Applying of Fuzzy Logic Modeling for the Assessment of ERP Projects Efficiency Andriy Semenyuk Lviv Academy of Commerce, Tugan-Baranovskoogo. 10, 79005 Lviv, Ukraine andriy.semenyuk@gmail.com Abstract. ERP software is one of costly and crucial projects for business in- vestment. It is known that nowadays Enterprises can rarely afford to implement long-term projects, in most cases the duration of implementation varies from 3- 4 months (automation of individual store retail chain) and 1-1.5 years when it comes to big projects. Only successful combination of analytical tools and methodologies will allow the project to realize and implement ERP-solutions for commercial enterprises on time and according to set business requirements. This paper proposes a practical assessment model which applies both the fuzzy analytic logic approach and the Expert Judgment method to evaluate whether the ERP software implementation project has succeeded or not. Keywords. Modeling, Efficiency, Project, Information Technology, Implemen- tation, Enterprise, ERP Key terms. Model, Methodology, Process, Management, Approach 1 Introduction Today it is especially important for Ukrainian Enterprises to be capable to analyze all the environmental aspects within they operate and be able to plan all needed resources with the most possible accuracy. To gain such competitive advantages within chang- ing economy and unstable markets, for particular Enterprise is not enough just to have the most modern production lines or good educated personnel it also requires to pos- sess some advanced technologies and modern information management systems that will quickly allow to react and adapt all the further changes. That is why more and more Enterprises in Ukraine from different sectors of economy are choosing to im- plement the Enterprise Resource Planning (ERP) system. ERP plays an important role to integrate organization's information and functions in all areas of enterprise activities and within the variety of departments and finally results in successful operation on the market. However ERP implementation as a pro- ject itself is costly and time consuming, it also can lead to loss of many valuable re- sources of the company in case of wrong approached and not efficient way of imple- 394 A. Semenyuk mentation. So it is critically important for the Enterprises to understand and clearly realize all the value achieved from ERP initiative [2]. Many factors are essential in determining the efficiency of the ERP projects. Since most of these factors are qualitative and relations between them are very complicated, determining their exact quantitative values is quiet difficult. Using the combined methods of Expert Judgment and Fuzzy logic can be helpful to simplify the calcula- tions and finally leads to a more precise result to determine generalized efficiency value of the implemented ERP-project. In this research, we intended to gather optimal KPIs values from different Enterprise activities and departments based on Experts Judgment data and design a combined Fuzzy Model to assess the efficiency for ERP- project [4]. 2 Problem Statement and Goals of the Paper The most common aspects and issues related to ERP systems development and im- plementation methods of ERP-projects seems to be widely discovered observed and investigated in works of many foreign as well as Ukrainian researches and scientists [1], [2], [4], [5]. However the problems related with particular to the efficiency of such projects are not enough covered. In view of this subject of the research is still topical. The main aim of the paper is to present a model for evaluating the effectiveness of ERP-project implemented on the markets of underdeveloped economic systems with involves a combination of fuzzy logic and expert judgment methods. Because the initial data for measuring the effectiveness of ERP-project is mostly inaccurate and variable so the use of fuzzy logic techniques to enhance the data gathered from the expert is really feasible here. 3 Proposed Model and Approach In order to develop the model for the assessment of ERP-project efficiency first of all it was conducted a set of related Expert Judgment questionnaires sessions, for the proposed assessment methods and optimal performance indicators or key performance indicators (KPI) values, in other words KPI is a type of performance measurement. An organization may use KPIs to evaluate its success, or to evaluate the success of a particular activity in which it is engaged. Sometimes success is defined in terms of making progress toward strategic goals, but often success is simply the repeated, peri- odic achievement of some level of operational goal (e.g. zero defects, 10/10 customer satisfaction, etc. Accordingly, choosing the right KPIs relies upon a good understand- ing of what is important to the organization [9]. The basics input data of our research are KPIs of ERP-projects that were received from managers of ERP-projects, and classified according to the criterion of "trend change". Determination of further scope of KPIs and the major ERP success factors also is based on variety international consulting agencies reports KPIs values, and ERP-projects Applying of Fuzzy Logic Modeling for the Assessment … 395 statistics obtained from such reports was additionally verified with the involved experts [6], [7], [8]. As the result it has been allocated four main groups of indicators: 1) X - perform- ance "increase group of KPIs" (the actual value of which increased for the Enterprise after ERP implementation), 2) Y - values "reduce group of KPIs" (the value of which decreased for the Enterprise after ERP implementation) 3) W – project financial and investments indicators. 4) Z - Generally optimized qualitative KPIs for different proc- ess aspects within Enterprise. To be able assess the effectiveness of ERP-project we developed a structural com- bined model (depicted on Fig. 1). The model contains of methodological approaches and structure of key performance indicators to determine the effectiveness of ERP- project. Summarized decision tree inference, which is presented at the bottom of the model, reflects the hierarchy of input variables. Fig. 1. Combined Model of ERP Projects Efficiency Assessment Developing a questionnaire for determining the Fuzzy (if-then) Rules with respect to the three optimal KPIs values obtained from Experts as inputs and ERP project efficient value as output. Validity and reliability of the questionnaire was confirmed and they were distributed among the ERP practitioners. Fuzzy rules as the basis for determination of the conditions of the company KPIs have been formed and entered into Fuzzy system through MATLAB software. Currently there are variety of software tools and system for applying the fuzzy logic calculations available on the market (CubiCalc 2.0 RTC, CubiQuick, FIDE, Flex Tool, FuziCalc, FuzzyTECH, JFS, MATLAB - Fuzzy Logic Toolbox, RuleMaker etc). Each of these products has its own strengths and weaknesses, however as soft- ware platform for our research it was decided to go with MATLAB Fuzzy Logic 396 A. Semenyuk Toolbox (FLT) as most appropriate tool in particular because of the integrated nature of the MATLAB environment that also provides functions, applications, and a simula- tive block for analyzing, designing, and simulating systems based on fuzzy logic, widely used not only in academic and research institutions but by industrial enter- prises as well. To determine the value of each factor, different questionnaire was prepared to collect related information for the KPIs values. Also validity and reliability of mentioned questionnaire was confirmed and it was distributed among managers and experts in that domain. Calculated means obtained from questionnaire, results has been inputted to the Fuzzy System (see fig. 2). Final results were analyzed and the efficiency of the imple- mented ERP project was determined by this software. Fig. 2. Identifying the membership functions for each input and output variable To design a Fuzzy system by MATLAB following: X, Y, Z, W are lingual values that also represents an organizational major KPIs groups and E is the lingual value of summa- rized project Efficiency (see fig. 3 and fig. 4). Fig. 3. The Fuzzy system of assessing the efficiency of the ERP implementation in MATLAB software Applying of Fuzzy Logic Modeling for the Assessment … 397 Fig. 4. Drawing a conclusion in Fuzzy system 4 Conclusions Proposed approach and model of determining the efficiency level of the implemented ERP-project with fuzzy logic can be used by variety of ERP practitioners, project managers, top management personnel of Enterprises that implements ERP-system for advanced analysis of the actual project results. Fuzzy rules should be further validated and formed by consulting with ERP practitioners and their results will be entered into knowledge base of Fuzzy system. Methods of fuzzy logic computing combined with provided expert judgment aimed optimize the speed of the decision-making on project efficiency level and simultaneously provide more accurate assessment abilities. References 1. Finney. S., Corbett. M.: ERP Implementation: a Compilation and Analysis of Critical Success Factors. Business Process Management Journal, 13(3), 329–347 (2007). 2. Allen, D., Ken, T., Havenhand, M.: ERP. Critical Success Factors: an Exploration of the Contextual Factors in Public Sector Institution. In: Proc. 35th Hawaii International Confer- encr on System Sciences, pp. 244–247 (2002) 3. O'Leary, D.: ERP Systems: Modern Planning and Enterprise Resource Management. Se- lect, Implement, Utilize. Vershina, Moscow (2004) 4. Savavko, M.: IS Fuzzy Expert. Publishing House of I. Franko Lviv National University, Lviv (2007). 5. Nozdrina, L.: Applying of Fuzzy Logic Modeling for the Assessment of ERP Projects Ef- ficiency. In: Proc. 5th Int. Sci. Conf. Project Management: Status and Opportunities, pp. 1–2, NUS, Nikolaev (2009) 398 A. Semenyuk 6. Gartner: Information Technology Research and Advisory Agency. http://www.gartner.com/technology/home.jsp 7. Panorama Consulting. Consulting Firm with Expertise in ERP Software, http://panorama- consulting.com 8. IDC. Global Provider of Market Intelligence, Advisory Services, and Events for the Infor- mation Technology, http://www.idc.com/home.jsp?t=1365517508962#.UWQk-5NTCjg 9. Austin, R. D.: Measuring and Managing Performance in Organizations. Dorset House Pub- lishing (1996) Applying of Fuzzy Logic Modeling for the Assessment … 399 Appendix A. Example of ERP User Satisfaction Survey 400 A. Semenyuk Appendix B. Example of ERP Expert Judgment Questionnaire