Gaining Competitive Advantage from Integrating Enterprise Resource Planning and Total Quality Management

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Enterprise resource planning (ERP) and total quality management (TQM) are practices that continue to have an enormous effect on business. First, ERP can be considered both as an organizational planning and reengineering opportunity as well as being a software application for tracking and controlling transactions. Specifically, an ERP system (i.e., an enterprise system) is an information technology (IT) infrastructure that facilitates the flow of information between the processes of an organization (Al-Mashari and Al-Mudimigh 2003). Although the initial intention of ERP was a "within-organization" focus, many organizations have addressed supply chain challenges with their enterprise systems. The Internet has also brought about a revolution in supply chain thinking (Davenport and Brooks 2004). Second, TQM is a holistic philosophy of management that requires the organization to continuously seek improvement in every activity, in every function, in every process. Particularly, Klenz (1999) offered that enterprise quality improvement is quite different from quality improvement at the process level requiring information from many departments within the organization. He argued that the disparity and disconnection of systems including ERP, manufacturing resource planning (MRPII), and statistical process control (SPC) poses a major problem for the implementation of enterprise quality improvement.

Quality management programs and ERP implementations are strategic business initiatives that aspire to improve firm performance (Laframboise 2002). As reported in Williams, Van der Wiele, van Iwaarden and Visser (2004), TQM is a management approach that ensures mutual cooperation of everyone in an organization and associated business processes to produce products and services that meet, and hopefully exceed, the needs and expectations of customers. The authors argue that even though there are signs of a decline in interest for TQM from top management, there is potential for renewed attention based on e-business and the Internet, although this might be more conspicuous at the operational level than the strategic level, albeit supported by top management commitment.

Similarly, others have discussed how both ERP and TQM initiatives have a broad scope, usually affecting all the processes and several areas of the company (Ang, Davies and Finlay 2000; Bhatt 2000; Ravichandran and Rai 2000; Koch 2001; Manetti 2001). However, McAdam and Henderson (2004) argued that rapid developments in technology would appear to have bypassed the TQM discourse given the paucity of systematic research specifically on e-business and TQM. They suggested that technology as an external driver of TQM, e-business in relation to business process reengineering (BPR) and supply chain issues need more studies in the area of IT as applied to TQM principles. Furthermore, very little academic research has been carried out on ERP (or on the business impacts of ERP systems post-implementation), except for research on reasons for implementation and on the challenges of the implementation project itself (Akkermans, Bogerd, Yucesan and van Wassenhove 2003).

As practices that drive organizational development, these strategic resources are instances of the approach known as the resource-based view (RBV). Kalling (2003) reported that the RBV provides a broader perspective for the organization because it focuses the sustainability of competitive advantage. He posited that resources affect processes, which in turn affect product and services. Quality and strategic planning are complementary and good-quality management is a key source of competitive advantage (Mehra and Agrawal 2003). TQM triggers an inimitable competitive advantage due to its ability to encourage routines and guidelines generating a wealth of distinctive competencies, and in line with RBV, it becomes an important competitive advantage (Tena, Llusar and Puig 2001). Furthermore, these initiatives can be incorporated as part of a supply chain management system (SCMS) to permit the partners in a chain to mutually gain from the initiatives. …