A Case Study of ERP Implementation

A Case Study of ERP Implementation
for Opto-Electronics Industry

1Chan-Hsing Lo, 2Chih-Hung Tsai, and 1Rong-Kwei Li
1 Department of Industrial Engineering and Management
National Chiao-Tung University, Hsinchu, Taiwan, ROC.
2 Department of Industrial Engineering and Management
Ta-Hwa Institute of Technology, Hsin-Chu, Taiwan, ROC
E-mail: ietch@thit.edu.tw
Abstract
The corporate competitive environment
is being liberalized and globalized, therefore
product life cycle is shortening. Markets
are undertaking globalization and because
of rapid changes in recent years, companies
need to act more responsively to the market
and customer demand as well as strengthen
information exchange and communication
systems in order to survive the highly
competitive and speed-oriented industrial
environment. In such a global competition
era, ERP (Enterprise Resources Planning)
has become the focus of corporate operation
and management. The pricey ERP system
does not only tackle information technology
(IT) issues but also attempt to solve problems
related to human resource, enterprise
culture, and organizational restructuring
and so on. Hence, successful implementation
of appropriate ERP system can improve
enterprise performance significantly. This
study aims to help enterprises successfully
implement ERP system by proposing
strategies and tactics to tackle the common
problems encountered in implementing ERP
system.
Keywords: Enterprise Resources Planning
(ERP), Supply Chain Management (SCM),
Material Requirements Planning (MRP),
Application Implementation Methodology
(AIM), Customer Relationship Management
(CRM)
1. Introduction
APICS (American Production and
Inventory Control Society) [1, 19] defines
ERP (Enterprise Resources Planning) as an
accounting-oriented computer information
system that assists enterprises to define and
plan on the resources required during the
operation process of purchase, production,
distribution, and strategic planning to satisfy
customers’ orders. It also effectively
integrates and manages these resources so as
to enhance overall performance and reduce
costs. ERP covers a wide range of fields, for
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
14
example, purchase and sale management in
distribution; production management, MRP
(Material Requirements Planning), quality
control, management of products in process,
cost management, material management, and
project design change management, which
represents a complete manufacturing process
including research and development,
production, product management, and total
quality control. In addition, ERP also
involves accounting, human resource, and
decision-making resource management. The
ultimate goal of ERP is to improve
enterprises’ operating cycle of planning,
implementing, auditing, and improving, and
to strengthen corporate internal control and
auditing capabilities [14, 21].
In a global market, companies are
exposed to competition from not only
traditional or local competitors but also
worldwide players in the industry. Therefore,
it is imperative companies develop a
responsive, integrated, and succinct
management procedure [4] to respond to any
future challenges from global competition in
21st century. The Opto-Electronics industry
has been growing rapidly, and even the
industrial internal competition has become
quite intense. Only companies that can make
right decisions in a timely fashion based on
market trends can sustain their profitability
in fierce competition, hence, more and more
enterprises in Opto-Electronics industry have
implemented ERP system to increase their
competitiveness. However, ERP system
implementation process involves a wide
range of complicated resources and issues.
With no plan or supporting procedure,
companies may spend tons of money,
resource, and time on ERP implementation
but not enjoy a bit of the benefit ERP system
should have brought out [2, 3, 7, 8, 10, 11,
15, 16, 17]. In particular, implementing ERP
in Taiwan costs dearly but few cases have
succeeded. Due to industrial difference, the
applicability of ERP system and the
opportunities it presents are the critical
factors for consideration in ERP
implementation [13]. The T Opto-Electronics
Company is analyzed in this case study
focusing on the following three aspects: (1)
how to assess appropriate ERP software and
the applicability of ERP software to
enterprises in Taiwan; (2) ERP system
implementation strategy and methodology;
and (3) problems that may be encountered
during implementation process and the
solutions. The results are intended to provide
future reference to the related enterprises in
implementing ERP system.
2. Literature Review
The APICS’s definition of ERP can be
summarized as: (1) ERP system is
accounting-oriented; (2) ERP system focuses
on satisfying customer demand; (3) ERP
system plans on all corporate resources,
which is similar to the typical MRPII; and (4)
ERP system utilizes many mature
information technologies in 1990s. The
concept of “ERP” was first introduced by
Gartner Group [6, 22] in early 1990s. The
Group believes ERP’s functions exceed
MRP II’s. In addition to information
technology included in APICS’s definition,
ERP employs artificial intelligence, has
simulation capability, and can be applied to
project management, integration of internal
functions, quality control, and external
integration with clients and suppliers.
Various reports can be produced as needed.
From operational perspective, based on
supply chain management (SCM) and
customer relationship management (CRM),
ERP effectively integrates enterprise internal
and external resources in order to reduce
operating costs and satisfy market demands.
In other words, ERP takes advantage of
information technology to effectively utilize,
share, and allocate such corporate internal
A Case Study of ERP Implementation for Opto-Electronics Industry
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
15
resources as finance, accounting,
manufacturing, quality control, material
purchase, sales, and human, aiming to satisfy
customer needs and utilize enterprise
resources more effectively while meet
product quality and specification
requirements based on timely analyses, thus
ultimately increase profitability. Based on
the changes in market characteristics and
demand for the period from 1970s to 21st
century, we can study the needs and sources
of information system and technology
evolution by understanding the focus
adjustment of enterprise operation and
management. The ERP system’s evolution
course can be divided into four stages (as
shown in Table 1) [20]:
Table 1: The ERP System Evolution Course
1970s 1980s 1990s 2000s
Market
Characteristics
Mass Market Segments Niche Market Individuals
Demand Focus Cost Quality Flexibility Timeliness
Manufacturing
Method
Mass production of
limited product lines
Small-scale production
of various product
lines
Mass production of
various product lines
Mass production of
customized products
Structure Centralized Decentralized Decentralized Virtual
Management
System MRP II JIT/TQC ERP + SCM EERP + SCM
Management
Focus
Focuses on sales,
production,
materials, and
financial
management,
planning and
implementation of
manufacturing
material integration.
Focuses on cost,
quality, efficiency, and
promptness of material
supply.
Focuses on research and
development, sales,
production allocation and
distribution, service,
integration and optimal
utilization of internal
financial resources.
Focuses on a global
operating model that
combines internal
and external
customers and
manufacturers.
Application
Territory
Large area Large area Worldwide Worldwide
Operation
Cycle
Periodic Periodic Periodic/Ad hoc Ad hoc
Prior to 1998, ERP system was referred
to as enterprise ‘internal’ decision-making
support system. However, after 1999, ERP
represents an operation and management
system integrating enterprise both ‘internal’
and ‘external’ information. Some people just
call it extended ERP (i.e. EERP). ERP
system’s evolution and functions are shown
in Figure 1. ERP has been promoted and
applied in Taiwan for almost 20 years.
During this period of time, our discussions
and concerns have centered on the fact that
the applications of ERP in Taiwan were
not successful, thus could not achieve
predetermined goals. Many researches and
practices have provided us sufficient proof
that the failure of ERP applications in
Taiwan is not attributable to technology,
fund, Internet, application software, or
software implementation but enterprise
mindset. To inspire enterprises’ sponsorship
by improving their knowledge and
understanding, increase their proactive
capabilities, and fully exert their functions as
the sponsor, shall improve the success in
ERP applications in Taiwan fundamentally
[9, 12, 14].
16
1970’s 1980’s 1990’s 2000’s
Figure 1: The ERP’s Evolution and Functions [19]
In implementing ERP system, business
process reengineering (BPR) is a
requirement [4]; therefore, how to use
process reengineering to drive success is
worth deep thinking. A successful
implementation of process reengineering is
determined by:
1. Human resource: strong leadership,
promotion and coordination across
functions, top-down delegation, and
outsourcing (e.g. management
consulting firm).
2. Organizational structure: analyze
corporate objectives and core
strategies, build the organization’s
business structure, define functions
and mechanism, assess shortfalls in the
functions of current structure, and
adjust operating process to meet the
requirements by ERP system’s
functions.
3. Objective and performance evaluation:
set measurable indexes or data,
predetermine the expected ERP’s
effect on enterprise operation and
profitability, produce checklist,
evaluate the return on investment and
benefit of ERP implementation, and
examine implementation process.
To summarize it, ERP system planning
smoothes out the whole system’s operation,
which doesn’t produce any immediate effect
MRP MRP II
Accounts Receivable
Accounts Payable
Salary System
Finance and Accounting
General Ledger
Human Resource
Planning
Scheduling
EDI
Enterprise Resource Planning
(ERP)
Sales and Shipping
Supply Chain Management
(SCM)
E-Commerce
Sales Force Automation
(SFA)
Customer Relationship
Management (CRM)
Extended ERP
(EERP)
17
but improves enterprise perpetual operating
capacity significantly, thus becomes
enterprise intangible asset. Nowadays, many
big foreign companies placing orders in
Taiwan list the adoption of ERP system as
one of the assessment criteria. Apparently, a
key to future success for information
enterprises lies in timely establishment and
effective implementation of ERP system.
3. Applicability Evaluation of ERP Software
What functions or modules should be
included in an ERP system is determined by
enterprise operating strategies, environment,
and needs, and the capacity of the integrated
software supporting such functions and
modules. This study provides a simple and
easy software system evaluation and
checklist (as shown in Table 2).
Table 2: The Software System Evaluation and Checklist
Factors Evaluation Items
□ Production by project □ Alternating production □ Process
1. Production Mode
□ Repetitive assembly □ Mixed machinery □ Streamline production
□ Electronics □ Semi-conductor □ Automobile
2. Applied Industry □Machinery □Gasoline and chemicals □Medical/Biochemistry
□ Food □ Other
3. Product Strategy □Manufacture to stock
(MTS) □ Manufacture to order
(MTO) □ Assemble to order (ATO,
BTO)
□ Customer order
management □ Customer relationship
management □ Production and sales
planning
□ Forecast □ Master schedule □ MRP/MRP II
□ Production capacity vs.
demand planning □ Manufacturing
implementing system □ Distribution vs. demand
planning
□ Purchase □ Warehouse management □ Human resource
management
4. Function/Module
□ Cost accounting □ Finance
5. Production
Schedule □ Support advanced planning
schedule □ Limited production
capacity schedule
□ Contract purchase □ Comprehensive purchase □ Quote inquiry
6. Purchase □Supplier’s schedule □EDI □Electronic payment
□ Supplier’s performance
□ Order/Invoice □ Accounts Receivable
(A/R) □ Accounts Payable (A/P)
□ General ledger □ Fixed assets □ Multinational trade/
exchange
7. Accounting
□ Consolidation
□ Bill-of-Materials for
project/manufacturing 8. Bill-of-Materials □Project design adjustment □Product components
Management
(BOM) □ Modulated bill-of-materials
(BOM) □ On-line consumer product
components □ Shared material
components
□ Timely reports □ Various financial analysis
reports □ Response to problems/
9. Management issues
Report
□ Dollar value of production volume
An ERP system implementation is very
expensive costing from millions to billions
NT dollars. However, very few cases were
successful. In many cases, the system was
unable to deliver the expected performance
after implementation. A checklist as shown
18
in Table 3 can be used to determine if an
ERP system has been successfully
implemented.
Table 3: The ERP Checklist
ERP Checklist Yes No
1. The basic information including material No., name, and specifications has
been completely and correctly filed. □ □
2. The information of Bill of Materials (BOM) and Routing has been filed. □ □
3. The accounting accuracy for the materials in stock is at least 95%. □ □
4. The accuracy of Bill of Material (BOM) is above 98%. □ □
5. The Master Production Schedule (MPS) has been established and will be
updated at least once a week. □ □
6. The forecast (when manufacture to stock) or the order (when manufacture to
order) is highly accurate. □ □
7. Hold periodic (at least once a month) production and sales meetings and
enter the finalized plans into the system. □ □
8. Periodically check the rationale underneath such parameters as preparation
time, safety inventory level, and lot sizes. □ □
9. Material requirements planning (MRP) needs to be updated at least once a
week. □ □
10. Replace manufacturing order and purchasing order (PO) with production
schedule and suppliers’ schedule. □ □
11. The users of the system must have been well educated and trained. □ □
12. The business process has been re-engineered when implementing the
system. □ □
13. The data of modules in the system is integrated, which doesn’t require
repetitive key-in. □ □
14. The output data of the system is for users and management to make
strategic decisions and judgment. □ □
15. The senior management supports ERP system and uses the system in
practice. □ □
4. Implementation Plan
4.1 Company Background
The T Opto-Electronics Co., Ltd. was
founded in Taiwan Hsinchu Science Park
Industry in September 1996. The company is
devoted to developing super bright Light
Emitting Diode (LED) series products by
using self-developed Metal Organic
Chemical Vapor Deposition (MOCVD)
technology. Large volume production of
Aluminum Gallium Indium Phosphide
(AlGaInP) (red, orange, and yellow) serial
Epitaxy wafer and dice officially started in
the fourth quarter of 1997. The R&D team is
made up of the experts from the Opto-
Electronics and Systems Laboratories (OESL)
of Industrial Technology Research Institute
(ITRI) and the experts who studied or
worked in Opto-Electronics area in USA.
The company, with NT$ 220 million capital,
19
has shown its strong competitive advantage
in optimizing the integration of product
design technology and mass production
capacity. The current product lines in
manufacturing include: AlGaInP and
Aluminum Gallium Arsenic (AlGaAs)
Lighting Emitting Diode Epitaxy wafer and
dice, which have the features of small size,
economic electricity consumption, and
extended life span. They can be widely
applied to such consumer electronic products
as indicator light, source light of fax machine
and scanner, backlight module of Liquid
Crystal Display (LCD), indoor or outdoor
information display, automobile light, and
traffic light.
4.2 Application Implementation
Methodology
This case employs the application
implementation methodology (AIM) and
makes modifications to it according to
individual needs. The AIM is an operating
methodology derived from numerous
implementation practices, which has helped
more than 6,000 enterprises around the world
successfully implement ERP system [8, 19].
The AIM divides system implementation
into: implementation strategy, operation
analysis, solution design, solution
development, documentation, transition, and
production run, so that it can conveniently
coordinate with operation process and
workflow improvement. The AIM flow is
shown in Figure 2 as below:
Computerized operation and
management process
improvement
Implementation Strategy
Implementation Strategy
Implementation Team Structure
and Plan
Kick-Off Meeting
Operation Analysis (Training)
(OA)
Solution Design (BRM)
(Application System Configuration)
(SOP)
(Decision on Customization)
Solution Development (SOP Walkthrough) Documentation (Documentation)
(CRP)
(Customized Operation)
(End-User Training)
(End-User CRP)
(Data Preparation)
Transition
Production Run
(Production)
(Post Support)
Figure 2: The AIM Flow
4.3 Team Structure
This case especially emphasizes
teamwork, which is deemed critical to the
success of the implementation [5]. The
implementation team comprises T Company
employees involved and the consultants from
ERP Software Company, whose goal is to
20
help clients handle various problems in the
maximum feasible scope under
predetermined time schedule. The ERP
software consultants encourage the
interaction among team members by means
of shared working area and responsive
mutual support between team members. The
implementation team in this case is
structured as shown in Figure 3:
Figure 3: The Implementation Team Structure
Senior Management Decision-Making
Committee (T Company/Software Company)
Project Manager (T Company Project Manager/
Software Company Project Manager)
T Company
(Information Department)
Finance Distribution
Software
Company
Consultant
T
Company
Key-User
Software
Company
Consultant
T
Company
Key-User
Software
Company
Consultant
T
Company
Key-User
21
4.4 Job Tasks at Different System
Implementation Stages
This case employs the application
implementation methodology (AIM). The
job tasks at different stages of the process are
illustrated as follows:
1. Operation Analysis Stage: As
shown in Table 4, T Company
provides and explains the current
operation process and the
expectations of future
computerization, helps consultants
fully understand operational needs
for analysis in order to determine
the focus of later system
implementation.
2. Solution Design Stage: After
operation analysis results are
released and discussed, consultants
will design solutions to how to
satisfy T Company’s future needs
by appropriate software
applications, propose the blueprint
for overall future structure, and
define the scope of customization
to the benefit of follow-up
customization jobs (as shown in
Table 5).
3. Solution Development Stage: After
variance analysis results review
meeting, based on the new process
and function structure proposed at
the early stage of solution design,
consultants will build a test
environment for simulation and
further confirm the future new
system standard operation process
(as shown in Table 6).
4. Customer Documentation Stage:
The User will write the operation
manual and education/training
manual. This way ensures the
User’s knowledge and
understanding of the new system’s
functions. Meanwhile, the manuals
can be used for reference when
roles change or alternate at T
Company (as shown in Table 7).
5. Transition Stage: At this stage, the
preparation work for transition
must be completed, including
environment and data setup and
transition training for End-User (as
shown in Table 8).
6. Production Run Stage: At this stage,
the system will officially start
running in production (as shown in
Table 9).
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Table 4: The Operation Analysis Stage
Job Task Operating Methodology Deliverab
les
Analyze
current
operation
process and
needs
Overview: The consultants explain the system’s functions and structure to
help the Key-User refresh his/her knowledge and develop correct
perception and understanding of the system. This also provides an
opportunity for the management who is unable to attend the full-length
course or the Key-User and MIS staff of the peripheral systems to build
the overall comprehensive concept of various modules.
Operation Analysis Preparation Work Description: The consultants of various
systems explain the preparation work and matters to the Key-User of the
systems before any operation analysis starts so that the operation analysis
meetings can achieve their goals more efficiently and effectively.
Operation Analysis Meetings: The system supervisor from T Company should
collect and summarize the current operation process and needs, prepare
PowerPoint presentation, explain to Oracle consultants in detail the
current operation’s bottleneck and the needs and expectations of future
computerization, as well as answer any questions the consultants may
have. For those questions that require further research or explanation, the
system supervisor needs to coordinate with the parties involved to answer
the questions or provide requested information. T Company’s MIS staff
should take notes from the meetings and obtain confirmation signatures
from the parties concerned.
Operation Analysis Documentation: The consultants should produce an
“Operation Analysis Report” based on the notes and results of the
meeting, propose inter-module topics to module consultants for discussion
at application implementation meeting, and then summarize the results
concluded from the meeting and deliver the “Operation Analysis Report”.
Operation Analysis Review Meeting: The consultants educate T Company’s
Key-User and related management with the system’s future operational
requirements. Meanwhile, the Key-User should familiarize himself/herself
with the details of “Operation Analysis Report” before the meeting; feel
free to ask any questions as soon as possible in order to improve the
efficiency of communication.
Operation Analysis Confirmation: The Key-User of modules is responsible
for the confirmation of the “Operation Analysis Report”. He/she should
collect questions within five business days after the operation analysis
review meeting, prepare a written explanation for consultants to make any
modification or adjustment. Otherwise, it is deemed confirmation is
completed.
Operation
Analysis
Report
23
Table 5: The Solution Design Stage
Job Task Operating Methodology Deliverables
Define the
new
operation
process and
analyze the
needs/
requirements
Function vs. Need: The consultants are responsible for matching the
application system to enterprise need based on the “Operation Analysis
Report”.
Matching Enterprise Need Meeting: Based on the operation proposal,
output report, data converting plan, information transfer plan, and
customization plan provided by the consultants, T Company’s Key-
User should invite all parties involved to discuss the contents and
obtain agreement. T Company’s MIS staff should take notes of the
meeting and request meeting participants’ confirmation signatures.
Matching Enterprise Need Documents: The consultants should write up an
“Matching Enterprise Need Report” on the basis of the meeting
results, collect and summarize inter-module topics for discussion with
module consultants at project implementation meeting, and then
modify and submit the “Matching Enterprise Need Report” after the
meeting.
Matching Enterprise Need Presentation: The consultants present to T
Company’s Key-User and related management the framework of the
enterprise future process and proposed solutions. The Key-User should
read the “Matching Enterprise Need Report” in detail before the
meeting, and raise any questions or concerns as early as possible to
improve the efficiency in communication.
Matching Enterprise Need Confirmation: The Key-Users of individual
modules are responsible for the confirmation of “Matching Enterprise
Need Report”. They should summarize the questions, and provide a
written explanation within 5 business days after the meeting for the
consultants to make any modifications necessary. Otherwise, it will be
deemed as the confirmation job has been completed.
Matching
Enterprise
Need Report
Variance
Analysis
Variance Analysis Meeting: After the meeting that aims to match
enterprise needs, the consultants should further analyze the
disconnected portion between future requirements and application
system based on the plans and proposals in “Matching Enterprise Need
Report”, including new operation, process, information processing,
and report requirements etc. functions. This will help T Company
confirm the requirements for customization. The consultants should
discuss with T Company’s Key-User and MIS staff.
Variance Analysis Documents: The consultants should prepare a “Variance
Analysis Report” based on the meeting results.
Variance Analysis Explanation Meeting: The consultants present to T
Company’s Key-User and MIS staff any function variance and the
requirements for customization. MIS staff should read the “Variance
Analysis Report” in detail before the meeting and raise questions and
concerns as early as possible to improve communication efficiency.
Variance Analysis Confirmation: All systems’ MIS staff should assist Key-
User in “Variance Analysis Report” confirmation job by summarizing
the questions, and providing a written explanation within 5 business
days after the meeting for the consultants to make any modifications
necessary. Otherwise, it will be deemed as the confirmation job has
been completed.
Variance
Analysis
Report
24
Table 6: The Solution Development Stage
Testing
Environment
Configuration
Testing Data Preparation: After the matching enterprise need meeting, ERP
software consultants should explain the corresponding testing data that need
to be prepared by T Company’s Key-User with MIS staff’s help. The practice
on real machines must be completed before testing environment is
configured.
System Configuration: The consultants configure the testing environment
parameters on T Company’s machines directly and explain them to the Key-
User. T Company’s Key-User is required to fill out the parameter
configuration table and prepare the “system parameter configuration
document”.
Test on Real Machines: ERP software company’s consultants should prepare the
test questions for function and operation practices.
The Blank
Table of
System
Parameter
Configuration
Function and
Operation
Practice
The consultants should explain to the Key-User the application system’s
main functions and operating methodology that are related to the future new
operating plan, and make sure the Key-User understand how to operate the new
process and the new system by practicing the testing data on real machines. The
Key-User should take the test prepared by the consultants in order to understand
his/her own knowledge level and practice more in the areas that need further
improvement.
Set up
Standard
Operating
Process (SOP)
Set up Standard Operating Process: With the consultants’ and MIS staff’s help, T
Company’s Key-User should standardize and document the future operating
process and document flow which can be used as operating standards when
the new system is in production.
Standard Operating Process Confirmation Meeting: The T Company’s Key-User
should try explaining the standard operating process to the consultants after
the documentation is finished so as to confirm the Key-User’s full knowledge
and understanding of the operating process and is ready to train End-User
before transition and help examine the correctness of SOP contents.
Standard Operation Analysis Confirmation: The consultants should include the
examination results from SOP meeting in the written memorandum
Memorandum
of Standard
Operating
Process
Confirmation
Meeting
New System
Function
Deduction
SOP Simulation Data Planning: The consultants should initiate a discussion of
simulation data contents according to SOP at implementation meeting. The
T Company should help provide simulation data in order to make sand table
exercise more accurately simulate future operation.
New System Function Integration and Deduction: The inter-module integrated
sand table exercise on real machines is intended to help Key-User learn
more about the future operating process.
25
Table 7: The Documentation Stage
User
Documentation
User Documentation: The Key-User is responsible for the job
usually with the consultants’ assistance.
Table 8: The Transition Stage
Operation Practice Education and Training: The Key-User will educate and train the
End-User, with the consultants’ help.
Configure
Transition
Environment
Transition Environment Configuration: The Key-User configures
the transition environment according to the “System
Parameter Configuration Documents” produced by
himself/herself early. The consultants will provide assistance
when needed.
Convert Data
Data Conversion Planning: The consultants should help T
Company develop data converting strategies and
methodology.
Data Conversion Coding: When writing codes to convert data, the
detailed design and program should follow customization
principles.
Data Conversion: The T Company’s MIS staff will conduct it.
Table 9: The Production Run Stage
Online Support At early stages, the consultants can provide support as needed. Acceptance
Report
5. Case Analysis
During the ERP system implementation
process at T Company in study, sometimes
the predetermined goals cannot be met. The
problems encountered in this case study and
their solutions are illustrated in the following:
5.1 Insufficient Professional Experience of
Implementation Consultants
Problem Description: The ERP system
implementation consulting team is one of
critical factors to consider in selecting
software. The consultants are required to not
only possess software professional
knowledge but also a fair amount of
industrial experience. However, finding
appropriate consultants is not an easy but
rather big task. During application
implementation, if the consultants are not
familiar with industrial characteristics, it will
usually cause misunderstanding in
communication, which will in turn require
extra operational analysis of the connections
among modules. If the consultants take the
26
leading role in implementation, the best
result is limited to introducing a set of new
rules and system not necessarily applicable
to the specific industry.
Solution: When applying the system to a
specific industry, a comprehensive
consulting team should be selected. It could
be comprised of either the experts in various
fields from the same consulting firm or the
comprehensive experts well trained by the
software company. The consultants are
mainly responsible for integrating software
system into enterprise culture. The job
responsibility requires full communication
with the client’s senior management since
the senior management understands their
own company’s process and structure as well
as the company’s future needs. Software
only plays the role of a tool in enterprise
resource planning. Enterprises are
specialized in various professional fields and
have the know-how particular to individual
industries. Therefore, if the consultants can
build up the solid foundation of mutual trust
with clients and are willing to solve
problems for clients, they can finally become
the client’s most trustworthy partners.
Consultants should be the enterprises’
partners but not the brokers wasting client’s
money.
5.2 Thoughts on Several Misconceptions
about Enterprise Software
Implementation
Enterprises usually have several
misconceptions in implementing software,
which causes some disappointment from
unrealistic expectation.
5.2.1 Misconception 1: Can computerization
save labor?
Problem Description: When implementing
ERP system, many enterprises expect the
system to save labor in complicated and
tedious statistics and calculation jobs. In fact,
the system can reduce human errors in
computation and conveniently generate some
statistics reports for management purposes.
However, introducing an ERP system will
not necessarily cut labor, possibly due to
original operators’ inability to produce
statistics or output reports in a timely fashion
as a result of lack of information.
Solution: As a matter of fact, after ERP
software is installed, when all the factors
mentioned above are excluded, users may
feel their workload has been increased.
However, on the other hand, the company’s
overall profitability has been improved
significantly. Take sales for example, sales is
the frontline work and the starting point of
many information systems: receive order –
produce – sell – accounting. The workload of
the frontline operators is not reduced but
increased to include some managerial
parameters. In addition, the process seems
like nothing quite different from handling
other document software, which thus causes
doubts about the benefits that ERP system
can bring to the operation. However, by
means of ERP system, other departments or
management can easily check or manage the
most updated status of the orders received,
then arrange enterprise resources accordingly.
Therefore, the management should certainly
correct any misconception of
computerization can save all labor.
5.2.2 Misconception 2: Can computers
cure all?
Problem Description: Many things cannot
possibly be done without computers, but can
computers cure all? A common
misconception in implementing ERP system
is that the software system can do everything.
However, after all, human brain is superior
to computer. As many enterprise cultures
take quite some time to evolve, many
enterprise-operating processes finally get on
27
track only after several reforms and
renovations. Many problems and issues
occurred in implementing ERP software still
require human beings to make the judgment.
Solution: ERP software provides enterprises
multiple options of system application. So
selection is a judgment. Whether the choice
is correct or not is determined by the policies
or strategies taken on by the enterprise at the
specific point of time but not the jobs that
ERP system can replace.
5.3 Enterprise-User Unable to Describe
Needs or Requirements Correctly
Problem Description: At operation analysis
stage, the common problem is that most of
the time the Key-User cannot accurately
describe the needs or requirements in full
detail or falls into the so-called “interview
trap”. “Interview Trap” refers to the dilemma
that the needs or requirements are brought up
only when related questions are asked by
ERP system implementation consultants.
Otherwise, the problems are hidden and later
become obstacles to satisfying enterprise
needs in the course of application
implementation. Even some would not be
revealed until the project is being closed.
Solution: ERP system implementation
consultants must bring out the enterprise
needs or requirements completely when
conducting operation analysis and identify
all the problems.
5.4 The Timing of Education and Training
Problem Description: In general, software
companies provide training before transition
happens. However, the training result is
usually the worst before the users can get
their hands on the software.
Solution: In the course of ERP system
implementation, users should be allowed to
continuously test software functions. In this
way, they can get themselves familiar with
the software and raise many operational
questions. Then the consultants can focus the
training on those questions. Thus, a better
effect can be achieved in official transition.
5.5 Defining System Variation
Generally speaking, when purchasing
software, most of the time only the
functional completeness can be evaluated. It
is not quite possible to conduct a complete
evaluation specific to enterprise operational
details. When actually implementing the
software, those functions that cannot be
provided by the software system due to
industrial variance are listed as system
variation items and will cost customization
charge. However, some variations may not
be attributable to industrial variance but
rather incomplete functionality. In this case,
the consultants should list the problem for
modification but not as a part of the client’s
requirements for customization.
6. Conclusions
In the present highly competitive market,
enterprise resource integration and planning
are very critical, especially to those
companies in existence for a long time.
When companies expand their hierarchy and
scale as needed by business growth, lack of
integrated planning always causes duplicate
functions and ambiguously defined
responsibilities. The resulting enterprise
internal discord will affect enterprise
operating efficiency, and even enterprise
normal operation when accompanied by
Y2K effect on enterprise resource utilization.
It therefore requires computer software and
hardware updates. This is a great opportunity
for enterprise restructuring. Enterprise
resource integration involves a wide range of
activities including selection of ERP
28
provider, communication equipment,
resource management planning, system
implementation, senior management’s vision,
human resource coordination, system
transition, and continuous renovation, which
are all determinants of the success of
implementing enterprise resource planning
system. Hence, the evaluation before
implementation is rather important. Due to
the consideration of industrial characteristics,
scale, degree of urgency, and software
applicability, not many enterprises have
currently officially implemented ERP
software, among which, the majorities are
from information/semi-conductor industry.
However, without complete preparation
beforehand, the huge investment of money,
time, and human resource usually cannot
generate the expected results because ERP
system implementation involves too many
resources and parties, is very timeconsuming
and capital-intensive. In addition
to their own advance planning, concept
education and promotion among employees,
another more important and essential job for
enterprises is to select well-fit and very
experienced software suppliers and
consulting firms. During the course of
implementation, only if enterprise, supplier,
and consulting firm can closely and
comfortably work side by side, can
enterprise effectively apply to ERP system
and thus realize the goal of integrated
resource utilization.
The rapid growth of Internet has
stimulated the development of ERP
application concept. Many new management
ideas and theories have come out as well.
From the overall fundamental development
perspective, ERP system considers the world
a single market and aims to build a global
operation management system ultimately.
Global operation management system refers
to an overall management process attempting
to economically and effectively plan on and
control raw materials, semi-finished products,
finished products, and related service
information communication from a global
perspective under the premise of satisfying
customer demand. In other words, it aims to
deliver consumers expected services at lower
cost with timely information. Global
operation management includes an extensive
range of contents, for example, the related
important processes in supply chain
including order fulfillment process, customer
service process, and new product
development which are all the necessary
conditions in global operation management
practice. Building a global operation
management and supply chain management
system based on integrated supply chain
management has become a key to enterprise
competitive advantage in globalizing
industrial competition.
The main reason for many enterprises to
introduce e-commerce is to reduce the
inventory cost in supply chain. They hope to
effectively manage the process from raw
materials, parts, semi-finished products,
assembly production, to shipping and
distribution by forecasting demand through
orders received. In this way, customer
satisfaction will be increased while inventory
cost declines. In order to achieve this goal,
the essential measures include order
management function system planning, and
systemizing such process designs as cost
analysis, purchase, production, sales, and
related accounting matters. In global
customer-oriented competition, how to use ecommerce
technology to create such a
structure of economy is very important.
Apparently, this goal can be reached by
external resource integration itself. However,
to build an ERP system effectively
integrating enterprise’s internal and external
resource planning is essential.
29
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