censes: Open Source GPL, public licenses that restrict
some aspects of the use or distribution, and owner licenses.
Generally, we can say that ERP vendors and enterprises
Being sure that the ERP selected is the most adequate for
have been aware of these risks that affect the success of
our company processes and way of work will help im-
software implementation [18], and the important role
plementation success. Therefore, we want to focus on the
management has in it. The implementation requires an
choice of the ERP software to be installed, after carrying
enormous effort from the firm; it involves organizational,
out an analysis of the scope, processes, requirements,
operative and internal changes. However, the organiza-
pricing, etc.
tions that have successfully adopted ERP systems view
The objective of this paper is proposing a relevant de-
them as one of the most important innovations that they
cisión matrix, with the different options available, by
have carried out, including tangible and intangible im-
following a methodology and organizing a close-to-real
provements in a variety of different áreas. Another chal-
pilot test that probes the critical issues. We must also
lenge is to decide whether it is necessary to change the
determine what personalization or developments should
company processes to fit the ERP or whether it is neces-
be carried out to fit the standard ERP to the business, the
sary to adapt the ERP to the processes of the company
scope of these developments and to distinguish between
[17]. This issue is critical in cost and time.
software development, reports, adaptations or renaming
Failures in ERP implementations have been related to
of fields or labels, and the cost involved.
different causes and these must be analyzed before the
This paper has the following structure. After this in-
implementation begins, in each case taking active actions
troduction, we describe the industry context: the Spanish
to decrease failure risks. These causes have been docu-
metal transformation firms in Section 2. In Section 3, we
mented by critical success factors reviews [19,20]:
discuss the ERP evaluation factors and the analytical
• Active management of the changing environment.
process involved, and then in Section 4, we apply this
• Culture of the organization.
methodology to a Spanish metal transformation firm,
• Adequacy between organizational structure and
obtaining a decisión matrix to help us to decide the ERP
ERP.
software brand to be installed. Finally, Section 5 con-
• Business process reengineering approach.
cludes the main recommendations obtained in the im-
• Enterprise organizational characteristics.
plementation of the methodology.
• Communication.
• ERP teamwork, composition and leadership.
• Monitoring and evaluation of performance. 2. The Spanish Metal Transformation Firms
• Project management.
• Software development and testing. ERP philosophy has been designed in an attempt to satisfy
• Top management support. all kinds of companies in almost all sectors, using pa-
• Data management. rameters to fit each one. This aspect requires implement-
tation teams to have a profound knowledge of the sector in tor outperforms the average: the usage of ERP systems
order to fit the ERP to the profile of each company. (25% in metal producís and 20% on the average) and in
At the European level, the e-Business Watch survey, Internet-based knowledge management solutions (12% in
financed by the European Commission [21], compared metal producís and 10% on the average).
the IT situation of the metal transformation sector with In order to discuss the ERP implementation state of
all sectors. Figure 1 shows the average diffusion of the sector, we have found data which shows the percent-
on-line technologies for the different types of applica- age of ERP implementation in firms segmented by size.
tions. In two applications, the metal transformation sec- Figure 2 illustrates the differences in each size. While

50
45
40
35
30
25

llli-kUlJlii
20
15
10

¿* &*
• & »

r^

^ *F
I All sectors U Metal P r o d u c t s «?
Source: European Commission, [Link]

Figure 1. Average diffusion of information technologies.

60 /

5 0 ^

4 0 / ^

jtiñJhl ÜÜÉ
\<* «?
• 0 - 4 9 wrk • 50 - 249 wrk • 250 + wrk

Source: European Commission, 2003.

Figure 2. Usage of online technology for interna! processes.

large companies have an ERP implementation level cióse • Sales: quotations, delivery times, sales prices, new
to 60%, in medium-sized enterprises it reaches 30% and producís, customer relationship management (CRM),
in small firms around 8%. It can observed that ERP has client discounts, special offers.
been largely implemented in large size companies, as the • Production: operations, production orders.
benefits for them in relation to location and importance • Stocks: valué and cost of stock (average, médium,
of real time data access are more obvious. Also, the cost LIFO (last in, first out)), reserved or available stock,
involved in this implementation is a minor factor com- automatic reordering at minimum stock levéis, mi-
pared to that for small and médium size companies. These nimum stock warnings, raw materials, stock de-
results have to be extrapolated to the Spanish environ- valuation, obsolete stock.
ment. • Financial: accounts, fixed assets, taxes formats and
To analyze the Spanish market and examine the pro- Communications, bank communication, structure,
file of the metal transformation firms, we used the data data imports from past years.
from the Spanish National Institute of Statistics (ESTE). Our aim is to identify the flow of information of all
The total number of Spanish firms is about 47,002, dis- processes inside the activities, especially those aspeets
tributed by sub-sectors according to Table 1. Over 50% considered in the normal management of the business, in
of the firms belong to the sub-sector of the manufacture order to analyze the processes and applications require-
of metal producís for construction, and 20% are in the ments. To analyze fit between ERP and business proc-
sector of metal treatment and coating. The remaining esses, attention must be paid to the flow diagram of each
companies are located in other sub-sectors as the manu- process.
facture of arricies of cutlery, tools and hardware, the
manufacture of metal producís, except furniture, and forg- 3. Evaluation Factors and Analytical Process
ing and stamping.
The distribution of firms by size clearly shows that the The scope of an ERP implementation project should vary
main group of the metal transformation sector consists of in each case, but when analyzing processes, all possible
companies with fewer than 10 employees (83%), while the interactions between these processes must be contem-
medium-sized enterprises comprise 15%, and only 2% are plated. Another important consideration is whether the
large companies. Therefore, we can say that the typical main área processes have been included in the scope. If
firm in this sector is a small size company with less than they have been excluded from the implementation scope,
20 workers. the information we get from the data will not be as valid as
In order to analyze the fit between the various ERPs we need.
and the firms, it is necessary to begin by identifying the All requirements should be structured taking into ac-
basic business processes in all activities of a metal trans- count two ideas: those processes within the scope that
formation company. In general, we can identify five basic must be integrated in the ERP, and those that consider
activities: purchasing, sales, production, stocks, and finan- ERP as external software. These needs must be contem-
cial. The main processes in each activity are the following: plated especially if some áreas are not to be integrated.
• Purchasing: orders, pardal or total deliveries, price This could be the case if in the project, some processes
or quantity variations, consultation of price, stock have to work with an older application. In this case, we
availability, reserved stock, management of pro- must be sure that, for example, the scope of implementa-
viders. tion takes into account that such processes will be working

Table 1. Total number of Spanish firms by principal activity.

Sub-sectors No. of firms %

Manufacture of metal producís for construction 25.450 54,1
Manufacture of tanks, reservoirs and metal containers, radiators 1.306 2,8
Manufacture of steam generators 60 0,1
Forging, stamping and forming of steel, powder metallurgy 1.961 4,2
Metal treatment/coating 9.521 20,3
Manufacture articles of cutlery, tools and hardware 4.413 9,4
Manufacture of metal producís, except furniture 4.291 9,1
Total 47.002 100,0

Source: INE, 2008

in an oíd platform or application to ensure that integration ERP solution, the first question to be asked is: which is
will be possible and data integrity will be guaranteed. In the optimum alternative. Normally, some employees
the first group, we will find that many processes fit in the should have prior experience with some applications. As
standard ERP solution, but others will need to be adapted the basic objective is to define a decisión analysis meth-
to the ERP, or the ERP reprogrammed to fit company odology, we propose a five step structure (Figure 4) that
processes. Those are customized processes and the manner has a distinct scope, concerning persons and groups in
in which they are to be adapted is a major evaluation factor. charge, and resources, and in each of them we will dis-
The diagram below identifies a taxonomy of applica- cuss the objective.
tions in accordance with the scope of the implementation, Step 1 - Determine scope and requirements
i.e., which are to be replaced with standard applications of When a firm has to make a selection between the dif-
the ERP function and which need to be linked to the ERP ferent options of ERP vendors, the firm must be clear
(Figure 3). about the scope, the approach definition, the requirements
The final task is to identify a list of processes and ap- and the criteria to evalúate. The objective in this first step
plications. We must analyze those that can be classified is to be sure that the firm understands what is going to be
as standard functional requirements to be covered by developed and replaced, the implications and the people
ERP and are not critical to the election. Then, we can affected.
focus on special processes and applications. This tax- The first stage begins by identifying what is involved in
onomy should be different for each of the ERP options, the implementation scope, the geographical issues such as
which then must be developed by the vendors, and later dispersión of the firm, multi-country and language needs
tested in the pilot. Additionally, we must analyze the and general functional requirements. After that, a tém-
applications currently used in the company, what the plate of functional requirements and functional áreas must
functions do, and how they interact with others, if they do. be filled out. As stated previously, personnel involvement
When a firm makes a decisión of implementing an is a key factor.

Customer A ^^^^^^^^^^^^^^^^^^^^^^_
Customized
Processes Special Process Out of Scope
Requirements

S t a n d a r d Functional Special application

Requirements Requirements

Industry
C o in mon ^^^^^^^^^^^^^^—^^^
Processes
>
E R P core functionality E R P non core functionality

Figure 3. Process categorization framework.

 ti Determine scope 2* Gritería to 3. Compile 5. Sclcction and

and requirements evalúate and RFP. responses into procurement

RFP questions licenses

Figure 4. Methodology steps.

The most intense work load is normally the identifica- Step 4 -Analysis of offers, costs involvedandresources
tion of processes. First, the global function involved in the needed
implementation scope must be identified. For example, When the offers are received, all aspeets of them must
inside purchasing we must consider all the general ac- be analyzed: the responses to special requirements, the
tivities or sub-processes: orders documentation, mainte- resources proposed, the range of costs, and the imple-
nance providers, delivery times, non-storable produets mentation plan, including time, work load and resources
such as transports, etc. For each sub-process, a flow chart involved. After this analysis, any doubts must be identi-
has to be designed to identify the decisions involved, the fied and the questions resent to the ERP vendor.
beginning and end of the process, and the interactions It is important to remember that errors may oceur;
with other processes. At this point in the project, col- therefore, our summary for each ERP vendor must be
laboration between management and workers is important revised by other colleagues.
because a correct identification and defmition of proc- Step 5 - Selection and procurement of licenses
esses will help in all steps of the implementation. Once the ERP vendor has been selected, the next step is
Finally, a spreadsheet with the all sub-processes is to initiate negotiations to adjust licensing, prices, the
made up, with a flow chart of each sub-process and an maintenance contract, and actualization issues. This final
explanation how it works. It is important to identify a step must comprise all points of our criteria to ensure a
short ERP vendors list which can be managed comfortably. global context implementation and specify the teams
Step 2 - Criteria to be evaluated and RFP involved, the people in charge, the schedule and penalties,
In this step, a criteria evaluation must be generated ifneedbe.
together with a weighted column of those points that Another critical aspect is the communication of deci-
should be determinants in the implementation, such as the sions to the entire company, keeping workers informed of
completion of the initial processes list, technology archi- the schedule and scope, especially those affected by
tecture needed, cost and duration of implementation, strategic tasks inside the company. Resistance to change
maintenance, training. The weights are assigned accord- is always a critical aspect in the implementation period.
ing to the firm's needs, priorities and overall objectives.
After this step, a Request for Proposal (RFP) is devel- 4. The Methodology Approach
oped with all criteria that must be evaluated, with an ex-
planation of the requirements about compliance or devia- The case study is focused on a médium size company (20
tions, the vendor's assumptions, implementation success workers) in the Spanish metal transformation sector
experiences and pricing. Finally, the RFP must be sent to which was interested in updating its IT capabilities to
all the ERP vendors included on the list. attain greater control of and better information about
Step 3 - Compile questions and responses for the RFP business, thus achieving a competitive advantage. The
The purpose of this step is to answer the ERP vendors' approach represents step one and two of the methodology
questions and to be sure that all requirements are under- in a real situation.
stood correctly. Afterwards, all ERP vendor responses
must be compiled into the RFP and the implementation 4.1. Characteristics of the Firm
alternatives, solutions for special processes, and applica-
tion requirements given by the vendors studied. The company is completely automated having highly
Once this step has been completed, ensuring that spe- robotized production lines. It has two business lines. The
cial requirements, alternatives and technical solutions are first produces standard produets, with a yearly demand for
checked, different demos should be prepared with each large quantities at a low cost. The second is focused on
vendor to clarify any weak points. After the pilot is pre- projeets on-demand, with engineering, design, prototype-
pared, and all the information is compiled, the complete ing and a short life eyele. The response time must be
offers are ready to be evaluated. expeditious, with delivery in 24 hours.
 The customers are mostly local firms. The company hard disk).
needs to be as cióse to them as possible since the cost of • Work orders are not automated. Workers must
transportation represents a significant expense and the know what is needed in order to manufacture an
quantity and price of each order is not high enough to order.
offset this cost.
One of the main characteristics of the metal processing 4.3. Scope and Requirements
sector is that it is very sensitive to price. Because of this,
the size of the company is crucial to obtain the best pnces Our aim is to intégrate all applications and departments
from the suppliers and the best manufacturing volume. Its in two phases. The first will consolidate all applications,
main suppliers are major steel producers or processors. except accounts software. When the operation is success-
This makes it necessary to acquire large volumes of raw ful, the second phase will include accounts.
materials to achieve a competitive discount advantage. Once this scheme has been approved, all the processes
The interaction between these two aspects makes a mé- must be analyzed and adapted to the functionalities and
dium size optimal for a company in this sector, as statis- characteristics of the ERP software, with the help of the
tics show. people in charge of each process. Everyone in the or-
The organization within the company is a typical func- ganization must be involved to ensure that all types of
tional organization, as shown in Figure 5, with each de- eventualities have been included. The new flow chart of
partment in charge of its own functions. the company is reflected in Figure 7 and represents how
the processes will be developed after this analysis.
4.2. Software and Functionalities The ERP software design includes finances, sales and
distribution, CRM, e-commerce, purchasing (MRP and
The analysis of the business operation in terms of installed MRPII), stock management and operations support inside
applications shows the existence of different applications a unique system, all integrated. After a first contact with
in each of the functional áreas (purchasing, production, different vendors and software, we noticed several Solu-
sales, etc), but no information flow between them. This is tions with different license approaches:
evident from the map of applications reflected in Figure 6. • Property license such as Microsoft Dynamics Nav,
The firm operates using the foliowing applications: SAP Business One and JD Edwards.
• Purchasing software in MsAccess with local data • Open Source (GPL license), such as Abanq and
(internally developed). OpenErp.
• Sales software, with local datábase, also in MsAc- • Public licenses that restrict some aspects of the use
cess and no link between any other programs or or distribution, such as Open Bravo and Compiere.
datábase (externally developed). Following the analysis, we identified which processes
• Operations control and productivity with written fit with a standard flow (supported) and which had to be
weekly reports (no software, done manually). customized initially (Table 2). For example, the pro-
• Stock control (no software, controlled manually). cesses relating to Calculation of Estimated Cost of existing
• Material Requirements Planning (MRP) (done producís, or Reserve Stock, meet the standard require-
manually, aided by spread sheets written by the ments offered by a commercial ERP and required no
Technical Department, and stored on a common customization. On the contrary, the processes related to

General Manager

Sales Dpt. Purchasing Dpt. Technical Dpt. Production Dpt. Finantial Dpt.

Stock
Operators
Management

Figure 5. General chart of the firm.

 Tech
Applications
(AutoCad,
3dSt udio.
Inventor)

Cuts
compounds
í\í.í\\ illLJ-

siorage

Workorders

Figure 6. Applications map.

Technical
development

Customer
Proposal Work orders Delivery
request

Stock
[Link] Purchasing Invoicing
Management

Figure 7. New general flow chart.

 Table 2. Processes and application table.

Processes ERP Supported Customlzation requlred

Proposal Management (Sales)

Proposal releases management X X

Estimated time of delivery X X

Existing producís (estimated cost calculation) X

Non existing producís (proposal creation and valuation) X

Purchasing

Split components X

Reserve stock X

Múltiple request X

Partial deliveries X

Differences between orders and deliveries X

Claims and returns X

Suppliers management X

Price update

Order Tracking

Technical definitions

Components

Drawing and codes

Work Orders

Workers management (cost and times) X

Split order management X

Work order sheet info X

Machinery preparation costs X

Machinery load/work surveillance X

Work load surveillance: X X

Desviation from estimated time and cost X X

Sales

Track orders X

Customer discount management X

Customer credit risk X

Customer orders update management X X

Delivery time surveillance X X

Drawing and Codes, and Price Updates needed complete Time and Cost, and others.
customization because they were not standard. That is In order to keep the case study from becoming too
also the case of Estimated Time of Delivery, Differences lengthy, we will focus on only three critical processes:
between Orders and Deliveries, Deviation from estimated Purchasing, Proposal Management and Work Orders. A
greater level of detail is required to customize the active- each external link is critical and represents one of the most
ties that must be developed for these processes. risky aspects, we must be sure to cióse all sources of the
Each process had to be analyzed at length to ensure its information flow so that the ERP doesn't lose control
fit with the standard, and if it did not, it became a new every time the flow gets out of the system (Figures 8, 9
development project within the implementation. Because and 10).

Purchasing

Request
•w í Components Order form
New client order múltiple
^M split
suppliers
yk
Y

Technical Reserve Partial

department Stock deliveries

Management of
Management
difierences
of material
between order
Quality
and delivery

Figure 8. Purchasing flow chart.

Technical Estimated
New client Technical department components,
question department initial materials and
development machinery

Estimated Estimated
Proposal Price
delivery time structure
calculator

Figure 9. Proposal management flow chart.

 Work orders

Technical
Componente
depanment
orders splitted
círawings

Noticc and
final product Manufacture Machínery Load
stock

Personnel
Management

Figure 10. Work orders flow chart.

From the analysis of all features included in the pro- redesigned according to this initial information.
cesses stands out a set of applications that needs to be Purchasing Process
studied in detail for customizing according to their own • The differences between ordered and delivered
requirements. quantities must be managed by the system. It must
Process for the Management of Proposals permit changes and recalculate all costs. Also, any
• The management of proposals must be flexible and returns must be included.
take into account all versions and changes discussed • To ensure that price given to the clients fits with the
with the client before the order is finalized. internal costs, the system should handle this infor-
• Regarding estimated delivery time, the ERP must be mation and analyze deviations. When the prices of
able to provide information about the work load and spare parts or raw materials are updated, the sys-
machinery that will help to analyze future delivery tem must be able to recalculate the cost elements
times. Optionally, the system could give an esti- involved.
mated time. • Work Orders Process
• Creation and valuation of non-existing products is a • The most important aspect in this process is to in-
major development because it collects the special tégrate the management of labour so that this in-
requirements of future developments or never pro- formation can be used as a reference for the rele-
duced products that must be budgeted. The most vant indicators such as productivity, absenteeism,
efficient way to budget non-existing products is to etc., and to narrow the initial time estimation. It
use the time frame estimated by the person in charge must include a control of deviations from estimated
of proposal, with advice from the technical de- time and the surveillance of workers.
partment if necessary, and the costs of the machin- • This application includes information which is
ery and workers estimated by the ERP. If the pro- needed in the report used in the work order.
posal is approved by the client, the order must be All the other processes (Sales and Technical definitions)
required for an efficient ERP design also require a set of weights were established by the management staff, ac-
applications that need to be customized. In the sales cording to the IT department and consultant's analysis
processes, the major problem reported by workers is the (Table 3).
constató updating of the order by the customers, and its
implications. This suggests the need for constató real-time 4.5. Analytical Hierarchy Process Method (AHP)
information between client sales and manufacturing on
the state of the order. The sales department must also An alternative comprehensive method has been proposed
ensure that tracking the order is always possible. by Saaty [23]. It determines the priority of a set of alter-
Finally, the integration of the system with the technical natives and the relative importance of attributes in a múl-
department requires a specific design of drawings and tiple criteria decision-making problem. It has been used in
code applications. various applications such as information system selection,
as well as ERP selection [24].
4.4. Concept Evaluation. Decisión Matrix and The basic approach of this method relies on building a
Evaluation Criteria hierarchy of all objectives derived from the strategic
analysis in order to distinguish fundamental-objectives
Once all processes have been analyzed in accordance with from means-objectives. The former being those that de-
the requirements identified in the flow of information, it cisión makers really want to accomplish while the latter
will be possible to decide which provider and alternative are those which help the fulfillment of other objectives.
of ERP will be best. All requirements should be listed on Consequently, fundamental-objectives are organized into
a spreadsheet with the information collected from the a hierarchy which will help the decisión makers in order
ERP vendors, the demonstrations, and our general im- to identiíy the relevance of ERP attributes. Thus, the
pressions. priority of alternatives can be obtained by aggregating
The Concept companson and Evaluation proposed by the weights over the hierarchy. This can speed up the
Pugh [22] is a well known and referred method for con- development of a consensus in relation to the ERP sys-
cept selection. It is based in the selection of the evaluation tem and vendors alternatives [24]. The Figure 11 illus-
criteria for the concepts. The spreadsheet with the dif- trates this selection alternative.
ferent main aspects must be organized to collect the im- In relation to ñindamental-objectives, it must be taken
pressions from employees in each functional department, into account the limitations of decisión factors and the
on usability and user friendliness, in addition to technical changing business environment. Means-objectives are
IT aspects and the costs involved. The decision-matrix is a usually organized into networks relating them (Le. flexi-
quantitative technique used to rank the multi-dimensional bility and ease of integration may be related with common
options of an option set and is a form of prioritization programming language, platform independence or system
matrix. The basic decisión matrix consists of establishing maturity). The set of ERP candidates and vendors can be
a set of weighted criteria upon which the potential options shortened by examining means-objectives and also de-
can be analyzed, scored and balanced to obtain a score velop detailed attribute specifications to assess the ERP
ranking. These scores are organized in order to rate each systems. Alternatives for attributes and inter-attribute
concept, the higher the socre the higher its compatibility. relative relevance can be converted into numerical scales
It is a useful iterative method for the comparison of in order to weight them.
alternative concepts.
The advantage of this approach to decision-making is 5. Conclusions
that subjective opinions about alternatives can be made
more objective. Another advantage of this method is that For a firm to gain competitive advantage, managers
sensitivity studies can be performed. The major advantage need to outline a set of objectives. Normally these object-
of this method is that it facilitates analytical and synthetic tives reflect both the business drivers and the market.
thinking and that new concepts can be generated as a Conversely, firms are facing significant challenges in
consequence. order to become suppliers of larger customers due to the
In reference to the firm being analyzed, six principal excessive costs associated with accessing a vast market of
aspects were identified: standard compliance, develop- potential customers. For these reasons, it is essential for
ments compliance for software adaptations, solutions companies to adopt an ERP system to maintain control of
offered by the different departments of the firm for criti- their operations and to compete globally. An ERP im-
cal issues reports, skills and confident in the demonstra- plementation is expensive and risky for all businesses, but
tion, technical requirements and fit with the IT depart- it is even more challenging for small businesses, which
ment, and finally cost involved. The main and secondary have particular characteristics.
 Table 3. Case study of a decisión matrix.

Vendor 1 Vendor 2 Vendor 3

Weight
Mark Mark Mark
(1-10) (1-10) (1-10)
Standard functionallty requirements 20%
Standard ERP Compliance 20%
Sales compliance 10%
Purchasing compliance 10%
Proposal compliance 10%
Stock management compliance 10%
Work order compliance 20%
Management compliance 20%
Special processes requirement 10%
Sales compliance 15%
Purchasing compliance 15%
Proposal compliance 15%
Stock management compliance 15%
Work order compliance 25%
Management compliance 15%
Special issues reported (solution provided) 20%
Proposal reléase management 10%
Delivery time info 10%
Non existing producís proposal management 20%
Differences between orders and deliveries 10%
Estimated price calculation and controls involved 10%
Workers management 20%
Updating of clients orders 10%
Client order tracking 10%
Demonstration 10%
Knowledge of the product 25%
Demo customization to company needs 35%
Usability 40%
Technical requirements 10%
Infraestructure 20%
Tools 15%
Datábase 15%
Integration 20%
Reporting 10%
Maintainance difficulty 20%
Pricing 20%
Hardware cost 15%
Software cost 15%
Maintenance cost 20%
Support cost 20%
License cost 15%
Training cost 15%
 CollecL rhe relevam informal ion abom ERP systems

Identify the projeel characteristics

Discuss and construcl the objectives of projecl

Distinguish the fundamental - aiici mcans - objectives

~ 1 "

Extrae! the attributes for Develop the atlríbuie detall s,

evalualing ERP sysiems scrccning and cvaiuation
^u i dance

I
Screen out the unqualified
Form the AHP model
ERP systems

Evalúate the ERP systems by the AHP method

Analy/e and discuss ihe results

Make the final decisión

Figure 11. E R P selection system based on A H P .

Despite the great potential and popularity, the adoption the design of the software, constitutes a key factor that
and implementation of an ERP is compromised by re- can contribute to reducing these failures. But the integra-
markable failures. While many studies highlight the ex- ron and standardization imposed by most ERP software
istence of different factors, we argüe that the integrated may not be suitable for all types of firms. Thus, the fit
nature of the ERP, which generally requires an organiza- between the characteristics of the adopting organization,
tion to adopt standardized business processes reflected in and the standardized business process designs embedded
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tation success or failure. tive," Information and Management, Vol. 40, No. 1,2002,
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