Quantifying the impact of ERP malfunctioning in a manufacturing plant

Enterprise Resource Planning system (ERP) benefits for manufacturing companies have been praised for years and companies have become increasingly dependent on these IT tools. However, any malfunctions or temporary unavailability of the ERP can significantly affect the company business. The ERP obsolescence invokes the critical decision on whether to update, upgrade or substitute it. When these operations require significant investments, a timely evaluation of the advantages and disadvantages is needed. In this paper, we present a methodology to quantify the economic loss caused by the malfunctioning of an ERP supporting a manufacturing plant. The research took cue from a real case of a world-famous multinational company of the automotive industry. In this case, the maintenance contract supporting the previous system expired and the company experienced significant inconveniences by delaying the introduction of a new ERP. Hence, the main functional features of an ERP in a production plant processes are listed, and the potential hindrances due to the information system malfunctioning are classified in four critical macro-categories: production planning, manufacturing operations management, materials management, warehousing and inventory control. The contribution of the paper resides in classification of the main operational losses due to ERP malfunction in a generic manufacturing site, on top of proposing possible criteria for estimating the related economic losses, based on the issues faced during the real-world scenario.