Management Decision Problem

Evaluating ERP Systems with a Scoring Model

1 .       Your company, Audio Direct, sells parts used in audio systems for cars and trucks and is growing very fast. Your management team has decided that the firm can speed up product delivery to customers and lower inventory and customer support costs by installing an enterprise resource planning (ERP) system. Two enterprise software vendors have responded to your request for proposal (RFP) and have submitted reports showing which of your detailed list of requirements can be supported by their systems. Audio Direct attaches the most importance to capabilities for sales order processing, inventory management, and warehousing. The Information Systems staff prepared the following matrix comparing the vendors capabilities for these functions. It shows the percentage of requirements for each function that each alternative ERP system can provide. It also shows the weight, or relative importance the company attaches to each of these functions.

Function

Weight

ERP System A %

ERP System A Score

ERP System B %

ERP System B Score

1.0 Order Processing

         

    1.1  Online order entry

4

67

 

73

 

    1.2   Online pricing

4

81

 

87

 

    1.3   Inventory check

4

72

 

81

 

    1.4  Customer credit check

3

66

 

59

 

     1.5  Invoicing

4

73

 

82

 

Total Order Processing

         
           

2.0 Inventory Management

         

       2.1 Production forecasting

3

72

 

76

 

       2.2 Production planning

4

79

 

81

 

       2.3 Inventory control

4

68

 

80

 

       2.4 Reports

3

71

 

69

 

Total Inventory Management

         
           

3.0   Warehousing

         

       3.1 Receiving

2

71

 

75

 

       3.2 Picking/packing

3

77

 

82

 

       3.3   Shipping

4

92

 

89

 

Total Warehousing

         
           

Grand Total

         

  1. Calculate each ERP vendor's score by multiplying the percentage of requirements for each function by the weight for that function.
  2. Calculate the each ERP vendor's total score for each of the 3 major functions (order processing, inventory management, and warehousing.) Then calculate the grand total for each vendor.
  3. On the basis of vendor scores, which ERP vendor would you select?
  4. Are there any other factors, including intangible benefits, that might affect your decision?