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Omega 31 (2003) 235 – 246

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The impact of organization size on enterprise resource

planning (ERP) implementations in the US manufacturing
sector
Vincent A. Mabert, Ashok Soni∗ , M.A. Venkataramanan
Operations and Decision Technologies Department, Kelley School of Business, Indiana University, Bloomington, IN 47405, USA
Received 19 February 2001; accepted 29 January 2003

Abstract
Enterprise Resource Planning (ERP) systems have experienced a phenomenal growth in the last 5 years and at present they
are pervasive in the US manufacturing sector. This paper describes an attempt to chronicle this phenomenon through a series of
case studies and an extensive survey. Manufacturing companies ranging in size from a few million dollars in annual revenues
to over a hundred billion dollars are included in this study. The key 4nding from this study is that companies of di5erent
sizes approach ERP implementations di5erently across a range of issues. Also, the bene4ts di5er by company size. Larger
companies report improvements in 4nancial measures whereas smaller companies report better performance in manufacturing
and logistics.
? 2003 Elsevier Science Ltd. All rights reserved.

Keywords: Enterprise resource planning; Organizational size; Survey methodology; Operations systems

1. Introduction ERP systems, which evolved from Materials Require-

Today’s global business environments are characterized
by unprecedented competitive pressures and sophisticated
customers who demand innovative and speedy solutions.
Understanding and optimizing business processes is a cor-
nerstone of success in these fast-changing environments.
Global distribution channels, numerous international plant
sites, and closely integrated sourcing arrangements have
changed the way hundreds of companies do business. A key
component of managing these organizations is Information
Technology (IT). Over the past few years, many companies
have embraced a new class of planning and resource man-
agement software systems to integrate processes, enforce
data integrity, and better manage resources. These package
systems are broadly classi4ed as Enterprise Resource Plan-
ning (ERP) systems.
∗ Corresponding author. Tel.: +1-812-855-3423; fax: +1-812-
856-5222.
E-mail address: soni@indiana.edu (A. Soni).
ments Planning (MRP) and Manufacturing Resource Plan-
ning (MRP II) systems, are expected to provide, at least in
theory, seamless integration of processes across functional
areas with improved workAow, standardization of various
business practices, improved order management, accurate
accounting of inventory, and better supply chain manage-
ment. The Gartner Group coined the term ERP in the early
1990s to describe these systems and stipulated that such
software should include integrated modules for accounting,
4nance, sales and distribution, human resources, materials
management and other business functions based on a com-
mon architecture that links the enterprise to both customers
and suppliers.
According to industry reports at least 30,000 com-
panies worldwide have implemented ERP systems. The
vast majority of these implementations have taken place
in the mid-1990s to 2000. Thus, these systems are rela-
tively new with very little research available concerning
their implementation, their operations or their impact.
Like many emerging areas, the initial research consisted

0305-0483/03/$ - see front matter ? 2003 Elsevier Science Ltd. All rights reserved.
doi:10.1016/S0305-0483(03)00022-7
236 V.A. Mabert et al. / Omega 31 (2003) 235 – 246
primarily of case studies and articles in the business press
or practitioner-oriented journals. Many of these articles
tended to be in terms of anecdotal information based on a
few successes or failures. As a result, initial information
on ERP often tended to be contradictory and skewed to
4t certain points of view. Also, these articles tended to be
general whereas our interest was to gather data in a more
systematic manner concerning the implementation of such
systems in manufacturing companies.
To better understand and guide this process, the authors
adopted a two-phased approach to analyze ERP adoption
and implementation experiences in the manufacturing sec-
tor. In the 4rst phase, a case study approach was used to
study 12 di5erent manufacturing ERP implementations.
These implementations were studied using structured in-
terviews of key managers, IT professionals, and users
associated with each company’s implementation. In addi-
tion, senior consultants at six consulting 4rms specializing
in ERP implementations were interviewed at length to get
their perspectives on ERP [1,2]. The primary objective of
the case studies and the consultant interviews was to obtain
reliable and detailed information on the current status of
ERP practice and implementations in the manufacturing
sector.
Two key issues emerged from this phase of the project.
First, companies of di5erent sizes tended to do di5erent
things in their implementations. In particular, there were dis-
tinct di5erences between small and large companies over a
range of issues. These di5erences included: (1) the moti-
vation to go with an ERP system; (2) the di5erent systems
adopted; (3) the implementation strategies; and (4) the de-
gree of reengineering and customization of the base system.
And second, there were di5erences in the outcomes and ben-
e4ts attained. While the case studies proved useful in under-
standing the general nature of these di5erences, this part of
the study was based on a small sample. To con4rm our initial
4ndings, a survey of a larger sample of companies was un-
dertaken in the second phase of the project in order to obtain
a broader perspective of ERP practice and experiences relat-
ing to adoption, selection of systems, customization, costs,
and performance, and success factors across di5erent sized
companies. More speci4cally, the primary objective of this
project is to study the impact of the organization size on
ERP adoption and implementation.
The relationship between structural variables of an
organization such as size, industry type and organizational
structure, and their impact on various operations has been
studied for a long time [3–5]. Organizational size is the
most frequently examined structural variable and has been
used to study issues relating to innovation, R & D expen-
ditures and market power [6–8]. The impact of company
size on adoption, implementation and use of information
technologies has received increasing attention in the recent
academic literature as well [9–12]. Gremillion conjectures
a lack of relationship between the size and usage. Addition-
ally, several papers [8,11,13] suggest that larger companies
are more likely to be early adopters of information technol-
ogy innovations.
In the Operations area, several studies of manufacturing
4rms indicate that organization size plays a critical role in
terms of the level of adoption and use of technologies [14–
18]. These 4ndings show that in general small manufactur-
ers tend to lag behind large manufacturers in implement-
ing new technologies, plus employ di5erent practices. ERP
implementations have followed similar trends. While larger
companies were the 4rst movers to ERP systems in the
mid-1990s, today smaller companies view this approach as
an important management tool. Increasingly, many mid-size
and smaller companies are either implementing or planning
to implement ERP systems [1].
The research reported here provides an insight into some
of these critical issues outlined above. In the next section,
we discuss the relevant research germane to this evolving
area and the research methodology employed to conduct the
investigation. Section 3 describes the initial data collection
4eld study, initial observations and 4ve research proposi-
tions. Section 4 outlines in detail the mail survey steps used
for a more extensive and systematic data collection e5ort,
and testing of the propositions. Section 5 presents other ob-
servations and insights gained from both the case studies
and the survey, with the 4nal section highlighting our con-
clusions.
2. Research issues and research framework
Despite the implementation of ERP systems since the
mid-1990s, academic research in this area is relatively new.
It is only recently that researchers have dealt with various
aspects of ERP in a more systematic manner. The initial
thrust of many of these articles has been in the implemen-
tation area. Davenport [19] in an early ERP article looked
at the reasons for implementing ERP systems and the chal-
lenges of the implementation project itself. Van Everdigen
et al. [20] surveyed 2647 European companies across all in-
dustry types to determine adoption and penetration of ERP
by functionality. Mabert et al. [1] used a hybrid approach
with a series of case studies followed by a survey to study
penetration of ERP systems, motivation, implementation
strategies, modules and functionalities implemented, and op-
erational bene4ts as they apply to the US manufacturing
sector. Adam and O’Doherty [21] used case studies to study
ERP implementations in small and medium enterprises in
Ireland.
More recently, several researchers have dealt with orga-
nizational issues either regarding implementation of ERP
systems or performance and bene4ts of ERP systems.
Abdinnour-Helm et al. [22] look at pre-implementation
attitudes and organizational readiness for implementing
an ERP system. They conclude that extensive organiza-
tional investments in shaping pre-implementation attitudes
do not always achieve the desired e5ects. Stratman and
Roth [23] develop and operationalize eight organizational
 V.A. Mabert et al. / Omega 31 (2003) 235 – 246
ERP competence constructs. They de4ne ERP competence
as a portfolio of managerial, technical and organizational
skills and expertise hypothesized as antecedents to im-
proved business performance after an ERP system is op-
erational and functionally stable. Sarkis and Sundrraj [24]
present a bene4ts-evaluation framework for assessing of-
ten under-emphasized resources created as a result of ERP
implementations. Bendoly and Jacobs [25] discuss the im-
portance of aligning ERP system implementation strategies
with operational requirements, and how operational require-
ments drive the appropriateness and bene4ts accrued from
these strategies. Another issue that has started to emerge
is the operational impact of ERP systems on various en-
terprise applications such as e-business and supply chain
management systems. One such paper is by Bendoly and
Kaefer [26] where they study the impact of ERP systems
on transactional eMciencies of e-commerce.
While these studies provide insights into some ERP im-
plementation issues and into bene4ts, the published research
to date does not provide a systematic approach to analyze
and evaluate ERP implementations for manufacturing com-
panies. In recent years, a growing number of researchers
have proposed exploratory research designs using method-
ologies such as case studies, the Delphi technique and sur-
veys for either emerging areas or where the knowledge base
is small [27,28]. The case study approach is increasingly
becoming popular because of the detailed information that
can be obtained [29,30]. Several studies in the IT area have
used this approach [31]. Surveys have been extensively used
for research. In the Operations Management area, there is
a strong tradition for using this methodology. For example,
studies of MRP and MRP II, two areas closely related to
ERP, have used this approach [32–34]. For this project, we
chose to use the case study and survey methodologies in a
phased approach. The case study approach was selected to
collect detailed information while the survey approach was
selected to provide a broader perspective.
In deploying ERP systems, companies have found that the
software installation complexity is just the tip of the iceberg.
A successful ERP implementation involves more than hav-
ing sophisticated software and advanced computing tech-
nologies. For example, each system is “generic” in that it
is a standard representation of how a typical company does
business. Within this standard representation, ERP systems
provide di5erent options on how to set up various processes.
These options, usually referred to as “Best Practices”, pro-
vide Aexibility in setting up the ERP system. Even with
this Aexibility, it may not be possible for a company to 4t
an ERP system exactly to 4t their organization. Thus, to
implement an ERP system, a company can either change
their processes to 4t the package or customize the system
to 4t their processes. Just how a company approaches this
decision can have major implications on how the imple-
mentation will be carried out and what the eventual out-
comes are. Thus, it is critical to study a range of di5erent
implementations.
237
3. The case studies
For the case study phase, 18 manufacturing companies
and six consulting 4rms were contacted to be part of the
project. Of these, twelve of the manufacturing companies
and all six of the consulting 4rms agreed to be in our study.
The manufacturing companies are located in Indiana, Illi-
nois, Minnesota and Ohio. The size of these companies
ranged from $30 million in annual revenues to over $35 bil-
lion. A detailed questionnaire was sent to the companies in
advance of the interviews. All interviews were conducted
at a company site by at least two interviewers. These inter-
views were all done during the summer of 1999. At least one
key executive, one member of the implementation team and
one key user were interviewed. All sessions were taped and
the transcriptions of these tapes were reviewed and authen-
ticated by all interviewers before any information or data
was used. In the case of two of the manufacturing compa-
nies, a follow-up visit was conducted to clarify some of the
initial 4ndings. The primary objective of the case studies
was to compare ERP initiatives and experiences as imple-
mented by manufacturing. The interviews were exploratory
in nature and designed to provide insight into the following
set of research questions:
1. What motivates a manufacturing company to imple-
ment an ERP package?
2. Which ERP packages do manufacturing companies im-
plement and how are they selected?
3. What is the con4guration of the systems implemented?
4. Which implementation strategies do manufacturing
companies utilize?
5. What degree of customization occurs in manufacturing
ERP implementations and are there some modules/processes
that are customized more than others?
6. What does it cost to implement an ERP system and are
the major cost categories inAuenced by type of implemen-
tation or implementation strategy?
7. Does return on investment play a major role in the
decision to implement?
8. What are the bene4ts the companies expect as a result
of implementing an ERP system?
The most striking part of the case studies was the amount
and detail of information companies were willing to share
about their implementations. These interviews provided the
following insights into these companies’ approach to their
ERP implementations:
• Companies adopted ERP systems for a variety of rea-
sons. These included theY2K problem, replacing legacy
systems, system simpli4cation and improvement, process
and operations improvement, reducing costs of informa-
tion systems, and competitive pressures.
• Most companies performed some type of ROI analysis
to justify adopting ERP systems. A few even approached
238 V.A. Mabert et al. / Omega 31 (2003) 235 – 246
the decision simply as a strategic initiative or as a cost of
doing business.
• The con4gurations of systems implemented varied. Some
companies implemented a single ERP package while
others selected modules from di5erent ERP packages
(Best-of-Breed approach). One even developed a totally
homegrown system.
• Several implementation strategies were used. These
included implementing all key modules at once (The
Big-Bang approach), phasing in modules one or a few
at a time (The Phased-In-By-Module approach), imple-
mented a sub-set of modules all at one time (The Mini
Big-Bang), and modules phased in by divisions, plants,
business units or geographies (The Phased-In-By-Site
approach).
• All companies stressed the importance of planning an
implementation. However, the degree of planning varied
across companies.
• Most companies customized the base system but the de-
gree of customization varied from very minor modi4ca-
tions to major rewrites of code for certain functionalities.
Any major modi4cations added signi4cantly to both costs
and implementation time.
• Most companies undertook some reengineering of pro-
cesses. A few did major reengineering upfront while most
deferred it to after the system had been implemented.
• Most companies expected positive returns from their ERP
implementation. The bene4ts and returns expected varied
signi4cantly across companies.
• The cost estimates and percentage breakdowns by various
categories such as the costs for the software, hardware,
consulting and training also showed interesting variations
across the companies.
While many of the above issues, activities, approaches and
strategies were common to all our case study companies,
there are many di5erences across these implementations.
One key di5erence is that companies of di5erent sizes tend
to do di5erent things in their implementations across a
range of issues. For example, smaller companies are more
likely to change their processes to 4t the system whereas
larger companies are more likely to customize the system.
Any changes to the system can have major implications.
Generally, modi4cations lead to higher costs, longer im-
plementation time and more complicated implementations.
Other di5erences across smaller and larger include the
motivation to go with an ERP system, the implementation
strategies, type of systems adopted, the extent of modi4ca-
tions to the base system, and the bene4ts the companies get
from ERP.
Organization size can be de4ned in two ways—by number
of employees or by revenues. Several studies have used num-
ber of employees as a measure of company size [14,15,17]
while others have used annual revenues [9,11,35]. We chose
to use annual revenues as a convenient measure of organiza-
tion size classifying the companies in both the case studies
and the survey as follows: companies with annual revenues
of less than $200 million are classi4ed as small, those be-
tween $200 million and $1 billion are classi4ed as medium,
and those with more than $1 billion are classi4ed as large.
These breakdowns were developed in consultation with the
case study companies and the consultants. With this clas-
si4cation scheme, the key di5erences across companies of
di5erent sizes in the case studies are stated in the form of
the following propositions:
Proposition 1. Adoption of ERP systems by large compa-
nies is motivated more by strategic needs whereas tactical
considerations are more important for smaller companies.
Proposition 2. Larger companies employ more ERP func-
tionality than small companies.
Proposition 3. Large companies customize ERP software
more while small companies adopt business processes
within ERP systems more.
Proposition 4. Large companies use an incremental im-
plementation approach by phasing in the systems while
smaller companies adopt more radical implementation ap-
proaches such as implementing the entire system or sev-
eral major modules at the same time (The Big-Bang or the
Mini Big-Bang approach).
Proposition 5. Large companies report greater bene8ts in
the 8nancial areas, while small companies report more ben-
e8ts from their ERP implementations in manufacturing
and logistics.
These di5erences were also reAected in such measures
as the cost to implement, the cost breakdowns by category,
and the implementation time. The cost of implementation
among the case study companies ranged between 1.5% and
6% of annual revenues. Measuring the implementation cost
as a percent of revenue provides a convenient way to de-
termine if size of the organization has any impact on ERP
costs. Our data show that small companies spent between
3.5% and 6% of revenues to implement ERP, with an aver-
age of 5.53%. Medium-sized companies reported an average
of 3.08% while large companies had an average cost to rev-
enue ratio of 2.23%. The breakdowns of costs into various
categories also showed key di5erences. Smaller companies
spent a higher proportion of their budgets on the cost of soft-
ware. Larger companies, on the other hand, spent a higher
percentage on their ERP implementation teams. The imple-
mentation times also varied by the size of the companies.
Some of the key di5erences are shown in Table 1.
The information from the case studies was used to de-
velop the survey questionnaire for the broader study of
ERP practice and experiences. The methodology used
and the 4ndings from the survey are reported in the next
section.
 V.A. Mabert et al. / Omega 31 (2003) 235 – 246
Table 1
Case study 4ndings of cost, time, and implementation strategies
Description Small Medium Large
4rms 4rms 4rms
Number of 4rms in 4 3 5
case study sample
Average cost to an- 5.53% 3.08% 2.23%
nual revenues ratio
Average implementa- 2.125 3 4.17
tion time (in years)
Numbers using the 3 1 0 ufacturing companies, a large number of respondents were
big-bang approach
Numbers using the 1/4 2/3 5/5
Phased-in approach
4. Survey objectives, methodology and results
The survey questionnaire was four pages long and had
a total 24 questions. It included questions on company and
respondent demographics, adoption and selection of a sys-
tem, implementation, customization, costs and bene4ts, and
post-implementation plans. This questionnaire was designed
as an exploratory instrument to collect information about
these phases of an ERP project. This instrument was not de-
signed to probe into the rationale for why companies chose
to do things in certain ways.
The responses were encoded using a mix of check boxes,
open-ended answers, and a Likert scale with measures from
1 to 5. The case studies provided the guidance for the en-
coding scheme in terms of what type of questions required
what responses. For example, the total cost was segmented
into buckets because the interviews showed that respon-
dents were more comfortable with providing approximate
4gures instead of exact values. The motivational and bene4ts
responses were encoded using the Likert scale because re-
spondents were generally good at determining relative mea-
surements for these kinds of questions. After the initial
development of the survey questionnaire, it was thoroughly
tested by two ERP project leaders from our case study com-
panies and two consultants, and 4ne-tuned.
The survey and cover letter were mailed to a randomly
selected sample of 5000 APICS members employed in
manufacturing companies in the US in August 1999. No
follow-ups were done. By September 1999, 482 usable re-
sponses had been received for an overall response rate of
9.6%. Given the length and comprehensive nature of the
survey, this response rate was concluded to be reasonable.
Respondents were not asked to provide company-identifying
information, and postage-paid return envelopes were pro-
vided to maintain con4dentiality.
Of the 482 responses, 44.6% of the companies had im-
plemented an ERP system, another 18.5% were in the pro-
cess of implementing, 10.4% were planning to implement
one within the next 18 months and 26.5% had no plans for
239
an ERP system for the foreseeable future. The companies
spanned a wide range as measured by revenue and employ-
ment. Approximately 45% have annual revenues of less than
$200 million. About the same percentage of companies em-
ploy less than 1000 people. The largest company has over
$100 billion in annual revenues and 240,000 employees. The
smallest has $2 million in revenues and 10 employees. The
distribution of make-to-stock and make-to-order was evenly
balanced across this set of companies. The respondents were
a mix of managerial and sta5 personnel. Since the question-
naire was sent to only APICS members working for man-
employed in the materials and production planning areas.
Just over 22% were executives, 17.0% were materials or
supply chain managers, 9.0% were plant managers, 11.6%
were purchasing managers or buyers, 19.8% worked in the
production or inventory control areas, and 8.4% were in the
systems area. Another 12.1% either did not respond to this
question or indicated some other position.
For the analysis reported here, only responses for entire
4rms or divisions who have already implemented or are in
the process of implementing an ERP system were selected.
The companies that met these criteria were separated into
large, medium, and small, based on the classi4cation scheme
discussed above. This resulted in the following breakdowns:
large companies—65, medium companies—52 and small
companies—76. From here on, we refer to these 193 com-
panies as the ERP sample. This sample of ERP companies
represents a total of 193 out of the 482 4rms who responded
to the original survey. Within the ERP sample, the num-
ber of small 4rms is 39.4% compared with 41.3% of small
companies in the overall sample, the number of medium
companies accounts for 26.9% compared with 25.9% in the
overall sample while the number of large companies in the
ERP sample is 33.7% compared with 32.8% in the overall
sample of 482. Thus, the breakdown of small, medium and
large companies implementing ERP systems is very similar
to the companies who responded to the survey.
Establishing whether the companies in the ERP sample
are representative of the population of companies adopting
ERP systems is harder to do since there was no demographic
information available on ERP implementations in the man-
ufacturing sector. One methodology we used was to com-
pare our sample with the information provided to us by two
of the consulting 4rms in our case studies. There are sev-
eral statistics that indicate that this sample comes close to
the population of companies who had adopted ERP systems
at the time of the survey. First, the analysis on package
adoption shows that package adoption rates of the sample
companies are very similar to the market shares of those
packages (Table 6). Second, the consulting 4rms had esti-
mated that about 50% of the manufacturing 4rms had imple-
menting an ERP system while our sample put this number at
44.6%. Third, the consulting data showed that about a third
of the implementations used the “Big-Bang” approach. Our
sample puts this number at about 36% (Table 3).
240 V.A. Mabert et al. / Omega 31 (2003) 235 – 246
A variety of methods have been used to evaluate the data.
The rest of the section summarizes our 4ndings.
4.1. Proposition 1: motivational factors
The questions relating to motivational factors employed
a 4ve point Likert scale (4ve being very important and one
being unimportant) to measure their importance. These mo-
tivational factors are a mix of IT factors and business fac-
tors. The responses were analyzed as follows: a response of
4 or 5 was considered positive, a 1 or 2 as negative and a
3 as neutral. The neutral responses were not included in the
analysis. Table 2 presents the summary of the respondents’
answers to these questions. The percentages reAect only the
positive responses. That is, the percentages indicate the per-
centage of 4rms who listed that motivational factor as either
important or very important. For example, 85.9% of all 4rms
listed “Replace Legacy Systems” as either important or very
important. Similarly, 86.8% of all the small 4rms listed this
motivational factor to be either important or very important.
When analyzed across di5erent sizes of companies, the
results show several similarities and di5erences. The impor-
tance of these factors by company size was tested using a
One-Factor ANOVA on the data from the survey questions.
The p-values in Table 2 are from this ANOVA test. The
factors “Replace Legacy Systems” and “Simplify and Stan-
dardize Systems” are important to all companies. These two
reasons were important to all of the case study companies
as well. All of them had been operating with a patchwork of
legacy systems that were becoming harder to maintain and
upgrade. Additionally, the competitive pressures on them in-
creasingly required more responsive systems with real-time
integrated information that the legacy systems could not
provide easily. Thus, it is not surprising that these two fac-
tors are important to all companies. However, there is a
signi4cant di5erence (p-value = 0:001) on the importance
of the factor “Simplify and Standardize Systems” by size
of company. Almost all large companies considered this
important. In addition to the ANOVA test, pair-wise com-
parisons were analyzed using categorical analysis. The sig-
ni4cant p-values reported are from the resulting Chi-square
test. These pair-wise comparisons show signi4cant di5er-
ences between large and small companies (p-value=0:001),
and large and medium companies (p-value = 0:04) as well.
One possible explanation is that large companies are likely
to have a number of legacy systems in place so simpli4ca-
tion and standardization becomes a more important issue.
For example, Owens Corning replaced 211 legacy systems
with their ERP system [19].
The factor, “Gain Strategic Advantage”, also shows a
signi4cant di5erence by company size. The pair-wise com-
parisons show a signi4cant di5erence (p-value = 0:008) be-
tween large and small companies. This is surprising because
having an ERP system by itself is not likely to give a com-
pany any signi4cant strategic advantage since their compe-
tition is likely to have implemented similar systems. For
example, over 300 pharmaceutical companies around the
world have implemented ERP systems (www.sap.com Au-
gust 2000). Thus, the ERP system by itself is not likely to
provide any signi4cant competitive or strategic advantages.
Our case study companies expected their strategic advantage
to come from how they leveraged the vast amounts of oper-
ational data generated by their ERP systems. One key use of
this operational data is in 4nancial analysis. All 4ve of the
large case study companies reported increased eMciencies
in budgeting, 4nancial controls and 4nancial close cycles as
a result of the information availability from their ERP sys-
tem. Another area of strategic importance is the use decision
support models and data mining tools. These systems are
generally not part of an ERP system but separate systems
known as “Bolt-Ons”. Finally, strategic and competitive ad-
vantages can also come from how companies integrate and
manage their specialized strategic systems, such as supply
chain management, customer management and e-business
systems, with their ERP system.
ERP systems are also important to large companies for
linking their global activities. There is a signi4cant di5er-
ence (p-value ¡ 0:0001) between large and small compa-
nies. That is to be expected since large companies are more
likely to have global activities. Linking to suppliers and cus-
tomers was a key objective of the both medium and large
case study companies. It was not emphasized as much by
the small companies in the case study sample. However, the
survey results show that this is of equal importance to all
companies. A surprising result from the survey is that the
Y2K issue was ranked very low among motivational fac-
tors. Much of the literature cites Y2K as the reason in the
upsurge of ERP in the mid-1990s. Solving the Y2K prob-
lem was more important to small- and medium-sized com-
panies. One key di5erence between the larger and smaller
case study companies was that managers in the larger com-
panies expressed more con4dence in solving the Y2K prob-
lem since they had large IT sta5s whereas the small- and
medium-sized companies did not have such dedicated re-
sources and looked more at the ERP system to solve that
problem.
4.2. Proposition 2: implementation strategies
The strategy used for the implementation is one of the
most important factors in assessing the impact of an ERP
system on an organization. Strategies can range from a sin-
gle go-live date for all modules (Big-Bang) to single go-live
date for a subset of modules (Mini Big-Bang) to phasing in
by module and/or site. While the Big-Bang approach usu-
ally results in the shortest implementation time, it is also the
riskiest approach because it can expose the entire stability
of a company in case of any problems. Clearly, in an inte-
grated environment, problems in one part of the system can
seriously impact the entire enterprise.
The decision on which strategy to deploy depends on
a range of issues such as complexities of size, processes
 V.A. Mabert et al. / Omega 31 (2003) 235 – 246 241

Table 2
Summary responses for motivational factors

Motivation factors All 4rms Small 4rms Medium 4rms Large 4rms Statistical
(%) (%) (%) (%) signi4cance

Replace legacy systems 85.9 86.8 78.9 89.5 No di5erence

Solve the Y2K Problem 56.5 63.1 63.6 42.3 0.04
Ease of upgrading systems 44.5 35.3 45.2 54.3 0.09
Simplify and standardize systems 83.3 72.4 82.9 94.7 0.001
Pressure to keep up with competitors 49.2 41.7 45.2 59.6 No di5erence
Improve interactions and communications
with suppliers and customers 75.2 70.6 81.3 76.1 No di5erence
Restructure company organization 32.0 32.8 27.0 34.6 No di5erence
Gain strategic advantage 79.6 70.0 75.8 91.8 0.03
Link to global activities 55.5 35.6 61.8 73.6 0.0001

Table 3
Implementation strategies

Strategy All 4rms Small 4rms Medium 4rms Large 4rms

(%) (%) (%) (%)

Big-Bang 36.32 47.37 48.00 14.06

Mini Big-Bang 17.37 23.68 18.00 9.38
Phased-In by Module 17.37 19.74 10.00 20.31
Phased-In by Site 25.79 7.89 24.00 48.44
Other 3.16 1.32 0.00 7.81

and operations. For both the case study and the survey, ap-
proximately half the implementations used one of the two
Big-Bang approaches and half used one of the Phased-In
approaches. However, as Table 3 shows, there are very
clear di5erences in the implementation strategies by size
of company. Over two-thirds (69%) of implementations
in large companies were phased in either by module or
by site whereas over 70% of small companies used one
of the Big-Bang approaches. Di5erences in strategies be-
tween both large and small companies, and large and
medium companies were statistically signi4cant (Chi-square
p-values ¡ 0:0001). There was no statistical di5erence
between small and medium companies.
Manufacturing companies seem to be selective in which
modules/functionalities to implement. The survey results
show that 4ve modules/functionalities (Financial Account-
ing/Control, Materials Management, Order Entry, Produc-
tion Planning, and Purchasing) have been installed in just
over 87% of the reporting companies. Four of these modules
are generally implemented during the 4rst or early phase of
the project, with the Production Planning module typically
delayed until later in the implementation. The Financial Ac-
counting module, at 92% by reporting companies, was most
frequently implemented. Of the “manufacturing/logistical”
modules, the Materials Management module was the most
frequently implemented at 90% of the companies. All com-
panies reported having at least implemented two or more of
these 4ve modules. In contrast, Van Everdingen et al. [20]
in a survey of 2647 small and mid-sized companies (across
all industry types) in Europe found that 13% of them used
ERP software in just one functional area and 70% used it in
more than three functional areas.
4.3. Proposition 3: customization of packages
Customization refers to modifying the package through
code re-writes, changes or additions. Because of the inte-
grative architecture of ERP systems, customizations can be
prohibitively expensive. A highly customized system also
becomes harder to upgrade because all the changes have to
be accounted for in the upgrade. The common hypothesis is
that companies are generally more willing to change their
operating processes than customizing the package. Our sur-
vey results, however, indicate that almost all companies went
through some form of customization, as shown in Table 4.
The degree of customization varies signi4cantly across
size of company. Larger companies customize more. There
are signi4cant di5erences between small and large compa-
nies (Chi-square p-value ¡ 0:001), and between medium
and large companies (Chi-square p-value = 0:06). The sur-
vey results show that over 50% of the large companies did
either signi4cant or major modi4cations whereas most small
companies only made minor modi4cations. For the large
companies, it may not be possible to avoid customization.
242 V.A. Mabert et al. / Omega 31 (2003) 235 – 246

Table 4
Degree of customization

Overall All 4rms Small 4rms Medium 4rms Large 4rms

customization (%) (%) (%) (%)

Minor 61.11 72.86 62.00 46.67

Signi4cant 29.44 22.86 24.00 41.67
Major 7.78 2.86 12.00 10.00
Other 1.67 1.43 2.00 1.67

Table 5
Module customization

Customization All 4rms Small 4rms Medium 4rms Large 4rms

by module (%) (%) (%) (%)

Order entry 33.86 31.58 41.18 33.85

Production planning 21.36 11.84 19.61 23.08
Materials management 16.15 5.26 19.61 21.54

Their complex operations and organizational structure tends
to increase the pressure for more custom-build processes
and reports. An interesting observation from the case studies
was that companies who started their implementations ear-
lier tended to customize more. Some of the managers have
hypothesized that the evolution of ERP systems through the
late 1990s had “improved” the systems to a point where it
was no longer necessary to customize as much, while others
think that the knowledge base among consultants and ven-
dors had improved signi4cantly over time, minimizing the
need for customization.
Order entry is the most customized module (Table 5).
A third of all companies made some changes to their or-
der entry module. Many of the case study companies had
also changed the order entry module, primarily for two rea-
sons. First, they felt this was such a critical process that they
just could not a5ord to make any errors. Second, most felt
their company order entry processes were unique because of
pricing, product lines, product bundling and customer ser-
vice/interface. Production planning modules had the second
highest degree of customization, followed by materials man-
agement modules. One out of every 4ve implementations is
customized to some degree for medium and large compa-
nies in these two categories. Multiple plants, geographical
dispersion (at times globally), and di5erent production pro-
cesses for multiple product lines could be attributed to this
customization.
4.4. Proposition 4: package adoption and con8guration
The issue of which ERP package to implement is an im-
portant decision for any company not only for functionality
and ease of implementation but also for future upgrades and
for using other specialized packages with the ERP system.
Tables 6 and 7 present company based data for adoption
of di5erent ERP packages. Table 6 summarizes the adop-
tion by package breakdowns across all companies and then
by size of company, with Table 7 providing data on how
the packages are implemented. Table 6 also includes the
global market shares of each package. Overall, the penetra-
tion of ERP packages in US manufacturing 4rms appears
to be very similar to overall global market shares reported
(a Chi-Square test was insigni4cant). The only exception
is Peoplesoft, which has only a 2.6% share in manufactur-
ing versus an overall market share of 9%. That is to be ex-
pected since its traditional strengths are in human resources
and not in manufacturing. There are clear di5erences across
the di5erent sized companies on the packages they adopt.
Chi-Square tests between all three combinations of compa-
nies (small vs. large, small vs. medium, and medium vs.
large) were all signi4cant (p-values ¡ 0:001).
As expected, large companies favor SAP more than small
companies (41.5% vs. 10.5%). Over 72% of the large com-
panies use just 4ve di5erent packages (SAP, Oracle, Baan,
JD Edwards and SSA) as compared to 47% for the small
companies. Van Everdingen et al. [20] in their survey found
that “best 4t” with “current business practices” and pack-
age Aexibility were the key criteria in the package adoption
decision. Since many of the “smaller” ERP systems, such
as MAPICS and QAD, have evolved directly from MRP II
packages, companies looking for a good 4t with their cur-
rent business practices are more likely to adopt ERP systems
that have evolved from their MRP II systems. For example,
two of the small companies in our case study sample chose
to go with ERP systems from the vendors of their original
MRP II system for precisely that reason.
There are also key di5erences (Table 7) among compa-
nies on the con4guration of the ERP system implemented.
Over 56% of small companies use only a single ERP pack-
age whereas only 33% of the medium-sized and 28% of the
 V.A. Mabert et al. / Omega 31 (2003) 235 – 246 243

Table 6
Summary responses for package adoption

ERP package Overall Small 4rms Medium 4rms Large 4rms Market sharesa
(%) (%) (%) (%) (%)

SAP 25.0 10.5 25.5 41.5 32

Oracle 14.6 11.8 19.6 13.8 13
Baan 9.4 14.5 5.9 6.2 7
JDE 6.8 10.5 2.0 6.2 7
SSA/BPCS 3.6 0.0 7.8 4.6 3
Peoplesoft 2.6 1.3 3.9 3.1 9
QAD 2.1 2.6 2.0 1.5 2
MAPICS 1.6 3.9 0.0 0.0 1
Others/multiple 34.4 44.6 25.5 23.1 26
a 1998 Forecasted market shares, AMR research [36].

Table 7
Summary responses for package implementation

Approach All 4rms Small 4rms Medium 4rms Large 4rms

(%) (%) (%) (%)

Single ERP package 40.6 56.6 33.3 27.7

Best-of-Breed from di5erent packages 4.2 1.3 2.0 9.2
Single ERP package with other systems 48.4 36.8 60.8 52.3
Multiple ERP packages with other systems 5.2 3.9 2.0 9.2
Others 1.5 1.3 2.0 1.5

Table 8
Implementation cost breakdowns

Cost breakdown Small 4rms Medium 4rms Large 4rms Statistical

(%) (%) (%) signi4cance

Software 35.14 28.70 23.38 0.001

Hardware 20.56 18.75 14.40 0.028
Consulting 23.51 29.48 25.00 No di5erence
Training 9.61 9.78 12.34 No di5erence
Implementation team 10.78 12.43 22.95 0.000
Other 0.49 0.83 0.86 No di5erence

large companies use this approach. Almost two-thirds of the
medium-sized and 71% of the large companies use multi-
ple systems compared to only 42% of the small companies.
One clear distinction driving this is the complexity of the
organization. Large companies are more likely to have more
global operations, more sites and generally more complex
operations. Even then ERP systems by themselves may not
be able to provide the functionality required to manage these
complex enterprises. To remedy such shortcomings, compa-
nies are increasingly using either self-contained add-on ERP
modules or extension systems, called Bolt-Ons, for such
functions as demand planning, order tracking, warehouse
management, supply chain management, customer relation-
ship management, on-line collaboration, e-procurement and
online business-to-business transactions. Not every ERP sys-
tem can support these specialized add-ons. Thus, the use of
these specialized packages then becomes a key decision fac-
tor for not only which system is adopted, but also for how
the package is implemented, and future enhancements and
upgrades.
4.5. Proposition 5: costs and bene8ts
The implementation costs reported in the survey part were
very similar to the case studies. As expected, implementa-
tions at larger companies generally cost much more than at
smaller companies. The cost breakdowns, however, show
di5erences across companies of di5erent sizes. These are
summarized in Table 8. The cost of the software at smaller
companies was higher as a percentage of overall cost than at
244 V.A. Mabert et al. / Omega 31 (2003) 235 – 246

Table 9
Summary responses for performance measures

Outcomes All 4rms Small 4rms Medium 4rms Large 4rms

(%) (%) (%) (%)

Reduced direct operating costs 20.8 23.1 18.8 20.0

Quickened information response time 75.5 76.9 70.6 79.2
Improved order management/order cycle 66.3 75.0 57.6 61.9
Lowered inventory levels 35.8 35.7 34.4 38.1
Increased interaction across the enterprise 79.0 75.0 77.4 87.0
Decreased 4nancial close cycle 59.6 47.7 60.6 77.8
Improved on-time delivery 50.5 60.0 48.4 31.6
Improved cash management 26.5 26.3 23.1 31.6
Improved interaction with suppliers 44.8 40.0 55.2 38.9
Improved interaction with customers 53.6 59.0 56.7 33.3

Table 10
Summary responses for areas bene4ting

Bene4t areas All 4rms Small 4rms Medium 4rms Large 4rms
(%) (%) (%) (%)

Integration of business operations/processes 80.4 76.7 82.4 84.0

Availability of information 82.8 86.8 71.1 92.0
Quality of information 75.5 80.4 62.9 84.0
Customer responsiveness/Aexibility 36.5 41.0 37.0 26.3
Financial management 59.8 55.6 48.0 81.0
Personnel management 15.4 8.9 18.4 23.8
Decreased information technology costs 12.8 11.6 8.8 20.8
Inventory management 62.6 71.4 59.4 50.0
Supplier management/procurement 49.4 52.3 54.2 35.3

medium or large companies. The importance of these costs
by company size was tested using a One-Way ANOVA
test on the data from the survey questions. The p-values in
Table 8 are from this ANOVA test. There are signi4cant
di5erences across the three groups on the costs associated
with software, hardware and the implementation teams, as
indicated in the table. The implementation costs are di5erent
because all of the large case study companies had created
special ERP implementation teams. Team members were
given special incentives to participate, increasing this com-
ponent of cost. Surprisingly, the consulting and the training
costs are very similar across all 4rms. All indications from
the case studies were that large companies spend more on
both consulting and on training. Another di5erence from ac-
cepted norms is that the overall consulting costs of between
1 and 1.5 times the software costs in the survey are lower
than the 2 to 5 times the software costs reported in a number
of publications [37].
Getting a measure of success and contribution for an
ERP implementation is diMcult, given the scope, complex-
ity and timing of this type of project. Many of these systems
have been implemented only recently so it may be too early
to judge the full impact of an ERP package at this stage.
Table 9 summarizes the impact of ERP systems on the
performance measures of key operating areas. The most
improvements are in “Increased Interaction across the En-
terprise”, and “Quicker Response Times for Information”.
There are also improvements in order management, on-time
deliveries, customer interaction and 4nancial close cycles.
The least improvements are in traditional cost measures such
as direct operating costs, inventory levels and cash man-
agement. The ANOVA test across all three company sizes
showed no signi4cant di5erences. However, there are key
di5erences between large and small companies on several
metrics. These pair-wise comparisons were analyzed us-
ing categorical analysis. Larger companies report better im-
provements in the 4nancial close cycle (p-value = 0:023).
On the other hand, smaller companies have more improve-
ments in order management (p-value=0:08), on-time deliv-
eries (p-value=0:026) and customer interactions (p-value=
0:057).
Table 10 summarizes the areas bene4ting the most from
ERP systems. As expected, integration of business pro-
cesses, availability of information and quality of information
are the areas most positively impacted. The areas bene4ting
the least are the costs of information technology and
 V.A. Mabert et al. / Omega 31 (2003) 235 – 246
personnel management. There are also several di5erences
here between companies of di5erent sizes. More large com-
panies report bene4ts in 4nancial management (p-value =
0:06) and personnel management (p-value = 0:08) than
small companies. On the other hand, small companies re-
port higher bene4ts than large in inventory management
(p-value = 0:04) and procurement (p-value = 0:08). Over-
all, both the case study and the surveyed companies re-
ported very similar trends on the impact of ERP systems on
performance.
All of the case study companies had done some form
of ROI or economic value added analysis to justify their
ERP system. Surprisingly, approximately 30% of the sur-
vey companies reported not doing an ROI or any form of
capital investment analysis. An approximate weighted ROI
for those companies who responded is approximately 20%.
There were no statistical di5erences across the three groups
on this dimension. This ROI is di5erent from what has
been reported in several publications. For example, the Meta
Group [38] reported the NPV of an implementation is a neg-
ative $1.5 million.
Most companies view their ERP system to be a long-term
investment. The expected life of an ERP system is just over
8 years, a value considered very high for a software system.
Over 80% of all companies indicted and expected life of
over 5 years. Approximately a third expects the life of their
ERP system to be greater than 10 years.
5. Conclusions
This study provides some key insights into the implemen-
tation and use of ERP systems in the manufacturing sector.
Our initial case studies suggested that enterprise size played
an important role in ERP implementations on several key
dimensions. This was later con4rmed through an extensive
survey. While there have been numerous studies on the im-
pact of organizational size on various issues, very little has
been done to study impact of size on the implementation and
utilization of large-scale enterprise-wide systems. This re-
search shows that size is again a key factor in the implemen-
tation approach for company-wide systems. This may have
implications for manufacturing companies as they move to
implement the next wave of enterprise systems such as sup-
ply chain management and customer relationship manage-
ment systems.
While this study covered all aspects of an ERP imple-
mentation, it was not designed to study such issues as the
rationale for doing things in certain ways or to determine
exact outcome relationships. For example, one key ques-
tion that our study could not answer de4nitively is the cost
and bene4t relationship. Another issue that needs to be
studied is whether early adopters or late adopters received
the better returns. While early adopters may have received
some competitive advantages, late adopters generally ben-
e4ted from upgraded systems and a better implementation
245
knowledge base. This raises the issue of the optimal time to
start an implementation of a large system. This study is an
initial 4rst step in answering such questions. ERP systems
are here for the long haul and will need to be studied more
thoroughly.
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