How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision Making Environment

*Hadi AL-Abrrow, Alhamzah Alnoor, Hasan Abdullah and Bilal Eneizan*

## **Abstract**

*Aim/purpose*: the current study explains the mediation of ERP in the role of a socio-technical approach and decision-making with firms' sustainable performance. *Background*: despite the existence of existing literature on success and failure factors of ERP, the current work highlights the impact of socio-technical factors and decision-making environment on ERP success. Additionally, the weak research work regarding the mediation of ERP is addressed here in this study and has tried to fill the mentioned gap. *Contribution*: the most important contribution of the study is assessing the mediating role of the ERP system in the linkage of decisionmaking environment and socio-technical factors. Moreover, the work contributes by examining the moderation of organizational culture while relating the sociotechnical environment and ERP system. *Findings*: the study finds that there is a significant role of ERP as a mediator while relating socio-technical elements and the decision-making environment; however, we do not find any significant moderation of organizational culture in the linkage of ERP system and socio-technical elements. *Impact on Society*: the societal implication of the study is that it provides a reference for the firms having the same cultural characteristics while using ERP to overcome the issue of pollution in Iraq.

**Keywords:** organizational culture, socio-technical approach, decision-making environment, ERP system, sustainable performance

## **1. Introduction**

Many multinational companies came in agreement with Iraq in the mid of 2009 in which they were required to work for sustainable performance and keep the focus on improving environment and standard of living for locals by refraining from what they were previously focusing, i.e., only profit. After this agreement, Iraq agreed to issue licenses for various multinational companies, so they can work for the exploration and production of oil and gas. Now, foreign oil companies in Iraq are seeking for "sustainability." There was very little investment in the Iraq oil industry before this agreement was signed in 2009. Iraq canceled her contracts

with many oil companies which failed to provide value to the environment, and it became the need of the hour for these companies to make internal changes in their processes so greater benefits are brought for the society. A company gets a competitive advantage over others by getting the sustainable performance, and for this purpose, they needed to bring an integration among different components of their organization [1]. To achieve integration in a better way and seek sustained performance, adoption of information technology was needed by these companies [2] in all their processes (both internal and external). Worldwide, a lot of organizations rely on enterprise resource planning (ERP) system to help them integrate their various organizational components [3, 4].

Organizational culture plays a vital role in several organizational processes [5], in which organizational change process is of keen importance. If we discuss organizational culture, then it indicates shared meaning, interpretations, values, norms, and the main thing which directs people [6]. The main thing on which the success or failure of a change process depends is the culture of the organization as to whether it supports or resists when there is some change [7, 6]. For an ERP system to be applied, a complete change process is required in a company for which it needs an organizational culture which supports change. Ref. [8] observed that there should be a supportive environment for decision-making to help in the change process. When an organization is working on change process for the environment, it should focus on creating a culture that supports to have a technological and social change which includes innovation, flexibility, adopting new technology, and opening new ways of entrepreneurship [9]. Then, it will help to evaluate how much success they were in getting the desired results [11].

In the studies up to present date, an ERP system is taken as an IT-based system which tends to replace our old systems and, in this way, help in the change process [12, 13], and organization will get fruitful results when this system is implemented and executed successfully [14]. To increase the chances of success of an ERP, we need to give proper attention to the values of the previous system which include sociocultural elements, decision-making environment, and present organizational culture, and then we will be able to get the desired results.

In the past, researches have been done to discuss the important factors on which success and failure of an ERP system are based and the extent to which it has an impact, but in this study we will consider only two factors, i.e., sociotechnical elements and environment of decision-making, and see that their impact on the success or failure of an ERP system means whether or not they are contributing toward a sustainable performance. You will be amazed to know that when we use ERP for a long time, it impacts not only processes positively but also the performance of the firm and thus enables top management and owners to get benefits from this system [15]. Al Dhaafri and Al Swidi [16] observed that to change traditional procedures and get maximum performance from an ERP system, we require nontraditional, risky, innovative, and visionary decisions. You need to be sure about the main reason for implying an ERP system in your firm, and only then, you will be able to get maximum benefits. In the decision-making environment, the decision-makers must be capable enough, and their temperament is highly tested [17]. ERP system serves as an intervening variable in the abovementioned relationship [16]. So, to get positive results, an organization needs to have a good ERP system [17]. There are many precedents in an organization that plays a vital role in the success of this system [18]. When we see the previous studies, they are focused on taking an ERP system as an independent variable which impacts organizational performance, and none of them have taken it as a mediator, and this is where we face a gap between new knowledge and academic research. So, this study is directed to bridge that gap. Moreover the study

**57**

*How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision...*

will provide the insides of the organizational culture along with the impact on ERP success or failure. Moreover the internal and external environmental factors

It was as late as the 1970s and 1980s when the term "organizational culture" was first used in organizational studies [19]. For the success of organizational processes and specifically change process, the culture plays a vital role [5]. Whether or not the culture is supportive to change determines the success of a change process [20]. If we discuss organizational culture, then it indicates shared meaning, interpretations, values, norms, and the main thing which directs people [21]. Of them, good organization culture is one which is very clear for employees and contributes toward the betterment of behaviors in the workplace [22]. There are several culture models such as the configuration model that can be defined as constant progress, which is a continuous process and depends on how we interact with others and the behavior shown by the leadership [23]. Structures, routines, rules and regulations, and norms all form part of it and the bases for guiding and restricting behaviors. Ref. [19] based his organizational culture new model on Hatch and Cunliffe's (2006) and Schein's (1985) model, in which he stated that there are numerous components responsible, both internally and externally, for organizational culture. Assuming the cultural identity of an organization, this model was developed. Moreover the firms' values, strategy, and artifacts and the synergy of the firms' structural design, operational processes, behavioral aspects, and performance were

Due to the development in technology and innovation, now organizational scholars use the term "organizational context" a lot in their research domains [24]. Kling and Lamb [25] state that now, we know that a fit between social and technological environment is of keen importance and has been named as "socio-technical approach." It suggests that there is consistency between human and technological behaviors. Another proposal made states that any change in technological behavior will have its impact on social relationships, feelings, and attitudes [26]. If there is already a system existing in any organization, then changing it with the developments in technology requires a lot of hard work. This is because the employees stick to the previous system and the change will impact them, while the development needs to be highly customized to align with the social behaviors of the

When a technological change is introduced, system components find it very difficult and complex to cope up with it, and this is because of their dynamic relationship with the existing environment [27, 13]. No matter how deep sociotechnical systems are, you need to completely restructure them, and to do so, you need to highly engage social components with the new environments to lower the resistance against the change. The better your social system is integrated with the new technological system, the better results you achieve [14]. The basis for sustainable performance, which is the main objective of firms, is when social system is correctly integrated with the new technological system [24], and thus it will enable

to rebrand yourself by reengineering the business [12].

*DOI: http://dx.doi.org/10.5772/intechopen.88447*

will be considered in the model [19].

**2.1 Configuration model of organizational culture**

**2. Theoretical background**

also taken in consideration.

organization [27].

**2.2 Socio-technical approach**

*How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision... DOI: http://dx.doi.org/10.5772/intechopen.88447*

will provide the insides of the organizational culture along with the impact on ERP success or failure. Moreover the internal and external environmental factors will be considered in the model [19].

## **2. Theoretical background**

*Application of Decision Science in Business and Management*

various organizational components [3, 4].

success they were in getting the desired results [11].

culture, and then we will be able to get the desired results.

with many oil companies which failed to provide value to the environment, and it became the need of the hour for these companies to make internal changes in their processes so greater benefits are brought for the society. A company gets a competitive advantage over others by getting the sustainable performance, and for this purpose, they needed to bring an integration among different components of their organization [1]. To achieve integration in a better way and seek sustained performance, adoption of information technology was needed by these companies [2] in all their processes (both internal and external). Worldwide, a lot of organizations rely on enterprise resource planning (ERP) system to help them integrate their

Organizational culture plays a vital role in several organizational processes [5], in which organizational change process is of keen importance. If we discuss organizational culture, then it indicates shared meaning, interpretations, values, norms, and the main thing which directs people [6]. The main thing on which the success or failure of a change process depends is the culture of the organization as to whether it supports or resists when there is some change [7, 6]. For an ERP system to be applied, a complete change process is required in a company for which it needs an organizational culture which supports change. Ref. [8] observed that there should be a supportive environment for decision-making to help in the change process. When an organization is working on change process for the environment, it should focus on creating a culture that supports to have a technological and social change which includes innovation, flexibility, adopting new technology, and opening new ways of entrepreneurship [9]. Then, it will help to evaluate how much

In the studies up to present date, an ERP system is taken as an IT-based system which tends to replace our old systems and, in this way, help in the change process [12, 13], and organization will get fruitful results when this system is implemented and executed successfully [14]. To increase the chances of success of an ERP, we need to give proper attention to the values of the previous system which include sociocultural elements, decision-making environment, and present organizational

In the past, researches have been done to discuss the important factors on which success and failure of an ERP system are based and the extent to which it has an impact, but in this study we will consider only two factors, i.e., sociotechnical elements and environment of decision-making, and see that their impact on the success or failure of an ERP system means whether or not they are contributing toward a sustainable performance. You will be amazed to know that when we use ERP for a long time, it impacts not only processes positively but also the performance of the firm and thus enables top management and owners to get benefits from this system [15]. Al Dhaafri and Al Swidi [16] observed that to change traditional procedures and get maximum performance from an ERP system, we require nontraditional, risky, innovative, and visionary decisions. You need to be sure about the main reason for implying an ERP system in your firm, and only then, you will be able to get maximum benefits. In the decision-making environment, the decision-makers must be capable enough, and their temperament is highly tested [17]. ERP system serves as an intervening variable in the abovementioned relationship [16]. So, to get positive results, an organization needs to have a good ERP system [17]. There are many precedents in an organization that plays a vital role in the success of this system [18]. When we see the previous studies, they are focused on taking an ERP system as an independent variable which impacts organizational performance, and none of them have taken it as a mediator, and this is where we face a gap between new knowledge and academic research. So, this study is directed to bridge that gap. Moreover the study

**56**

### **2.1 Configuration model of organizational culture**

It was as late as the 1970s and 1980s when the term "organizational culture" was first used in organizational studies [19]. For the success of organizational processes and specifically change process, the culture plays a vital role [5]. Whether or not the culture is supportive to change determines the success of a change process [20].

If we discuss organizational culture, then it indicates shared meaning, interpretations, values, norms, and the main thing which directs people [21]. Of them, good organization culture is one which is very clear for employees and contributes toward the betterment of behaviors in the workplace [22]. There are several culture models such as the configuration model that can be defined as constant progress, which is a continuous process and depends on how we interact with others and the behavior shown by the leadership [23]. Structures, routines, rules and regulations, and norms all form part of it and the bases for guiding and restricting behaviors. Ref. [19] based his organizational culture new model on Hatch and Cunliffe's (2006) and Schein's (1985) model, in which he stated that there are numerous components responsible, both internally and externally, for organizational culture. Assuming the cultural identity of an organization, this model was developed. Moreover the firms' values, strategy, and artifacts and the synergy of the firms' structural design, operational processes, behavioral aspects, and performance were also taken in consideration.

### **2.2 Socio-technical approach**

Due to the development in technology and innovation, now organizational scholars use the term "organizational context" a lot in their research domains [24]. Kling and Lamb [25] state that now, we know that a fit between social and technological environment is of keen importance and has been named as "socio-technical approach." It suggests that there is consistency between human and technological behaviors. Another proposal made states that any change in technological behavior will have its impact on social relationships, feelings, and attitudes [26]. If there is already a system existing in any organization, then changing it with the developments in technology requires a lot of hard work. This is because the employees stick to the previous system and the change will impact them, while the development needs to be highly customized to align with the social behaviors of the organization [27].

When a technological change is introduced, system components find it very difficult and complex to cope up with it, and this is because of their dynamic relationship with the existing environment [27, 13]. No matter how deep sociotechnical systems are, you need to completely restructure them, and to do so, you need to highly engage social components with the new environments to lower the resistance against the change. The better your social system is integrated with the new technological system, the better results you achieve [14]. The basis for sustainable performance, which is the main objective of firms, is when social system is correctly integrated with the new technological system [24], and thus it will enable to rebrand yourself by reengineering the business [12].

## **2.3 Decision-making environment**

Managers are required to take risks and make daring decisions more often than before, and this is because nowadays, there is a rapid increase in technological changes as we are uncertain about these changes [28, 29]. This change has made problems for organizations. This scenario requires wise decisions that have minimal cognitive biases in them, and having a decision-making environment helps it [28].

There are a set of factors (bases) of any decision-making environment which includes the level of education, synergy, the capacity to analyze, and available information and resources, and they tell how efficient and effective the decision a manager will make [29]. Barney [30] argues that you can say that when you are deciding, the sum of internal and external factors needs to be considered. The factors such as people, organizational units, and other factors are classified as internal, while customers, suppliers, competitors, sociopolitical factors, and technological developments all are external factors [8, 31].

To make improved decisions, the physical variables and the socioeconomic ones require a close interaction for a better decision-making environment [29, 32]. Decision-makers must have the idea about all decision-making environment components like its effects, issues related socially, nature of decision made, and information processing [32, 33]. This increases the importance of environmental components for making efficient decisions [31]. The basis of the decision-making environment is the managerial ability of evaluation and implementation of various plans from decision-makers' past experiences [32, 34]. According to Hsu and Chen [35], the success or failure of any decision-making environment is dependent upon opinion's accuracy and divert sources.

#### **2.4 ERP systems**

Installing an enterprise system is not an easy job as it is not only complex but also costly and time taking [36, 37]. If the project is not handled correctly in technical terms, it may turn into a horror story for the business and managers know the consequences of a failed system. To avoid any mishap, organizations are spending too much on ERP systems [38]. It helps a lot in coping with problems related to inventory and working capital. It also bridges the gap between what the customer needs and what the company thinks by providing recent information and helps manage widespread suppliers at a single place [39, 37]. If your ERP system is implemented properly, it will provide you all business data in real time and thus also help in cost reduction which is an important factor in developing countries like Iraq [40]. You need to be aware of the evolution of ERP systems and their strengths, weaknesses, and challenges related to its implementation before you can successfully implement it in developing countries like Iraq [41].

#### **2.5 Sustainable performance**

Pollution has increased, natural resources are being depleted, and there are a lot of social problems for businesses, so a big question around the world is about "sustainability" [21]. Since organizations are operating in distinctly different environments, customized strategies work better in achieving "sustainability" for them now than general market strategies [42, 43]. Preventing environment to get damaged and investing in processes and products that are environmentally friendly are a big concern for organizations nowadays and require a huge investment [42]. Stakeholders are also pressurizing organizations in devising their processes and

**59**

*How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision...*

perform their corporate activities in such a way as to achieve sustainability [44, 45]. A big point of discussion is raised on how to continue the social responsibilities of an organization in general, along with achieving corporate sustainability [46, 47]. To get economic, social, and environmental goals for an organization, managers

Studies have indicated that there is a need to adopt technology for information and communication sectors as it is of primary importance in improving sustainability. Sustainability is significantly impacted by technology quality, management, and information culture [49]. Ziemba [50] also researched on sustainability information society index and found this index an important one. Greenhouse gas emissions are increasing in Iraq from the energy sector, and there is no government effort in

are working on sustainability performance management to effectively and efficiently use organization resources [48, 45]. There are a lot of standards, nowadays, regarding the environment, human rights, and corporate governance imposed by both national and international bodies, and companies are required by law to follow

**2.6 Socio-technical approach, decision-making environment, ERP system,** 

When you are installing any technological system in an environment which is socio-technical, you need to give more importance to its elements as they are the deciders for success [52, 53]. Social and technological factors held keen importance for an ERP system to succeed as indicated by research [54, 36]. It is very important to bring change; to do so you need to align technological and social systems and thus bring better coordination among business units which is of primary importance [53]. However, this alignment is not an easy task to perform, because it may have a significant relationship with perceptions, attitudes, and willingness to embrace change [36]. This is more important when implementing ERP requires collective efforts [54]. When decision-making is in process, your communication with the stakeholder becomes of keen importance [53]. Stakeholders are much concerned about the success of implementing ERP systems and taking maximum benefits from

As evident by prior suggestions, there is a slight decline in outcomes in the shape of operational and economic performance of a firm after it implements ERP system, but the decline is for short term; after that decline, firms are going to achieve better targets in the future [37]. The lag and success after ERP implementation are often the cause of new procedures, software, and channels of information [56]. Clemmons and Simon [57] have recognized ERP system as a way for new information channels, new ways of growth, innovation, and entrepreneurship, and thus it is far more than just a cost-cutting tool. Proper market investigation and exploration of external opportunities can be done by having to access data from customers and market which will help attain sustainable performance in the long run [58]. From operation side to strategic benefits, ERP system adds value in a wide range for a company. You will not see sudden fruitful results in terms of cost-cutting, learning, or other factors, and you need a complete analysis of your organization to get more benefits [59, 60]. The decision-making environment also impacts in achieving sustainable performance as indicated by researches [61]. The social environment needs to be harmonized with new methods to implement new systems successfully and achieve sustainable performance [62]. Sustainable organizational performance is increased when social and

them. However, sustainability is much more than these legalities [42].

regularizing companies in this regard, as assessed by [51].

it through their perception and knowledge [36, 55].

technological systems are aligned [63].

**and sustainable performance**

*DOI: http://dx.doi.org/10.5772/intechopen.88447*

#### *How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision... DOI: http://dx.doi.org/10.5772/intechopen.88447*

perform their corporate activities in such a way as to achieve sustainability [44, 45]. A big point of discussion is raised on how to continue the social responsibilities of an organization in general, along with achieving corporate sustainability [46, 47].

To get economic, social, and environmental goals for an organization, managers are working on sustainability performance management to effectively and efficiently use organization resources [48, 45]. There are a lot of standards, nowadays, regarding the environment, human rights, and corporate governance imposed by both national and international bodies, and companies are required by law to follow them. However, sustainability is much more than these legalities [42].

Studies have indicated that there is a need to adopt technology for information and communication sectors as it is of primary importance in improving sustainability. Sustainability is significantly impacted by technology quality, management, and information culture [49]. Ziemba [50] also researched on sustainability information society index and found this index an important one. Greenhouse gas emissions are increasing in Iraq from the energy sector, and there is no government effort in regularizing companies in this regard, as assessed by [51].

## **2.6 Socio-technical approach, decision-making environment, ERP system, and sustainable performance**

When you are installing any technological system in an environment which is socio-technical, you need to give more importance to its elements as they are the deciders for success [52, 53]. Social and technological factors held keen importance for an ERP system to succeed as indicated by research [54, 36]. It is very important to bring change; to do so you need to align technological and social systems and thus bring better coordination among business units which is of primary importance [53]. However, this alignment is not an easy task to perform, because it may have a significant relationship with perceptions, attitudes, and willingness to embrace change [36]. This is more important when implementing ERP requires collective efforts [54]. When decision-making is in process, your communication with the stakeholder becomes of keen importance [53]. Stakeholders are much concerned about the success of implementing ERP systems and taking maximum benefits from it through their perception and knowledge [36, 55].

As evident by prior suggestions, there is a slight decline in outcomes in the shape of operational and economic performance of a firm after it implements ERP system, but the decline is for short term; after that decline, firms are going to achieve better targets in the future [37]. The lag and success after ERP implementation are often the cause of new procedures, software, and channels of information [56]. Clemmons and Simon [57] have recognized ERP system as a way for new information channels, new ways of growth, innovation, and entrepreneurship, and thus it is far more than just a cost-cutting tool. Proper market investigation and exploration of external opportunities can be done by having to access data from customers and market which will help attain sustainable performance in the long run [58]. From operation side to strategic benefits, ERP system adds value in a wide range for a company. You will not see sudden fruitful results in terms of cost-cutting, learning, or other factors, and you need a complete analysis of your organization to get more benefits [59, 60]. The decision-making environment also impacts in achieving sustainable performance as indicated by researches [61]. The social environment needs to be harmonized with new methods to implement new systems successfully and achieve sustainable performance [62]. Sustainable organizational performance is increased when social and technological systems are aligned [63].

*Application of Decision Science in Business and Management*

Managers are required to take risks and make daring decisions more often than

before, and this is because nowadays, there is a rapid increase in technological changes as we are uncertain about these changes [28, 29]. This change has made problems for organizations. This scenario requires wise decisions that have minimal cognitive biases in them, and having a decision-making environment helps it [28]. There are a set of factors (bases) of any decision-making environment which includes the level of education, synergy, the capacity to analyze, and available information and resources, and they tell how efficient and effective the decision a manager will make [29]. Barney [30] argues that you can say that when you are deciding, the sum of internal and external factors needs to be considered. The factors such as people, organizational units, and other factors are classified as internal, while customers, suppliers, competitors, sociopolitical factors, and technological

To make improved decisions, the physical variables and the socioeconomic ones require a close interaction for a better decision-making environment [29, 32]. Decision-makers must have the idea about all decision-making environment components like its effects, issues related socially, nature of decision made, and information processing [32, 33]. This increases the importance of environmental components for making efficient decisions [31]. The basis of the decision-making environment is the managerial ability of evaluation and implementation of various plans from decision-makers' past experiences [32, 34]. According to Hsu and Chen [35], the success or failure of any decision-making environment is dependent upon

Installing an enterprise system is not an easy job as it is not only complex but also costly and time taking [36, 37]. If the project is not handled correctly in technical terms, it may turn into a horror story for the business and managers know the consequences of a failed system. To avoid any mishap, organizations are spending too much on ERP systems [38]. It helps a lot in coping with problems related to inventory and working capital. It also bridges the gap between what the customer needs and what the company thinks by providing recent information and helps manage widespread suppliers at a single place [39, 37]. If your ERP system is implemented properly, it will provide you all business data in real time and thus also help in cost reduction which is an important factor in developing countries like Iraq [40]. You need to be aware of the evolution of ERP systems and their strengths, weaknesses, and challenges related to its implementation before you can successfully implement

Pollution has increased, natural resources are being depleted, and there are a lot of social problems for businesses, so a big question around the world is about "sustainability" [21]. Since organizations are operating in distinctly different environments, customized strategies work better in achieving "sustainability" for them now than general market strategies [42, 43]. Preventing environment to get damaged and investing in processes and products that are environmentally friendly are a big concern for organizations nowadays and require a huge investment [42]. Stakeholders are also pressurizing organizations in devising their processes and

**2.3 Decision-making environment**

developments all are external factors [8, 31].

opinion's accuracy and divert sources.

it in developing countries like Iraq [41].

**2.5 Sustainable performance**

**2.4 ERP systems**

**58**

## **2.7 Mediating effects of ERP system**

There are some important factors for business performance improver, and gains of an ERP system are highly dependent on them [18]. You will be amazed to know that when we use ERP for a long time, it not only impacts our processes positively but also contributes toward the overall performance of the firm and thus enables top management and owners to get benefits from this system [15]. Al Dhaafri and Al Swidi [16] observed that to change traditional procedures and get maximum performance from an ERP system, we require nontraditional, risky, innovative, and visionary decisions. To gain more advantages from your ERP system, you need to know why you have installed this system. Job characteristics and job satisfaction are also impacted by an ERP system [64]. The perception of people who are running an ERP system has a great impact on the success or failure of an ERP system. Whether they are intended toward its success for better performance or not will be decided by their perception. Alignment and human material fit are required for it.

### **2.8 Moderating effects of organizational culture configuration**

If system elements are interacted closely, chances of ERP system success increase. You first need to create a culture in an organization which will accept and support change and helps in implementing your ERP system successfully [53]. It means that if your ERP system and organization culture are not aligned, then the system is more likely to face failure. The complex interactions that occur in social and technological systems are affected by organizational culture [55]. Understanding and grasping the ERP system by individuals and groups within the organization is determined by organization culture [64]. Performance and competitive advantages are impacted by organizational culture, and it is the decisive factor in determining whether your ERP system will succeed or not [65, 66]. It is the organization culture which has an influence on socio-technical elements of an organization, and it also determines the interaction people will have with technology and the way technology will have an impact on job design and structure [67].

## **3. Main components of change program**

The organizational change program is the combination of different contents, contextual and process [68]. It is required for the purpose of attaining the change process in the organization that should be aligned with the organizational objectives, process, features, and other factors as a whole [69]. As far as the process factors are concerns that are associated the action that is being taken by the managers to execute change in the organization. Process factors are used in order to bring change and how is being implemented such as selecting the best approach to bring change. The selected approach should realize and develop understanding about the benefits of the change implication and ensure them that change approach is highly effective and affirmative for them and for the organization as well [70]. Content is the other feature that emphasizes upon the factors that are required to be changed and will bring positive change on the effectiveness and efficiency in the organization. Content factors are used in assessing the relations between strategic objectives of the organization with the organizational culture like substitute strategic orientation, hierarchy of the organization, and performance-based reward system. It is evident that content factors highly impact upon the organizational and lead their mission and focus adequately [71]. As far as the contextual factors are concerned, they are based upon the environmental factors. These factors include the internal

**61**

*How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision...*

that focuses upon the culture of the organization like professional approach, management behavior regarding change, hierarchy of the organization, cultural values, and others [69]. As far as the external factors are concerned, it is based upon the outside of the organization like competitive rivalry and government rules and regulation [70]. In the organization external contextual factors are the largest fare for the management to face. The reason is that the organization is not having control on the outside factors [72]. From the management perspective, it is highly important that management should focus upon the developing urgency and readiness to undertake the change execution that will reduce the resistance in the organization and will be effective to make it successful. Readiness is being illustrated such as it revokes the tendency and factors of resistance to be reduced by allowing the change to replace the system [73]. It is required that management should communicate that change in the organization will bring stability and create the difference between current and future positions of the organization. It is evident that change program is meant to reduce the gap between the current and future performances of the organization. Those individuals in the organization that perceive change is better and effective for the organization are always keen to contribute in the change process and make it successful adequately [17]. The study that was conducted in Korean and that selected 72 organizations as the sample where 350 employees were working that suggested readiness to change is the biggest success for the organization to break resistance and make the organizational environment effective and conductive to implement change or ERP system [10]. The benefit of the readiness to change brings the dedication and increases personal approach to adopt change, as far as the behavior of the organizational change process is concerned and the readiness to change is relying upon individual characteristics such as knowledge and gender [72]. The behavior of the individual toward the change process of the educational history suggests that individuals that are having less education are more likely to be the part of the bringing of the change in the organization, and they are supportive to it [69]. Gender and age are also factors to support the change program. Young and energetic employees are keener to adopt the change than the old generation. Those individuals are married, having a close relation with their seniors and colleagues in the organization [36]. It is the management's responsibility to undertake the individual issues and concern because it is an important feature for the development of job design, performance appraisal, and development of reward

*DOI: http://dx.doi.org/10.5772/intechopen.88447*

strategies to motivate the best performance [70].

In order to develop the study, the capability to handle and make the ease in the application of change process of BPR is being used as the readiness to change; the BPR is associated with the organizational employee's ability to have the positive behavior toward the requirement of the BPR system of the organization to adopt the

Bruch et al. (2005) state that only about 50% of all change programs are successful. The achievement of successful change program is still a puzzle. Therefore, the managers should ask how organizations could ensure successful change processes [30]. For instance, the Dutch "D-Check" program aimed to find a good mechanism to insure success in change process. The program consisted of four phases. The first phase was designing the change. In this phase, the managers asked "what is the right change for the company." In order to achieve that goal, the program was built on the Lufthansa's strategic need. The second phase was focusing the change agenda. The Lufthansa's management built a clear agenda based on clear priorities for the change processes in order to keep it manageable. Therefore, the company identified the right change the company needed. The third phase was to do what the company really is ready to commit to. The company recognized the important role of the credibility of the top management. The top management asked itself at the

change and have the positive behavior accordingly to make it successful.

### *How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision... DOI: http://dx.doi.org/10.5772/intechopen.88447*

that focuses upon the culture of the organization like professional approach, management behavior regarding change, hierarchy of the organization, cultural values, and others [69]. As far as the external factors are concerned, it is based upon the outside of the organization like competitive rivalry and government rules and regulation [70]. In the organization external contextual factors are the largest fare for the management to face. The reason is that the organization is not having control on the outside factors [72]. From the management perspective, it is highly important that management should focus upon the developing urgency and readiness to undertake the change execution that will reduce the resistance in the organization and will be effective to make it successful. Readiness is being illustrated such as it revokes the tendency and factors of resistance to be reduced by allowing the change to replace the system [73]. It is required that management should communicate that change in the organization will bring stability and create the difference between current and future positions of the organization. It is evident that change program is meant to reduce the gap between the current and future performances of the organization. Those individuals in the organization that perceive change is better and effective for the organization are always keen to contribute in the change process and make it successful adequately [17]. The study that was conducted in Korean and that selected 72 organizations as the sample where 350 employees were working that suggested readiness to change is the biggest success for the organization to break resistance and make the organizational environment effective and conductive to implement change or ERP system [10]. The benefit of the readiness to change brings the dedication and increases personal approach to adopt change, as far as the behavior of the organizational change process is concerned and the readiness to change is relying upon individual characteristics such as knowledge and gender [72]. The behavior of the individual toward the change process of the educational history suggests that individuals that are having less education are more likely to be the part of the bringing of the change in the organization, and they are supportive to it [69]. Gender and age are also factors to support the change program. Young and energetic employees are keener to adopt the change than the old generation. Those individuals are married, having a close relation with their seniors and colleagues in the organization [36]. It is the management's responsibility to undertake the individual issues and concern because it is an important feature for the development of job design, performance appraisal, and development of reward strategies to motivate the best performance [70].

In order to develop the study, the capability to handle and make the ease in the application of change process of BPR is being used as the readiness to change; the BPR is associated with the organizational employee's ability to have the positive behavior toward the requirement of the BPR system of the organization to adopt the change and have the positive behavior accordingly to make it successful.

Bruch et al. (2005) state that only about 50% of all change programs are successful. The achievement of successful change program is still a puzzle. Therefore, the managers should ask how organizations could ensure successful change processes [30]. For instance, the Dutch "D-Check" program aimed to find a good mechanism to insure success in change process. The program consisted of four phases. The first phase was designing the change. In this phase, the managers asked "what is the right change for the company." In order to achieve that goal, the program was built on the Lufthansa's strategic need. The second phase was focusing the change agenda. The Lufthansa's management built a clear agenda based on clear priorities for the change processes in order to keep it manageable. Therefore, the company identified the right change the company needed. The third phase was to do what the company really is ready to commit to. The company recognized the important role of the credibility of the top management. The top management asked itself at the

*Application of Decision Science in Business and Management*

There are some important factors for business performance improver, and gains of an ERP system are highly dependent on them [18]. You will be amazed to know that when we use ERP for a long time, it not only impacts our processes positively but also contributes toward the overall performance of the firm and thus enables top management and owners to get benefits from this system [15]. Al Dhaafri and Al Swidi [16] observed that to change traditional procedures and get maximum performance from an ERP system, we require nontraditional, risky, innovative, and visionary decisions. To gain more advantages from your ERP system, you need to know why you have installed this system. Job characteristics and job satisfaction are also impacted by an ERP system [64]. The perception of people who are running an ERP system has a great impact on the success or failure of an ERP system. Whether they are intended toward its success for better performance or not will be decided

by their perception. Alignment and human material fit are required for it.

If system elements are interacted closely, chances of ERP system success increase. You first need to create a culture in an organization which will accept and support change and helps in implementing your ERP system successfully [53]. It means that if your ERP system and organization culture are not aligned, then the system is more likely to face failure. The complex interactions that occur in social and technological systems are affected by organizational culture [55]. Understanding and grasping the ERP system by individuals and groups within the organization is determined by organization culture [64]. Performance and competitive advantages are impacted by organizational culture, and it is the decisive factor in determining whether your ERP system will succeed or not [65, 66]. It is the organization culture which has an influence on socio-technical elements of an organization, and it also determines the interaction people will have with technology and the way technology will have an impact on job design and structure [67].

The organizational change program is the combination of different contents, contextual and process [68]. It is required for the purpose of attaining the change process in the organization that should be aligned with the organizational objectives, process, features, and other factors as a whole [69]. As far as the process factors are concerns that are associated the action that is being taken by the managers to execute change in the organization. Process factors are used in order to bring change and how is being implemented such as selecting the best approach to bring change. The selected approach should realize and develop understanding about the benefits of the change implication and ensure them that change approach is highly effective and affirmative for them and for the organization as well [70]. Content is the other feature that emphasizes upon the factors that are required to be changed and will bring positive change on the effectiveness and efficiency in the organization. Content factors are used in assessing the relations between strategic objectives of the organization with the organizational culture like substitute strategic orientation, hierarchy of the organization, and performance-based reward system. It is evident that content factors highly impact upon the organizational and lead their mission and focus adequately [71]. As far as the contextual factors are concerned, they are based upon the environmental factors. These factors include the internal

**2.8 Moderating effects of organizational culture configuration**

**3. Main components of change program**

**2.7 Mediating effects of ERP system**

**60**

designing phase the crucial questions: "What can credibility implement?" "What kind of change are we able to commit to?". Finally, in order to succeed in change processes, company designed a change program according to its current culture [31]. Because BPR implies significant organizational changes in terms of organizational structure, organization's cultures, as well as process management, effective change management is considered a tool to manage and achieve these changes [26].

## **4. Change and social approach**

From the perspective of this approach, change in the organization will be due to the organizational factors but also social factors such as human factors particularly. It is being suggested that successful change will only be possible if the individuals are supporting toward the readiness to change and have the positive intention adequately [74]. Readiness of the employees toward change requirement is required to have the belief, behavior, and intention regarding the change program. There is a need that the organization should develop motivation among the employees regarding their behavior about the change, and it will be effective for the organization to achieve the short- and long-term organizational objectives [57].

Organizational development theory focuses on the main feature of the social approach to bring change [12]. The organization focuses upon the development or organization and employees as well [50]. OD is the approach of behavioral science for the development of organizational process to facilitate organizational performance. It focuses upon the behavioral features that are important to be used in the change process such as culture, leadership, operations, and collaboration between employees along with the external change factors to implement change [71]. From the social perception, change requires a thorough difference in the behavior, and it will impact upon the people's ability and urge two-way communications. It is evident change did not have time period to be implemented the process of change adequately. The study discusses or analyzes the humanistic side of BPR [74]. It is also argued that there are different factors that can reduces and human are the most priority feature to be focused in BPR. It is evident that lack of management practices and lack of ability to not able to break the resistance in the change process and lack of approach to deal with the BPR with the individual are important for the purpose of changing human approach which should be considered adequately in the case of BPR. The study analyzes that BPR is the main aspect in the HRM because individuals are the main source of implementing change in the organization; individuals are being treated differently which creates resistance and bad behavior toward change implementation [64]. From the perspective of the technological approach, the BRP is highly effective in reducing resistance, and it complements the effectiveness of BPR with the technology and brings the behavioral change toward the attitude of the individual to adopt technology quickly.

## **5. Socio-technical perspective of BPR**

From the socio-technical perspective, the organization has the combination of technical and social systems. The purpose of having social and technical perspectives is to develop harmony of human and technology with each other. The socio-technical system is based upon combination of human and technology [68]. There are social factors that are included such as motivation, loyalty status, power, and others; technological factors are process and system of technology that should be assimilated [64]. This assimilation encourages the management to collaborate both systems into the process

**63**

**6. Methodology**

**6.1 The sample and data collection**

*How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision...*

of change. Technology and social feature combination is beneficial for the organization in the long run and for the change process. The purpose of focusing upon the socioeconomic system is to use the right person and right technology that should support the organizational processes and value of the organization. STS is helpful in coordination

In view of the BPR, socio-technical system is the right approach to assimilate the engineering operations. The STS system includes the social and technology features simultaneously. The technical system involves the tool, information, education, and ability to accomplish the objectives that help attaining the required products or services. As far as social system is concerned, it includes norms, attitude, beliefs, and relation with the individual and groups as well. To increase the feasibility of the system, restructuring is needed with the technical and social systems and developing the equation among the people and technology to use technology with the authority [41]. The socio-technical features suggested that there are different rules that should be used to execute the BPR system. These rules are as follows: abilities should be math that can help the organization to achieve objectives; the standards should be at the minimum level that can be able to produce required performance and redesign it adequately; variance control should be done in order to resolve the issues socially and technologically; the system should be developed that includes flexibility which facilitates the efficiency to be as per expectation; responsibilities should be designed accordingly, and coordination and communication with each other should be encouraged; flow of information should be adequate which helps the management to control the employees, and effective results are produced; the comparative system is developed which increases the feature of building infrastructure such as adequate development of the reward system; human value system is developed that suggests development in the organizational objectives and providing the effective

Argued that the transition according to socio-technical approach must occur in a multilevel perspective. The socio-technical system is involved in three components: socio-technical regime forms the representation of the rules that organize and coordinate the direction of social group activities and marinate the stability of socio-technical system. For instance, the organizational commitment positively contributes to the stability of the organization. However, because the stabilization concept disagrees with the radical innovation change (in this study BPR) within socio-technical system, the second component, niches, is represented as a locus or "incubation rooms" of radical innovation change. The niches might be small market niche form that bases on the specific criteria from the existing regime or technological niche forms that need high resources and investments and are wide changes resulting in social, economic, and technological changes. The final component is the socio-technical landscape that refers to the broader exogenous environment that

The study focuses on three companies existing in Iraq, i.e., British Petroleum, Lukoil, and Eni. All of them are multinational companies. The data collection instrument was a close-ended survey questionnaire which was distributed to 600 employees working in the abovementioned companies; however, 233 filled questionnaires were received. In the beginning only 238 were received; however, 5 of them were not having sufficient responses or not properly filled, and it was decided

with the engineering, social, anthology, and behavioral sciences [75].

and quality workplace adequately to the employees [75].

affects the development of the socio-technical system [70].

*DOI: http://dx.doi.org/10.5772/intechopen.88447*

#### *How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision... DOI: http://dx.doi.org/10.5772/intechopen.88447*

of change. Technology and social feature combination is beneficial for the organization in the long run and for the change process. The purpose of focusing upon the socioeconomic system is to use the right person and right technology that should support the organizational processes and value of the organization. STS is helpful in coordination with the engineering, social, anthology, and behavioral sciences [75].

In view of the BPR, socio-technical system is the right approach to assimilate the engineering operations. The STS system includes the social and technology features simultaneously. The technical system involves the tool, information, education, and ability to accomplish the objectives that help attaining the required products or services. As far as social system is concerned, it includes norms, attitude, beliefs, and relation with the individual and groups as well. To increase the feasibility of the system, restructuring is needed with the technical and social systems and developing the equation among the people and technology to use technology with the authority [41].

The socio-technical features suggested that there are different rules that should be used to execute the BPR system. These rules are as follows: abilities should be math that can help the organization to achieve objectives; the standards should be at the minimum level that can be able to produce required performance and redesign it adequately; variance control should be done in order to resolve the issues socially and technologically; the system should be developed that includes flexibility which facilitates the efficiency to be as per expectation; responsibilities should be designed accordingly, and coordination and communication with each other should be encouraged; flow of information should be adequate which helps the management to control the employees, and effective results are produced; the comparative system is developed which increases the feature of building infrastructure such as adequate development of the reward system; human value system is developed that suggests development in the organizational objectives and providing the effective and quality workplace adequately to the employees [75].

Argued that the transition according to socio-technical approach must occur in a multilevel perspective. The socio-technical system is involved in three components: socio-technical regime forms the representation of the rules that organize and coordinate the direction of social group activities and marinate the stability of socio-technical system. For instance, the organizational commitment positively contributes to the stability of the organization. However, because the stabilization concept disagrees with the radical innovation change (in this study BPR) within socio-technical system, the second component, niches, is represented as a locus or "incubation rooms" of radical innovation change. The niches might be small market niche form that bases on the specific criteria from the existing regime or technological niche forms that need high resources and investments and are wide changes resulting in social, economic, and technological changes. The final component is the socio-technical landscape that refers to the broader exogenous environment that affects the development of the socio-technical system [70].

## **6. Methodology**

#### **6.1 The sample and data collection**

The study focuses on three companies existing in Iraq, i.e., British Petroleum, Lukoil, and Eni. All of them are multinational companies. The data collection instrument was a close-ended survey questionnaire which was distributed to 600 employees working in the abovementioned companies; however, 233 filled questionnaires were received. In the beginning only 238 were received; however, 5 of them were not having sufficient responses or not properly filled, and it was decided

*Application of Decision Science in Business and Management*

**4. Change and social approach**

designing phase the crucial questions: "What can credibility implement?" "What kind of change are we able to commit to?". Finally, in order to succeed in change processes, company designed a change program according to its current culture [31]. Because BPR implies significant organizational changes in terms of organizational structure, organization's cultures, as well as process management, effective change management is considered a tool to manage and achieve these changes [26].

From the perspective of this approach, change in the organization will be due to the organizational factors but also social factors such as human factors particularly. It is being suggested that successful change will only be possible if the individuals are supporting toward the readiness to change and have the positive intention adequately [74]. Readiness of the employees toward change requirement is required to have the belief, behavior, and intention regarding the change program. There is a need that the organization should develop motivation among the employees regarding their behavior about the change, and it will be effective for the organization to

Organizational development theory focuses on the main feature of the social approach to bring change [12]. The organization focuses upon the development or organization and employees as well [50]. OD is the approach of behavioral science for the development of organizational process to facilitate organizational performance. It focuses upon the behavioral features that are important to be used in the change process such as culture, leadership, operations, and collaboration between employees along with the external change factors to implement change [71]. From the social perception, change requires a thorough difference in the behavior, and it will impact upon the people's ability and urge two-way communications. It is evident change did not have time period to be implemented the process of change adequately. The study discusses or analyzes the humanistic side of BPR [74]. It is also argued that there are different factors that can reduces and human are the most priority feature to be focused in BPR. It is evident that lack of management practices and lack of ability to not able to break the resistance in the change process and lack of approach to deal with the BPR with the individual are important for the purpose of changing human approach which should be considered adequately in the case of BPR. The study analyzes that BPR is the main aspect in the HRM because individuals are the main source of implementing change in the organization; individuals are being treated differently which creates resistance and bad behavior toward change implementation [64]. From the perspective of the technological approach, the BRP is highly effective in reducing resistance, and it complements the effectiveness of BPR with the technology and brings the behavioral change toward

achieve the short- and long-term organizational objectives [57].

the attitude of the individual to adopt technology quickly.

From the socio-technical perspective, the organization has the combination of technical and social systems. The purpose of having social and technical perspectives is to develop harmony of human and technology with each other. The socio-technical system is based upon combination of human and technology [68]. There are social factors that are included such as motivation, loyalty status, power, and others; technological factors are process and system of technology that should be assimilated [64]. This assimilation encourages the management to collaborate both systems into the process

**5. Socio-technical perspective of BPR**

**62**

that they were to be discarded; hence 233 questionnaires were left. According to Hair et al. [76] for performing structural equation modeling, a sample of 200 is sufficient in order to get reliable results. The data collection was done during the first quarter of 2017. To collect the data, special consent was taken from the human resource department of the abovementioned companies. Moreover the HR departments in the companies also cooperated to collect the data from the employees. There were 180 male respondents, while the number of female respondents was 53, which constitutes 77.25 and 22.75% for males and females' share in total responses, respectively. As far as the positions of the respondents are concerned, they include managers around 21%, officers around 25.8%, professionals around 32%, and technical support around 21%. The average age of the respondents was around 41% showing that on average the respondents were matured enough to respond on the basis of their experience. The education of the respondents shows that around 25% of the respondents were having secondary education, while those who did diploma were 30%, and around 35% were having the bachelors' degree; however those who had postgraduate level of education were only 10.2**%**. There were 102 items in the question; all of them were developed on 5-point Likert scale from 1 = strongly disagree. The number of items is a bit high; however, researchers like [77] state that for achieving the generalization of the outcomes of data analysis and sufficient level of validity and reliability, detailed instrument is required.

## **6.2 Measurements of variables**

Organizational Culture: This construct has 3 dimensions and 21 items in a scale developed by Schien (1985). Out of the 21 items, there are 5 artifacts, 8 norms, and


**65**

*How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision...*

8 items related to the basic values. The measurement of different construct along with their dimensions and number of items is present in a summarized form in

The study utilized SPSS 22 and AMOS 22 for data analyses which were aimed to understand the demographic profile of the respondents, descriptive characteristics of the data, and testing the measurement and structural model. The model fit was assured along with the reliability and validity statistics found to be with the benchmark values. For testing the hypothesized relationships of the study, path model

The study was aimed to examine the impact of human and technology relation on the grounds of sustainable performance in the existence of an ERP system. The focus of the study was on the perception of moderating act of the organizational culture design with the relation between the elements such as socio-technical, decision-making environment, and ERP system. In the above section there are different results extracted and suggested that organization has to be effective in considering the technological system might have an impact when it interacting with the employees for sake of attaining the expected results. The organizational purpose is to focus upon the sustainable performance and use the new technology to attain the objectives of it. In this regard, the suggestion and discussion of management along with the experts are valuable in order to use the new technology into the system. The general perception is that systems are developed to facilitate the attainment

of the certain task with the high performance. This system will not be effective if the humans have no understanding about the new system. That is the reason the researcher is suggesting the system should be analyzed thoroughly in order to undertake that system is effective for the attainment of success [54, 36]. Here it is highly important that humans that are using the system should be competent and no resistance should exist if the change is being implemented [36]. As far as the implementation of the new system is concerned, the socio-technical factor in how humans will perceive the new technology in their operations is required to be undertaken. Quality, innovation, and effective decision should be undertaken in the supportive decision-making environment [21]. The analyzing of the advantages and disadvantages regarding the implementation of the ERP system from the organizational and employee perspective is important [19]. Humans should be aware that after implementing the ERP, they will not be affected, and it will increase their effectiveness at the workplace. It can be suggested that human and technological features should be assessed prior to the implementation of the ERP system that will

impact upon the success on the sustainable performance in future [18].

It is also confirmed that organizational culture should be flexible and employees should be adopting the change adequately. It is necessary that organizational culture should be bearing the resistance to change at an acceptable level. It is evident if the organization is aiming to bring change, then it is feasible that the implementation of new system will bring success in to the organization [12, 13, 60, 58]. The results of the study endorse the same feature that organizational culture should be flexible enough to accept the new ERP system to ensure success. The culture of the organization describes about the communication style in the organization. As far as the employees are concerned, it also illustrates the internal environment of the

*DOI: http://dx.doi.org/10.5772/intechopen.88447*

**Table 1**.

**6.3 Data analysis**

was tested [20].

**7. Discussion**

## **Table 1.**

*Number of items included in each construct.*

*How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision... DOI: http://dx.doi.org/10.5772/intechopen.88447*

8 items related to the basic values. The measurement of different construct along with their dimensions and number of items is present in a summarized form in **Table 1**.

### **6.3 Data analysis**

*Application of Decision Science in Business and Management*

of validity and reliability, detailed instrument is required.

**6.2 Measurements of variables**

that they were to be discarded; hence 233 questionnaires were left. According to Hair et al. [76] for performing structural equation modeling, a sample of 200 is sufficient in order to get reliable results. The data collection was done during the first quarter of 2017. To collect the data, special consent was taken from the human resource department of the abovementioned companies. Moreover the HR departments in the companies also cooperated to collect the data from the employees. There were 180 male respondents, while the number of female respondents was 53, which constitutes 77.25 and 22.75% for males and females' share in total responses, respectively. As far as the positions of the respondents are concerned, they include managers around 21%, officers around 25.8%, professionals around 32%, and technical support around 21%. The average age of the respondents was around 41% showing that on average the respondents were matured enough to respond on the basis of their experience. The education of the respondents shows that around 25% of the respondents were having secondary education, while those who did diploma were 30%, and around 35% were having the bachelors' degree; however those who had postgraduate level of education were only 10.2**%**. There were 102 items in the question; all of them were developed on 5-point Likert scale from 1 = strongly disagree. The number of items is a bit high; however, researchers like [77] state that for achieving the generalization of the outcomes of data analysis and sufficient level

Organizational Culture: This construct has 3 dimensions and 21 items in a scale developed by Schien (1985). Out of the 21 items, there are 5 artifacts, 8 norms, and

**Construct Dimensions Items References** Socio-technical elements Information sharing 4 Safarnia et al.'s (2012)

Decision-making environment Types of decisions 5 Duncan's (1972)

ERP system System quality 11 Ifinedo's (2007)

Sustainable performance Environmental sustainability 6 Crutzen's (2011)

**Total items 15**

**Total items 10**

**Total items 40**

**Total items 16**

Organizational culture 4 Process improvement 4 Customer satisfaction 3

Information needed 5

Information quality 8 Individual impact 6 Workgroup impact 7 Organizational impact 8

Economic sustainability 3 Social sustainability 7

**64**

**Table 1.**

*Number of items included in each construct.*

The study utilized SPSS 22 and AMOS 22 for data analyses which were aimed to understand the demographic profile of the respondents, descriptive characteristics of the data, and testing the measurement and structural model. The model fit was assured along with the reliability and validity statistics found to be with the benchmark values. For testing the hypothesized relationships of the study, path model was tested [20].

## **7. Discussion**

The study was aimed to examine the impact of human and technology relation on the grounds of sustainable performance in the existence of an ERP system. The focus of the study was on the perception of moderating act of the organizational culture design with the relation between the elements such as socio-technical, decision-making environment, and ERP system. In the above section there are different results extracted and suggested that organization has to be effective in considering the technological system might have an impact when it interacting with the employees for sake of attaining the expected results. The organizational purpose is to focus upon the sustainable performance and use the new technology to attain the objectives of it. In this regard, the suggestion and discussion of management along with the experts are valuable in order to use the new technology into the system.

The general perception is that systems are developed to facilitate the attainment of the certain task with the high performance. This system will not be effective if the humans have no understanding about the new system. That is the reason the researcher is suggesting the system should be analyzed thoroughly in order to undertake that system is effective for the attainment of success [54, 36]. Here it is highly important that humans that are using the system should be competent and no resistance should exist if the change is being implemented [36]. As far as the implementation of the new system is concerned, the socio-technical factor in how humans will perceive the new technology in their operations is required to be undertaken. Quality, innovation, and effective decision should be undertaken in the supportive decision-making environment [21]. The analyzing of the advantages and disadvantages regarding the implementation of the ERP system from the organizational and employee perspective is important [19]. Humans should be aware that after implementing the ERP, they will not be affected, and it will increase their effectiveness at the workplace. It can be suggested that human and technological features should be assessed prior to the implementation of the ERP system that will impact upon the success on the sustainable performance in future [18].

It is also confirmed that organizational culture should be flexible and employees should be adopting the change adequately. It is necessary that organizational culture should be bearing the resistance to change at an acceptable level. It is evident if the organization is aiming to bring change, then it is feasible that the implementation of new system will bring success in to the organization [12, 13, 60, 58]. The results of the study endorse the same feature that organizational culture should be flexible enough to accept the new ERP system to ensure success. The culture of the organization describes about the communication style in the organization. As far as the employees are concerned, it also illustrates the internal environment of the

organization and its communication with the employees as well [55]. It will illustrate the relation between organization's culture and decision-making environment of the organization along with the organizational adoption of the culture toward the new system adoption.

## **8. Conclusion**

ERP is being used in different organizations around the world, and this type of system needs some features that contribute to its success. Therefore, there is a need to develop and update the system periodically to ensure that system will produce quality results and success for the organization and meet the sustainable performance adequately with the help of ERP system. The most important aspect is the human and technological interaction which is highly important for the sake of getting success. The planning of the new system should be done adequately before the implementation phase of the ERP system. The organizational culture is the most evident feature to illustrate the organizational success when the ERP system is being implemented in the organization. This research study is having high contribution toward the literature, that is, it analyzes that the ERP system is a moderate construct in the model that has not been considered prior to this study. The research also analyzes the participation of the organizational culture as a moderator. In the previous study, the selected model was not implemented on the oil industry; this study is applying this model into the oil industry, because it is an important sector that contributes heavily in the economy. This will be the first study that is being applied in the context of Iraq along with the developed research model.

Recommendation of the study is being done through the help of extracted findings. Managers are required to undertake different factors prior to the implementation of the ERP system in the organization. The system should be implemented slowly because the change can impact upon the success of the organization, and employees will be given proper training and knowledge about it. The system evaluation should be conducted periodically for the purpose of identifying and exploring the issues that impact the organizational success that should require correction. Management should discuss about the new system internally and externally in order to get the expected results.

As far as Iraq is concerned, it is a developing country which requires ERP system that can achieve the sustainable performance if the ERP system should be incorporating the change management and organizational development features; the purpose of that is to attain the employee's skills, capabilities, and training of the system. This study is based upon the oil sector of Iraq that might impact adversely the organizational success; therefore, the need is to have a slow speed and bring change in the organizational culture as well.

**67**

**Author details**

Hadi AL-Abrrow1

Basrah, Iraq

\*, Alhamzah Alnoor2

Economic, University of Basrah, Basrah, Iraq

College, Southern Technical University, Basrah, Iraq

4 Marketing Department, Jadara University, Jordan

provided the original work is properly cited.

\*Address all correspondence to: hauni\_2000@yahoo.com

1 Department of Business Administration, College of Administration and

2 Department of Business Management Techniques, Management Technical

3 College of Computer Science and Information Technology, University of Basrah,

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

, Hasan Abdullah3

and Bilal Eneizan4

*DOI: http://dx.doi.org/10.5772/intechopen.88447*

*How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision...*

*DOI: http://dx.doi.org/10.5772/intechopen.88447 How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision...*

## **Author details**

*Application of Decision Science in Business and Management*

the new system adoption.

to get the expected results.

change in the organizational culture as well.

**8. Conclusion**

organization and its communication with the employees as well [55]. It will illustrate the relation between organization's culture and decision-making environment of the organization along with the organizational adoption of the culture toward

ERP is being used in different organizations around the world, and this type of system needs some features that contribute to its success. Therefore, there is a need to develop and update the system periodically to ensure that system will produce quality results and success for the organization and meet the sustainable performance adequately with the help of ERP system. The most important aspect is the human and technological interaction which is highly important for the sake of getting success. The planning of the new system should be done adequately before the implementation phase of the ERP system. The organizational culture is the most evident feature to illustrate the organizational success when the ERP system is being implemented in the organization. This research study is having high contribution toward the literature, that is, it analyzes that the ERP system is a moderate construct in the model that has not been considered prior to this study. The research also analyzes the participation of the organizational culture as a moderator. In the previous study, the selected model was not implemented on the oil industry; this study is applying this model into the oil industry, because it is an important sector that contributes heavily in the economy. This will be the first study that is being applied

Recommendation of the study is being done through the help of extracted findings. Managers are required to undertake different factors prior to the implementation of the ERP system in the organization. The system should be implemented slowly because the change can impact upon the success of the organization, and employees will be given proper training and knowledge about it. The system evaluation should be conducted periodically for the purpose of identifying and exploring the issues that impact the organizational success that should require correction. Management should discuss about the new system internally and externally in order

As far as Iraq is concerned, it is a developing country which requires ERP system that can achieve the sustainable performance if the ERP system should be incorporating the change management and organizational development features; the purpose of that is to attain the employee's skills, capabilities, and training of the system. This study is based upon the oil sector of Iraq that might impact adversely the organizational success; therefore, the need is to have a slow speed and bring

in the context of Iraq along with the developed research model.

**66**

Hadi AL-Abrrow1 \*, Alhamzah Alnoor2 , Hasan Abdullah3 and Bilal Eneizan4

1 Department of Business Administration, College of Administration and Economic, University of Basrah, Basrah, Iraq

2 Department of Business Management Techniques, Management Technical College, Southern Technical University, Basrah, Iraq

3 College of Computer Science and Information Technology, University of Basrah, Basrah, Iraq

4 Marketing Department, Jadara University, Jordan

\*Address all correspondence to: hauni\_2000@yahoo.com

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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[59] Ahlawat J, Punam. ERP systems and business performance. International Economics & Finance Journal. 2011;**6**(2):273-286. Available from: https://pdfs.semanticscholar.org/b3b2/08 fbdf8da856dd9b92784965ab5237946ee6. pdf

[60] Njihia E, Mwirigi FM. The effects of enterprise resource planning systems on firm's performance: A survey of commercial banks in Kenya. International Journal of Business and Commerce. 2014;**3**(8):120-129

[61] Waas T, Hugé J, Block T, Wright T, Benitez-Capistros F, Verbruggen A. Sustainability assessment and indicators: Tools in a decision-making strategy for sustainable development. Sustainability. 2014;**6**(9):5512-5534. DOI: 10.3390/ su6095512

[62] Smith A. Translating sustainabilities between green niches and sociotechnical regimes. Technology Analysis & Strategic Management. 2007;**19**(4):427-450. DOI: 10.1080/09537320701403334

[63] Dwyer C. Socio-technical systems theory and environmental sustainability. In Proceedings of

SIGGreen Workshop. Sprouts: Working Papers on Information Systems. 2011;**11**(3). Available from: http:// sprouts.aisnet.org/11-3

[64] Morris MG, Venkatesh V. Job characteristics and job satisfaction: Understanding the role of enterprise resource planning system implementation. MIS Quarterly. 2010;**34**:143-161. DOI: 10.2307/20721418

[65] Riaz U, Sair A, Shrafat M, Malik ME. Effect of organizational culture and top management support on ERP implementation. Science International. 2014;**26**(3):1361-1369

[66] Tang M, Cheung W. Organizational culture, supply chain management practices and organization's decision upon ERP systems. In: The 9th International Conference on Electronic Business. 2009. pp. 618-623

[67] Vatrapu RK. Explaining culture: An outline of a theory of sociotechnical interactions. In: Proceedings of the 3rd International Conference on Intercultural Collaboration. ACM; 2010. pp. 111-120. DOI: 10.1145/1841853.1841871

[68] Holt DT, Armenakis AA, Feild HS, Harris SG. Readiness for organizational change: The systematic development of a scale. The Journal of Applied Behavioral Science. 2007;**43**(2):232-255

[69] Pettigrew AM. Longitudinal field research on change: Theory and practice. Organization Science. 1990;**1**(3):267-292

[70] Self DR, Armenakis AA, Schraeder M. Organizational change content, process, and context: A simultaneous analysis of employee reactions. Journal of Change Management. 2007;**7**(2):211-229

[71] Armenakis AA, Bedeian AG. Organizational change: A review

**73**

*DOI: http://dx.doi.org/10.5772/intechopen.88447*

of theory and research in the 1990s. Journal of Management.

[72] Walker HK, Armenakis AA, Bernerth JB. Factors influencing organizational change efforts: An integrative investigation of change content, context, process and individual differences. Journal of Organizational Change Management.

[73] Huczynski A, Buchnan D. Organizational Behaviour An Introductory Text. 4th ed. 2001. Prentice Hall-Financial Times

[74] Nadler DA, Tushman ML. Organizational Frame bending: Principles for managing reorientation.

The Academy of Management Executive. 1989;**3**(3):194-203

Alnoor A, Eneizan B. A multilevel study of influence knowledge management small and medium enterprises. Polish Journal of Management Studies. 2019;**19**(1)

[76] Hair JF, Black WC, Babin BJ, Anderson RE. Multivariate Data Analysis. 7th ed. New York: Pearson

[77] Jain SK, Gupta G. Measuring service quality: Servqual vs. Servperf scales. Vikalpa. 2004;**29**(2):25-38. DOI:

10.1177/0256090920040203

[75] Abdulaali AR,

Prentice Hall; 2010

1999;**25**(3):293-315

2007;**20**(6):761-777

*How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision...*

*DOI: http://dx.doi.org/10.5772/intechopen.88447 How Does Socio-Technical Approach Influence Sustainability? Considering the Roles of Decision...*

of theory and research in the 1990s. Journal of Management. 1999;**25**(3):293-315

*Application of Decision Science in Business and Management*

SIGGreen Workshop. Sprouts: Working

Papers on Information Systems. 2011;**11**(3). Available from: http://

[64] Morris MG, Venkatesh V. Job characteristics and job satisfaction:

enterprise resource planning system implementation. MIS Quarterly.

2010;**34**:143-161. DOI: 10.2307/20721418

[66] Tang M, Cheung W. Organizational culture, supply chain management practices and organization's decision upon ERP systems. In: The 9th

International Conference on Electronic

[67] Vatrapu RK. Explaining culture: An outline of a theory of sociotechnical interactions. In: Proceedings of the 3rd International Conference on Intercultural Collaboration. ACM; 2010. pp. 111-120. DOI: 10.1145/1841853.1841871

[68] Holt DT, Armenakis AA, Feild HS, Harris SG. Readiness for organizational change: The systematic development of a scale. The Journal of Applied Behavioral Science. 2007;**43**(2):232-255

[69] Pettigrew AM. Longitudinal field research on change: Theory and practice. Organization Science.

[70] Self DR, Armenakis AA,

Schraeder M. Organizational change content, process, and context: A simultaneous analysis of employee reactions. Journal of Change Management. 2007;**7**(2):211-229

[71] Armenakis AA, Bedeian AG. Organizational change: A review

1990;**1**(3):267-292

Business. 2009. pp. 618-623

sprouts.aisnet.org/11-3

Understanding the role of

[65] Riaz U, Sair A, Shrafat M, Malik ME. Effect of organizational culture and top management support on ERP implementation. Science International. 2014;**26**(3):1361-1369

[56] Nicolaou AI, Bhattacharya S. Organizational performance effects of ERP systems usage: The impact of post-implementation changes. International Journal of Accounting Information Systems. 2006;**7**(1):18-35. DOI: 10.1016/j.accinf.2005.12.002

[57] Clemmons S, Simon SJ. Control and coordination in global ERP configuration. Business Process Management Journal. 2001;**7**(3):205- 215. DOI: 10.1108/14637150110392665

enterprise resource planning (ERP) implementation process on users performance. Anvesha. 2016;**8**(1):44-56

[59] Ahlawat J, Punam. ERP systems and business performance. International Economics & Finance Journal. 2011;**6**(2):273-286. Available from: https://pdfs.semanticscholar.org/b3b2/08 fbdf8da856dd9b92784965ab5237946ee6.

[60] Njihia E, Mwirigi FM. The effects of enterprise resource planning systems on firm's performance: A survey of commercial banks in Kenya. International Journal of Business and Commerce. 2014;**3**(8):120-129

[62] Smith A. Translating sustainabilities

between green niches and sociotechnical regimes. Technology Analysis & Strategic Management.

2007;**19**(4):427-450. DOI: 10.1080/09537320701403334

[63] Dwyer C. Socio-technical systems theory and environmental sustainability. In Proceedings of

[61] Waas T, Hugé J, Block T, Wright T, Benitez-Capistros F, Verbruggen A. Sustainability assessment and indicators: Tools in a decision-making strategy for sustainable development. Sustainability. 2014;**6**(9):5512-5534. DOI: 10.3390/

[58] Motwani B. Impact of

**72**

su6095512

pdf

[72] Walker HK, Armenakis AA, Bernerth JB. Factors influencing organizational change efforts: An integrative investigation of change content, context, process and individual differences. Journal of Organizational Change Management. 2007;**20**(6):761-777

[73] Huczynski A, Buchnan D. Organizational Behaviour An Introductory Text. 4th ed. 2001. Prentice Hall-Financial Times

[74] Nadler DA, Tushman ML. Organizational Frame bending: Principles for managing reorientation. The Academy of Management Executive. 1989;**3**(3):194-203

[75] Abdulaali AR, Alnoor A, Eneizan B. A multilevel study of influence knowledge management small and medium enterprises. Polish Journal of Management Studies. 2019;**19**(1)

[76] Hair JF, Black WC, Babin BJ, Anderson RE. Multivariate Data Analysis. 7th ed. New York: Pearson Prentice Hall; 2010

[77] Jain SK, Gupta G. Measuring service quality: Servqual vs. Servperf scales. Vikalpa. 2004;**29**(2):25-38. DOI: 10.1177/0256090920040203

Chapter 5

Abstract

evaluate a proposed framework.

1. Introduction and background

be very costly, even fatal.

75

(MCDM) methods, selection process, supply chain

A Framework for Detecting

of Third-Party Logistics, the

Requirements of Managers,

and the Type of Input Data

Patricija Bajec and Danijela Tuljak-Suban

Decision-Making Method Taking

into Account the Characteristics

The aim of the paper is to propose a framework for improving the process of choosing an appropriate multi-criteria decision-making (MCDM) method in the selection of a third-party logistics provider (3PLP). A systematic combining process was used, along with two literature reviews, one empirical survey and a case study. A four-step framework was proposed, starting with identifying common criteria that are harmonised to the 3PLP selection process, followed by analysing all aspects of the 3PLP selection problem and the selected MCDM methods in view of common criteria, finishing with a decision tree, divided into seven branches that orient the decision-maker towards his decisions. The paper also contributes to the theory by identifying and evaluating criteria that characterise 3PLP decision-making and by suggesting a suitable order of criteria. A numerical example was implemented to

Keywords: third-party logistics provider (3PLP), multi-criteria decision-making

Competitive supply chain management is largely dependent on the efficient management of the logistics chain [1]. Since companies (shippers) spend more and more time focusing on core competencies, they increasingly outsource logistics in parts or in their entirety to 3PLPs, which assist them in gaining competitive advantage [2–4]. However, logistics outsourcing can fail if not done properly, which can

There are many reasons for outsourcing failures. Of the most frequently is relationship failure between the buyer and the provider of logistics outsourcing

the Proper Multi-Criteria

## Chapter 5

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method Taking into Account the Characteristics of Third-Party Logistics, the Requirements of Managers, and the Type of Input Data

Patricija Bajec and Danijela Tuljak-Suban

## Abstract

The aim of the paper is to propose a framework for improving the process of choosing an appropriate multi-criteria decision-making (MCDM) method in the selection of a third-party logistics provider (3PLP). A systematic combining process was used, along with two literature reviews, one empirical survey and a case study. A four-step framework was proposed, starting with identifying common criteria that are harmonised to the 3PLP selection process, followed by analysing all aspects of the 3PLP selection problem and the selected MCDM methods in view of common criteria, finishing with a decision tree, divided into seven branches that orient the decision-maker towards his decisions. The paper also contributes to the theory by identifying and evaluating criteria that characterise 3PLP decision-making and by suggesting a suitable order of criteria. A numerical example was implemented to evaluate a proposed framework.

Keywords: third-party logistics provider (3PLP), multi-criteria decision-making (MCDM) methods, selection process, supply chain

## 1. Introduction and background

Competitive supply chain management is largely dependent on the efficient management of the logistics chain [1]. Since companies (shippers) spend more and more time focusing on core competencies, they increasingly outsource logistics in parts or in their entirety to 3PLPs, which assist them in gaining competitive advantage [2–4]. However, logistics outsourcing can fail if not done properly, which can be very costly, even fatal.

There are many reasons for outsourcing failures. Of the most frequently is relationship failure between the buyer and the provider of logistics outsourcing [5, 6], caused by 'possible defects in a partner, perception of opportunistic behaviour, lack of understanding between partners, conflict risk, lack of competence, loss of core proprietary capabilities and encroachment risk' [7, 8], lack of expertise of a partner, lack of information, etc. [9].

To solve these issues an e-survey was used. A preliminary survey questionnaire

The 3PLP selection process is mainly done by the buyers of outsourcing (16 of 25 companies). They are used to it and they are familiar with the used methodology. However, they are not satisfied with the method's ability or with its results. It seems that they are familiar with the method they are using but not with other methods

Those that outsource the selection process either because it is time and staff consuming or because of lack of knowledge and experience request tailor made solutions regarding the type of results and methods used, but are disappointed with

Correlation between reasons for not outsourcing the selection process and reasons for dissatisfaction with the

was firstly developed and distributed to three researchers from three different logistics faculties, and to three decision-makers, familiar with the subject topic area, to ensure the survey was thorough and understandable. Following several modifications from this first review, the web-based survey was developed and then sent to producers, retailers, and suppliers located in Slovenia. Only companies that have had experiences with logistics outsourcing and only employees familiar with the selection process were contacted. Of the 50 e-mails 2 were not delivered and 25 were fully answered. The survey examined three main topics: the first was general (number of participants in the selection process, insourcing or outsourcing of selection process; the second relates to those that outsource the selection process and the third to those that insource selection process. Close-ended and open-ended

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method…

DOI: http://dx.doi.org/10.5772/intechopen.87222

questions were used. The following results were outlined:

that exist (Table 1).

Table 1.

77

results of the performed selection process.

Some features of 3PLP come to light when performing outsourcing and are therefore difficult to predict in advance. But many risks related to 3PLP can be predicted and eliminated, reduced or elided in the early build-up stage of 3PL relationship development. This is the stage during which potential 3PLP are selected by the buyer to negotiate and develop a contract. This study is only focused on the 3PLP selection process, which covers the selection of criteria, of the appropriate decision-making method or methods to evaluate the criteria, and final selection of potential 3PLP [10–14]. Negotiations and development of a contract were not considered in this article.

Identification of selection criteria, representing the first phase of the selection process, was outlined in two the authors' previous papers [15, 16]. Four groups of criteria (C1, C2, C3 and C4) were proposed. The C1 group covers vitally important criteria for the success of the supply chain, C2 are very important criteria, C3 group are important criteria and C4 are less important elements and therefore completely left to the discretion of the decision-maker.

The second phase of the 3PLP decision-making problem relates to the selection of the appropriate method. There is a wide range of MCDM methods, but not every method can be used for solving every decision-making problem. The characteristics as well as the advantages and disadvantages of each method are very different. The use of different methods can therefore result in different solutions to the same problem [17]. The approach for selecting the appropriate method should be tailored to each single decision-making process and not vice-versa [18]. Thus, the selection of the appropriate method is one of the most difficult problems in the selection process [19–22].

A very extensive and deep review of the literature on the most frequently used MCDM for selecting the 3PLP (108 scientific papers, published from 1999 (when the first articles in this field began to appear) to 2016, were systematically reviewed) revealed that many MCDM methods and combinations of methods have been used. The most frequently used method was the analytic hierarchy process (AHP), followed by the technique for order of preference by similarity to ideal solution (TOPSIS), analytic network process (ANP), Linear programming, data envelopment analysis (DEA), VIKOR, DELPHI, quality function deployment (QFD), decision-making trial and evaluation laboratory (DEMATEL), the preference ranking organisation method for enrichment of evaluations (PROMETHEE), elimination and choice expressing reality (ELECTRE) and interpretive structural modelling (ISM). Other methods were used once or never.

A vast array of MCDM methods has been applied. The applied methods have very different characteristics, which raises doubts over whether the method is harmonised with the characteristics of the 3PL industry, the single selection process and its objective. Discussions regarding the harmonisation of the applied MCDM with the 3PL characteristics or even single selection process have been very sparse. Explorations of the concrete use of MCDM methods, from the point of view of the decision-makers, have been very limited as well. Authors [23] in one of their studies assume that the MCDM method is still selected arbitrarily (the method is popular). Authors [18] share very similar opinion, arguing that decision-makers have an affinity for the chosen MCDM method, or they apply it, because it is easy to use. However, no research has yet been launched into the real circumstances of the reasons for choosing a particular method, problems associated with the use of different methods, plus challenges and needs of decision-makers.

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method… DOI: http://dx.doi.org/10.5772/intechopen.87222

To solve these issues an e-survey was used. A preliminary survey questionnaire was firstly developed and distributed to three researchers from three different logistics faculties, and to three decision-makers, familiar with the subject topic area, to ensure the survey was thorough and understandable. Following several modifications from this first review, the web-based survey was developed and then sent to producers, retailers, and suppliers located in Slovenia. Only companies that have had experiences with logistics outsourcing and only employees familiar with the selection process were contacted. Of the 50 e-mails 2 were not delivered and 25 were fully answered. The survey examined three main topics: the first was general (number of participants in the selection process, insourcing or outsourcing of selection process; the second relates to those that outsource the selection process and the third to those that insource selection process. Close-ended and open-ended questions were used. The following results were outlined:

The 3PLP selection process is mainly done by the buyers of outsourcing (16 of 25 companies). They are used to it and they are familiar with the used methodology. However, they are not satisfied with the method's ability or with its results. It seems that they are familiar with the method they are using but not with other methods that exist (Table 1).

Those that outsource the selection process either because it is time and staff consuming or because of lack of knowledge and experience request tailor made solutions regarding the type of results and methods used, but are disappointed with


#### Table 1.

Correlation between reasons for not outsourcing the selection process and reasons for dissatisfaction with the results of the performed selection process.

[5, 6], caused by 'possible defects in a partner, perception of opportunistic behaviour, lack of understanding between partners, conflict risk, lack of competence, loss of core proprietary capabilities and encroachment risk' [7, 8], lack of expertise of a

Some features of 3PLP come to light when performing outsourcing and are therefore difficult to predict in advance. But many risks related to 3PLP can be predicted and eliminated, reduced or elided in the early build-up stage of 3PL relationship development. This is the stage during which potential 3PLP are selected by the buyer to negotiate and develop a contract. This study is only focused on the 3PLP selection process, which covers the selection of criteria, of the appropriate decision-making method or methods to evaluate the criteria, and final selection of potential 3PLP [10–14]. Negotiations and development of a contract were not

Identification of selection criteria, representing the first phase of the selection process, was outlined in two the authors' previous papers [15, 16]. Four groups of criteria (C1, C2, C3 and C4) were proposed. The C1 group covers vitally important criteria for the success of the supply chain, C2 are very important criteria, C3 group are important criteria and C4 are less important elements and therefore completely

The second phase of the 3PLP decision-making problem relates to the selection of the appropriate method. There is a wide range of MCDM methods, but not every method can be used for solving every decision-making problem. The characteristics as well as the advantages and disadvantages of each method are very different. The use of different methods can therefore result in different solutions to the same problem [17]. The approach for selecting the appropriate method should be tailored to each single decision-making process and not vice-versa [18]. Thus, the selection of the appropriate method is one of the most difficult problems in the selection

A very extensive and deep review of the literature on the most frequently used MCDM for selecting the 3PLP (108 scientific papers, published from 1999 (when the first articles in this field began to appear) to 2016, were systematically

reviewed) revealed that many MCDM methods and combinations of methods have been used. The most frequently used method was the analytic hierarchy process (AHP), followed by the technique for order of preference by similarity to ideal solution (TOPSIS), analytic network process (ANP), Linear programming, data envelopment analysis (DEA), VIKOR, DELPHI, quality function deployment (QFD), decision-making trial and evaluation laboratory (DEMATEL), the preference ranking organisation method for enrichment of evaluations (PROMETHEE), elimination and choice expressing reality (ELECTRE) and interpretive structural

A vast array of MCDM methods has been applied. The applied methods have very different characteristics, which raises doubts over whether the method is harmonised with the characteristics of the 3PL industry, the single selection process and its objective. Discussions regarding the harmonisation of the applied MCDM with the 3PL characteristics or even single selection process have been very sparse. Explorations of the concrete use of MCDM methods, from the point of view of the decision-makers, have been very limited as well. Authors [23] in one of their studies assume that the MCDM method is still selected arbitrarily (the method is popular). Authors [18] share very similar opinion, arguing that decision-makers have an affinity for the chosen MCDM method, or they apply it, because it is easy to use. However, no research has yet been launched into the real circumstances of the reasons for choosing a particular method, problems associated with the use of

modelling (ISM). Other methods were used once or never.

different methods, plus challenges and needs of decision-makers.

partner, lack of information, etc. [9].

Application of Decision Science in Business and Management

left to the discretion of the decision-maker.

considered in this article.

process [19–22].

76


RQ3. How can decision-makers combine the characteristics of the 3PLP decision-making with criteria and their individual requirements to help them

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method…

is to propose a framework to help detect the appropriate MCDM method or

In line with the above thinking and research questions, the purpose of this paper

methods in the selection of 3PLP within the early build-up stage of 3PL relationship

The aim of this article is not new theory development but grounded theory refinement and adaptation to the 3PL industry. The authors aim to discover potential new criteria and determine a new hierarchical order of criteria appropriate for MCDM method selection in 3PLP decision-making process within grounded and

Although the article contains a bit of testing of the current theory, 'which suggests a deductive approach, and although a quasi-deductive theory testing means is used [25], the paper is ultimately closer to the inductive approach, which helps the researchers to delineate important variables and directs interpretation of findings' [26], but does not help to develop new theory. Mixed method research, which uses both quantitative and qualitative data, is preferred for allowing a better understanding [27] and spurring progress in a new field, but is not so fruitful for theory development and does not investigate the relationship between reality and

A systematic combining process was, on the other hand, found to be particularly useful in the refinement of existing theories and even in matching theory and reality [26, 28]. It was therefore used in this paper for the creation of the framework that facilitates the choice of a MCDM method in 3PLP selection. In line with the systematic combining process a five-phase methodology was adopted, as shown in

3. A framework facilitating choosing an appropriate MCDM method

A framework proposed in this article builds on the interactive decision support system (IDSS) of [29], on the general tentative guidelines of [21], on the multicriterion evaluation approach of [23] and on two rather new studies, by [20, 30]. Authors [29] stated that the particular IDSS should be based on a set of selected methods and on a suitable approach for the specific problem. Authors [23] proposed defining common criteria as a basis for establishing a correspondence between

choose the most appropriate MCDM method?

DOI: http://dx.doi.org/10.5772/intechopen.87222

development.

general theory.

grounded theory [26].

Figure 1.

Figure 1.

79

Phases of the research.

2. Research methodology

#### Table 2.

Correlation between reasons for outsourcing and reasons for dissatisfaction with the selection process.

the performance of the external provider (Table 2). It seems they are very well aware of the abilities the process of selection can offer, but have a lack of knowledge and experience.

Both those that insource and those that outsource the selection process are not satisfied. The selection process is dissatisfactorally performed. Moreover, the final result of the selection process may not be appropriate. This increases the risk of relationship failure. Again, more than half of logistics partnerships end within three to 5 years [24]. Decision-makers therefore need a reliable means for choosing the right method or combination of methods.

In summary, the extensive literature review found: (1) a lack of critical analysis of the published knowledge on the MCDM methods which would help to reveal the appropriate methods or group of methods for the logistics industry and (2) a dearth of studies determining the specific context of the 3PL industry and 3PLP decisionmaking. The empirical survey furthermore indicated that companies are setting up more tailor made requirements.

The main research questions (RQ) of this research are therefore three:

RQ1. What are the characteristics of the 3PLP decision-making?

RQ2. What are the most appropriate criteria for selecting MCDM method in the 3PLP decision-making?

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method… DOI: http://dx.doi.org/10.5772/intechopen.87222

RQ3. How can decision-makers combine the characteristics of the 3PLP decision-making with criteria and their individual requirements to help them choose the most appropriate MCDM method?

In line with the above thinking and research questions, the purpose of this paper is to propose a framework to help detect the appropriate MCDM method or methods in the selection of 3PLP within the early build-up stage of 3PL relationship development.

## 2. Research methodology

The aim of this article is not new theory development but grounded theory refinement and adaptation to the 3PL industry. The authors aim to discover potential new criteria and determine a new hierarchical order of criteria appropriate for MCDM method selection in 3PLP decision-making process within grounded and general theory.

Although the article contains a bit of testing of the current theory, 'which suggests a deductive approach, and although a quasi-deductive theory testing means is used [25], the paper is ultimately closer to the inductive approach, which helps the researchers to delineate important variables and directs interpretation of findings' [26], but does not help to develop new theory. Mixed method research, which uses both quantitative and qualitative data, is preferred for allowing a better understanding [27] and spurring progress in a new field, but is not so fruitful for theory development and does not investigate the relationship between reality and grounded theory [26].

A systematic combining process was, on the other hand, found to be particularly useful in the refinement of existing theories and even in matching theory and reality [26, 28]. It was therefore used in this paper for the creation of the framework that facilitates the choice of a MCDM method in 3PLP selection. In line with the systematic combining process a five-phase methodology was adopted, as shown in Figure 1.

Figure 1. Phases of the research.

## 3. A framework facilitating choosing an appropriate MCDM method

A framework proposed in this article builds on the interactive decision support system (IDSS) of [29], on the general tentative guidelines of [21], on the multicriterion evaluation approach of [23] and on two rather new studies, by [20, 30].

Authors [29] stated that the particular IDSS should be based on a set of selected methods and on a suitable approach for the specific problem. Authors [23] proposed defining common criteria as a basis for establishing a correspondence between

the performance of the external provider (Table 2). It seems they are very well aware of the abilities the process of selection can offer, but have a lack of knowledge

Correlation between reasons for outsourcing and reasons for dissatisfaction with the selection process.

Both those that insource and those that outsource the selection process are not satisfied. The selection process is dissatisfactorally performed. Moreover, the final result of the selection process may not be appropriate. This increases the risk of relationship failure. Again, more than half of logistics partnerships end within three to 5 years [24]. Decision-makers therefore need a reliable means for choosing the

In summary, the extensive literature review found: (1) a lack of critical analysis of the published knowledge on the MCDM methods which would help to reveal the appropriate methods or group of methods for the logistics industry and (2) a dearth of studies determining the specific context of the 3PL industry and 3PLP decisionmaking. The empirical survey furthermore indicated that companies are setting up

RQ2. What are the most appropriate criteria for selecting MCDM method in the

The main research questions (RQ) of this research are therefore three: RQ1. What are the characteristics of the 3PLP decision-making?

and experience.

Table 2.

right method or combination of methods.

Application of Decision Science in Business and Management

more tailor made requirements.

3PLP decision-making?

78

characteristics of the spatially-referenced decision problems and characteristics of the multi-criterion aggregation procedure. Authors [23] suggested starting the study of MCDM methods first by identifying a set of criteria for each method. After that a comparative study using a carefully crafted simulation is made.

The selection of the MCDM method depends on specific characteristics of the decision-making problem, characteristics of MCMD methods and resource constraints [19, 21–23, 29]. To select an appropriate MCDM method all three groups of characteristics should correspond among themselves and correspondence should be established in accord with common criteria [21–23, 29].

Keeping in mind the views of these researchers, the following 4-step framework is proposed: (1) Identifying common criteria (limits, conditions of application for MCDM method) for evaluation and identification of the characteristics of the 3PLP selection process and characteristics of MCDM groups of methods or single methods that are harmonised in regard to the 3PLP selection process. (2) Analysing all aspects of the 3PLP selection problem in view of common criteria. The result of this step is to elucidate the characteristics of the 3PLP selection problem. (3) Analysing the selected MCDM methods in view of common criteria, which highlights the appropriate groups of methods or a single MCDM method. (4) Proposing a decision tree to facilitate selecting the appropriate MCDM method.

#### 3.1 Identifying common criteria

Authors [23] suggested the evaluation of the decision problem and MCDM methods based on three common criteria: (1) type of decision problem, (2) nature of the set of alternatives and (3) nature and features of input information. Authors [29] stated that the particular decision-making system should be based on the set of ordinary criteria, pseudo-criteria and quasi-criteria. Authors [21] identified the following groups of common criteria: (1) the input data, (2) the preference elucidation, (3) the aggregation procedure, (4) the quality and quantity of the input information, (5) the compensation degree of the method and (6) the decision support system (software, user friendly aid packages).

MCDM methods have different forms of preferences: trade-offs, assessment of lotteries, direct rating and pairwise comparison, presence of veto, etc. The degree of compensation which concerns the 'trade-offs; that is, the possibility of offsetting a "disadvantage" of some criterion with a sufficiently large "advantage" of another

There are also some criteria that determine the use of the MCDM method but are totally dependent on the need or request of each individual decision-maker. These criteria often relate to user-friendliness [21, 31], intelligibility and the structure of

Authors [20] suggested also using secondary parameters in case the decisionmaker after taking into account various parameters still hesitates between several

3.2 Analysing all aspects of 3PLP selection problem in view of common criteria

A literature review on selection criteria in 3PL found that the number of criteria vary from 6 to more than 20 [15]. In all reviewed articles mixed types of criteria (qualitative and quantitative data) were applied. Costs were found to be the most frequently used criterion, closely followed by many qualitative criteria [16]. Based on these results, it is clear that the 3PL industry is characterised by the mixed types of input data (quantitative and qualitative) and many input data which are usually

The most frequently used method was found to be the AHP, followed by TOPSIS

and ANP. DEA, VIKOR, DELPHI, DEMATEL, QFD, ISM, PROMETHEE and ELECTREE were used more rarely [15]. Based on these results, it is clear that the pairwise comparison of criteria is the most desired preference elucidation mode. The results of decision-making are most frequently presented as numerical values

The fuzzy optimised method has been applied the most frequently (in 38 of 108 articles) [15]. Based on this fact, it is clear that the 3PL industry is characterised

criterion—whereas smaller advantages would not do the same' [22].

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method…

DOI: http://dx.doi.org/10.5772/intechopen.87222

methods.

81

Figure 2.

Classification of common criteria.

conflicting (lower costs, high quality).

(score for each alternative) or as ranked alternatives.

by input data, which are usually uncertain.

the method [18], ease of computation and costs of adopting methods [31].

Authors [30] claimed that the choice of criteria is very dependent on the decision-making context. A crucial parameter in their view is the adaptation of the type of results the method is expected to deliver, following with the correct handling of input information and adaptation of the degree of compensation.

In view of these findings two groups of common criteria were identified: primary and secondary (Figure 2). Criteria are presented in a hierarchical order (from the most important to the least important) to help the decision-maker chose the most appropriate method. However, the order of criteria within the key criteria related group is not mandatory.

The decision-maker can choose mainly between following types of results: a numerical value that is, available for each potential action, ranking of potential actions, without assignment of a numerical value for each potential action, selection of a subset of actions in preparation for making a final choice and assignment of actions to some a priori defined categories.

Kind of input information determines whether the information is qualitative, quantitative or mixed. An information feature deals with the information determinism or non-determinism (certain, uncertain, ambiguous, non-ambiguous information, etc.) [21]. There are three crucial types of problem statements: (1) The choice problem statement in which one or more alternatives are selected. (2) The sort problem statement in which various alternatives are sorted in classes. (3) The rank problem statement that ranks alternatives according to a preference structure [22, 29].

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method… DOI: http://dx.doi.org/10.5772/intechopen.87222

Figure 2. Classification of common criteria.

characteristics of the spatially-referenced decision problems and characteristics of the multi-criterion aggregation procedure. Authors [23] suggested starting the study of MCDM methods first by identifying a set of criteria for each method. After

The selection of the MCDM method depends on specific characteristics of the decision-making problem, characteristics of MCMD methods and resource constraints [19, 21–23, 29]. To select an appropriate MCDM method all three groups of characteristics should correspond among themselves and correspondence should be

Keeping in mind the views of these researchers, the following 4-step framework is proposed: (1) Identifying common criteria (limits, conditions of application for MCDM method) for evaluation and identification of the characteristics of the 3PLP selection process and characteristics of MCDM groups of methods or single methods that are harmonised in regard to the 3PLP selection process. (2) Analysing all aspects of the 3PLP selection problem in view of common criteria. The result of this step is to elucidate the characteristics of the 3PLP selection problem. (3) Analysing the selected MCDM methods in view of common criteria, which highlights the appropriate groups of methods or a single MCDM method. (4) Proposing a decision

Authors [23] suggested the evaluation of the decision problem and MCDM methods based on three common criteria: (1) type of decision problem, (2) nature of the set of alternatives and (3) nature and features of input information. Authors [29] stated that the particular decision-making system should be based on the set of ordinary criteria, pseudo-criteria and quasi-criteria. Authors [21] identified the following groups of common criteria: (1) the input data, (2) the preference elucidation, (3) the aggregation procedure, (4) the quality and quantity of the input information, (5) the compensation degree of the method and (6) the decision

Authors [30] claimed that the choice of criteria is very dependent on the decision-making context. A crucial parameter in their view is the adaptation of the type of results the method is expected to deliver, following with the correct handling of input information and adaptation of the degree of compensation.

In view of these findings two groups of common criteria were identified: primary and secondary (Figure 2). Criteria are presented in a hierarchical order (from the most important to the least important) to help the decision-maker chose the most appropriate method. However, the order of criteria within the key criteria

The decision-maker can choose mainly between following types of results: a numerical value that is, available for each potential action, ranking of potential actions, without assignment of a numerical value for each potential action, selection of a subset of actions in preparation for making a final choice and assignment of

Kind of input information determines whether the information is qualitative, quantitative or mixed. An information feature deals with the information determinism or non-determinism (certain, uncertain, ambiguous, non-ambiguous information, etc.) [21]. There are three crucial types of problem statements: (1) The choice problem statement in which one or more alternatives are selected. (2) The sort problem statement in which various alternatives are sorted in classes. (3) The rank problem statement that ranks alternatives according to a preference

that a comparative study using a carefully crafted simulation is made.

established in accord with common criteria [21–23, 29].

Application of Decision Science in Business and Management

tree to facilitate selecting the appropriate MCDM method.

support system (software, user friendly aid packages).

3.1 Identifying common criteria

related group is not mandatory.

structure [22, 29].

80

actions to some a priori defined categories.

MCDM methods have different forms of preferences: trade-offs, assessment of lotteries, direct rating and pairwise comparison, presence of veto, etc. The degree of compensation which concerns the 'trade-offs; that is, the possibility of offsetting a "disadvantage" of some criterion with a sufficiently large "advantage" of another criterion—whereas smaller advantages would not do the same' [22].

There are also some criteria that determine the use of the MCDM method but are totally dependent on the need or request of each individual decision-maker. These criteria often relate to user-friendliness [21, 31], intelligibility and the structure of the method [18], ease of computation and costs of adopting methods [31].

Authors [20] suggested also using secondary parameters in case the decisionmaker after taking into account various parameters still hesitates between several methods.

#### 3.2 Analysing all aspects of 3PLP selection problem in view of common criteria

A literature review on selection criteria in 3PL found that the number of criteria vary from 6 to more than 20 [15]. In all reviewed articles mixed types of criteria (qualitative and quantitative data) were applied. Costs were found to be the most frequently used criterion, closely followed by many qualitative criteria [16]. Based on these results, it is clear that the 3PL industry is characterised by the mixed types of input data (quantitative and qualitative) and many input data which are usually conflicting (lower costs, high quality).

The most frequently used method was found to be the AHP, followed by TOPSIS and ANP. DEA, VIKOR, DELPHI, DEMATEL, QFD, ISM, PROMETHEE and ELECTREE were used more rarely [15]. Based on these results, it is clear that the pairwise comparison of criteria is the most desired preference elucidation mode. The results of decision-making are most frequently presented as numerical values (score for each alternative) or as ranked alternatives.

The fuzzy optimised method has been applied the most frequently (in 38 of 108 articles) [15]. Based on this fact, it is clear that the 3PL industry is characterised by input data, which are usually uncertain.

In 35% of the reviewed articles, software tools were used. Frequent use of software tools may prove that user friendly solutions are required. Moreover, ease of use and low level of complexity are desired.

#### 3.3 Analysing the selected MCDM methods in view of common criteria

A selection of MCDM methods has been made on the basis of the literature review. Twenty-six methods in total, used in the 3PLP selection process, were found to exist, but only the most frequently used (in 75% of cases) were selected to be evaluated according to the criteria presented in the section "Identifying common criteria".

The comparison of the methods (Table 3) is based on a review of the literature [18, 20, 22, 29, 32–37] and not on expert study of each of the methods. Any method not considered in this table can be added to the table and analysed in the same way.

According to comparative analysis, the AHP, ANP, TOPSIS, ISM, VIKOR, DEMATEL and ELECTRE methods were found to be the most appropriate for the 3PLP decision-making problem and were later used in typological decision tree.

## 3.4 A typological decision tree diagram for the selection of the appropriate MCDM method

Based on the insights presented mainly in Sections 3.1, 3.2 and 3.3, the three diagram (Figure 3) which helps decision-maker to narrow down opinions following the branches was prepared [21, 29, 38]. A typological tree was used, because of its ability to capture all the sides of the decision-making problem (different methods, many parameters, extensive information) [21].

On the top of the tree are listed MCDM methods that, in Section 3.3 were found to be most appropriate in the selection of 3PLPs. The tree structure is then divided into seven nodes with questions which guide decision-makers in selecting the most appropriate MCDM. Questions are criteria identified in Section 3.1. The questions

are in a hierarchical order, from the most general and pertinent to the least perti-

The tree diagram can include any other method and may be upgraded with

4. Validation of the proposed decision tree using a case study of local spare parts for a construction and agricultural machinery dealer

To validate the usefulness and practicality of the proposed approach we present a case study of a local spare parts company dealing with construction and agricultural machinery. The management intends to outsource all parcel delivery and occasionally value added services (repackaging of goods) to a single 3PLP. Thus far they have worked with five domestic and international parcel distributors. Due to a large number of contacts, different pricing, operating conditions and even quality of services, the situation can be quite chaotic at times. The dealer therefore

decided to cooperate with one or at most two logistics providers who are

favourable, offer a high quality of service particularly in terms of time, quality and quantity of package accuracy, flexibility, responsiveness, high frequency of deliv-

To define the criteria set, the list of the most frequently used criteria detected by [15] was submitted to the top management of a spare parts dealer. According to the dealer's requirements and the nature of its business, the following criteria were

additional questions from the third group of parameters as well.

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method…

DOI: http://dx.doi.org/10.5772/intechopen.87222

The decision tree for selecting MCDM method in 3PLP decision-making.

nent [20].

Figure 3.

ery, etc.

83


#### Table 3.

Comparison of selected MCDM methods on the basis of common criteria.

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method… DOI: http://dx.doi.org/10.5772/intechopen.87222

Figure 3. The decision tree for selecting MCDM method in 3PLP decision-making.

are in a hierarchical order, from the most general and pertinent to the least pertinent [20].

The tree diagram can include any other method and may be upgraded with additional questions from the third group of parameters as well.

## 4. Validation of the proposed decision tree using a case study of local spare parts for a construction and agricultural machinery dealer

To validate the usefulness and practicality of the proposed approach we present a case study of a local spare parts company dealing with construction and agricultural machinery. The management intends to outsource all parcel delivery and occasionally value added services (repackaging of goods) to a single 3PLP. Thus far they have worked with five domestic and international parcel distributors. Due to a large number of contacts, different pricing, operating conditions and even quality of services, the situation can be quite chaotic at times. The dealer therefore decided to cooperate with one or at most two logistics providers who are favourable, offer a high quality of service particularly in terms of time, quality and quantity of package accuracy, flexibility, responsiveness, high frequency of delivery, etc.

To define the criteria set, the list of the most frequently used criteria detected by [15] was submitted to the top management of a spare parts dealer. According to the dealer's requirements and the nature of its business, the following criteria were

In 35% of the reviewed articles, software tools were used. Frequent use of software tools may prove that user friendly solutions are required. Moreover, ease

A selection of MCDM methods has been made on the basis of the literature review. Twenty-six methods in total, used in the 3PLP selection process, were found to exist, but only the most frequently used (in 75% of cases) were selected to be evaluated according to the criteria presented in the section "Identifying common

The comparison of the methods (Table 3) is based on a review of the literature

3.3 Analysing the selected MCDM methods in view of common criteria

[18, 20, 22, 29, 32–37] and not on expert study of each of the methods. Any method not considered in this table can be added to the table and analysed in the

According to comparative analysis, the AHP, ANP, TOPSIS, ISM, VIKOR, DEMATEL and ELECTRE methods were found to be the most appropriate for the 3PLP decision-making problem and were later used in typological decision tree.

3.4 A typological decision tree diagram for the selection of the appropriate

Based on the insights presented mainly in Sections 3.1, 3.2 and 3.3, the three diagram (Figure 3) which helps decision-maker to narrow down opinions following the branches was prepared [21, 29, 38]. A typological tree was used, because of its ability to capture all the sides of the decision-making problem (different methods,

On the top of the tree are listed MCDM methods that, in Section 3.3 were found to be most appropriate in the selection of 3PLPs. The tree structure is then divided into seven nodes with questions which guide decision-makers in selecting the most appropriate MCDM. Questions are criteria identified in Section 3.1. The questions

> The preference elucidation mode

mixed choice, ranking pairwise comparison yes, partially

mixed choice, ranking direct rating yes, totally

mixed choice, ranking pairwise comparison yes, partially

mixed choice, ranking trade-offs/rating yes, partially

Compensation

Type of problem statement

DEA ranking mixed ranking pairwise comparison yes, partially

DEMATEL ranking mixed ranking pairwise comparison yes, partially ELECTRE ranking mixed ranking pairwise comparison yes, partially PROMETHEE ranking mixed ranking pairwise comparison yes, partially

of use and low level of complexity are desired.

Application of Decision Science in Business and Management

many parameters, extensive information) [21].

Kind of info

Comparison of selected MCDM methods on the basis of common criteria.

Type of results

value

value

value

value

AHP numerical

TOPSIS numerical

ANP numerical

VIKOR numerical

criteria".

same way.

MCDM method

Table 3.

82

MCDM method

selected: costs (C1), warehouse services (C2), added value services (C3), accurate time, quality and quantity (C4), flexibility (C5), responsiveness (C6), frequency of delivery (C7), staff quality (C8), information exchange capability (C9). Some of them are qualitative, some quantitative. Mixed types of data were therefore used in this selection process, which answered the second question of a tree diagram proposed in Section 3.4.

Selection of the most appropriate MCDM started with answering the six questions of the decision tree, since the second question was already answered with the selection of the criteria for choosing the 3PLP. The top management was not familiar with MCDM methods. The authors, therefore, need to explain questions 1, 3, 4, 5, 6 and 7 of the decision tree in order to receive proper answers. The top management preferred to have 3PLPs ranked from the best to the worst. They wished to eliminate subjectivity. Pairwise comparison and not direct rating was selected. They wanted to take into account compensation and preferred to use an easy method. Using the tree diagram proposed in Figure 3, the PROMETHEE and DEMATEL methods were found to be the most appropriate for the requirements of the top management. But since 'PROMETHEE shows better balance between theory and implementation, it is easier to use and the software is simple to understand [18] the present decision-making process used PROMETHEE.

PROMETHEE requires the use of weights of relative importance f g w1; w2; …; wm to associate with the criteria set C ¼ f g C1;C2; …;Cm , m ¼ 9. The following weights are obtained with the AHP method: w<sup>1</sup> ¼ 0:24, w<sup>2</sup> ¼ 0:06, w<sup>3</sup> ¼ 0:05, w<sup>4</sup> ¼ 0:20, w<sup>5</sup> ¼ 0:11, w<sup>6</sup> ¼ 0:10, w<sup>7</sup> ¼ 0:18, w<sup>8</sup> ¼ 0:03, w<sup>9</sup> ¼ 0:03: They are based on the nine stage Saaty comparison scale [39] and form the pair-wise comparison matrix M.

The consistency index ð Þ CI of the comparison matrix M is computed using the normalised principal Eigen vector method and the approximate value of the maximum eigenvalue λmax which is 9.83 [40]. The consistency index is CI ffi 0:1, divided with the random consistency index ð Þ RI , which is 1,45, results in the consistency ratio CR ffi 0:07, which is <10%. Therefore, the comparison matrix M is consistent and the weights have been properly computed. In the next step, the set of alternatives A ¼ f g a1; a2; …; an must be evaluated with respect to the proposed criteria. In the case study n ¼ 5 and fa<sup>1</sup> ¼ TNT; a<sup>2</sup> ¼ DHL; a<sup>3</sup> ¼ GLS; a<sup>4</sup> ¼ Posta SLO; a<sup>5</sup> ¼ FEDEXg. Evaluations are defined in the matrix fi aj � �; <sup>1</sup>≤<sup>i</sup> <sup>≤</sup><sup>9</sup> � ; <sup>1</sup>≤j<sup>≤</sup> <sup>5</sup><sup>g</sup> and values of evaluation (Figure 4) are based on the five stage scale where intermediate evaluations are also allowed (1 = very low,…, 5 = very strong).

Now the preference structure of the PROMETHEE method is defined. For this purpose the range of evaluations of alternatives is computed with respect to each criterion:

$$d\_k(a\_i, a\_j) = f\_k(a\_i) - f\_k(a\_j) \tag{1}$$

Pk ai; aj

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method…

DOI: http://dx.doi.org/10.5772/intechopen.87222

π ai; aj <sup>¼</sup> <sup>∑</sup>

π aj; ai <sup>¼</sup> <sup>∑</sup>

The multi-criteria preference flows (out and in) are defined as:

ϕþð Þ¼ a

ϕ�ð Þ¼ a

ordering the actions according to the decreasing values of the flow scores:

computed: ϕþð Þ¼ a<sup>1</sup> 0:11, ϕþð Þ¼ a<sup>2</sup> 0:01, ϕþð Þ¼ a<sup>3</sup> 0:09, ϕþð Þ¼ a<sup>4</sup> 0:75,

and the least useful is DHL.

85

Figure 4. Evaluation matrix.

The preference degree of criteria ai with respect to aj is defined as:

<sup>¼</sup> P dk ai; aj

m k¼1

m k¼1

1 <sup>n</sup> � <sup>1</sup> <sup>∑</sup> n i¼1

1 <sup>n</sup> � <sup>1</sup> <sup>∑</sup> n i¼1

The positive preference flow ϕ<sup>þ</sup> measures the given alternative's global preference with respect to the preferences of all other alternatives. The negative preference flow ϕ� measures the global preference of all the other alternatives with respect to a given alternative. The PROMETHEE complete ranking is obtained by

For functions defined by Eq. (1)–(8), it has been verified that all request conditions are fulfilled [41]. Using Eq. (6) the out multi-criteria preference flows are

To check the usefulness of the proposed framework and the obtained results the authors asked the spare parts dealer to validate five logistics service providers using

ϕþð Þ¼ a<sup>5</sup> 0:18. Then using Eq. (7) the in multi-criteria preference flows are computed: ϕ�ð Þ¼ a<sup>1</sup> 0:27, ϕ�ð Þ¼ a<sup>2</sup> 0:46, ϕ�ð Þ¼ a<sup>3</sup> 0:28, ϕ�ð Þ¼ a<sup>4</sup> 0, ϕ�ð Þ¼ a<sup>5</sup> 0:15. The ranking of alternatives is obtained using Eq. (8): ϕð Þ¼ a<sup>4</sup> 0:75≥ ϕð Þ¼ a<sup>5</sup> 0:04≥ ϕð Þ¼� a<sup>1</sup> 0:15 ≥ ϕð Þ¼� a<sup>3</sup> 0:18≥ ϕð Þ¼� a<sup>2</sup> 0:45. The best alternative is Posta SLO

ϕð Þ¼ a ϕþð Þ� a ϕ�ð Þ a ; ϕð Þ a ϵ½ � 0; 1 (8)

and the preference degree of criteria aj with respect to ai is defined as:

Pk ai; aj

Pk aj; ai

: (3)

wk (4)

wk: (5)

πð Þ a; ai ; (6)

π ai ð Þ ; a ; (7)

and the preference function P xð Þ is defined as:

$$P(\mathbf{x}) = \begin{cases} 0, & \mathbf{x} \le q \\ \frac{\mathbf{x} - q}{p - q}, & q \le \mathbf{x} \le p \\ 1, & \mathbf{x} \ge p \end{cases};\tag{2}$$

where q and p are, respectively, the smallest and the largest threshold deviation values sufficient to generate a full preference. In our case q ¼ 0:2 and p ¼ 0:6:

Preferences are values between 0 and 1 and are defined as:

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method… DOI: http://dx.doi.org/10.5772/intechopen.87222


Figure 4. Evaluation matrix.

selected: costs (C1), warehouse services (C2), added value services (C3), accurate time, quality and quantity (C4), flexibility (C5), responsiveness (C6), frequency of delivery (C7), staff quality (C8), information exchange capability (C9). Some of them are qualitative, some quantitative. Mixed types of data were therefore used in this selection process, which answered the second question of a tree diagram pro-

Selection of the most appropriate MCDM started with answering the six questions of the decision tree, since the second question was already answered with the selection of the criteria for choosing the 3PLP. The top management was not familiar with MCDM methods. The authors, therefore, need to explain questions 1, 3, 4, 5, 6 and 7 of the decision tree in order to receive proper answers. The top management preferred to have 3PLPs ranked from the best to the worst. They wished to eliminate subjectivity. Pairwise comparison and not direct rating was selected. They wanted to take into account compensation and preferred to use an easy method. Using the tree diagram proposed in Figure 3, the PROMETHEE and DEMATEL methods were found to be the most appropriate for the requirements of the top management. But since 'PROMETHEE shows better balance between theory and implementation, it is easier to use and the software is simple to understand [18] the

PROMETHEE requires the use of weights of relative importance f g w1; w2; …; wm to associate with the criteria set C ¼ f g C1;C2; …;Cm , m ¼ 9. The following weights are obtained with the AHP method: w<sup>1</sup> ¼ 0:24, w<sup>2</sup> ¼ 0:06, w<sup>3</sup> ¼ 0:05, w<sup>4</sup> ¼ 0:20, w<sup>5</sup> ¼ 0:11, w<sup>6</sup> ¼ 0:10, w<sup>7</sup> ¼ 0:18, w<sup>8</sup> ¼ 0:03, w<sup>9</sup> ¼ 0:03: They are based on the nine stage Saaty comparison scale [39] and form the pair-wise comparison

The consistency index ð Þ CI of the comparison matrix M is computed using the normalised principal Eigen vector method and the approximate value of the maximum eigenvalue λmax which is 9.83 [40]. The consistency index is CI ffi 0:1, divided with the random consistency index ð Þ RI , which is 1,45, results in the consistency ratio CR ffi 0:07, which is <10%. Therefore, the comparison matrix M is consistent and the weights have been properly computed. In the next step, the set of alternatives A ¼ f g a1; a2; …; an must be evaluated with respect to the proposed criteria. In

� �; <sup>1</sup>≤<sup>i</sup> <sup>≤</sup><sup>9</sup> � ; <sup>1</sup>≤j<sup>≤</sup> <sup>5</sup><sup>g</sup> and

� � (1)

; (2)

the case study n ¼ 5 and fa<sup>1</sup> ¼ TNT; a<sup>2</sup> ¼ DHL; a<sup>3</sup> ¼ GLS; a<sup>4</sup> ¼ Posta SLO;

values of evaluation (Figure 4) are based on the five stage scale where intermediate

Now the preference structure of the PROMETHEE method is defined. For this purpose the range of evaluations of alternatives is computed with respect to each

� � <sup>¼</sup> <sup>f</sup> <sup>k</sup>ð Þ� ai <sup>f</sup> <sup>k</sup> aj

0, x≤q

1, x≥p

where q and p are, respectively, the smallest and the largest threshold deviation

, q≤ x≤ p

x � q p � q

values sufficient to generate a full preference. In our case q ¼ 0:2 and p ¼ 0:6:

8 >><

>>:

a<sup>5</sup> ¼ FEDEXg. Evaluations are defined in the matrix fi aj

evaluations are also allowed (1 = very low,…, 5 = very strong).

dk ai; aj

P xð Þ¼

Preferences are values between 0 and 1 and are defined as:

and the preference function P xð Þ is defined as:

present decision-making process used PROMETHEE.

Application of Decision Science in Business and Management

posed in Section 3.4.

matrix M.

criterion:

84

$$P\_k\left(a\_i, a\_j\right) = P\left[d\_k\left(a\_i, a\_j\right)\right].\tag{3}$$

The preference degree of criteria ai with respect to aj is defined as:

$$\pi(a\_i, a\_j) = \sum\_{k=1}^{m} P\_k(a\_i, a\_j) w\_k \tag{4}$$

and the preference degree of criteria aj with respect to ai is defined as:

$$
\pi(a\_j, a\_i) = \sum\_{k=1}^{m} P\_k(a\_j, a\_i) w\_k. \tag{5}
$$

The multi-criteria preference flows (out and in) are defined as:

$$\phi^+(a) = \frac{1}{n-1} \sum\_{i=1}^n \pi(a, a\_i);\tag{6}$$

$$\phi^-(a) = \frac{1}{n-1} \sum\_{i=1}^n \pi(a\_i, a);\tag{7}$$

The positive preference flow ϕ<sup>þ</sup> measures the given alternative's global preference with respect to the preferences of all other alternatives. The negative preference flow ϕ� measures the global preference of all the other alternatives with respect to a given alternative. The PROMETHEE complete ranking is obtained by ordering the actions according to the decreasing values of the flow scores:

$$
\phi(a) = \phi^+(a) - \phi^-(a);\ \phi(a)\epsilon[0,1] \tag{8}
$$

For functions defined by Eq. (1)–(8), it has been verified that all request conditions are fulfilled [41]. Using Eq. (6) the out multi-criteria preference flows are computed: ϕþð Þ¼ a<sup>1</sup> 0:11, ϕþð Þ¼ a<sup>2</sup> 0:01, ϕþð Þ¼ a<sup>3</sup> 0:09, ϕþð Þ¼ a<sup>4</sup> 0:75, ϕþð Þ¼ a<sup>5</sup> 0:18. Then using Eq. (7) the in multi-criteria preference flows are computed: ϕ�ð Þ¼ a<sup>1</sup> 0:27, ϕ�ð Þ¼ a<sup>2</sup> 0:46, ϕ�ð Þ¼ a<sup>3</sup> 0:28, ϕ�ð Þ¼ a<sup>4</sup> 0, ϕ�ð Þ¼ a<sup>5</sup> 0:15. The ranking of alternatives is obtained using Eq. (8): ϕð Þ¼ a<sup>4</sup> 0:75≥ ϕð Þ¼ a<sup>5</sup> 0:04≥ ϕð Þ¼� a<sup>1</sup> 0:15 ≥ ϕð Þ¼� a<sup>3</sup> 0:18≥ ϕð Þ¼� a<sup>2</sup> 0:45. The best alternative is Posta SLO and the least useful is DHL.

To check the usefulness of the proposed framework and the obtained results the authors asked the spare parts dealer to validate five logistics service providers using customer relationship management (CRM) software. The software enables management of the database of logistics service providers and also offers some extra services including an evaluation of the service providers. In order to be as objective as possible authors decided not to inform the dealer of the results of the PROMETHEE ranking. Authors suggested they use the same criteria as in the PROMETHEE ranking, while everything else was left to their choice. Posta SI was found to be the best alternative, followed by FEDEX, TNT, GLS and DHL. The same results were obtained using the PROMETHEE method.

preferences of the decision-maker. The order in which questions follow is chosen according to the priorities in making choices. The authors argue that the most relevant criteria to consider is the type of the results, followed by the type of data, elimination- or degree of limitation- of subjectivity, preference elucidation mode, degree of compensation, and finally, the ease of use and the availability of software. The tree diagram could be upgraded with additional branches but it will nevertheless remain easy to understand, even for those decision-makers who are not familiar

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method…

The proposed guideline was illustrated by a single case study of a local spare parts company. The decision-making process was made using the PROMETHEE. The PROMETHEE ranking of alternatives was at the end compared with results obtained by the CRM software tool. The evaluation of the framework in the case

The paper upgrades the general theory of IDSS and tailors it to the 3PL purposes, contributing to the theory by firstly suggesting a novel framework for facilitating the selection of the MCDM method. Further, it identifies and evaluates the criteria that characterise 3PLP decision-making in view of MCDM as well as individual criteria. The paper also suggests a suitable order of criteria and makes a comparative

From a managerial perspective, this paper provides a kind of a tool for guiding decision-makers selecting an MCDM method. A decision-maker should first decide how many and which criteria are relevant for the decision-making process. Then, a decision-making tree helps the decision-maker focus on the proper MCDM method. Moreover, the proposed framework makes a significant contribution to the choice of the 3PLP that best suits decision-maker needs and consequently decreases relationship risks and increases performance outcomes for the 3PLP and its buyer. The paper has some limitations. First, the drawback of a single-case design is its inability to provide a generalised conclusion. To strengthen the external validity of guideline, further empirical studies are necessary. The authors suggest testing the guideline in other case studies. Second, an issue that remains open, one that was not considered in this paper, is the importance of each criterion within the framework. Not all criteria are equally important. Further studies that will measure the weight

Faculty of Maritime Studies and Transport, University of Ljubljana, Portorož,

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium,

\*Address all correspondence to: patricija.bajec@fpp.uni-lj.si

with MCDM methods.

study demonstrated its utility.

analysis of MCDM based on the criteria.

DOI: http://dx.doi.org/10.5772/intechopen.87222

of each criterion should be conducted.

Patricija Bajec\* and Danijela Tuljak-Suban

provided the original work is properly cited.

Author details

Slovenia

87

## 5. Discussion

After proposing a typological tree and testing its usefulness it can be concluded that the tree cannot be simply used by a decision-maker in the same way as it was presented, but must be tailored to each specific 3PL selection process. Each 3PL selection process is unique and each decision-maker has different requirements in regard to the questions (criteria) and also different levels of knowledge about MCDM methods.

Moreover, due to the diversity of methods, the answers to the questions presented in the tree are often quite complicated. The comparison of MCDM methods presented in Chapter 3.3 also revealed that by some criteria methods cannot simply be compared [20] because of diversity of calculation, lack of an approach, for example, to characterising the degree of compensation, etc. [22] etc.). Authors [21], therefore, argue that a comparative analyse of different MCDM can only be used to identify in what circumstances (by which criteria) one method is appropriate.

Accordingly, it is impossible to describe all the 3PL decision-making situations and to formulate a tree diagram with a family of questions that would simply allow choosing the appropriate method [20]. The tree diagram presented here, as a final stage of the proposed framework, is therefore not a miraculous tool which enables the choosing of the proper methods, but only a general guideline that facilitates the choice of the proper methods.

The proposed framework is based on three different characteristics: 3PL characteristics; those of MCDM methods; and individual requirements of each single decision-making process. When selecting an appropriate method all three characteristics need to be matched [22], which is not an easy task, one requiring knowledge of the MCDM methods. The MCDM methods resulting from the tree diagram are frequently also equivocal, which requires a deep and axiomatic study in order to confidently make a choice.

## 6. Conclusion

Decision-making in 3PLP selection has an important impact on logistics outsourcing success. Therefore, the appropriate MCDM method or methods must therefore be used to select the most appropriate 3PLP. Because of the sheer volume and variance among MCDM methods, decision-makers face a difficult dilemma.

To solve this problem a four step approach facilitating the choosing of an appropriate method was proposed. The first two steps relate to criteria identification, the third to the identification of the right MCDM methods for 3PLP selection and the last combines all of the first three steps' results on order to construct a typological tree.

The typological tree is divided into branches (simple questions) which orients the decision-maker, guiding him towards an eventual opinion. The questions relate the characteristics of the logistics industry, aspects of MCDM methodology and the

## A Framework for Detecting the Proper Multi-Criteria Decision-Making Method… DOI: http://dx.doi.org/10.5772/intechopen.87222

preferences of the decision-maker. The order in which questions follow is chosen according to the priorities in making choices. The authors argue that the most relevant criteria to consider is the type of the results, followed by the type of data, elimination- or degree of limitation- of subjectivity, preference elucidation mode, degree of compensation, and finally, the ease of use and the availability of software. The tree diagram could be upgraded with additional branches but it will nevertheless remain easy to understand, even for those decision-makers who are not familiar with MCDM methods.

The proposed guideline was illustrated by a single case study of a local spare parts company. The decision-making process was made using the PROMETHEE. The PROMETHEE ranking of alternatives was at the end compared with results obtained by the CRM software tool. The evaluation of the framework in the case study demonstrated its utility.

The paper upgrades the general theory of IDSS and tailors it to the 3PL purposes, contributing to the theory by firstly suggesting a novel framework for facilitating the selection of the MCDM method. Further, it identifies and evaluates the criteria that characterise 3PLP decision-making in view of MCDM as well as individual criteria. The paper also suggests a suitable order of criteria and makes a comparative analysis of MCDM based on the criteria.

From a managerial perspective, this paper provides a kind of a tool for guiding decision-makers selecting an MCDM method. A decision-maker should first decide how many and which criteria are relevant for the decision-making process. Then, a decision-making tree helps the decision-maker focus on the proper MCDM method.

Moreover, the proposed framework makes a significant contribution to the choice of the 3PLP that best suits decision-maker needs and consequently decreases relationship risks and increases performance outcomes for the 3PLP and its buyer.

The paper has some limitations. First, the drawback of a single-case design is its inability to provide a generalised conclusion. To strengthen the external validity of guideline, further empirical studies are necessary. The authors suggest testing the guideline in other case studies. Second, an issue that remains open, one that was not considered in this paper, is the importance of each criterion within the framework. Not all criteria are equally important. Further studies that will measure the weight of each criterion should be conducted.

## Author details

customer relationship management (CRM) software. The software enables management of the database of logistics service providers and also offers some extra services including an evaluation of the service providers. In order to be as objective

After proposing a typological tree and testing its usefulness it can be concluded that the tree cannot be simply used by a decision-maker in the same way as it was presented, but must be tailored to each specific 3PL selection process. Each 3PL selection process is unique and each decision-maker has different requirements in regard to the questions (criteria) and also different levels of knowledge about

Moreover, due to the diversity of methods, the answers to the questions presented

presented in Chapter 3.3 also revealed that by some criteria methods cannot simply be compared [20] because of diversity of calculation, lack of an approach, for example, to characterising the degree of compensation, etc. [22] etc.). Authors [21], therefore, argue that a comparative analyse of different MCDM can only be used to identify in what circumstances (by which criteria) one method is appropriate.

Accordingly, it is impossible to describe all the 3PL decision-making situations and to formulate a tree diagram with a family of questions that would simply allow choosing the appropriate method [20]. The tree diagram presented here, as a final stage of the proposed framework, is therefore not a miraculous tool which enables the choosing of the proper methods, but only a general guideline that facilitates the

The proposed framework is based on three different characteristics: 3PL charac-

teristics; those of MCDM methods; and individual requirements of each single decision-making process. When selecting an appropriate method all three characteristics need to be matched [22], which is not an easy task, one requiring knowledge of the MCDM methods. The MCDM methods resulting from the tree diagram are frequently also equivocal, which requires a deep and axiomatic study in order to

Decision-making in 3PLP selection has an important impact on logistics outsourcing success. Therefore, the appropriate MCDM method or methods must therefore be used to select the most appropriate 3PLP. Because of the sheer volume and variance among MCDM methods, decision-makers face a difficult dilemma. To solve this problem a four step approach facilitating the choosing of an appropriate method was proposed. The first two steps relate to criteria identification, the third to the identification of the right MCDM methods for 3PLP selection and the last combines all of the first three steps' results on order to construct a

The typological tree is divided into branches (simple questions) which orients the decision-maker, guiding him towards an eventual opinion. The questions relate the characteristics of the logistics industry, aspects of MCDM methodology and the

in the tree are often quite complicated. The comparison of MCDM methods

as possible authors decided not to inform the dealer of the results of the PROMETHEE ranking. Authors suggested they use the same criteria as in the PROMETHEE ranking, while everything else was left to their choice. Posta SI was found to be the best alternative, followed by FEDEX, TNT, GLS and DHL. The same

results were obtained using the PROMETHEE method.

Application of Decision Science in Business and Management

5. Discussion

MCDM methods.

choice of the proper methods.

confidently make a choice.

6. Conclusion

typological tree.

86

Patricija Bajec\* and Danijela Tuljak-Suban Faculty of Maritime Studies and Transport, University of Ljubljana, Portorož, Slovenia

\*Address all correspondence to: patricija.bajec@fpp.uni-lj.si

© 2019 The Author(s). Licensee IntechOpen. This chapter is distributed under the terms of the Creative Commons Attribution License (http://creativecommons.org/licenses/ by/3.0), which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.

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[2] Evangelista P, Huge-Brodin M, Isaksson K, Sweeney E, editors. The impact of 3PL's green initiatives on the purchasing of transport and logistics services: An exploratory study. In: 20th International Purchasing and Supply Education and Research Association (IPSERA) Conference; 2011; Dublin: Maastricht University; 2011

[3] Perçin S, Min H. A hybrid quality function deployment and fuzzy decision-making methodology for the optimal selection of third-party logistics service providers. International Journal of Logistics Research and Applications. 2013;16(5):380-397

[4] Sanchís-Pedregosa C, Palacín-Sánchez M-J. Exploring the financial impact of outsourcing services strategy on manufacturing firms. Operations Management Research. 2014;7(3-4): 77-85

[5] Delerue H. Relational risks perception in European biotechnology alliances: The effect of contextual factors. European Management Journal. 2004;22(5):546-556

[6] Das TK, Teng B-S. Trust, control, and risk in strategic alliances: An integrated framework. Organization Studies. 2001;22(2):251-283

[7] Tsai M-C, Lai K-H, Lloyd AE, Lin H-J. The dark side of logistics outsourcing—Unraveling the potential risks leading to failed relationships. Transportation Research Part E: Logistics and Transportation Review. 2012;48(1):178-189

[8] Martin N, Verdonck L, Caris A, Depaire B. Horizontal collaboration in logistics: Decision framework and typology. Operations Management Research. 2018;11:1-19

criteria that consider the requirements of an external competitive environment. Transport Problems. 2017;12(special

DOI: http://dx.doi.org/10.5772/intechopen.87222

[25] Easton G, editor. Case research as a methodology for industrial networks: A

[26] Dubois A, Gadde L-E. Systematic combining: An abductive approach to case research. Journal of Business Research. 2002;55(7):553-560

[27] Britta G. Editorial. The International Journal of Logistics Management. 2017;

[28] Marchet G, Melacini M, Perotti S, Sassi C, Tappia E. Value creation models in the 3PL industry: What 3PL providers do to cope with shipper requirements. International Journal of Physical

Distribution and Logistics Management.

[29] Teghem J, Delhaye C, Kunsch PL. An interactive decision support system (IDSS) for multicriteria decision aid. Mathematical and Computer Modelling.

[30] Amine ME, Pailhes J, Perry N. Critical review of multi-criteria decision aid methods in conceptual design phases: Application to the development of a solar collector structure. Procedia

[31] Triantaphyllou E. Multi-Criteria Decision Making Methods: A Comparative Study: Springer; 2000.

[32] Munda G. The Iof Consistency: Basic Discrete Multi-Criteria

"Methods". Vol. XVII. Berlin: Springer-Verlag Berlin Heidelberg; 2008. p. 210

[33] Polatidis H, Haralambopoulos DA, Munda G, Vreeker R. Selecting an appropriate multi-criteria decision analysis technique for renewable energy

realist apologia. Interaction, Relationships and Networks: Past-Present-Future; Manchester, United Kingdom, IMP: Manchester Federal School of Business and Management;

1995

A Framework for Detecting the Proper Multi-Criteria Decision-Making Method…

28(2):226-227

2017;47(6):472-494

1989;12(10):1311-1320

CIRP. 2014;21:497-502

pp. 5-21

[17] Zardari NH, Ahmed K, Shirazi SM, Yusop ZB. Weighting Methods and Their Effects on Multi-Criteria Decision Making Model Outcomes in Water Resources Management. Vol. XI.

Springer International Publishing; 2014.

[18] Cinelli M, Coles SR, Kirwan K. Analysis of the potentials of multi criteria decision analysis methods to conduct sustainability assessment. Ecological Indicators. 2014;46:138-148

[19] Belton V, Stewart T. Multiple Criteria Decision Analysis: An Integrated Approach. Vol. XIX. USA:

[20] Roy B, Słowiński R. Questions guiding the choice of a multicriteria decision aiding method. EURO Journal on Decision Processes. 2013;1(1):69-97

[21] Guitouni A, Martel J-M. Tentative

appropriate MCDA method. European Journal of Operational Research. 1998;

[22] El Amine M, Pailhes JM, Perry N. Selection and use of a multi-criteria decision aiding method in the context of conceptual design with imprecise information: Application to a solar collector development. Concurrent Engineering. 2016;24(1):35-47

[23] Laaribi A, Chevallier JJ, Martel JM. A spatial decision aid: A multicriterion evaluation approach. Computers, Environment and Urban Systems. 1996;

[24] Sangam V. Global Logistics Outsourcing Trends: Challenges in Managing 3PL Relationship. Research Paper. New Zealand: Massey University;

guidelines to help choosing an

109(2):501-521

20(6):351-366

2005

89

Springer; 2002. p. 372

edition):157-168

p. 166

[9] Selviaridis K, Spring M. Third party logistics: A literature review and research agenda. The International Journal of Logistics Management. 2007; 18(1):125-150

[10] Lambert DM, Emmelhainz MA, Gardner JT. Building successful logistics partnerships. Journal of Business Logistics. 1999;20(1):165

[11] Whipple JM, Frankel R. Strategic alliance success factors. Journal of Supply Chain Management. 2000;36(2): 21-28

[12] Quélin B, Duhamel F. Bringing together strategic outsourcing and corporate strategy: Outsourcing motives and risks. European Management Journal. 2003;21(5):647-661

[13] Schwartz E. Supply-Chain Logistics Handoff Framingham. MA: Infoworld; 2003 [Accessed: 28/05/2019]. Available from: https://www.infoworld.com

[14] Keramydas C, Tsolakis N, Xanthopoulos A, Aidonis D. Selection and evaluation of 3PL providers: A conceptual decision-making framework. In: Folinas D, editor. Outsourcing Management for Supply Chain Operations and Logistics Service. Thessaloniki, Greece: ATEI; 2012. pp. 280-295

[15] Bajec P, Tuljak-Suban D. Identification of environmental criteria for selecting a logistics service provider: A step forward towards green supply chain management. In: Krmac E, editor. Sustainable Supply Chain Management. Rijeka: InTech; 2016

[16] Bajec P, Tuljak-Suban D. Selecting a logistics service provider: A definition of A Framework for Detecting the Proper Multi-Criteria Decision-Making Method… DOI: http://dx.doi.org/10.5772/intechopen.87222

criteria that consider the requirements of an external competitive environment. Transport Problems. 2017;12(special edition):157-168

References

[1] Jazairy A, Lenhardt J, von Haartman R. Improving logistics performance in crossborder 3PL relationships. International Journal of Logistics Research and Applications. 2017;20(5):1-23

Application of Decision Science in Business and Management

logistics: Decision framework and typology. Operations Management

[9] Selviaridis K, Spring M. Third party logistics: A literature review and research agenda. The International Journal of Logistics Management. 2007;

[10] Lambert DM, Emmelhainz MA, Gardner JT. Building successful logistics partnerships. Journal of Business

[11] Whipple JM, Frankel R. Strategic alliance success factors. Journal of Supply Chain Management. 2000;36(2):

[12] Quélin B, Duhamel F. Bringing together strategic outsourcing and corporate strategy: Outsourcing motives and risks. European Management Journal. 2003;21(5):647-661

[13] Schwartz E. Supply-Chain Logistics Handoff Framingham. MA: Infoworld; 2003 [Accessed: 28/05/2019]. Available from: https://www.infoworld.com

Xanthopoulos A, Aidonis D. Selection and evaluation of 3PL providers: A conceptual decision-making framework. In: Folinas D, editor. Outsourcing Management for Supply Chain Operations and Logistics Service. Thessaloniki, Greece: ATEI; 2012.

[14] Keramydas C, Tsolakis N,

[15] Bajec P, Tuljak-Suban D.

Rijeka: InTech; 2016

Identification of environmental criteria for selecting a logistics service provider: A step forward towards green supply chain management. In: Krmac E, editor. Sustainable Supply Chain Management.

[16] Bajec P, Tuljak-Suban D. Selecting a logistics service provider: A definition of

pp. 280-295

Logistics. 1999;20(1):165

Research. 2018;11:1-19

18(1):125-150

21-28

[2] Evangelista P, Huge-Brodin M, Isaksson K, Sweeney E, editors. The impact of 3PL's green initiatives on the purchasing of transport and logistics services: An exploratory study. In: 20th International Purchasing and Supply Education and Research Association (IPSERA) Conference; 2011; Dublin:

Maastricht University; 2011

2013;16(5):380-397

77-85

[3] Perçin S, Min H. A hybrid quality function deployment and fuzzy decision-making methodology for the optimal selection of third-party logistics service providers. International Journal of Logistics Research and Applications.

[4] Sanchís-Pedregosa C, Palacín-Sánchez M-J. Exploring the financial impact of outsourcing services strategy on manufacturing firms. Operations Management Research. 2014;7(3-4):

[5] Delerue H. Relational risks

Studies. 2001;22(2):251-283

[7] Tsai M-C, Lai K-H, Lloyd AE, Lin H-J. The dark side of logistics outsourcing—Unraveling the potential risks leading to failed relationships. Transportation Research Part E: Logistics and Transportation Review.

[8] Martin N, Verdonck L, Caris A, Depaire B. Horizontal collaboration in

2004;22(5):546-556

2012;48(1):178-189

88

perception in European biotechnology alliances: The effect of contextual factors. European Management Journal.

[6] Das TK, Teng B-S. Trust, control, and risk in strategic alliances: An integrated framework. Organization

[17] Zardari NH, Ahmed K, Shirazi SM, Yusop ZB. Weighting Methods and Their Effects on Multi-Criteria Decision Making Model Outcomes in Water Resources Management. Vol. XI. Springer International Publishing; 2014. p. 166

[18] Cinelli M, Coles SR, Kirwan K. Analysis of the potentials of multi criteria decision analysis methods to conduct sustainability assessment. Ecological Indicators. 2014;46:138-148

[19] Belton V, Stewart T. Multiple Criteria Decision Analysis: An Integrated Approach. Vol. XIX. USA: Springer; 2002. p. 372

[20] Roy B, Słowiński R. Questions guiding the choice of a multicriteria decision aiding method. EURO Journal on Decision Processes. 2013;1(1):69-97

[21] Guitouni A, Martel J-M. Tentative guidelines to help choosing an appropriate MCDA method. European Journal of Operational Research. 1998; 109(2):501-521

[22] El Amine M, Pailhes JM, Perry N. Selection and use of a multi-criteria decision aiding method in the context of conceptual design with imprecise information: Application to a solar collector development. Concurrent Engineering. 2016;24(1):35-47

[23] Laaribi A, Chevallier JJ, Martel JM. A spatial decision aid: A multicriterion evaluation approach. Computers, Environment and Urban Systems. 1996; 20(6):351-366

[24] Sangam V. Global Logistics Outsourcing Trends: Challenges in Managing 3PL Relationship. Research Paper. New Zealand: Massey University; 2005

[25] Easton G, editor. Case research as a methodology for industrial networks: A realist apologia. Interaction, Relationships and Networks: Past-Present-Future; Manchester, United Kingdom, IMP: Manchester Federal School of Business and Management; 1995

[26] Dubois A, Gadde L-E. Systematic combining: An abductive approach to case research. Journal of Business Research. 2002;55(7):553-560

[27] Britta G. Editorial. The International Journal of Logistics Management. 2017; 28(2):226-227

[28] Marchet G, Melacini M, Perotti S, Sassi C, Tappia E. Value creation models in the 3PL industry: What 3PL providers do to cope with shipper requirements. International Journal of Physical Distribution and Logistics Management. 2017;47(6):472-494

[29] Teghem J, Delhaye C, Kunsch PL. An interactive decision support system (IDSS) for multicriteria decision aid. Mathematical and Computer Modelling. 1989;12(10):1311-1320

[30] Amine ME, Pailhes J, Perry N. Critical review of multi-criteria decision aid methods in conceptual design phases: Application to the development of a solar collector structure. Procedia CIRP. 2014;21:497-502

[31] Triantaphyllou E. Multi-Criteria Decision Making Methods: A Comparative Study: Springer; 2000. pp. 5-21

[32] Munda G. The Iof Consistency: Basic Discrete Multi-Criteria "Methods". Vol. XVII. Berlin: Springer-Verlag Berlin Heidelberg; 2008. p. 210

[33] Polatidis H, Haralambopoulos DA, Munda G, Vreeker R. Selecting an appropriate multi-criteria decision analysis technique for renewable energy

Chapter 6

Abstract

dependence network

intelligence are:

software.

sion categories:

91

Decision Rule Induction Based

The graph theory is a well-known and wildly used method of supporting the decision-making process. The present chapter presents an application of a decision tree for rule induction from a set of decision examples taken from past experiences. A decision tree is a graph, where each internal (non-leaf) node denotes a test on an attribute which characterises a decision problem, each branch (also called arc or edge) represents the outcome of a test (attribute value), and each leaf (or terminal) node holds a class label which can be interpreted as a decision type. In the presented approach, the object-attribute-value (OAV) framework will be used for decision problem characteristics. The chapter presents a method of optimal decision tree induction. It discusses the Iterative Dichotomiser 3 (ID3) algorithm and provides

an example of the decision tree induction. Also, rules supporting the decision-making in engineering will be developed in this chapter.

Keywords: decision tree, decision rule induction, ID3 algorithm, QFD,

The main issues related to decision support with the use of artificial

• Representing knowledge as close as possible to the human way of thinking.

• Knowledge representation should be easy to use and updated with computer

Decision problems in industry may be classified into one of the following deci-

In order to solve decision problems, we need knowledge, information and data. Data are understood as a set of discrete objectives, facts and events. Information represents a relationship between some pieces of data. For data to be transformed into information, raw data should be cleaned, corrected and processed while considering the context of a decision. Knowledge can be defined as application of the relevant information to address specific problems. Knowledge in decision problems is developed based on the decision-maker's experiences. Hence, data gathering and analysis is one of the necessary stages of decision support systems development

1. Introduction: decision problems in industry

with the use of artificial intelligence.

on the Graph Theory

Izabela Kutschenreiter-Praszkiewicz

planning. Energy Sources, Part B: Economics, Planning and Policy. 2006; 1(2):181-193

[34] Figueira J, Mousseau V, Roy B. Electre methods. Multiple Criteria Decision Analysis: State of the Art Surveys: Springer; 2005. pp. 133-153

[35] Brans J-P, Mareschal B. Promethee methods. Multiple Criteria Decision Analysis: State of the Art Surveys: Springer; 2005. pp. 163-186

[36] Geldermann J, Zhang K. Software review: Decision lab 2000. Journal of Multi-Criteria Decision Analysis. 2001; 10(6):317-323

[37] Linkov I, Moberg E. Multi-Criteria Decision Analysis: Environmental Applications and Case Studies. Boca Raton: CRC Press; 2011. p. 204

[38] Hwang B-N, Shen Y-C. Decision making for third party logistics supplier selection in semiconductor manufacturing industry: A nonadditive fuzzy integral approach. Mathematical Problems in Engineering. 2015;1:1-12

[39] Saaty TL. How to make a decision: The analytic hierarchy process. European Journal of Operational Research. 1990;48(1):9-26

[40] Kordi M. Comparison of fuzzy and crisp analytic hierarchy process (AHP) methods for spatial multicriteria decision analysis in GIS [Master thesis]. Gavle: University of Gavle; 2008

[41] Clímaco J, Craveirinha J. Multiple criteria decision analysis–state of the art surveys. New York: Springer; 2005. p. 899-951

## Chapter 6

planning. Energy Sources, Part B: Economics, Planning and Policy. 2006;

Application of Decision Science in Business and Management

[34] Figueira J, Mousseau V, Roy B. Electre methods. Multiple Criteria Decision Analysis: State of the Art Surveys: Springer; 2005. pp. 133-153

[35] Brans J-P, Mareschal B. Promethee methods. Multiple Criteria Decision Analysis: State of the Art Surveys: Springer; 2005. pp. 163-186

[36] Geldermann J, Zhang K. Software review: Decision lab 2000. Journal of Multi-Criteria Decision Analysis. 2001;

[37] Linkov I, Moberg E. Multi-Criteria Decision Analysis: Environmental Applications and Case Studies. Boca Raton: CRC Press; 2011. p. 204

[38] Hwang B-N, Shen Y-C. Decision making for third party logistics supplier

manufacturing industry: A nonadditive fuzzy integral approach. Mathematical Problems in Engineering. 2015;1:1-12

[39] Saaty TL. How to make a decision: The analytic hierarchy process. European Journal of Operational Research. 1990;48(1):9-26

[40] Kordi M. Comparison of fuzzy and crisp analytic hierarchy process (AHP) methods for spatial multicriteria decision analysis in GIS [Master thesis]. Gavle: University of Gavle; 2008

[41] Clímaco J, Craveirinha J. Multiple criteria decision analysis–state of the art surveys. New York: Springer; 2005.

p. 899-951

90

selection in semiconductor

1(2):181-193

10(6):317-323
