Change and uncertainty in SME manufacturing environments using ERP

Abstract

Purpose

The aim of this paper is to investigate how enterprise resource planning (ERP) systems could create a competitive advantage for small and medium‐sized enterprises (SMEs). The objectives of this study are to examine how responsive and agile the existing ERP systems are to change and uncertainty, and to identify the types of change and uncertainty in SME manufacturing environments.

Design/methodology/approach

A mixed methodology is used in this study, which involves literature review, questionnaire survey and follow‐up, in‐depth telephone interviews. An uncertainty diagnosing business model is applied to collect data from SME manufacturers in make‐to‐stock (MTS), make‐to‐order (MTO) and mixed mode (MM) manufacturing environments in a structured manner, and to analyse the effects of the underlying causes of uncertainty on product late delivery in MTS, MTO and MM manufacturing environments in SMEs. Some 108 enterprises responded (86 per cent response rate), of which 64 are SMEs. Analysis of variance (ANOVA) is carried out in SPSS to analyse the effects of the underlying causes of uncertainty on product late delivery in MTS, MTO and MM manufacturing environments in SMEs.

Findings

ANOVA results show that a different group of underlying causes of uncertainty significantly affects the product late delivery performance in MTS, MTO and MM manufacturing environments in SMEs. This study found that ERP could improve responsiveness and agility to change, but not to uncertainty. SMEs could create a competitive advantage by being more responsive to change in the ERP system before generating purchase and work order. ERP systems could not deal with uncertainty due to its stochastic and unpredictable nature. SMEs use a range of buffering or dampening techniques under uncertainty to be competitive in delivery.

Originality/value

It can be concluded that the application of the business model in SMEs that use ERP has provided useful knowledge about the significant underlying causes of uncertainty that affect product late delivery performance in MTS, MTO and MM manufacturing environments. Using this knowledge, similar SMEs could then prioritise the effort and devise suitable buffering or dampening techniques to manage the causes of uncertainty and hence prevent any changes to the ERP system.

Citation

Lenny Koh, S.C. and Simpson, M. (2005), "Change and uncertainty in SME manufacturing environments using ERP", Journal of Manufacturing Technology Management, Vol. 16 No. 6, pp. 629-653. https://doi.org/10.1108/17410380510609483