Factors Affecting Adoption of Enterprise Resource Planning Software in Manufacturing Sector in Nairobi Metropolitan Kenya

Abstract

The challenges facing the manufacturing sector include low levels of productivity, stiff competition from cheap imports and counterfeits, and the high cost of production. Irrespective of the high efficiency levels that are required, most of the firms in the Kenya's manufacturing sector are still using old and inefficient technology. The Government of Kenya aims at facilitating efficient productivity through the exploitation of knowledge in science, technology and innovation. The usage of various automation hardware and software tools is a sure way of establishing a reliable platform for enhancing efficiency and effectiveness in different economic sectors. One of such software tools is the. Enterprise Resource Planning (ERP) software, which is an organization-wide software that enhances the efficiency through the automation, integration, and sharing of business processes across the enterprise in a real-time environment. Additionally, ERP software is commonly chosen because of the need to focus on customer service, cutting cycle times, reducing idle time, and optimizing the resources of an organization. The adoption ofERP software is a subject of concern due to the undesirable situation that is created by factors that constrain its adoption. The purpose of this study was to examine the extent of ERP adoption and determine the influence of business complexity, planned organizational change, business environment, and ERP attributes on, its adoption in Kenya. A cross-sectional descriptive research design was applied in this study, in which the target population was 417 companies which were members ofKAM that operated within the Nairobi metropolitan region in the year 2010. A questionnaire was administered to a sample of 141 corporate members of KAM. The sample was selected through proportional stratified random sampling technique, as indicated in the 2009 directory of KAM. Additionally, the interview technique was used to collect qualitative data from 17 ERP vendor companies that were selected through snow-ball technique because there was no existing sampling frame for them. The interview method was meant to complement the questionnaire in capturing qualitative data. Descriptive and inferential statistical measures were used to analyze the data. Logit model was used to estimate the relationship between the binary ERP adoption and the independent variables. A significance level of 0.05 was used in this study. The regression coefficient of business complexity was found to be significant (B=0.006, t=3.000, p=O.OII), whereas the regression coefficients of planned organizational change (8=1.293, t=1.776, p=0.076), business environment (B=0.443, t=0.791, p=0.429), and ERP attributes (8=2.390, t=1.693, p=0.091) were insignificant and positively related to ERP adoption. The study recommended that ERP software should be designed to cater for the business complexity needs of not only the middle and large-sized organizations, but also the small-sized organizations. The findings of this study are likely to benefit the academicians, students, KAM, business community, public sector and the government.