RISK MANAGEMENT IN ENTERPRISE RESOURCE PLANNING
IMPLEMENTATION USING A FUZZY APPROACH
Hamid Akhavan Asghari
Institute of Information Technology, Azerbaijan National Academy of Sciences (ANAS), Baku, Azerbaijan
Mehrbakhsh Nilashi
Computer Engineering Department, Islamic Azad University, Roudsar, Iran
Firidon Ağayev
Institute of Information Technology, Azerbaijan National Academy of Sciences (ANAS), Baku, Azerbaijan
Farshad Akbari
Computer Engineering Department, Islamic Azad University, Lahijan, Iran
Keywords: Enterprise Resource Planning (ERP), Risk Managenet, Balance Scorcard (BSC), Critical Success Factor
(CSF), Fuzzy logic.
Abstract: Without powerful risk management, it is very difficult to imagine a successful implementation of enterprise
resource planning (ERP) system. In order to analyze risk management we need an overall view to project's
Critical Success Factors (CSFs). Having an accurate assessment of CSFs is a key point to challenges ahead
in ERP projects. Some weighted list of CSFs has been created up to now. In this article, a new classification
over CFSs by Balance Scorecard (BSC) will be presented. Our fuzzy approach causes some changes over
CSF importance.
1 INTRODUCTION
ERP systems are software applications that use
single information architecture to integrate a range
of business functions in order to acquire an overview
of the business (Gable et al., 1998). They automate
core enterprise activities such as manufacturing and
the management of finances, human resources, and
the supply chain. This has eliminated complex,
expensive links between systems and business
functions that had been previously performed across
legacy systems (Bingi et al, 1999; Kumark and
Hillegersberger, 2000; Mabert et al., 2000; Hong
and Kim, 2002; Tarn et al., 2002; Aloini et al., 2007;
Jones et al., 2006; Markus et al., 2000).
The implementation and utilization of ERP
systems represent a radical change from the legacy
systems of the past. Implementation is defined as the
process that begins with the initial analysis of
organizational processes and data (often referred to as
the “as is” stage), includes the planning of
organizational process and data changes the ERP is
used to bring about (“to be”), extends through training
users and installing the completed package for use
(Ross, 1999), and continues through a period of
adjustment or stabilization that can take several
months or years (Rockart 1979; Holland et al., 1999).
So that ERP implementation is one of the most
important challenges in information system
deployment in an organization. It is a little bit hard to
imagine a successful ERP implementation without
considering and planning on CSF.
The Critical Success Factors are defined as “the
limited number of areas in which results, if they are
satisfactory, will ensure successful competitive
performance for the organization (Somers and
Nelson, 2001). In the ERP context, (Kaplan and
290
Akhavan Asghari H., Nilashi M., A
˘
gayev F. and Akbari F..
RISK MANAGEMENT IN ENTERPRISE RESOURCE PLANNING IMPLEMENTATION USING A FUZZY APPROACH.
DOI: 10.5220/0003546502900294
In Proceedings of the 13th International Conference on Enterprise Information Systems (ICEIS-2011), pages 290-294
ISBN: 978-989-8425-53-9
Copyright
c
 2011 SCITEPRESS (Science and Technology Publications, Lda.)

Norton, 1996) define them as "the factors needed to
ensure a successful ERP project".
The Balance Scorecard (BSC) evaluates the
management process from four different
perspectives: financial, customer, internal processes
and learning and growth. For a better description
learning and growth has been replaced by human
resource (HR). In this paper a new arrangement of
CSFs on BSC with a small change in its concept will
be presented. To have an analytical view on ERP
implementation, Somers & Nelson 2001 (Capaldo et
al., 2008) CSF List will be re-ranked by a fuzzy
approach.
2 LITERATURE REVIEW
The BSC evaluates the management process from
four different perspectives: financial, customer,
internal processes and learning and growth (Centeno,
2002). Kaplan and Norton comment that a properly
constructed balanced scorecard should tell the story
of a company’s strategy. But in our model we are
going to use this tool to give a better view to project
stockholders like project managers, top management,
Vendor Company and etc (Centeno, 2002). We
described these aspects as follow:
A. Financial:
Although in original BSC the Financial Perspective
covers the financial objectives of an organization and
allows managers to track financial success and
shareholder value, but in our new definition we look
at the financial situation of organization to carry out
such an expensive project (TCO of software,
expensive consultant, valuable personnel salary such
as project champions and key users …) on start and
during implementation of ERP.
B. Customer:
In BSC classic definition the Customer Perspective
covers the customer objectives such as customer
satisfaction, market share as well as product and
service attributes. For us, the ERP vendor is the most
important customer you may insert external
implementation team to the customers list, So that any
CSF related to solution vendor may returned to this
aspect.
C. Internal Process:
In classic definition the Internal Process Perspective
covers internal operational goals and outlines the key
processes necessary to deliver the customer
objectives. And in our view it is refer to those
activity which affect the business process in
organization like project management,
Interdepartmental communication and so on. It seems
to be the most important aspect.
D. Learning and Growth:
With a small change in the learning and growth
Perspective that covers the intangible drivers of future
success such as human capital, organizational capital
and information capital including skills, training,
organizational culture, leadership, systems and
databases. We emphasize on Human resource (HR)
issues that more affect the project related CSF and the
other sides of it will be mentioned during the work.
Figure 1: The structure of ERP model.
3 OBTAINING THE CSFS
PRIORITY BY AHP METHOD
In this paper Somers & Nelson 2001 CSF ranked list
categorize upon BSC aspects as Table 1.
The AHP enables decision-makers to structures a
complex problem to a simple hierarchy form in order
to evaluate large number of quantitative and
qualitative factors in a systematic way under
conflicting multiple criteria. It first structures the
problem in the form of a hierarchy to capture the
basic elements of a problem and then derives ratio
Dedicated
resources
Vendor support
Vendor partnership
Vendor’s tools
ERP Systems CSFs
Classification
Top management support
Project team competence
Project champion
Project champion
Learning and Growth
Process
Finance
Customer
Interdepartmental
communication
Interdepartmental co-
operation
Clear goals and objectives
Project management
Use of consultant
RISK MANAGEMENT IN ENTERPRISE RESOURCE PLANNING IMPLEMENTATION USING A FUZZY
APPROACH
291

Table 1: Somer & Nelson CSF list categorized by BSC.
ROW CSF Name
Rank
Category
1
Top management support 4.29 Learning and Growth
2
Project team competence 4.2 Learning and Growth
3
Interdepartmental co-operation 4.19 Process
4
Clear goals and objectives 4.15 Process
5
Project management 4.13 Process
6
Interdepartmental
communication 4.09 Process
7
Management of expectations 4.06 Process
8
Project champion 4.03 Learning and Growth
9
Vendor support 4.03 Customer
10
Careful package selection 3.89 Process
11
Data analysis and conversion 3.83 Process
12
Dedicated resources 3.81 Finance
scales to integrate the perceptions and purposes into a
synthesis (Dasarathy, B. V., 1976).
Most of the CSFs would hold for IT
implementation projects in general, but some are
more important for ERP projects in particular. AHP
ranked factors have been selected to the rest of study.
Table 2 displays the priority of the CSF.
Table 2: Classification CSFs in BSC aspects (process,
customer, finance, learning and growth) by AHP method.
finical
learning and
growth
process customer Row
Dedicated
resources
Top
management
support
Interdepartmental
co-operation
Vendor
support
1
Project team
competence
Clear goals and
objectives
Vendor
partnership
2
Project
champion
Project
management
Vendor’s
tools
3
Project
champion
Interdepartmental
communication
4
4 RULES INDICATING ERP
IMPLEMENTATION SUCESS
LEVELS
Clustering is one of the refining techniques to find
the rules in fuzzy models. In this paper, k-means
clustering has been chosen.
2
11
)(
||||
j
k
j
n
i
j
j
cxJ −=
∑∑
==
(1)
A major function in clustering k-means is
equation 1.
All clustering activities were done by SPSS software
and the fuzzy rules have been refined from clusters.
Where || || is the criteria of distance between points and
C
j
is the center of j
th
cluster.
The rules describing the ERP implementation
success level are based on the degree of learning and
growth, process, customer and finical that these degrees
have been formulated like linguistic variable .similarly,
the degree for ERP level has been graded from very
low to very high in 5 distinctive fuzzy, collections
.these rules have been reached from the users ' answers
after ordering, analyzing, and clustering.
One of the collection rules for ERP
implementation success level can be like following:
If (HR = high and Process = high and customer =
high and finical=high) then (ERP =high).
5 ERP IN THE DEVELOPED
FUZZY SYSTEM
After discovering the rules related to ERP level,
relevant inputs and outputs for earning ERP
implementation success level in fuzzy tool box to Be
organized and were created relevant membership for
input and output. Figure 2 shows the fuzzy system
that can be used to derive the ERP implementation
success level. Figure 3 shows the fuzzy membership
functions of ERP Implementation level too.
Figure 2: Fuzzy system to obtain ERP implementation
success level based on learning and growth , PROCESS ,
CUSTOMERS and FININCE inputs.
Figure 3: Fuzzy membership functions of ERP
Implementation level.
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6 ANALYSIS OF ERP
IMPLEMENTATION VERSUS
LEARNING AND GROWTH
To complete understanding participation need in ERP
Implementation success level, it is necessary to test
the participation of each factor separately.
Figure 4 shows contribution ERP Implementation
success level originating from the learning and
growth. Therefore, the contribution from three
factors has been kept fixed. Figure 3 shows ERP
Implementation success level is monotonically
increasing by increasing perceived learning and
growth for any given level of three other factors.
Figure 4: ERP Implementation success level versus learning
and growth factor.
7 VISUALIZATION OF ERP
IMPLEMENTATION SUCCESS
LEVEL AS FUNCTION OF
PROCESS AND LEARNING
AND GROWTH
We now attempt to visualize the ERP
Implementation success level as a continuous
function of its input parameters. Figure 5 Attempts to
portray variation of ERP Implementation as
encapsulated in the rules for ERP Implementation
success level. The highest gradient for ERP
Implementation is when process is ‘moderate’ and
learning and growth is ‘moderate’ to ‘high’. Look at
figure 4, diagonally from (low, low) to (high, high)
levels of learning and growth and process.
As observes three plateaus where the last one is
around 0.911, and remains at that level even when
the input factors are increased further. This result is
somehow unexpected and may be due to the fuzzy
nature of the expert system where a ‘ERP
Implementation success’ level of 100% is unrealistic.
Figure 5: ERP Implementation is positively related to
levels of learning and growth and process.
8 CONCLUSIONS
This study shows the learning and growth plays a
very important role in ERP implementation success.
Although the direct sum of these factors ranks give
us a different conclusion. As you can see in figures 3
there is a very low chance of successful ERP
implementation for low amount of learning and
growth, so it is strongly recommended to empower
this aspect of organization before attempting any
large IT project like ERP. Process is another
important aspect of each project, by a linear sum,
you can easily understand that it should be important
aspect; this study shows that with a strong backbone
of process and learning and growth you can increase
the chance of successful ERP implementation up to
90%. However a successful ERP implementation by
empowering process aspect lonely could not be
guaranteed.
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