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Antecedents of MRP
Antecedents of MRP
BIJ
8,2 Antecedents of MRP adoption
in small and medium-sized
firms
144 Alberto Petroni and Antonio Rizzi
UniversitaÁ di Parma, Parma, Italy
Keywords MRP, Technology, Small-to-medium-sized firms, Implementation
Abstract This research seeks to provide an understanding of the MRP adoption process using
classic adoption models for prediction. To this end, four classical adoption models were used to
provide the foundation for the constructs tested in this study. The framework of research strives
to investigate the relationships between benefit analysis, feasibility studies, organizational
willingness and the mediating construct, MRP positive evaluation. A statistical analysis on a
sample of 109 small and medium-sized firms was carried out which revealed that these constructs
play an important role in the decision making process leading, ultimately, to MRP adoption. The
analysis has, thus, lent support to the adoption models considered and might provide useful
indications to managers seeking to maximize the investment in MRP packages.
Introduction
Material requirements planning (MRP) systems help manufacturers determine
precisely when and how much material to purchase and process based upon a
time-phased analysis of sales orders, production orders, current inventory, and
forecasts. They ensure that firms will always have sufficient inventory to meet
production demands, but not more than necessary at any given time. MRP will
even schedule purchase orders and/or production orders for just-in-time receipt.
MRP modules takes the guesswork out of purchasing by automatically
calculating material requirements, and coordinating purchase orders and
production orders for timely receipt. Unrealistic manufacturing plans can be
easily identified, which may arise when there is not enough time to
manufacture an intermediate for a target production date, or if a vendor is
unlikely to deliver materials by the time they are required.
Since MRP determines requirements based upon master production
schedule (MPS), the modules offer several ways to help keep schedule current.
For instance, production orders may be scheduled based upon current customer
orders and/or inventory levels, thus accommodating both ``make to order'' and
``make to stock'' procedures. The MPS can also include product forecasts, which
may be calculated automatically using data from sales or production history.
Despite its simplicity, MRP systems hold great potential for making
significant contributions in the quest for productivity that would allow small
firms to compete in an international marketplace. However, in their zeal to
quickly correct several decades of poor manufacturing practices, many small
Benchmarking: An International
companies rushed to introduce MRP which they viewed to be a magical and
Journal, Vol. 8 No. 2, 2001,
pp. 144-156. # MCB University
simplistic method of doing business. In this context, manufacturers may have
Press, 1463-5771 overlooked a very important aspect of MRP systems: implementation. Despite
the growth in MRP systems sales worldwide, their implementation is, in fact, Antecedents of
often a cumbersome process (Manthou et al., 1996; Ritter, 1992). There are still MRP adoption
many problems involved with the effective running of MRP/MRP II (Smith,
1993; Turnipseed et al., 1992) and a general lack of confidence in the system is
frequently reported (Clode, 1993). Without software adoption the considerable
resources invested in MRP will be at best under-utilized and at worst wasted.
Therefore, the research seeks to provide an understanding of the adoption 145
process by predicting what stages small and medium-sized firms are most
likely to go through before they are ready for MRP adoption. Equipped with the
knowledge, managers can employ the necessary strategies to move their
organization efficiently through the adoption process so that funds and other
valuable resources will not be lost.
The purpose of this paper is to use four classic adoption models to predict the
MRP implementation process. Toward this end, the research follows a
conceptual framework of technology adoption found in management literature.
The framework states that managers must go through several stages including
awareness, identification of specific applications and their benefits, commitment
and evaluation before technology is fully integrated into line operations.
The paper is divided into four parts. First, a description of the framework
that provides the theoretical foundation for the constructs studied is explained.
Second, the methodology used to investigate the hypotheses is described.
Third, the analyses used to test the research hypotheses are highlighted.
Finally, the research findings from this study are presented and suggestions for
future research are discussed.
Research hypotheses
The model depicted in Figure 1 shows the hypothesized relationships among
the theoretical constructs. The model shows the relationships between benefit
analysis, feasibility, organizational willingness, and the mediating construct,
evaluation. It is the positive evaluation that ultimately leads to MRP adoption.
The hypothesized construct relationships are presented below:
H1: The manager's awareness of MRP will lead to a positive evaluation.
H2: The manager's perceptions of the benefits of MRP will lead to a
positive evaluation.
Figure 1.
Hypothesized
relationships between
constructs
H3: The manager's knowledge of the implementation milestones and the Antecedents of
prerequisites of implementation will lead to a positive evaluation. MRP adoption
H4: The project team's perceptions of the organization's openness to MRP
will lead to a positive evaluation.
H5: The positive evaluation of MRP will lead to adoption.
149
Research methodology
Sample
The research design employed in this study was a postal survey. Data were
collected from small and medium manufacturing firms (SMEs) throughout
northern Italy. The term ``SME'' (small and medium-sized enterprises) covers a
variety of definitions and measures. In OECD Member countries, employment
is the most widely used criterion for determining firm size. SMEs are usually
defined as firms with fewer than 500 employees, although a number of
countries, including those in the European Union, use a lower cut-off point of
300. The latter criterion was used in the present research. The rationale behind
this choice is that it was meant to reflect the framework adopted by the OECD
that distinguishes between:
. micro establishments (1-19 employees): those firms that are generally
family-owned and perform an almost artisan type of activity;
. small establishments (20-99 employees); and
. medium establishments (100-299 employees).
The firms included in the survey were selected within the packaging and
packing machinery industry which was chosen for the vitality shown over the
last years in the adoption of MRP systems. The choice of this specific industry
is motivated by other reasons:
. the fact that these manufacturers represent the backbone of some local
economies of northern Italy, with approximately 85 percent of
production being sold abroad; and
. the importance that the machinery-building manufacturing
environments are gaining in terms of production planning issues.
The problems which arise with this respect are so relevant that most of the
major MRP and ERP commercial packages are striving to design and
implement new products to include modules specifically designed for these
type of firms.
The initial target population (590 firms) was obtained from listings provided
by the Italian Association of Automatic Packing and Packaging Machinery
Manufacturers (UCIMA) and from CIBUS database (an international food
exhibition annually held in Parma, Italy). These were carefully verified and
cross-checked to ensure complete and up-to-date information. A follow-up letter
and a telephone call were also utilized to maximize the response rate. A total of
119 firms were identified as MRP users. The term ``MRP'' is used as a general
BIJ term to include all MRP versions, namely, MPR I (i.e. materials requirements
8,2 planning), closed-loop MRP (i.e. MRP I with capacity planning and shop floor),
and MRP II (i.e. closed-loop MRP integrated with the other functions such as
finance and marketing), as in Duchessi et al. (1988), Sum and Yang (1993) and
Sum et al. (1997). All of the firms were contacted personally and ten refused to
be involved in the research project. A total number of 109 firms were, thus,
150 included in the final sample. Typical designations of the respondents included
the master scheduler, production and inventory manager, production manager,
plant manager and material handling manager.
Awarensss 0.198
Analysis of benefits 0.654*
Feasibility 0.407
Organizational willingness 0.678***
Positive evaluation 0.781**
Coefficient of determination 0.695
Table IV.
Notes: * Significant at the 0.01 level; ** Significant at the 0.05 level; *** Significant at the Multiple regression
0.1 level results
Figure 2.
Hypothesis testing
results
BIJ The model, F = 9.47, was significant at the 0.10 level and explains almost 70
8,2 percent of the variance associated with MRP adoption decision.
H2, reflecting perception of MRP benefits, was significant at the 0.01 level
(p-value = 0.001), suggesting that one can be 99 percent sure that managers
with an understanding of the benefits MRP systems provide will also have a
positive evaluation of the software.
154 Organizational willingness, represented by H3, was significant at the 0.10
level (p-value = 0.087), indicating that one can be 90 percent certain that
managers working in organizations that are open to adopting new technologies
will also have a positive evaluation of the technology.
The mediating construct, evaluation (H4), was found to be significant at the
0.05 level (p-value = 0.038). Therefore, as hypothesized, having a positive
evaluation of the MRP package will lead to organizational adoption.
No statistically significant support was found to H1 and H3, that,
respectively, link the awareness and the feasibility construct to positive
evaluation of the MRP system.
Conclusion
In conclusion, this research provides valuable insights into the MRP adoption
process. By using four classic adoption models as the theoretical foundation of
hypotheses development, a multiple regression model was formulated that
explains almost 70 percent of the adoption process. Preliminary analysis of
benefits, organizational willingness and positive evaluation of the technology
are all significant stages of the adoption process. With this knowledge,
managers can establish strategies that will help the organization pass through
these stages quickly and effectively. Most managers would agree that one of
the greatest barriers to implementing new technology is overcoming
employees' resistance to organizational change. This study can be extremely
helpful to managers because it alerts them to the stages that must be passed
through before adoption, thereby allowing time to develop strategies to
alleviate some resistance.
It is interesting to note that awareness of the MRP technology was not
significant and therefore does not contribute to the adoption process. Thus, just
informing managers about the technology will not lead to a positive evaluation.
It also seems that being aware of the time needed and the technical constraints
(feasibility) is also not significant and will not lead to a positive evaluation.
Therefore, while awareness of the technology's existence is necessary it is not
correlated with evaluation or MRP adoption. Likewise understanding the pre-
requisites of the technology application, while informative, is also not
significant to MRP adoption.
Future research
As for the possibility of generalization of the findings, it is worth noting that
both the research framework and the results obtained may generally be
representative of any firm belonging to the machinery-building industries (e.g.
machine tools, wood machinery manufacturers and so on). On the other hand, Antecedents of
when dealing with other types of production types (e.g. process, one-of-a-kind, MRP adoption
batch, etc.) the emphasis placed on some of the items considered in our study
will probably vary. For example, the problems related to data accuracy may
largely differ from a machinery manufacturer to a process firm.
This study applied four classical adoption models to understanding the
adoption of MRP technology at major railroads. Thus, only constructs included 155
in the classical models were tested. Future studies could test the impact of cost,
employee training, competition and other environmental factors on the
organizational adoption process.
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