Enterprise Systems

From ERP, IERP to ERP

 

General purpose Enterprise Resource Planning (ERP) systems have been used to serve many industries and functional areas in an integrated and standardized fashion. However, general purpose ERP systems face several challenges, such as complex configuration processes and low adaptation to specific industries. In order to alleviate these issues, the concept of Industry-oriented ERP (IERP) and a component-based approach to IERP development have been proposed. This paper will also introduce the next-generation ERP, called Entire Resource Planning.

Keywords: Enterprise information system; enterprise resource planning; industry-oriented enterprise resource planning; IERP; Entire Resource Planning

1. Introduction

Currently the ERP (Enterprise Resource Planning) market is one of the fastest growing and most profitable areas in the software industry. Enterprise Information Systems (EIS) such as ERP are becoming increasingly important since, as companies compete in their respective industries, EIS has become a basic business information processing requirement for many industries. ERP systems have now been installed across many different production and service industries to provide benefits to organizations by integrating data, providing opportunities to improve business processes, and unifying information support within organizations (Xu 2007).

From a technological perspective, ERP systems are viewed as configurable, multi-module software packages (Tsai et al 2009). An ERP system usually integrates business processes across the different functional areas of an organization and includes modules for manufacturing, finance, marketing, customer relationship management, etc. ERP systems have been recognized as complex, and this can limit their implementation. Implementation of ERP systems can pose problems such as extensive implementation time and low adaptation to specific business processes. In addition, ERP evolution has become more complicated with time because the systems need to be repeatedly modified to meet the changes in technology and business practices. Although factors affecting the unsuccessful ERP implementation have been investigated, related factors (such as the complexity of configuring parameters, low industry relevance, and the inconvenience of version evolution) can be substantial (Li et al 2008).

2. General Purpose ERP and IERP

A general purpose ERP system, such as SAP R/3, is a software package which is generally designed for a wide range of enterprises. A general purpose ERP system can be used to serve many industries and a number of functional areas in an integrated and standardized fashion. The application generality of the general purpose ERP packages comes at the expense of greater product complexity.  For example, the SAP R/3 involves about 25,000 different tables which can be filled out to permit customization of the product to an enterprise’s needs. It is noted that such complexity entails high implementation costs (Cooke and Peterson 1998).

As many industries have their own processing requirements, general purpose ERP packages may not fit precisely to a specific industry.  General purpose ERP packages do not always fit with the firm-specific business models, business processes, organization structures, and management cultures (Wood & Caldas 2001). Thus, extensive customization and configuration of the general purpose ERP packages is often required. Research shows that many companies have modified ERP software in various ways to meet their essential business needs (Soh et al. 2000; Brehm et al. 2001). For industries with specific needs and tasks, customized ERP packages are generally preferred, although the expenses incurred through development and maintenance can be relatively high (Scheer and Habermann 2000).  For example, the SAP R/3 comprises more than 5000 parameters (Scheer and Habermann 2000), which can make configuration and customization tasks very challenging. Extensive configuration, customization, and modification are not often perceived to be positive by many researchers and practitioners (Tossavainen, 2005).

In the textile and apparel industry, the Bill of Material (BOM) for textile production has a “one-to-many” characteristic. Although different yarns with different counts, colors, and warp types are all produced from the same raw material, the difference in the BOM creates a long list of requirements in almost all aspects including the planning, production, dyeing and finishing, quality control, and sales and distribution that are specific to the textile industry. Under such circumstances, extraordinary customization efforts are required to meet specific requirements and needs. As a result, adopting a textile and apparel industry-oriented ERP package (such as Datatex TIM) is obviously a better choice for a textile company than using a general purpose ERP package. The scale of business process reengineering (BPR) and the customization tasks involved in the software implementation process are considered to be the major reasons of dissatisfaction for general purpose ERP (Scheer and Habermann 2000). In a survey study, many ERP participants indicate that they prefer an implementation approach in which customization can be minimized (Tossavainen, 2005).

In order to better satisfy the requirements of specific industries and to reduce the configuration workload during the implementation of ERP software, more and more general purpose ERP vendors have begun to take steps to redesign or reengineer existing software to provide industry-specific reference solutions based on existing software products (Jacob and Bendoly 2003). For example, SAP, a leading general purpose ERP vendor, now offers business solutions for over twenty industries (among them the aerospace, defense, automotive, and banking industries) by tailoring its existing ERP package and by collaborating with key users and partners in different industries.  Research also indicates that ERP systems’ functionality and integration have been greatly improved over the last decade, as they have incorporated specific industry solutions (Stefanou and Revanoglou 2006).

However, research on industry-orientated ERP was still very limited until the publication of the paper by Wu et al (Wu et al 2009).  Wu et al (2009) classify ERP systems into two categories according to their applications: general purpose systems or industry-oriented systems. An Industry-oriented ERP (IERP) system is generally designed for enterprises belonging to a specific industry sector and can often support specific business needs which are not covered by existing general purpose software packages, as some industry-specific business processes may be so unique that there is no equivalent to be found in the general purpose ERP packages (Izza 2009; Wu et al 2009). 

3. IERP

According to Wu et al (2009), an IERP system is the ERP software designed for a specific industry sector and thus can satisfy most of processing requirements of the target industry or industries.  An IERP system has an explicit target industry. As the processing requirements in a specific industry can be fully examined and refined, it is possible to make continuous improvements to IERP software. As a result, software modules of IERP systems can incorporate more industry-specific requirements, eliminate redundant modules and functions, and maintain a moderate scale of IERP software.

An IERP system can be version-based and customizable for specific industries. A version-based and customizable system allows a user to add or remove software components, to make continuous modification of business logic, and to integrate with third party or legacy systems.

Systematic software reuse methodology provides general guidelines and techniques for practice. It is commonly recognized that there are significant amounts of similarities in business domains, business processes, and business logic among different industries. These similarities can be collected, documented, and encapsulated for future reuse in a systematic way. Systematic software reuse methodology and business software infrastructure platforms are indispensable for constructing IERP software.             To efficiently construct version-based IERP software, component-based variation design for individual processing characteristics is preferred.

 

4. An IERP-orientedsoftware componentization approach

Nowadays, component-oriented software technology has become a major approach in facilitating the development and evolution of software systems (Lumpe and Schneider 2005). It is not surprising that software components and software reuse techniques can be introduced into ERP software as well. The component-based software development approach can enable the practical reuse of valuable software assets (Szyperski 2002). In addition, the concept of software reuse has been extended to encompass all of the resources used and produced during the development of software (Hafedh et al. 1995). Accordingly, the concept of the software component in IERP is extended to encompass all kinds of intellectual artifacts such as domain specific software architecture (DSSA), application frameworks, design patterns, class libraries, and even test data.

4.1 Connotation of IERP-oriented componentization

The connotation of IERP-oriented componentization includes three main aspects. Firstly, IERP is a component-based systematic software reuse process which involves acquiring, reuse, and management issues. In order to facilitate the assembling of components from different providers and to support the evolution of IERP systems, component documentation should be emphasized. The reusable portion can include information such as component objectives, design rationale, production results, test outcomes, and maintenance procedures.

Secondly, IERP supports a domain-specific componentization process which involves the acquisition and reuse of reusable assets. According to domain engineering (DE), a reuse-based approach usually defines the scope (domain analysis), specifies the structure (domain design), and builds the assets (domain implementation) for a class of systems, subsystems, or applications (Sherif and Vinze 2002). Thus, domain engineering (DE) can be instrumental to the implementation of IERP.

Thirdly, business components are the most important reusable artifacts. A business component is “the software implementation of an autonomous business concept or business process. It consists of all the software artifacts necessary to represent, implement, and deploy a given business concept as an autonomous, reusable element of a larger distributed information system” (Herzum and Sims 2000). Unlike traditional software modules and technical components (such as GUI objects), business components are expected to support some business functionalities (Vitharana et al. 2003). Examples include inventory transaction processing, accounts payable, and order processing components. Thus, business components can be effectively used to deposit and reuse industry solution knowledge. An effective way to obtain business components of all kinds is to adopt a business-driven approach for IERP system-oriented componentization.

4.2 Business-driven approach for IERP system-oriented componentization

Generally, manufacturing industries can be divided into several business domains according to their functionalities (such as manufacturing, distribution, etc). Each business domain is composed of many business functions, which are performed by executing particular business processes of the domain. There are significant numbers of similarities in business domains, business functions, and business processes among sub-industries. On the other hand, business processing logic within the same business function may vary, depending upon industries and requirements of specific business processes in enterprises within the same industry. In fact, it is possible to adopt a systems approach to analyze, obtain, encapsulate, and reuse business components of all kinds by systematically analyzing business processes of enterprises. This approach can be called a business-driven approach for IERP-oriented componentization. With this approach, one usually starts the analysis with common business processes and activities. Generally, this approach includes three aspects: business driven modelling (business functions, business processes and business tasks), acquisition of business components in the form of one or several available component models, and IERP systems construction with reusable business components.

4.3 Categories of business components

There are several ways to categorize business components. Generally, business components can be classified into two categories: atomic components or compound components. An atomic component is the unit of component reuse. A compound component is made up of smaller member components, which can be either atomic or compound components. Compared with an atomic component, a compound component, in general, has higher granularity. According to the level of generality, business components are categorized into industry-neutral components (e.g. order entry and work calendar components, which can be reused widely among different industries) and industry specific components (e.g. garment size management components and sample management components for the textile and apparel industries). According to component granularity, business components can be categorized into business process components, business task components, and business object components. According to the level of generality, business object components can be further divided into basic business object components and supporting business object components. Basic object components are used to encapsulate basic business entity sets, which generally provide direct support for business tasks. Supporting business object components are, generally, a family of tool components.

In order to satisfy the needs of different industries, the interfaces of business components may have different implementations. For example, the BOM component may have a different implementation to support business functions for discrete and process manufacturing.

5. Business software platform framework for constructing IERP systems

In an attempt to improve the process of development and operability of IERP systems, a hierarchical business software platform framework can be considered to take advantage of software reuse ideas. Research has shown that using a framework for software development has many advantages such as modularity, reusability, and extensibility (Recio-García et al 2006).

This framework consists of five layers: server layer, teamwork supporting layer, IERP system construction and customization layer, reusable component library and toolset layer, and IERP system instance layer. Below is a brief description of the layers.

The IERP system construction and customization layer is the key to effective support of the construction and customization of IERP software for a target industry or industries. A group of correlated productive software utilities are integrated seamlessly at this layer.

The teamwork supporting layer provides a toolset for harmonizing the development efforts of multiple teams. The typical functions provided by this layer are task decomposition, resource allocation, access control, and communication supporting, among other functions.

The IERP system instances layer is made up of industry-specific ERP applications (e.g., applications in the auto industry, health care industry, textile industry, etc.), which can be directly deployed in enterprises of target industries.

The server layer is composed of two sub-layers: the application server and the operating system and database management system. Particularly, the application server provides fundamental supporting services, such as load balancing, database connections, session management, and HTTP request and response management, etc., which can be directly used in constructing IERP systems.

The reusable component library and toolset layer consists of two parts: a reusable component library and the toolset for managing these components. The reusable component library is the depository of components of all kinds, including business components, industry-neutral reference models, industry-specific reference models, ERP system reference modes, etc. The reusable component management tools include acquisition, classification and description, retrieval and instantiation, and assembly and configuration. The seamless integration of this layer with the IERP construction and customization layer and the teamwork-supporting layer will play a key role in the successfully implementation of the strategy of IERP software construction.

6. ERP (Entire Resource Planning)

Xu’s Comprehensive Material Flow Theory, published recently, reveals the essence of material flow (MF) objects and phenomena (Xu 2008). He describes material flows in terms of the MF in the economic dimension, the MF in the social dimension, and the MF in the natural dimension, as well as their interrelationship.  He also presents various material flows in the MF in the economic dimension. Among them, the MF in the economic dimension is the core for the material flow, while the MF in the social dimension and the MF in the natural dimension are the foundations for the material flow. Xu (2008) also points out that the material flow is not only an economic phenomenon, but also a social and a natural one. In other words, there is not only an existing economic material flow, but there are also social and natural ones. The economic material flow is the core of the material flow, but the social and natural material flows are the basis of the material flow.

Xu’s paper provides extremely important insights into future enterprise integration in a global supply chain environment, especially for sustainable economic and societal development and growth (Xu 2008). Based upon this, the concept of next-generation enterprise information systems as well as their strategies and applications have been proposed by Xu (Wu et al 2009; Xu 2009). It is called Entire Resource Planning (ERP) or Complete Resource Planning (CRP); in it, the concepts of ERP, ERPII, and ERPIII have been integrated and extended to comprehensively encompass the resources used and produced by enterprises in different industrial sectors, in the context of economic and societal development. In Entire Resource Planning, not only economic material flow is included, but also social and natural flows.

7. Summary and future research

ERP has become one of the most important developments in the corporate use of information technology. Although ERP has become a basic business information processing requirement for many industries, the research on IERP for specific industries has not received sufficient attention. To improve research in this area, we propose an IERP approach to tackle issues common to the ERP implementation (such as excessive configurative parameters, low industry pertinence, and long implementation cycles). We also discuss the componentization of IERP systems and business software platform in this paper. In this paper, we propose the concept of IERP, present an IERP-oriented software componentization approach, and introduce a business software platform framework.

Future research should be directed to Entire Resource Planning, as it represents the future direction of EIS for sustainable economic and societal development.

References

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About the Authors

Shiliang Wu is an associate professor at the School of Management Science and Engineering, Nanjing University of Finance and Economics, China; and a visting professor at the University of Groningen (Netherlands). His research interests are mainly in the area of innovation of enterprise information systems – industrial organization and system modeling theory applied in the context of information systems. Specific research topics include enterprise information system modeling and software as a service (SaaS) pricing strategy.  His research has been published in a number of jounals, including Enterprise Information Systems and Computer Integrated Manufacturing System.

Wu He received his Ph.D. from the School of Information Science & Learning Technologies at the University of Missouri, USA in 2006. He is currently an Assistant Professor in the Center for Learning Technologies at Old Dominion University, Norfolk, Virginia, USA.  He is also working on his second Ph.D. in Information Technologies. His research interests include knowledge-based systems, data/text mining, expert systems and enterprise information systems. He has published more than 20 peer reviewed journal articles.

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