Exploring the Effects of Enterprise Resource Planning Systems on Direct Procurement: An Upstream Asset-intensive Industry Perspective

Abstract

The past two decades have experienced an unprecedented rise in enterprise resource planning (ERP) systems implementation among asset-intensive organizations. Typical asset-intensive industries such as oil & gas, energy, and mining, rely heavily on the performance of their asset investments to stay competitive. Recently, several ERP vendors have developed solutions with diverse functionalities to address different business processes within such organizations. However, challenges unique to asset-intensive industries such as multiplex global supply chains, geographically dispersed sites, and sporadic climatic conditions add to existing impediments. This paper explores the effects of ERP systems on direct procurement with a focus on upstream asset-intensive industries. The study examines existing functionalities within ERP to determine benefits and constraints and builds on a framework with which to address potential gaps and opportunities. A quantitative research method was used to address five constructs related to ERP systems functionality to support inventory levels, delivery lead-times, procure-to-pay process, engineering change management, and ERP usability. The findings reveal statistically significant relationships between ERP systems effectiveness and all mentioned constructs, except the procure-to-pay process and ERP usability. The study informs on future improvements and feasible developments in procurement management and extends the scope of ERP systems knowledge in asset intensive industries.