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JMTM
19,4 Investigating factors affecting
ERP selection in
made-to-order SME sector
430
Aman Deep
Wolfson School of Mechanical and Manufacturing,
Received May 2007
Revised August 2007 Loughborough University, Loughborough, UK
Accepted September 2007 Peter Guttridge
Guttridge Services Pvt Ltd, UK, and
Samir Dani and Neil Burns
Wolfson School of Mechanical and Manufacturing,
Loughborough University, Loughborough, UK

Abstract
Purpose – The purpose of this paper is to present the findings of research carried out as part of an
industrial project for selection of an enterprise resource planning (ERP) system in a made-to-order (MTO)
small-to-medium enterprise (SME) scenario. It develops a framework or methodology for selection. It also
highlights the areas pertaining to the unique needs of, first, the SME sector and, second, the MTO sector, to
be considered while selecting a solution. A work book is developed to provide a structured ERP software
selection process for SMEs using a comprehensive literature review plus practical experience. This research
is potentially aimed at being useful to other SMEs as a guide for a structured selection process.
Design/methodology/approach – A combination of comprehensive literature review and
experience of managing the selection process for an ERP system in an SME was employed for the study.
Findings – Over the past few years, the number of large companies buying new ERP systems has
reached saturation point. This has led to the ERP developers seeking instead other potential markets
among SMEs. The MTO scenario within the SME sector is one which is very capricious in terms of
demand forecasting, lead times, routings, etc. When selecting a system, an organisation in such a
segment needs a tailored methodology and a list of key target areas to consider.
Practical implications – The paper represents a very useful source of practical information for the
SME sector to consider when selecting an ERP system.
Originality/value – The paper provides valuable insight into the details of ERP selection, focusing
on the peculiarities of the SME MTO sector.
Keywords Manufacturing resource planning, Bespoke production, Small to medium-sized enterprises
Paper type Research paper

Journal of Manufacturing Technology
Management
Vol. 19 No. 4, 2008
pp. 430-446
q Emerald Group Publishing Limited
1741-038X
DOI 10.1108/17410380810869905
1. Introduction
Enterprise resource planning (ERP) systems are increasingly becoming commonplace
in the small and medium enterprise (SME) sector and are being viewed as one of the
prime ways to achieve competitive advantage and to reengineer processes (Gable and
Stewart, 1999). ERP software is aimed at combining the disparate sources of
information within an organisation into a central database. Since each data element is
populated only once it eliminates multiple data entry and ensures better data visibility
within the organisation. The ERP systems typically encompass all functions including
finance, sales, CRM, accounting, manufacturing, payroll, etc. (Al-Mashari, 2003; Chung Factors affecting
and Snyder, 2000). Another factor commonly cited in ERP literature is the need for ERP selection
integrated supply chains and potentially a common format for exchange of information
in ordering between suppliers and customers (Møller, 2005; Bruun and Mefford, 2004).
In order to achieve this, supplier and customer portals in current ERP systems are
being based on the new service-oriented architecture which enables direct transactions
between suppliers/customers and the main ERP database (Richardson, 2006). 431
Owing to technological and economical restrictions, ERP systems till recently only
focussed on large enterprises, however the SME sector is gaining popularity among the
ERP vendors because it remains a largely untapped market and new ERP systems or
versions from the Tiers II and III ERP suppliers are being launched which are
specifically designed for this sector (Koh and Simpson, 2005; Petroni and Rizzi, 2001).
The apparent benefits and economically attractive initial price of the ERP systems
has developed an increasing interest within SMEs which view these systems as a
panacea to achieve competitive advantage. However, SMEs are riddled with an inherent
lack of defined structure or formalisation of procedures which form the core of efficiency
for an ERP system (Achanga et al., 2006; Illa et al., 2000). A large proportion of ERP
projects end in failure and this prospect seems more likely and devastating for a SMEs
because of unclear objectives and a confused understanding of what and how any ERP
system can help in achieving performance improvement and competitive advantage.
Made to order (MTO) is a segment within manufacturing SMEs which offers a
different paradigm for operation and one which has received only little attention from
researchers. MTO have their requirements which are very different than made to stock
(MTS). These include an overall low volume of production including a higher variability
in each product type, production schedules which need to be flexible and are
comparatively more unstable and, a higher need for information sharing and higher
local autonomy (Yen and Sheu, 2004). On the other hand, the focus with MTS is on
quality consistency. Considering Tiers II and III ERP vendors, each system comes with
its strengths of industry types which it most usefully supports. SMEs operating in an
MTO environment have specific characteristics and how these organisations select ERP
systems as enablers of growth needs to be distinct and is one area in which no detailed
research is available. The need for investigating the factors affecting ERP selection in
MTO SME sector stemmed from a project aimed at selecting and implementing an
integrated business management system for the case company (described later in the
paper). After initial analysis regarding system requirements, it was decided to select and
implement a commercial ERP system. When studying the specifications of various
commercially available ERP systems it was noticed that it would be beneficial to focus
on issues related to the specific company environment (MTO) when making the decision.
The study reported in this paper was initiated as a part of the ERP selection phase to
investigate the uniqueness of the MTO environment with a focus on ERP selection.

2. Literature review
Until recently, research into the impact of ERP systems has mainly focussed on ERP
implementation and post-implementation issues (Esteves and Pastor, 2001; Verville,
2000; Al-Mashari and Al-Mudimigh, 2003; Braglia and Petroni, 1999; Gable and
Stewart, 1999; Nah et al., 2001; Okrent and Vokurka, 2004; Woo, 2007). Some work has
been conducted to understand the ERP selection process but is mostly directed towards
JMTM the larger enterprise (Illa et al., 2000; Langenwalter, 2000; Verville and Halingten, 2002)
with the notable exception of (Baki and Çakar, 2005; Lin and Ford, 2004; Wei et al.,
19,4 2005) which in some measure address the SME environment.
There has been a significant growth in the use of ERP systems by SMEs. The reasons
for this are attributed by Gable and Stewart (1999) as firstly, a saturation in the larger
enterprise market for ERP systems, secondly, with the advancement of technology and
432 internet there is a significant benefit to be achieved by closer integration of large
enterprises and SMEs using ERP systems, thirdly, the numbers constituting SMEs are
far greater than the large enterprises and each regional economy relies heavily on SMEs
to make up the majority portion of the total manufacturing enterprises. Lastly, the
packages initially designed for SMEs are now becoming upward scalable in line with the
growth of an organisation.
The key issues impacting ERP system adoption in SMEs is that they generally suffer
from a widespread lack of culture, with regards to the concept of business processes as
remarked by Beretta (2002): “it is not by chance that the reinforcement of the concept of
business process is often claimed as one of the critical success factors in ERP
implementation”. Such a situation is mainly caused by the low extent of formalisation of
roles and functions which is attributed to people through management discretion rather
than by particular skill sets (Dutta and Evrard, 1999). It is common within an
organisation for a person to wear multiple hats and thus the concept of process owner or
key user is often ambiguous (Koh and Simpson, 2005). This often leads to a situation
where the features of the software do not correctly fit the business requirements and the
organisation thus faces a difficult choice of either changing the business processes to fit
the software with minimum customisation or to modify the software to fit the processes
(Buonanno et al., 2005). Of the research into the methodologies for ERP selection one
which stands out is by Lin (Lin and Ford, 2004) who has developed a methodology for
SMEs and tackles the selection in five main stages. The steps include project initiation,
BPR, business requirements, establishing a business case and the selection process.
Other methodologies which include the SME elements include the SHERPA
methodology and the “Strub” selection model. However, none of these models are
specifically tailored for an MTO scenario which limits their use and arguably does not
provide sufficient detail. This is due to the lack of focus on the main issues of MTOs in
achieving competitive advantage through priorities of volume and flexibility and hence
cannot be used without major customisation. Also, they lack the practical insight of an
actual selection which renders them difficult to be followed in real scenarios.

3. Research methods
The research method employed for this study is a case study method. Yin (1994) argues
that in instances of lack of theory, single case studies can be useful to represent unique
cases. A case study is defined as an examination of a research question in its natural
settings, using different methods of data collection to gather information from one or
many entities which can either be people, groups or organisation.
The questions which this case study tries to address are:
RQ1. What are the reasons for ERP adoption?
RQ2. What are the unique features of an SME MTO organisation?
RQ3. How these features translate into a sound selection procedure?
The case research method used in the study is one of action research defined as: Factors affecting
[. . .] studies where the author, usually a researcher, is a participant in the implementation of ERP selection
the system but simultaneously wants to evaluate a certain intervention technique. The
strength is the in-depth and first hand understanding the researcher obtains. Conversely, a
weakness is the potential lack of objectivity stemming from the researchers stake in effecting
a successful outcome for the client organisation (Benbasat et al., 1987).
Yin (1994) listed six sources of evidence for data collection in the case study protocol
433
but remarked that not all need to be used in every case study. The six sources are:
documentation, archival records, interviews, direct observation, participant
observation and physical artefacts.
Given the exploratory nature of the research, the study relies on literature review
and qualitative research. The instruments used are semi-structured interviews using
open-ended and reflective questioning, data from existing systems within the company
and collected though seminars, direct observation and finally direct participation. The
population interviewed include top management, users, ERP selection team and
potential vendors to determine the requirements for the ERP system. The interviews
were analysed for recurrent themes and content analysis to highlight prime areas of
software limitation and scope for improvement. The methodology used for selection is
not developed independently but is tailored from existing methodologies for selection
to the specific needs of an MTO organisation.

4. The case company

The case company is a small sized manufacturing company (about 100 employees)
located in the East Midlands Region of the UK. Founded in 1962, they manufacture
conveyors and elevators for moving bulk materials (e.g. wheat, flour, meals, pellets,
etc.).Their turnover is approximately £7.5-10 million. Typical uses of the machines are
in cereals storage plants, animal feed mills, pet food manufacturing plants, chemical
factories and many other types of industries, both in the UK and abroad. The company
operate out of a single manufacturing location.
About half of its production is based around a standard range of machines, but each
machine is customised to suit the client’s needs (i.e. length). The company
predominantly operated within a typical MTO scenario. However, it also comprises a
small but significant percentage of engineered to order (ETO) machines. Also included
in the portfolio is a strategic business unit which offers the facility of lasercut or
subcontract operations for various customers to ensure best utilisation of spare capacity.
The company is representative of the sector targeted in the study and conforms to the
size and manufacturing processes of the market which has only recently opened up to
the possibility of selecting ERP systems for achieving competitive advantage. Company
A has witnessed a high- and steady-growth rate since 2000 and recently identified
significant improvement potential, perceived inside as achievable by upgrading their
current material requirement planning (MRP) II system. The system in use at Company
A was developed in house, initially on a DOS-based platform. It was developed around
the specific needs of the company and had been in use for the past 15 years. However,
lack of integration between systems and the increase in data resulting from the recent
growth had challenged the company to investigate alternate options.
This study is limited in the fact that the possibility of continuing with the current
system was ruled out before the study began, however it had not been decided that
JMTM an ERP system was the best alternative for the development of the company and it had
19,4 to be analysed in detail before reaching the decision.

5. General MTO features

MTO for the purpose of this study is restricted in its definition to only the final product
being made to order. The main distinction is made between MTO, MTS, assembled to
434 order (ATO) and ETO. Customer order decoupling point (CODP) or order penetration
point is extensively defined as a tool for defining and understanding these different
mechanisms and is described as the point where a product becomes unique for a
particular customer order (Olhager, 2003; Sharman, 1984). In terms of understanding
the requirements and benefits to be achieved from ERP, it is imperative to understand
how planning can be carried out for an MTO industry.
Planning in ERP systems can be carried out through two mechanisms. This is either
achieved through advanced planning and scheduling (APS) or through the classic MRP
systems. APS is the next generation of MRP and is now available in most ERP systems
for the SME sector either as a core function or as an add-on module. The difference
between the two lies in the fact that APS takes into consideration the limited
availability of resources and includes true optimisation algorithms to enable features
like “what if” and “available to promise” analysis (Gunther and Beek, 2003). These are
crucial for the MTO industry and are more accurate than a MRP/MRPII system which
generates production/purchase orders by exploding the hierarchy of the bills of
materials and bills of labour corresponding to confirmed orders or through specified
reordering mechanisms (Gunther and Beek, 2003; Lee and Adam, 1986).
In Figure 1, it is seen that in a MTO scenario the CODP is placed very early on in the
product cycle. The terms push and pull are defined as “push” being the manufacture of
a product which does not yet have a customer order against it and “pull” meaning
CUSTOMER ORDER
ENGINEER FABRICATE ASSEMBLE DELIVER
DECOUPLING POINT

COD
MADE TO STOCK P

COD
ASSEMBLED TO ORDER P
CUSTOMER

COD
MADE TO ORDER P

ENGINEERED TO ORDER COD

P

Figure 1.
Different product CODP
points corresponding to
different manufacturing PUSH
scenarios) PULL
Source: Sharman (1984)
a product which is pulled by the customer requirement through the manufacturing Factors affecting
process (Drew et al., 2004; Womack and Jones, 1996). This in turn means that for an ERP selection
MTO organisation the product spends most of its life in a pull scenario and therefore
attributes like purchase time, lead time, availability of labour resources and
information are critical in meeting customer deadlines and eventually customer
satisfaction (Hallgren and Olhager, 2006; Olhager, 2003).
Traditionally, MRP or old ERP systems were limited to little or no consideration of 435
capacity constraints in terms of labour and machine availability which severely limited
their applicability in the MTO scenario. With the advent of APS systems, it may be
possible to overcome these issues in planning when using an ERP system.
Yen and Sheu (2004) lay down the competitive priorities for the MTO organisations are
volume and flexibility. They translate into ERP selection for packages that allow easier
information sharing, higher local autonomy, easier access to the database and more
software packages adaptation. These also are likely to operate in smaller production
volumes, a wide variety in end product, high-labour shortages, unstable production
schedules which need to be more flexible and responsive and a large number of suppliers.

6. The unique features

To ensure quality of research design and findings, the managers and end-users of
every department were requested to participate in open interviews to identify common
trends impacting the company. Altogether, 30 key users were interviewed as part of
this exercise. The findings of these interviews were analysed for common trends or
“patterns” of concerns within the SME. These are listed in Table I.
Some of the key points listed above have been picked up for further discussion.
Although these are specific to the case company, they are likely be prevalent in other
companies in a similar business segment:

Sales Design/BOM Production/despatch Finance

Incalculable demand Lack of standardised Very short visibility of Multiple parallel

pattern BOM and times for each oncoming jobs systems for MRP,
machine type financial accounting,
Difficulty in agreeing Difficulty in tracking Need for a proper time and attendance
specifications revisions and obsolete planning system leading to duplication of
parts data and entry
Ongoing changes to Huge variety of Difficulty in
specifications machines leading to measuring work
Large size of customer incomplete 3D models centre efficiency
base drawings Multiple systems of
stock replenishment
Significant manual Skill shortage High number of
input in quotation suppliers
preparation
Difficulty in predicting Need for an integrated Vendor analysis
accurate dispatch dates system to attach termed as important
drawings to sales orders OTD as KPI Table I.
ETO section consumed Concerns within different
most of design time functional departments
JMTM .
Incalculable demand pattern. Fundamental to Company A is the underlying
19,4 uncertainty of demand. It is for this reason that the end product does not move
from a MTO to an ATO or MTS scenario. At Company A, it was observed that
the machines were mostly minor variations on standards within the brochure
which led the author to consider tools like the product variety funnel as one of
several solutions to tackle the lead time problem. However, the sheer number of
436 machines and variations within each machine dictated the need for there to be a
stable demand to avoid unnecessary and unmanageable build-up of the stock at
various manufacturing levels.
.
Production lead times. As mentioned earlier, the CODP for a MTO is very early in
the manufacturing cycle. This means that there is little or no buffer available
further downstream. For this reason, production lead time and the metric of on
time delivery (OTD) become a prime concern for the organisation to monitor
(Koh and Simpson, 2005). Within Company A, the OTD was used as a key metric
to measure production efficiency.
.
Pulled items. Traditionally, ERP systems operate on pushing the item through
the operations (Bartholomew, 2001; Goddard, 2003) this is achieved by stocking
items through reorder levels or forecasts but at Company A it was observed that
the machines were only manufactured once the customer confirmed the order
and a due date was set.
.
Multiple modes of replenishment and operation. One of the key methods to ensure
timelines and to ensure efficiency of operations which was used by Company A
was the presence of mixed modes of stocking for the low-level items in the bills of
materials. It is important to note that although the machines were MTO, a lot of
components (purchased and manufactured) and sometimes even minor
subassemblies were stocked (consignment or normal) and maintained by
different replenishment methods which were MRP driven through customer
orders or minimum stock level, etc.
.
Overlap of different functions. Owing to the size of the company, there were
several different people who were responsible for particular related functions.
For example, at Company A, due to the absence of a dedicated quality
department, the design department was also responsible for non-conformity
analysis and rectifications. This illustrates the presence of processes which did
not have a dedicated process owner, which is key in business process analysis for
any ERP system (Achanga et al., 2006; Al-Mashari, 2003).
.
High degree of management control, visibility and involvement. The management
in an SME plays a more visible and involved role in the daily functioning of
processes. This can lead to communication being more responsive within SMEs
and as a consequence potentially more flexible processes (Achanga et al., 2006).
At Company A, the management was very visible and involved with the daily
running of the organisation.
.
Lack of defined procedures, routings and standardised times. All ERP systems
require standardised procedures or workflows with attached routings and times
for each operation for it to be most efficient (Bradford et al., 2001; Buonanno et al.,
2005). However, in the MTO SME scenario standardisation is limited. This
problem is further complicated at Company A by the presence of a small section
 of ETO work for which, it is nearly impossible to predict operation times and Factors affecting
routings until very late in the production cycle. This leads to severe difficulties in ERP selection
having an effective overall planning system. The production supervisor
remarked “We have a plan for the day, but suddenly a new job which we were
unaware of comes down as a priority and blows the plan into pieces.”
.
Little control over supplier. Another important limitation which most SMEs face
is the control they can exert over the suppliers. Owing to the small scale of 437
operation and unpredictable demand, the supplier negotiations are limited.
However, as this may lead to an order placed only once in a year, it is extremely
useful to be able to view past rates and performance of a supplier with respect to
other possible candidates before confirming the preferred one.
.
Product changes happen late into the manufacturing cycle either by customers or
by the design function. Another challenge which is somewhat unique to the MTO
with respect to the MTS system is the possibility of product changes. Another
common theme at the shop floor is best summed up by the statement “We are
only as good as the information we receive, if the information is wrong then what
we make is also wrong, which makes the job harder to produce.” This was
countered by the sales manager saying “Sometimes although the order is placed
the specifications can change from the customers, this might lead to delays but
they are never predictable and work has to begin regardless.” It was observed at
Company A that this leads to delays both before and during manufacturing. It is
a practical limitation which can be restricted by adding relevant terms and
conditions to a contract but it is very difficult to eliminate. Any ERP system
therefore must be able to handle such an unplanned event without undue
complexity.
.
Limited engineering skills. Engineering skills and technical competence is sparse
in most SMEs (Achanga et al., 2006). From an ERP acquisition point of view, this
necessitates the need for faster communication between departments, ease of use,
navigation and training methods are also key concerns. Also as the IT staff is
limited in most SMEs, so the ability to modify screens, etc. without the need for
trained personnel can be a big advantage.

7. ERP selection
7.1 First things first
The published research on ERP implementation repeatedly specifies that
understanding and developing a clear picture of business processes is critical in
successful implementation of an ERP system (Al-Mashari and Al-Mudimigh, 2003;
Beheshti, 2006; Buonanno et al., 2005). From the information collected for the MTO,
it seemed imperative to identify the different value streams and use process mapping
to ascertain the details of the processes. It was necessary to conduct this initial study as
seen from the perspective of the sales manager – “I would love to help you but there
are no standard processes or times, each machine is different.”
An IT system is aimed at streamlining the information flow systems of any
organisation. Information flow is defined by Nightingale (1999) as “To provide
processes for seamless and timely transfer of and access to pertinent information.” It is
measured by the metrics of commonality of databases, information retrieval time and
JMTM information sharing between customers and suppliers. The enabling practices include
19,4 making processes and flows more visible, to establish open and timely
communications, to link databases for key functions throughout the value chain and
to minimise documentation while ensuring necessary data traceability and availability.
At Company A, the selection procedure began with an investigation into the information
flow within the company. This was done by developing value stream maps and process
438 flows of the material and specifications. This was done with the prime focus to:
.
quantify the time taken for each process within the flow of information within
the organisation with the aim of identifying trouble areas; and
.
ascertain the flow of information with the aim of eliminating unnecessary steps
which could potentially be removed with the use of new technology or enhanced
functionality within the existing system.

The analysis of process time and subsequent interview with the top management
revealed that there were inconsistencies in time taken for different jobs. However,
there was a presence of three distinct flow paths with the possible classification into
the traditional runners, repeaters and strangers of final machines. Runners being the
complete “off the brochure” machines with well defined machine specification bills, etc.
the variability was restricted to machine type, length and drive specifications.
Repeaters were defined as machines requiring slight modifications as requested by the
customer; they included the same build structure as the runners but had minor
customisation changes. The strangers were the ETO machines for which it was
impossible to predict the build structure before hand or were only very loosely similar
to the existing build structures. Each of these was studied separately.
Owing to lack of standardised procedures, the investigation was long and involved
many open and reflective questions for the end-users, coupled with data records from
past jobs and analysis present within the company to ascertain the flow of information
and the time required for each process. This information was very useful in identifying
possible areas of improvement in the areas listed above. The idea that a lot of repeaters
could be configured by a set of additional extras set in a “configurator” was confirmed
during this investigation. It also offered a detailed understanding of what information
was needed to make this possible. The configurator needed was required to be
parametric, rule based and capable of handling complicated algorithms.
Also achieved was a rough understanding of the possible future state for the most
efficient processes. This was done through discussions with the top management
following review of existing processes and inferences from the review.

7.2 The options

Following the analysis, a study was undertaken to investigate the possible options to
reach the desired future state. The options that Company A were faced with were:
.
to rewrite the existing system;
.
to select an ERP system; and
.
to achieve added functionality by adding best of breed applications to the current
system.
Each of these options was studied in detail and compared with each other in parallel Factors affecting
under the headings of budgetary costs, time of implementation, main benefits and ERP selection
concerns of each option.
This was presented to the management for review. The decision was made to
investigate the ERP option in further detail.

8. The selection process 439

Before embarking on a selection process for an ERP system, a series of semi-structured
interviews were conducted with 17 members comprising the end-users and
management of the company to ascertain which areas needed special emphasis as
the desired outcome of the effective selection process. These are listed below on a scale
of importance arrived at from analysing the frequency of occurrence from the
interviews:
.
better integration between different systems, including MRP, financial system,
CRM, Document management system, etc.;
.
need for an effective planning system-APS;
.
include a rule-based parametric configurator;
.
well structured BOM maintenance;
.
flexibility of modification without source code changes;
.
ease of use and user friendliness; and
.
automated quotation system.

The selection process features the standard phases of planning, evaluation, evaluation
and selection as identified by Illa et al. (2000) and Lin and Ford (2004). These were
analysed for applicability to the particular scenario and although the basic stages were
preserved, certain modifications were carried out to the steps involved in each
stage and components were modified to suit the particular scenario of the company.
These modifications were reviewed against practical constraints and availability to
time, resources and information needed to achieve each step. The basic steps involved
in the selection methodology are shown in Figure 2.
The key features specific to the SME MTO sector arising out of the case study for
each of the stages shown in Figure 2 are listed in Table II.

8.1 Planning
.
Planning the ERP selection in an SME offers the unique opportunity for
communication and input throughout all key users of the system. This is difficult
to achieve in large organisations as it is difficult to manage the total number of
users. In Company A, the process was initiated by setting up a library of
resources on the intranet combined with presentations to the different
departments. This was followed by discussing with individual departments
the benefits envisioned through the mapping of the future state and how it can
possibly be achieved using an ERP system. Information flow maps were
generated in detail for each information flow and desired attributes were
identified. This was done for processes both within the departments and between
different departments.
JMTM
Core Team Formation Review Requirement planning
19,4
PLAN

Ranking priority of Tasks Information flow diagrams-Functional

440
List of potential candidates Software evaluation criteria

IDENTIFY

Prepare ITT Vendor evaluation criteria

Short listing of candidates (2-4)

Detaled demonstrations / workshops
EVALUATE

Customer site visits

Figure 2.
Package Selection Negotiation
Diagram of the selection SELECT
process
Selection

.
For most SMEs, the need for an ERP solution arises from the need for additional
functionality. This entails certain processes which are not currently occurring
but would potentially be available through an ERP system. For example, for
Company A, the functionality of a configurator and APS was required by the
company. These processes need special and deservedly more attention to detail
as the organisation would typically not be experienced with the potential
shortfalls of such processes. A technique applied within Company A was to
dummy run such processes on simpler software like Microsoft Excel to enable
detailed understanding of the potential requirements.
.
The flow of the runners and repeaters formed the core of the requirements whilst
care was taken to tend to the strangers in a manner that they would not obstruct
the flow of the other two and could be managed within the ERP system.
.
All major information flows were drafted on a template as shown in Figure 3.

8.2 Identify
This stage marks the identification of potential candidates, developing a software and
vendor shortlist criteria and to develop an invitation to tender (ITT). Key features
include:
.
As a natural progression of the requirements understanding and ranking in the
first phases, list down only the unique features of your company. At Company A,
once the requirements were clear, the ITT was developed keeping a focus only on
the unique features whilst just broadly cross checking ones which were standard.
.
Gather information about prospective candidates aiming for the Tiers II and III
candidates. Narrow down on the candidates which have an experience in
 Factors affecting
Plan Core team formation Develop a team with members representing all functional
areas ERP selection
Project Initiation meeting
Develop a database on the network for information
Information flow diagrams Map all the major information flow systems
Interview end-users on scope of improvement
Discuss with functional heads about expectations from new 441
system
Review requirement planning Review inter-departmental flow of information
Clearly define roles and responsibilities
Core team to discuss and reach consensus on functional
future state
Ranking of priority Categorise the needs as required, desired and future use
items
Within each category rank the needs on a 1-10 scale
Identify List of potential candidates Identify information resources and build list
Conduct preliminary assessment against fit
Invite vendors for discussions
Software shortlist criteria Develop shortlist criteria based on rankings and needs
assessment (both functional and IT criteria)
Vendor shortlist criteria Develop a shortlist criterion to evaluate the vendors
Prepare ITT Combine needs assessment, functional requirements,
technical requirements, vendor selection criteria to develop
ITT
Evaluate Shortlist potential software Based on ITT response shortlist 3-4 candidates
and vendors
Detailed demonstrations/ Functional evaluation with dummy data and scripted
workshops with end-users scenarios
Technical evaluation of hardware support needed and
integration with other software
Evaluate price and maintenance levels
Vendor evaluation in terms of company support and history
Customer site visits
Select Package selection Calculate final evaluation scores
Review scores and consider final criteria Table II.
Vendor site visit The selection process

MTO manufacturing. Invite them to visit your company and gain an understanding
of where you want to head towards.
.
As ERP systems are not widely implemented in SMEs, the experience of vendors
and the vendor profile becomes extremely critical. The vendor shortlisting
criteria aims at identifying these features in a structured manner. Their
experience with SMEs, training mechanisms, vendor’s future prospects
(considering they are Tiers II or III), vendor support, etc.
.
Obtain an insight into the systems by attending seminars or talking to people
using ERP systems in similar manufacturing scenarios.
.
Involve people within the organisation to build interest and optimism about the
new system and invite suggestions from everyone in the organisation.
JMTM Information Flow Problem listing and analysis
19,4 PROCESS NAME
Information Flow Cause of the Problem How is it minimised ? Process/Screen
Problem attributes

442
PROCESS
NAME
C F

D G
A B
Figure 3.
Template for information
flow maps within the
organisation E

8.3 Evaluate
This stage is governed by analysing the ITT response, shortlisting final candidates
(2-3) and arranging demonstrations or workshops. Key features include:
.
Include as many members as possible for the workshops which should ideally be
developed around company data and scripted scenarios based on the initial
vision for the runners, repeaters and strangers. Daily issues of complications like
revision of specifications after release, part release of BOM, etc. should also be
included for discussion. At Company A, four candidates were selected for
demonstrations and workshops. Each vendor was scored on the basis of a rated
selection criteria on a scale of 1-5. A template used for scoring is shown in
Figure 4.

Demonstration ScoreCard

Evaluator A

Vendor Vendor Vendor Vendor

Selection Criteria Weight A B C D

A X X X X

B X X X X

Figure 4. C X X X X
Template for
demonstration evaluation D X X X X
 .
It is also advisable to involve the project manager for implementation from the Factors affecting
vendor end and not just the sales team. This ensures that the project manager ERP selection
confirms the claims during the workshop.
.
An extremely important step of this stage is reference visits. The focus for SMEs
should be on similar size and type of industry, implementation challenges,
lessons learnt, software version, etc. References should ideally be both, those
recommended by the vendor and those which can be contacted directly. 443
.
Evaluate vendors on software (both functionality and ease), implementation
plan, hardware requirements, cost (software, implementation and support).

8.4 Selection
.
Ensure all the aspects of contract specific to software (including all the modules
being sold along with fax, printer management, report writing software, etc.),
implementation (including consultancy, training, and conference room pilots),
hardware (server, networking cable, computer systems, barcode readers, touch
screens, etc.) and yearly support costs are included.
. Ensure the plan for payment dates and break-up of the total cost including
interest rates agrees with the cash flow for the related financial period.

9. Overall lessons learned

Following an ERP selection at Company A, the key lessons learned are listed below as:
.
The selection for an ERP system begins and ends with a realistic estimate of
what the value-adding processes should be. There is an immense scope and
opportunity for incorporating lean tools of value stream mapping and process
flow diagrams to set the most efficient underlying flows before they are codified
in an ERP system. It helps structure the processes and also brings out specific
areas of standardisation. It also brings to fore the key performance indicators
and variables which would eventually be used as outputs from the ERP for
decision making and analysis.
.
The ERP system selection has to be a team decision and it is imperative to
involve as many end-users as possible either directly or indirectly in
understanding needs and expectations. In the MTO sector, because each job is
unique, specialised skills and practices occur within each department. Best
practices therefore are maintained in clusters or islands. An ERP affects
everyone in the organisation therefore participation from every department is a
must.
.
Change management scenario is also unique within smaller organisations, The
users are less likely to have an experience of using complex computer systems,
therefore ERP systems entail educating people who have little or no experience of
such systems. On the other hand, SMEs are marked by sub-optimised procedures
and changes are more welcome as compared to larger organisations.
.
Reference visits are more important than the demonstrations. ERP systems were
traditionally designed for the MTS sector and all claim to be flexible to the needs
of the MTO. However, this can only be verified by good reference visits.
Regardless of the type of end product, the key features to look for in a potential
JMTM reference is that they operate in MTO, have similar functional needs, similar size
19,4 and preferably nearby. This limits the vendor to include not just the best
reference. Demonstrations are usually delivered by expert salesmen and
therefore are tailored to impress. To avoid being blinded by the claims, two
important reality checks include firstly, to try and involve the project manager at
the demonstration stage and secondly, to visit reference sites in parallel.
444 .
Owing to inherent difficulty in defining process paths for the MTO environment,
such as in areas of ambiguity in demand, process paths, etc. Pareto’s 80-20 rule
was found very useful in deciding the normal or standard trend.
.
Cost is a key concern to SMEs, but it was found useful to not eliminate any
candidate till the evaluate stage on basis of cost. Each element of the cost needs
careful consideration and pessimistic estimates are more likely to reflect the true
figures.

10. Conclusion
This paper provides valuable insight into the details of ERP selection, focussing on the
peculiarities of the SME MTO section. In particular, it lists the experiences of an action
research based on the foundations set by existing literature and identifies a list of key
concerns for each section of the ERP selection specific to a typical MTO SME. The
major contribution from this study has been the insight gained in selection of ERP
systems for a very focussed sector, primarily MTO SME. The study has been
successful in identifying the ERP system for the case company and has also provided a
working guide for SMEs embarking on ERP selection and implementation. The next
phase of the project is now ongoing with ERP implementation and the factors affecting
implementation are being studied.

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Corresponding author
Samir Dani can be contacted at: s.dani@lboro.ac.uk

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