A systematic approach for ERP implementation in the construction industry

A SYSTEMATIC APPROACH FOR ERP IMPLEMENTATION IN THE CONSTRUCTION INDUSTRY

Authors:Assaf, Sadi A KFUPM, KSA

Hadidi, Laith AKFUPM, KSA

Presented By: Mohammad Rabay’ah

By Mohammad Rabay'ah

Outline• Abstract

• Introduction

• Research Methodology

• Case Study

• Conclusion

• Critique



Abstract

• This paper provides a Decision support tool that helps in prioritizing ERP modules’ implementation.

• A “case study approach” is conducted with experts in ERP implementation at construction field.

• This research develop a four steps methodology to sequence the ERP module implementation.



• What is Enterprise Resource Planning (ERP)?

▫ An integral software.

▫ spanning to cover all organization functions with one shared database.

▫ Which increase information sharing and integrity of business processes

Introduction



• ERP is seen as an expensive investment for architectural and construction companies.

• ERP is deployed in a form of internal company project usually with multi-years delivery plan:▫ Size of company ▫ Number of selected ERP modules.

• ERP is noticeably deployed successfully in manufacturing and trading firms.

Introduction



• ERP in Construction field:▫ Time and cost required to deploy a full scale ERP

projects are higher than other fields.

▫ Higher Failure rate in reported deployment projects.

▫ ERP implementations within large scale construction organizations have yielded more failures than successes.

Introduction



• Assessing the risk of ERP implementation failures is encouraged to be assessed prior to deployment.

• Better risk management will help organizations to increase the likelihood for ERP implementation success.

Introduction



• This research proposes the case study methodology approach.

• This approach fits in situation when “how” and “why” questions are being posed, and the researcher has little control over events.

• paper propose a decision model developed in four steps as follows:

Research Methodology



▫ First step: Identify common-used ERP Modules in construction and validate it by experts.

▫ Second step: Identify benefit evaluation criteria and validate it by expert.




Six benefit evaluation criteria of ERP modules are validated by the same ERP expert; namely: 1 cost reduction. 2 increased efficiency. 3 improved decision making. 4 improved information quality. 5 improved user satisfaction. 6 improved organizational flexibility.




▫ Third step: Evaluate the ERP Modules against each benefit criteria.

▫ Fourth step: The overall ranking of ERP Modules is found by calculating the total weight for ERP modules.




• This Study conducted in Eastern Province of Saudi Arabia .

• The data collection was done using face to face interviews with ERP managers:▫ interview started with introduction of the subject.▫ questionnaire is presented and explained to interviewee.

Case Study



• This research approached grade 1 building contracting companies in Saudi Arabia as classified by MOMRA (ministry of municipality and rural affairs, Saudi Arabia).

• The grade 1 contractors in the eastern province, Saudi Arabia are twenty three, Only 13 had an ERP systems.

• Seven valid responses (out of thirteen) were received

Case Study



• The valid responses were only seven which compose 53% of the population in eastern province, Saudi Arabia.

Case Study



Step 1: Identify common-used ERP Modules in

construction

Case Study



▫ The research started with a twelve ERP modules defined by Chung et al. (2007) as a possible ERP modules for construction companies, namely:1. change management.2. project data management.3. project contract management.4. project collaboration.5. resources management.6. subcontract management.7. project costing, project billing.8. inventory control.9. Purchasing.10. human resources.11. Time.12. Labor.

Case Study, Step 1



▫ Previous ERP modules were reviewed by the research team and ERP expert and revised into thirteen modules, namely:1. Sales and Marketing.2. Human Resources.3. Tendering/bid management.4. Resource management.5. Data/document management.6. Collaboration.7. Contract and Change management.8. Project management and Budgeting.9. Subcontractor management.10. Time, expenses & invoicing.11. Project Finance and accounting.12. Procurement.13. Inventory control and logistics.

Case Study, Step 1



Step 2: Benefit Sub-Criteria Weights

Case Study



▫ The ranking of EPR modules is based on scoring inputs of respondents as shown in figure 1 (Next slide).

▫ Each respondent will evaluate the importance of each benefit criteria on a scale from 1 to 9 (highest score).

Case Study, Step 2



Figure 1: Criteria evaluation.

Case Study, Step 2



▫ The collected data was analysed using an importance index. The importance index (I) was computed by equation below (Assaf et al., 1995) where:

I = importance index i = response category index where i = 1,2,…, 9. ai = constant expressing the weight of the ith response, , where ai = 0,1,2,…,9 for i =

1,2,3,…,9 respectively. xi = frequency of the ith response given as a percentage of the total responses for each

ERP module. sixty three is the highest count can be achieved if all the respondents (seven) scored

the highest possible weight which is (nine).

Case Study, Step 2



▫ Respondents’ score inputs for benefit sub-criteria are used to calculate their weights using importance index (I) equation. In table 1, the weight distribution for every benefit sub-criteria for the seven respondents is given.

Table 1: Criteria Index.

Case Study, Step 2

1 2 3 4 5 6 7 8 9

Cost Reduction 1 2 2 1 1Increased efficiency 1 3 1 2Improved decision making 1 1 1 4Improved information quality 1 1 1 1 3improved user's satisfaction 1 1 1 1 1 1 1improved organizational flexibility 1 2 1 2 1

Rank Count

Importance Index74.60%79.37%90.48%79.37%63.49%74.60%



Step 3: Evaluate ERP Modules on benefit criteria

Case Study



▫ The questionnaire proceeds to collect the ranking of the thirteen modules for each benefit

▫ For each benefit criteria, the thirteen module will be ranked similar to the way the benefits were ranked.

▫ Figure 2 (next slide) shows the modules evaluation against each criteria.

Case Study, Step 3



Figure 2: Modules evaluation for each benefit.

Case Study, Step 3



▫ Tables 2 and 3 in the next two slides shows the weighted count for ERP modules under the six benefits criteria.

▫ Higher ranking number means higher benefit of the module compared to others.

Case Study, Step 3



Table 2: Modules' index for benefits cost reduction, increased efficiency and improved decision making.

Case Study, Step 3

1 2 3 4 5 6 7 8 9 Index 1 2 3 4 5 6 7 8 9 Index 1 2 3 4 5 6 7 8 9 Index

Sales and Marketing 0 2 0 0 1 0 2 1 1 63.49% 0 0 1 0 2 0 3 0 1 68.25% 1 0 0 0 2 1 1 1 1 65.08%Human Resources 0 0 0 1 0 0 2 1 3 84.13% 0 0 1 0 0 1 2 0 3 79.37% 0 0 0 1 0 0 2 2 2 82.54%Tendering/Bid Management 0 0 0 0 1 3 0 1 2 77.78% 0 1 1 0 0 1 1 1 2 69.84% 0 1 0 0 0 0 2 2 2 79.37%Resource Management 0 0 0 1 1 1 1 1 2 76.19% 0 0 0 0 0 0 2 3 2 88.89% 0 0 0 0 1 0 3 1 2 82.54%Data/Document Management 0 0 0 2 0 2 1 1 1 69.84% 0 1 0 0 0 0 4 0 2 76.19% 0 0 0 0 1 3 2 0 1 73.02%Collaboration 0 0 3 0 0 1 1 1 1 61.90% 0 0 0 0 1 1 1 2 2 82.54% 1 0 0 0 2 0 1 2 1 68.25%Contract and Change Management 0 0 0 1 1 0 1 2 2 79.37% 0 0 0 0 1 0 3 2 1 80.95% 0 0 0 0 1 2 1 2 1 77.78%Project Management and Budgeting 0 0 1 0 0 0 1 2 3 84.13% 0 0 0 0 0 1 1 4 1 85.71% 0 0 0 0 1 0 3 1 2 82.54%Sub-Contractor Management 0 0 0 1 0 2 2 0 2 76.19% 0 0 1 0 0 1 2 2 1 76.19% 0 0 0 1 0 1 2 1 2 79.37%Time, Expenses & Invoicing 0 0 0 1 0 2 1 1 2 77.78% 0 0 0 0 0 0 3 1 3 88.89% 0 0 1 0 0 1 2 1 2 77.78%Project Finance and Accounting 0 0 0 0 0 1 2 1 3 87.30% 1 0 0 0 0 0 1 4 1 77.78% 0 0 0 0 0 1 2 2 2 85.71%Procurement 0 0 0 0 1 0 0 2 4 90.48% 0 0 0 0 0 1 2 1 3 87.30% 0 0 0 0 0 1 1 2 3 88.89%Inventory Control and Logistics 0 0 0 0 0 0 0 1 6 98.41% 0 0 0 0 0 1 1 1 4 90.48% 0 0 0 0 0 1 2 1 3 87.30%

Improved Decision MakingCost Reduction Ranking Increased Efficiency



Table 3: Modules' index for benefits: improved information quality, users' satisfaction, and organizational flexibility.

Case Study, Step 3

1 2 3 4 5 6 7 8 9 Index 1 2 3 4 5 6 7 8 9 Index 1 2 3 4 5 6 7 8 9 Index

Sales and Marketing 0 0 1 0 2 0 3 0 1 68.25% 0 2 0 0 3 0 1 0 1 55.56% 0 1 0 0 3 0 2 0 1 63.49%Human Resources 0 0 0 0 1 0 2 2 2 84.13% 0 1 0 0 2 0 1 1 2 71.43% 0 1 0 0 1 2 1 1 1 68.25%Tendering/Bid Management 0 0 0 0 2 0 2 1 2 79.37% 0 1 0 2 1 1 1 0 1 58.73% 1 1 0 0 2 0 2 0 1 57.14%Resource Management 0 0 0 1 3 0 1 0 2 69.84% 0 1 0 0 3 1 1 0 1 61.90% 0 0 0 0 1 1 4 0 1 76.19%Data/Document Management 0 0 0 1 1 1 2 1 1 73.02% 0 0 1 0 1 2 1 0 2 71.43% 0 0 1 1 1 1 2 0 1 65.08%Collaboration 1 0 0 0 1 0 2 1 2 73.02% 0 0 0 0 2 1 2 0 2 76.19% 0 0 0 0 2 1 2 1 1 74.60%Contract and Change Management 0 0 0 1 0 1 1 1 3 82.54% 0 0 0 1 3 1 0 1 1 66.67% 0 0 1 0 2 0 3 0 1 68.25%Project Management and Budgeting 0 0 0 0 0 1 3 1 2 84.13% 0 0 0 1 1 1 1 2 1 74.60% 0 0 0 1 1 1 2 0 2 74.60%Sub-Contractor Management 0 0 0 0 0 1 3 1 2 84.13% 0 0 0 0 2 2 1 1 1 73.02% 0 0 0 1 1 2 2 0 1 69.84%Time, Expenses & Invoicing 0 0 1 0 0 0 2 2 2 80.95% 0 0 0 0 3 1 0 2 1 73.02% 0 0 0 0 1 0 1 4 1 84.13%Project Finance and Accounting 0 0 0 0 0 0 2 3 2 88.89% 0 0 0 0 3 0 1 2 1 74.60% 0 0 0 1 1 0 1 3 1 77.78%Procurement 0 0 0 0 2 0 1 1 3 82.54% 0 0 0 1 2 0 1 2 1 73.02% 0 0 0 0 1 1 1 2 2 82.54%Inventory Control and Logistics 0 0 0 0 2 0 1 1 3 82.54% 0 0 0 0 2 2 0 2 1 74.60% 0 0 0 0 0 2 1 2 2 84.13%

Improved Information Quality Improved User Satisfaction Improved Organizatiuonal Flexibility



Step 4: Find the overall ranking of ERP Modules

Case Study



▫ The overall rank of the ERP module will be found as shown in Global Index equation below:

▫ Table 4 (Next Slide) shows the final ranking of ERP modules based on their overall weight.

Case Study, Step 4

6

1i

IndexCriteriaIndexModuleIndexGlobal



Table 4: Modules Global Index.

Case Study, Step 3

Rank ERP Module Global Index1 Inventory Control and Logistics 3.998488282 Procurement 3.906525573 Project Finance and Accounting 3.803476954 Project Management and Budgeting 3.752582515 Time, Expenses & Invoicing 3.723104066 Human Resources 3.634668687 Sub-Contractor Management 3.543461838 Resource Management 3.536407169 Contract and Change Management 3.5258251410 Collaboration 3.354245411 Data/Document Management 3.3048626912 Tendering/Bid Management 3.2816830413 Sales and Marketing 2.97228521



Conclusion

• A newly defined four step methodology is followed in this paper to sequence the ERP module implementation for construction firms.

• The approach includes Four steps.

• The collected data were based on seven of the largest construction companies in eastern province in Saudi Arabia.



Conclusion

• Out of thirteen modules, the top ranked modules were ▫ Inventory control and Logistics▫ Procurement▫ Project finance and Accounting.

• The findings of the paper would help construction firms to prioritize the acquisition of different ERP modules and can be easily adjusted to their specific needs.



Critiques

• The title of the article is appropriate and clear.

• Abstract specific, representative of the article.

• The purpose of the article made clear in the introduction.

• All related details are explained within the paper



Critiques

• Referring to more than 30 paper most of it with a recent Publish date

• More solved examples is required, at least one in each step.

• Make a summary of formulas and tables at the end Article to ease calculation follow up.





A systematic approach for ERP implementation in the construction industry

Documents