Fuzzy Multi-criteria Method for Revaluation of ERP System Choices Using Real Options

Transcription

1 Proceedgs of the World Cogress o Egeerg 11 Vol II WCE 11, July 6-8, 11, Lodo, U.K. Fuzzy Mult-crtera Method for Revaluato of ERP System Choces Usg Real Optos A.Cagr Tolga Abstract May corporate had mplemeted ERP systems sce md 199s. Some of them bega late md s. ERP systems are ewly well uderstood ad cofuso about these systems s becomg clear. I ths study a corporate based o costructo has may compaes ad much of them are usg dfferet ERP systems. Top maagemet decded to ufy ad revaluate the system ad uravel the etaglemet about ths topc. Evaluato process of ERP systems eeds to take may crtera to accout. A effcet method called AHP s sutable for ths revaluato process because of ts uderstadablty. Professoals the evaluato process are asked to part of the system ad AHP method s comprehesblty allows ths tegrato. ERP systems has may rsks mplemetg phase, these rsks have to be hadled by more complex evaluato method. Facal optos based real optos fts lke a glove for ths revaluato process. Real optos gve top maagemet much flexblty about ther decso. They mght use opto to wat revaluatg the ERP system or they mght exercse the opto mmedately. Vagueess ad the process, lack of data or dsallowace of gettg out the data from the compay drves the problem solvers to use fuzzy logc. Ths study tegrates fuzzy real optos wth fuzzy AHP to revaluate the ERP systems of the corporate that s costructo based. Idex Terms bomal lattce, ERP selecto, fuzzy, multcrtera, real optos. E I. INTRODUCTION NTREPRISE resource plag (ERP) systems help to tegrate maagemet, staff, ad equpmet, combg all aspects of the busess to oe system order to facltate every elemet of the maufacturg process. ERP groups tradtoal compay ad maagemet fuctos (such as accoutg, huma resources [HR], maufacturg maagemet, ad customer relatoshp maagemet [CRM]) to a coheret whole. Maufacturg maagemet also cludes vetory, purchasg, ad qualty ad sales maagemet. ERP systems esure that formato etered oe formato system ca be shared wth other systems used elsewhere the corporato. Whe formato s shared by systems throughout the orgazato, the eterprse becomes more effcet [1]. Therefore, today s world mplemetg ERP system s evtable for ay md sze or large scale corporate. Evaluatg the ERP system s Mauscrpt receved February 15, 11; revsed March 5, 11. Ths work s facally supported by Galatasaray Uversty scetfc research proect fuds. A. Cagr Tolga s wth the Departmet of Idustral Egeerg, Galatasaray Uversty, Ortakoy, Besktas, 34357, Istabul, Turkey (correspodg author to provde phoe: ; fax: ; e-mal: ctolga@gsu.edu.tr). ISBN: ISSN: (Prt); ISSN: (Ole) geerally made by maagemet ad formato system (MIS) departmet of the compay. However, valuato of a ERP system s more complex through ts ature. Not oly oe departmet most of the top maagemet should be the part of the decso process. ERP system selecto has may dmesos cocerg cost, scalablty, adaptablty, ad etc. Evaluato of busess strategy explas the form of dog busess. Because whe a ERP system s mplemeted may busess forms wll chage ad the workers mght attempt to offer resstace. Due to may dmesos sad above a mult-crtera method should be charged to evaluato process of a ERP system. A soluto method called aalytcal herarchy process (AHP) s used for mult-crtera process ad the effcecy of the method s proved because of ts soluto offer to more complex problems. O the cotrary of ts complexty, the method has comprehesble steps ad the logc of the model could be uderstood o average. Beeath these advatages the AHP method takes moetary ad o-moetary crtera to cosderato. The covetoal vestmet aalyss methods such as preset worth (PW), equal aual worth (EAW), rate of retur aalyss, B/C rato, etc. aalyses were used for ecoomc evaluato of ERP systems. The dyamc sde of the ERP system evaluato ecesstates more sophstcated method for ecoomc vestmet aalyss. Oe of the attrbutes wll cocer ths aalyss ad wll be tegrated to AHP method usg real optos. A real opto valuato (ROV) model s prcples are based o facal optos. However, the ature of real optos volves permaet, fxed or mmovable assets. Valuato of real optos ecesstates real opto aalyss. The key advatage ad value of real opto aalyss s to tegrate maageral flexblty to the valuato process ad thereby assst makg the best decsos []. Real optos gve a rght but ot a oblgato to make or ot to make a vestmet for a certa perod. Real crcumstaces daly lfe are very ofte ucerta ad vague several ways. Ad whe there s a lack of formato, a system mght ot be kow completely. Zadeh [3] suggested a strct mathematcal outle amed fuzzy set theory that overcomes these adequaces. May compaes do ot share to get the facal data out the corporato because of ther secrecy. Due to these sad reasos fuzzy logc wll be used real opto aalyss ad also AHP method ths study. Referece [4] presets a comprehesve framework for selectg a sutable ERP system usg AHP method. Other study about AHP s made by [5] for maufacturg compaes. Selectg the most approprate software betwee two elected caddates after some aalyss for the fal WCE 11

2 Proceedgs of the World Cogress o Egeerg 11 Vol II WCE 11, July 6-8, 11, Lodo, U.K. decso by usg a techque wth aalytc herarchy process (AHP) support a factory whch s plag to use ERP software that fts ts fuctos study s made by [6]. A approach to select a sutable ERP system for textle dustry usg fuzzy AHP s made by [7]. The author uses balaced scorecard to show how the overall strategc obectves are traslated to the performace drvers that the compay has detfed as crtcal success factors. AHP method uder fuzzess allowg decso makers to express ther evaluatos lgustc expressos, crsp or fuzzy umbers s appled by [8] a automotve frm for selectg the best alteratve amog three ERP outsourcg frms. Researchers worked o aother fuzzy mult-crtera method called aalytcal etwork process (ANP) for selectg ERP systems. A easy ERP software selecto procedure by settg up ANP ad artfcal eural etwork (ANN) models s offered by [9]. Calculato of geometrc mea of aswers that obtaed from may experts s uecessary that procedure. A tellget approach to ERP software selecto through a fuzzy ANP s proposed by takg to cosderato quattatve ad qualtatve elemets to evaluate ERP software alteratves by [1]. A geeral level coceptual framework to sequece ERP module mplemetatos ad expaded model to a more detaled level a case study s preseted by [11]. The prortes for the mplemetato sequece of the ERP modules are determed the sad study. A actve ERP mplemetato maagemet perspectve to maage ERP rsks based o the Real Optos (RO) theory, addressg ucertates over tme, resolvg ucertates chagg evromets that caot be predefed s offered by [1]. Referece [13] suggests a method that could help formato techology (IT) maagers to produce a well-structured valuato process IT vestmet decso-makg, ad to uderstad the teractos betwee IT rsks ad optos value a clear way. The study also llustrates how the proposed procedure s appled to a ERP proect a costructo compay. Referece [14] tackles the problem usg a real-opto aalyss framework, ad apples multstage stochastc teger programmg formulatg a aalytcal model whose soluto wll yeld optmum or ear-optmum vestmet decsos for ERP proects. Aother study troducg a real optos-based methodology whch overcomes the lmtatos of tradtoal valuato methods ad eablg decso-makers to value a ERP system vestmet corporatg multple optos s offered by [15]. The orgazato of ths paper s as follows. I secto revaluato crtera for ERP systems ad herarchy of these crtera s gve. The thrd secto cossts of kowledge of fuzzy AHP method. I secto 4, fuzzy real optos soluto method usg bomal lattce soluto method s gve. The steps ad the backboe of the proposed method are preseted Secto 5. Fally secto 6 the coclusos of ths study are dscussed. II. THE REVALUATION AND RESELECTION CRITERIA FOR ERP SYSTEM The crtera set of ths study those ecesstated by fuzzy AHP are determed by collaboratos of professoals. Fve ma crtera are set cludg culture ad structures, adaptato ad developmet, soluto parter, productvty, ad fuzzy real optos value (FROV). Also sxtee subcrtera ad seve sub-sub crtera are offered wth coecto to the ma crtera. Crtera umbers are determed wth dlgece because of ot to dmsh the effcecy of the method. Deftos of all these ma, sub ad sub-sub crtera are gve Table I. The herarchy that AHP method eeds s llustrated Fg. 1. Ths work s desged by the help of a costructo based compay (XYZ hereafter) Turkey. The XYZ eterprse has twelve compaes four dfferet sectors those clude costructo, eergy, cemet producto, ad foudry. These compaes were usg dfferet systems cludg ERP systems ad dfferet md-sze local software. The top maagemet decded to ufy them. They also decded to revaluate ad reselect a uque system for ther eeds. A team whose members are from eterprse (HR drector, MIS drector), from uversty ad from cosultat compay s composed for ths revaluato ad reselecto process. A lterature search s made as gve the TABLE I CRITERIA FOR ERP SYSTEM REVALUATION AND RESELECTION ERP Ma Crtera b Crtera b-sub Crtera Defto Culture ad Structures (CS) Busess strategy (CB) Chagg type of busess, explaato of t ad ablty to desg the processes at the employer sde Soco-Ecoomc factors (CE) Competeces of physcal ad evrometal codtos Huma Resources (CH) Competecy of eterprse huma resources Top maagemet support (CT) Stablty ad support of corporate top maagemet Adaptato ad Developmet (AD) Flexblty (AF) Table (AFT) Exstece of table customzato Module (AFM) Exstece of module customzato Code (AFC) Exstece of code customzato Process Adaptablty (AP) Adaptato of system to the process Implemetato tme (AI) Applcato tme offered by the soluto parter Effcet ad fast reportg (AE) Competecy of fast e effcet reportg Producto structure (AS) Producto (ASP) Approprateess of producto processes Commercal (ASC) Approprateess of commercal processes (AA) Iteral (AAI) Approprateess of system to teral audt Exteral (AAE) Approprateess of system to exteral (Treasury, SPK, etc.) audt Soluto Parter-Vedor (SP) Coceptual desg (SC) Talorg cocepts betwee employer ad the soluto parter Servce ad support (SS) Servce after sale ad huma, facal ad physcal resources trasferred by the soluto parter Refereces ad reputato (SR) Works doe by the soluto parter the sector ad awareess Productvty (P) Fuctoalty (PF) Fuctoalty of the system, easly maageablty ad user fredless of terface Scalablty (PS) Expadablty or reducblty of the system Itegrato (PI) Harmoy wth the evro systems (Offce, Explorer, Mozlla etc.) FROV - Fuzzy Real Opto Value of ERP system alteratves ISBN: ISSN: (Prt); ISSN: (Ole) WCE 11

3 Proceedgs of the World Cogress o Egeerg 11 Vol II WCE 11, July 6-8, 11, Lodo, U.K. Best ERP System Culture ad Structures (CS) Adaptato ad Develop. (AD) Soluto Parter (SP) Productvty (P) FROV Busess Strategy (CB) Socoecoomc Factors (CS) Huma Resources (CH) Top Maageme t pport (CT) Flexblty (AF) Process Adaptablty (AP) Implemetato Tme (AI) Effcet ad Fast Reportg (AE) Producto Structure (AP) (AA) Coceptual Desg (SC) Servce ad pport (SS) Refereces ad Reputato (SR) Fuctoalty (PF) Scalablty (PS) Itegrato (PI) Table (AFT) Module (AFM) Code (AFC) Producto (ASP) Commercal (ASC) Iteral (AAI) Exteral (AAE) Hertage Alter. 1 Alter. Alter. 3 Fg. 1. Herarchy for ERP system revaluato ad reselecto process. troducto secto for crtera determato. The may meetgs are orgazed for ths process. Delph method s appled wth the help of team members ad the crtera set show below are decded to use the revaluato ad reselecto process. Oe of the ERP system alteratves mostly used by 4 compaes of the XYZ eterprse called hertage. I addto three more alteratves are added to the data set wth udgmets of team members. III. FUZZY ANALYTIC HIERARCHY PROCESS (FAHP) The AHP method developed by Saaty [16] cosders ad compares both qualtatve ad quattatve data smultaeously. Its data requremet s mmal ad capable of hadlg multple obectves for ERP system selecto proects ad decomposg the problem to multlevel structure or herarchy. I fuzzy AHP, fuzzy umbers represet the measuremet of experts vew toward the preferece of assessmet by formg the par-wse comparso matrces. I ths study, though we use trapezodal fuzzy umbers, Buckley s fuzzy AHP method wll be employed [17]. AHP ca accelerate the developmet of a cosesus amogst multple decso makers ERP system selecto process. IV. FUZZY REAL OPTIONS METHOD Makg a decso of vestg or revestg a ERP proect s smlar to purchasg of a opto o a future vestmet however t s a real vestmet. The ature of the vestmet ERP system selecto decsos s dscrete ad you have to decde whether to carry o the opto or exercse t every year. Sce there s a lack of data or vagueess fuzzy real opto aalyss s eeded. I real opto aalyss lattce models for evaluatg the alteratves are ft lke a glove for ths type of vestmet. I facal optos dvded payg stocks optos are computed dfferg from o-dvded payg stocks. Dvded paymet reduces the prce of opto ad calculato has to be made accordg to ths clause. A aalogy mght be made betwee facal ad real optos about ths topc. I real optos for example compettor etrace dmshes the future cash flows (CF) or hgh flato mght cause a decle CF, though ths case dvded payg stock optos computg has to be appled. I ths study sce there s o statemet affectg the CF, o-dvded payg real optos aalyss s utlzed. Bomal tree method was developed by Cox et al. [18] for prcg the optos a dscrete form. The method puts o the future expected rewards trasparetly. Though the bomal method has more flexblty the put varables of the model could be chaged aytme durg the lfe of the optos. The volatlty of the prces ca be fxed wthout complex chage the model. The results ad the model ca be explaed to the decso maker easly. I real optos the decso are made at aytme ad t could be made dscrete pot ay perod, though the bomal lattce soluto method s coveet for real optos. The bomal tree s easer to work wth because of ts regular grd ad ts flexblty, allowg relatvely easy exteso to tme-varyg drft ad volatlty parameters. I ths chapter, we preset geeral fuzzy form of the bomal tree model for the case of complete data or vagueess. The bomal tree approach s llustrated Fg.. ppose that p u, ad p d are the probabltes of up, ad dow movemets at each ode ad t s the legth of the tme step. For a o-dvded payg stock, parameter values that match the mea ad stadard devato of prce chages whe terms of order hgher tha t are gored: a x t () u e x (3) d 1 u (4) r t e (1) ISBN: ISSN: (Prt); ISSN: (Ole) WCE 11

4 Proceedgs of the World Cogress o Egeerg 11 Vol II WCE 11, July 6-8, 11, Lodo, U.K. Here, pots out the ucertaty of expected cash flows, r quatfes the aualzed cotuously compouded rate o a safe asset. a d pu u d (5) u a pd u d (6) As metoed above f there s lack of data or vagueess s occurred fuzzy otatos have to be used. S deotes the possble values of the preset value of expected cash flows, a smlar maer X quatfes the possble values of vestmet cost. At tme zero, the preset value of expected cash flows, S s kow. At tme t, there are two possble S values,, ad ; at tme t, there are three possble S values,, S, ad ; ad so o. I geeral, at tme t, 1 S values are cosdered. These are: S, S u d,,1,, (7) S p u p d t Fg.. Bomal lattce. Notce that the u 1 d relatoshp s used computg the S value at each ode of the tree Fg.. For example,. Real optos by lattce methods are evaluated by startg at the ed of the tree (tme T) ad workg backward. The value of the real opto s kow at tme T. Let us express the approach algebracally. Because the value of the real opto at ts exprato date s max(, S X), we kow that c max(, S X),,1,, T (8) T, T, S 3 3 c e [ p c p c ] (9) rt u 1, 1 d 1, for T 1 ad. Whe early exercse s cosdered, ths value for c must be compared wth the opto s trsc value, ad we obta: c max e [ p c p c ], S X (1) rt u 1, 1 d 1, Whle attag to these data, experts defed them a fuzzy maer. Beeath these, because the ature of fuzzy terms, we eed to compare whether the secod term of the result (8) s greater or smaller tha zero. A effcet ad fast alteratve fuzzy umber rakg s offered by [19]. I comparg fuzzy umbers wth zero ad rakg fuzzy umbers ths offered method s used ths study. I the followg secto full steps of the ew offered method s formulae are preseted. V. STEPS OF THE MODEL Ths study offers a fuzzy real opto wth o-dvded payg bomal lattce method tegrated fuzzy AHP for revaluato of ERP systems. The steps are as follows: Step 1: Costruct the par-wse comparso matrx cotag fuzzy umbers obtaed from questoares. Step : Fd geometrc mea of each row by (11): 1/ z t,for each value (11) 1 Step 3: Calculate the fuzzy weghts, 1 w, by (1): w z z (1) 1 Repeat Step 3 for every performace grades. Step 4: For fuzzy real optos value, calculate all S values by (7). Step 5: Calculate c T, values by (8) do ot forget to compare fuzzy values wth zero by (13). N U f I( w) (.5,1] PKT ( N, U ) N U f I( w).5 U N f I( w) [,.5) (13) Let N ( 1,, 3, 4) ad U ( u, u, u, u ) be two dfferet fuzzy umbers. Calculato of dex I( ) s the key factor sad method ad that method ca be appled to both tragular ad trapezodal fuzzy umbers. Usg (14) tragular fuzzy umbers s as easy as wkg. After computg the c T, values, (o early exercse) c values at each ode could be calculated by the formula below: ISBN: ISSN: (Prt); ISSN: (Ole) WCE 11

5 Proceedgs of the World Cogress o Egeerg 11 Vol II WCE 11, July 6-8, 11, Lodo, U.K., u1 4 ( 4 u1) ( u u13 4), u 3, u14 ( 4 3 1) ( u4 u3 u u1) 4 3 u u1 I ( ), u3, u 3 ( 4 3 1) ( u4 u3 u u1) ( u3) ( 4 3 u u1) ( u4 u3 1), u3, u4 1 ( 4 3 1) ( u4 u3 u u1) 1, u4 1 (14) Step 6: Compute all c values by (9), tll fdg c, value. Ths value s fuzzy real opto value of oe alteratve. Step 7: Repeat Steps 4-7 for each alteratve ad fd all alteratves FROVs. Step 8: Normalze these values for tegratg fuzzy AHP. Step 9: Combe fuzzy weghts ad fuzzy performace grades those are obtaed from calculatos by Steps 1-8. The, calculate the fuzzy utltes U, by (15): U w r, (15) 1 Step 1: Rak the alteratves descedg order accordg to Kahrama ad Tolga s [19] fuzzy umber orderg method. VI. CONCLUSION ERP systems have become vtal for challegg corporate recet years. Utlzg the rght system offers cost advatage ad effcecy accordg to the system gets you frot of your compettors. However f a corporate has dfferet ERP systems each are mplemeted dfferet tmes to dfferet compaes, ths meas there s a cofuso about ERP mplemetato. A revaluato process s eeded to select uque sutable ad rght ERP system to be mplemeted to whole eterprse. Rsky ad dyamc sde of the selecto process s evaluated by real optos. Real optos gve the maagemet flexblty about makg a vestmet about ERP systems. Fuzzy AHP s a mult-crtera evaluato method for choosg procedure ad t s more comprehesble tha the other methods. Ths property saves tme, workload ad moey because of the applcato tme of the problem. Beeath ts savg resources the method produces the rght decso to the problem. I case of lack of formato ad vague data stuatos fuzzy logc s offered. I ths study fuzzy form s used because of the compay does ot wat to take out the other part of the data crsply. Fuzzy logc overcomes these dffcultes. Though these defceces, the ma cotrbuto of ths work s to make revaluato amog the ERP system choces usg fuzzy real optos tegrated fuzzy AHP method. REFERENCES [1] M. Bradford, Moder ERP-Select, mplemet & use today s advaced busess systems. Ralegh, NC, 8, pp [] M. A. Brach, Real Optos Practce. New Jersey: Joh Wley & Sos, 3. [3] L. A. Zadeh, Fuzzy sets, Iformato Cotrol, vol. 8, pp , [4] C. C. We C. F. Che ad M. J. J. Wag, A AHP-based approach for ERP System Selecto, Iteratoal Joural of Producto Ecoomcs, vol. 96, o. 1, pp. 47 6, 5. [5] H. S. C. Perera, ad W. K. R. Costa, Aalytcal Herarchy Process for Selecto of ERP Software for Maufacturg Compaes, The Joural of Busess Perspectve, vol. 1, o. 4, pp. 1 11, 8. [6] N. Karaarsla, ad E. Gudogar, A applcato for modular capablty-based ERP software selecto usg AHP method, Iteratoal Joural of Advaced Maufacturg Techology, pp. 1 9, 8. [7] U. Cebec Fuzzy AHP-based decso support system for selectg ERP systems textle dustry by usg balaced scorecard, Expert Systems wth Applcatos, 36, pp , 9. [8] C. Kahrama, A. Beskese, ad I. Kaya, Selecto amog ERP outsourcg alteratves usg a fuzzy mult-crtera decso makg methodology, Iteratoal Joural of Producto Research, vol. 48, o., pp , 1. [9] H. R. Yazga, S. Bora, ad K. Goztepe, A ERP software selecto process wth usg artfcal eural etwork based o aalytc etwork process approach, Expert Systems wth Applcatos, 36, pp , 9. [1] Z. Ayağ, ad R. G. Özdemr, A tellget approach to ERP software selecto through fuzzy ANP, Iteratoal Joural of Producto Research, vol. 45, o. 1, pp , 7. [11] P. Hallkae, H. Kvarv ad M. Tuome, pportg the module sequecg decso the ERP mplemetato process - a applcato of the ANP method, Iteratoal Joural of Producto Research, vol. 119, o., pp. 59-7, 9. [1] L. C. Wu, C. S. Og, ad Y. W. Hsu, Actve ERP mplemetato maagemet: A Real Optos perspectve, The Joural of Systems ad Software, vol. 81, pp , 8. [13] T. Che, J. Zhag, ad K. K. La A tegrated real optos evaluatg model for formato techology proects uder multple rsks, Iteratoal Joural of Proect Maagemet, upublshed, 9. [14] F. Wu, H. Z. L L. K. Chu, D. Scull ad K. Gao, A approach to the valuato ad decso of ERP vestmet proects based o real optos, Iteratoal Joural of Proect Maagemet, upublshed, 9. [15] C. O. Özogul, E. E. Karsak, ad E. Tolga, A real optos approach for evaluato ad ustfcato of a hosptal formato system, The Joural of Systems ad Software, upublshed, 9. [16] T. L. Saaty, The Aalytcal Herarchy Process. New York: Wley, 198. [17] J. J. Buckley, Fuzzy herarchcal aalyss, Fuzzy Sets ad Systems, Vol. 17, pp , [18] J. C. Cox, S. A. Ross, ad M. Rubste, Opto prcg: a smplfed approach, Joural of Facal Ecoomcs, Vol. 7, pp. 9-63, [19] C. Kahrama, ad A. C. Tolga, A alteratve rakg approach ad ts usage Mult-crtera Decso-makg, Iteratoal Joural of Computatoal Itellgece Systems, Vol., o. 3, pp , 9. ISBN: ISSN: (Prt); ISSN: (Ole) WCE 11