A Case Study of Erp Implementation for Opto-Electronics Industry
Content
A Case Study of ERP Implementation for Opto-Electronics Industry
A Case Study of ERP Implementation for Opto-Electronics Industry
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Chan-Hsing Lo, 2Chih-Hung Tsai, and 1Rong-Kwei Li
Department of Industrial Engineering and Management National Chiao-Tung University, Hsinchu, Taiwan, ROC. Department of Industrial Engineering and Management Ta-Hwa Institute of Technology, Hsin-Chu, Taiwan, ROC E-mail: [email protected]
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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
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Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
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
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A Case Study of ERP Implementation for Opto-Electronics Industry
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
Market Characteristics Demand Focus Mass Market Segments Cost Quality Mass production of Small-scale production Manufacturing limited product lines of various product Method lines Structure Centralized Decentralized Management MRP II JIT/TQC System Focuses on sales, production, materials, and Focuses on cost, financial quality, efficiency, and Management management, Focus promptness of material planning and supply. implementation of manufacturing material integration. Application Large area Large area Territory Operation Periodic Periodic Cycle
1990s
Niche Market Flexibility Mass production of various product lines Decentralized ERP + SCM
2000s
Individuals Timeliness Mass production of customized products Virtual EERP + SCM
Focuses on research and development, sales, production allocation and distribution, service, integration and optimal utilization of internal financial resources. Worldwide Periodic/Ad hoc
Focuses on a global operating model that combines internal and external customers and manufacturers. Worldwide 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].
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1970’s MRP
Accounts Receivable
1980’s MRP II
1990’s
2000’s
Enterprise Resource Planning Accounts Payable General Ledger Salary System Human Resource Planning Scheduling Sales and Shipping Supply Chain Management (SCM) Finance and Accounting (ERP)
Extended ERP (EERP)
EDI
E-Commerce
Sales Force Automation (SFA)
Customer Relationship Management (CRM)
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
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A Case Study of ERP Implementation for Opto-Electronics Industry
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 1. Production Mode □ Production by project □ Repetitive assembly □ Electronics □ Machinery □ Food Manufacture to stock □ (MTS) Customer order □ management □ Forecast Production capacity vs. □ demand planning Evaluation Items □ Alternating production □ Mixed machinery □ Semi-conductor □ Gasoline and chemicals □ Other Manufacture to order □ (MTO) Customer relationship □ management □ Master schedule Manufacturing □ implementing system □ Process □ Streamline production □ Automobile □ Medical/Biochemistry □
2. Applied Industry
Assemble to order (ATO, BTO) Production and sales □ planning □ MRP/MRP II Distribution vs. demand □ 4. Function/Module planning Human resource □ Purchase □ Warehouse management □ management □ Cost accounting □ Finance 5. Production Support advanced planning Limited production □ □ Schedule schedule capacity schedule □ Contract purchase □ Comprehensive purchase □ Quote inquiry □ Supplier’s schedule □ EDI □ Electronic payment 6. Purchase □ Supplier’s performance Accounts Receivable □ Order/Invoice □ □ Accounts Payable (A/P) (A/R) Multinational trade/ 7. Accounting □ General ledger □ Fixed assets □ exchange □ Consolidation Bill-of-Materials for □ Project design adjustment □ Product components 8. Bill-of-Materials □ project/manufacturing Management Modulated bill-of-materials On-line consumer product Shared material (BOM) □ □ □ (BOM) components components Various financial analysis Response to problems/ □ Timely reports □ □ 9. Management reports issues Report □ Dollar value of production volume 3. Product Strategy
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
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Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
in Table 3 can be used to determine if an ERP system has been successfully
implemented.
Table 3: The ERP Checklist ERP Checklist Yes 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) □ □ □ □ □ □ □ □ □ □ □ □ No □ □ □ □ □ □ □ □ □ □ □ □ □ □ □
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 OptoElectronics 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,
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A Case Study of ERP Implementation for Opto-Electronics Industry
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:
Implementation Strategy Implementation Strategy
Computerized operation and management process improvement Operation Analysis
Implementation Team Structure and Plan Kick-Off Meeting (Training) (OA)
Solution Design
(BRM) (Application System Configuration)
(SOP)
(Decision on Customization)
(SOP Walkthrough)
Solution Development
Documentation
(Documentation)
(CRP) Transition (Customized Operation) (End-User Training) (End-User CRP) (Production) (Post Support) Production Run (Data Preparation)
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
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Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
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:
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
T Company Key-User
Software Company Consultant
T Company Key-User
Software Company Consultant
T Company Key-User
Software Company Consultant
Figure 3: The Implementation Team Structure
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A Case Study of ERP Implementation for Opto-Electronics Industry
4.4
Job Tasks at Different Implementation Stages
System
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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Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
Table 4: The Operation Analysis Stage Job Task Operating Methodology
Deliverab les
Overview: The consultants explain the system’s functions and structure to help the Key-User refresh his/her knowledge and develop correct Analyze perception and understanding of the system. This also provides an Operation current opportunity for the management who is unable to attend the full-length Analysis operation course or the Key-User and MIS staff of the peripheral systems to build Report process and the overall comprehensive concept of various modules. needs 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.
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A Case Study of ERP Implementation for Opto-Electronics Industry
Table 5: The Solution Design Stage Job Task Operating Methodology Deliverables
Define the new operation process and analyze the needs/ requirements
Variance Analysis
Function vs. Need: The consultants are responsible for matching the application system to enterprise need based on the “Operation Analysis Report”. Matching Matching Enterprise Need Meeting: Based on the operation proposal, output report, data converting plan, information transfer plan, and Enterprise customization plan provided by the consultants, T Company’s Key- Need Report 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. 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 Variance system based on the plans and proposals in “Matching Enterprise Need Report”, including new operation, process, information processing, Analysis and report requirements etc. functions. This will help T Company Report 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 KeyUser 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.
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Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
Table 6: The Solution Development Stage
Job Task Operating Methodology
Deliverables 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 The Blank Testing on real machines must be completed before testing environment is Table of Environment System configured. Configuration System Configuration: The consultants configure the testing environment Parameter parameters on T Company’s machines directly and explain them to the Key- Configuration 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 consultants should explain to the Key-User the application system’s main functions and operating methodology that are related to the future new Function and operating plan, and make sure the Key-User understand how to operate the new Operation 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 Practice his/her own knowledge level and practice more in the areas that need further improvement. 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 Memorandum Set up of Standard the new system is in production. Standard Operating Standard Operating Process Confirmation Meeting: The T Company’s Key-User Operating Process should try explaining the standard operating process to the consultants after Process (SOP) the documentation is finished so as to confirm the Key-User’s full knowledge Confirmation and understanding of the operating process and is ready to train End-User Meeting 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 SOP Simulation Data Planning: The consultants should initiate a discussion of simulation data contents according to SOP at implementation meeting. The New System T Company should help provide simulation data in order to make sand table Function exercise more accurately simulate future operation. Deduction 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.
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A Case Study of ERP Implementation for Opto-Electronics Industry
Table 7: The Documentation Stage Job Task Operating Methodology
User Documentation User Documentation: The Key-User is responsible for the job usually with the consultants’ assistance.
Deliverables
Table 8: The Transition Stage Job Task
Operating Methodology
Deliverables
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. 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.
Convert Data
Table 9: The Production Run Stage Job Task Operating Methodology
Online Support At early stages, the consultants can provide support as needed.
Deliverables
Acceptance Report
critical factors to consider in selecting software. The consultants are required to not During the ERP system implementation only possess software professional process at T Company in study, sometimes knowledge but also a fair amount of the predetermined goals cannot be met. The industrial experience. However, finding problems encountered in this case study and appropriate consultants is not an easy but their solutions are illustrated in the following: rather big task. During application implementation, if the consultants are not 5.1 Insufficient Professional Experience of familiar with industrial characteristics, it will Implementation Consultants usually cause misunderstanding in communication, which will in turn require Problem Description: The ERP system extra operational analysis of the connections implementation consulting team is one of among modules. If the consultants take the
5. Case Analysis
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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?
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
Problem Description: When implementing ERP system, many enterprises expect the system to save labor in complicated and
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A Case Study of ERP Implementation for Opto-Electronics Industry
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
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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.
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References
[1] APICS, APICS Dictionary, The 9th edition, 1998. [2] Bingi, P., Sharma, “Critical Issues Implementation,” Management, Vol. 1999. M.K. and Godla, J.K., Affecting an ERP Information Systems 16, Issue. 5, pp.7-14,
[9] Shen, Yuan-huang and Hsu, Ping-yu, “ERP Implementation Effect Not Up to Expectations?,” Data and Computers, 2002/1, pp.52-57. [10] Chu, Hai-cheng and Lai, Chu-liang, “ERP Crucial Success Factors (CSF) and Failure Causes Investigation,” Electronic Business and Digital Lifestyle Discussion Panel, Taiwan Electronics Business Institute, Shita University Data Control Department, 2002. [11] Hung, Yu-chung, Hsiao, Tsui-chen, and Hsu, Chun-lin, “ERP Key Success Factor Analysis—A Case Study of Company P’s Implementation of SAP,” Electronic Business and Digital Lifestyle Discussion Panel, Taiwan Electronics Business Institute, Shita University Data Control Department, 2002. [12] Lien, Ya-hui and Wang, Chiang-liu, “Surpassing Time Competitiveness,” Chinese Production Capability Center, 1998. [13] Chen, Chih-che, “Taiwan Enterprise Data Operation Requirement Analysis: Manufacturing Version,” MIC Research Report, 2001/3. [14] Chen, Chih-che, “Using Traditional Industry Electronic Analysis Enterprise Electronic Strategy,” MIC Research Report, 2001/4. [15] Lin, Feng-ju, “Research Regarding Relationship between ERP Package Software Strategy Target Strategic Targets and Key Factors,” Taiwan University Business Research Masters Thesis, Taiwan, 1999.
[3]
Holland, C.P. and Light, B., “A Critical Success Factors Model for ERP Implementation,” IEEE Software, Vol. 16, Iss. 3, pp.30-36, 1999. Mandal, P. and Gunasekaran, A., “Application of SAP R/3 in on-line inventory control,” International Journal of Production Economics, Vol. 75, pp.47-55, 2002. Motwani, J., Mirchandani, D., Madan, M. and Gunasekaran, A., “Successful implementation of ERP projects: Evidence from two case studies,” International Journal of Production Economics, Vol. 75, pp.83-96, 2002. Norris, G., Hurley, J.R., Hartley, K.M., Dunleavy, J.R. and Balls, J.D., E-Business and ERP, John Wiley & Suns, 2000. Summer, M., “Critical success factors in enterprise wide information manage-ment system projects,” Proceedings of the SIGCPR’99, New Orleans, LA, USA, pp.297-303, 1999. Welti, Norbert, Successful SAP R/3 Implementation: Practical Management of ERP Project, Addison Wesley Longman, 1999.
[4]
[5]
[6]
[7]
[8]
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[16] Liu, Shih-hao, Wu, Shih-ming, Pi, Shi-ming and Tsai, Yi-chang, “ERP Strategic Investigation Research,” 11th Nationwide Data Control Academic Research Discussion Thesis, Kaohsiung Chungshan University, Taiwan, 2000. [17] Tsai, Yu-in, “Taiwan Electronic Industry ERP System Key Factors,” Chunghsing University Business Administration Masters Thesis, Taiwan, 1999. [18] Jin, Da-ren, “Eight Bottlenecks of ERP Applications”, Enterprise Resource Management Center, 2000. [19] URL: www.erp.org.tw. [20] Wang, Er-rui, Introduction to ECommerce, Hua-Tai Bookstore, Taiwan, 2000. [21] Zeng, Huan-zhao, “Arthur Management Consulting Communication 29th Edition”, 2000. [22] URL: www1.trdi.edu.tw/~875115/erp.htm.
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A Case Study of ERP Implementation for Opto-Electronics Industry
1
Chan-Hsing Lo, 2Chih-Hung Tsai, and 1Rong-Kwei Li
Department of Industrial Engineering and Management National Chiao-Tung University, Hsinchu, Taiwan, ROC. Department of Industrial Engineering and Management Ta-Hwa Institute of Technology, Hsin-Chu, Taiwan, ROC E-mail: [email protected]
2 1
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
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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
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A Case Study of ERP Implementation for Opto-Electronics Industry
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
Market Characteristics Demand Focus Mass Market Segments Cost Quality Mass production of Small-scale production Manufacturing limited product lines of various product Method lines Structure Centralized Decentralized Management MRP II JIT/TQC System Focuses on sales, production, materials, and Focuses on cost, financial quality, efficiency, and Management management, Focus promptness of material planning and supply. implementation of manufacturing material integration. Application Large area Large area Territory Operation Periodic Periodic Cycle
1990s
Niche Market Flexibility Mass production of various product lines Decentralized ERP + SCM
2000s
Individuals Timeliness Mass production of customized products Virtual EERP + SCM
Focuses on research and development, sales, production allocation and distribution, service, integration and optimal utilization of internal financial resources. Worldwide Periodic/Ad hoc
Focuses on a global operating model that combines internal and external customers and manufacturers. Worldwide 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].
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1970’s MRP
Accounts Receivable
1980’s MRP II
1990’s
2000’s
Enterprise Resource Planning Accounts Payable General Ledger Salary System Human Resource Planning Scheduling Sales and Shipping Supply Chain Management (SCM) Finance and Accounting (ERP)
Extended ERP (EERP)
EDI
E-Commerce
Sales Force Automation (SFA)
Customer Relationship Management (CRM)
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
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A Case Study of ERP Implementation for Opto-Electronics Industry
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 1. Production Mode □ Production by project □ Repetitive assembly □ Electronics □ Machinery □ Food Manufacture to stock □ (MTS) Customer order □ management □ Forecast Production capacity vs. □ demand planning Evaluation Items □ Alternating production □ Mixed machinery □ Semi-conductor □ Gasoline and chemicals □ Other Manufacture to order □ (MTO) Customer relationship □ management □ Master schedule Manufacturing □ implementing system □ Process □ Streamline production □ Automobile □ Medical/Biochemistry □
2. Applied Industry
Assemble to order (ATO, BTO) Production and sales □ planning □ MRP/MRP II Distribution vs. demand □ 4. Function/Module planning Human resource □ Purchase □ Warehouse management □ management □ Cost accounting □ Finance 5. Production Support advanced planning Limited production □ □ Schedule schedule capacity schedule □ Contract purchase □ Comprehensive purchase □ Quote inquiry □ Supplier’s schedule □ EDI □ Electronic payment 6. Purchase □ Supplier’s performance Accounts Receivable □ Order/Invoice □ □ Accounts Payable (A/P) (A/R) Multinational trade/ 7. Accounting □ General ledger □ Fixed assets □ exchange □ Consolidation Bill-of-Materials for □ Project design adjustment □ Product components 8. Bill-of-Materials □ project/manufacturing Management Modulated bill-of-materials On-line consumer product Shared material (BOM) □ □ □ (BOM) components components Various financial analysis Response to problems/ □ Timely reports □ □ 9. Management reports issues Report □ Dollar value of production volume 3. Product Strategy
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
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in Table 3 can be used to determine if an ERP system has been successfully
implemented.
Table 3: The ERP Checklist ERP Checklist Yes 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) □ □ □ □ □ □ □ □ □ □ □ □ No □ □ □ □ □ □ □ □ □ □ □ □ □ □ □
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 OptoElectronics 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,
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A Case Study of ERP Implementation for Opto-Electronics Industry
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:
Implementation Strategy Implementation Strategy
Computerized operation and management process improvement Operation Analysis
Implementation Team Structure and Plan Kick-Off Meeting (Training) (OA)
Solution Design
(BRM) (Application System Configuration)
(SOP)
(Decision on Customization)
(SOP Walkthrough)
Solution Development
Documentation
(Documentation)
(CRP) Transition (Customized Operation) (End-User Training) (End-User CRP) (Production) (Post Support) Production Run (Data Preparation)
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
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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:
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
T Company Key-User
Software Company Consultant
T Company Key-User
Software Company Consultant
T Company Key-User
Software Company Consultant
Figure 3: The Implementation Team Structure
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A Case Study of ERP Implementation for Opto-Electronics Industry
4.4
Job Tasks at Different Implementation Stages
System
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
Overview: The consultants explain the system’s functions and structure to help the Key-User refresh his/her knowledge and develop correct Analyze perception and understanding of the system. This also provides an Operation current opportunity for the management who is unable to attend the full-length Analysis operation course or the Key-User and MIS staff of the peripheral systems to build Report process and the overall comprehensive concept of various modules. needs 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.
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Table 5: The Solution Design Stage Job Task Operating Methodology Deliverables
Define the new operation process and analyze the needs/ requirements
Variance Analysis
Function vs. Need: The consultants are responsible for matching the application system to enterprise need based on the “Operation Analysis Report”. Matching Matching Enterprise Need Meeting: Based on the operation proposal, output report, data converting plan, information transfer plan, and Enterprise customization plan provided by the consultants, T Company’s Key- Need Report 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. 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 Variance system based on the plans and proposals in “Matching Enterprise Need Report”, including new operation, process, information processing, Analysis and report requirements etc. functions. This will help T Company Report 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 KeyUser 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.
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Table 6: The Solution Development Stage
Job Task Operating Methodology
Deliverables 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 The Blank Testing on real machines must be completed before testing environment is Table of Environment System configured. Configuration System Configuration: The consultants configure the testing environment Parameter parameters on T Company’s machines directly and explain them to the Key- Configuration 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 consultants should explain to the Key-User the application system’s main functions and operating methodology that are related to the future new Function and operating plan, and make sure the Key-User understand how to operate the new Operation 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 Practice his/her own knowledge level and practice more in the areas that need further improvement. 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 Memorandum Set up of Standard the new system is in production. Standard Operating Standard Operating Process Confirmation Meeting: The T Company’s Key-User Operating Process should try explaining the standard operating process to the consultants after Process (SOP) the documentation is finished so as to confirm the Key-User’s full knowledge Confirmation and understanding of the operating process and is ready to train End-User Meeting 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 SOP Simulation Data Planning: The consultants should initiate a discussion of simulation data contents according to SOP at implementation meeting. The New System T Company should help provide simulation data in order to make sand table Function exercise more accurately simulate future operation. Deduction 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.
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Table 7: The Documentation Stage Job Task Operating Methodology
User Documentation User Documentation: The Key-User is responsible for the job usually with the consultants’ assistance.
Deliverables
Table 8: The Transition Stage Job Task
Operating Methodology
Deliverables
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. 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.
Convert Data
Table 9: The Production Run Stage Job Task Operating Methodology
Online Support At early stages, the consultants can provide support as needed.
Deliverables
Acceptance Report
critical factors to consider in selecting software. The consultants are required to not During the ERP system implementation only possess software professional process at T Company in study, sometimes knowledge but also a fair amount of the predetermined goals cannot be met. The industrial experience. However, finding problems encountered in this case study and appropriate consultants is not an easy but their solutions are illustrated in the following: rather big task. During application implementation, if the consultants are not 5.1 Insufficient Professional Experience of familiar with industrial characteristics, it will Implementation Consultants usually cause misunderstanding in communication, which will in turn require Problem Description: The ERP system extra operational analysis of the connections implementation consulting team is one of among modules. If the consultants take the
5. Case Analysis
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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?
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
Problem Description: When implementing ERP system, many enterprises expect the system to save labor in complicated and
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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
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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.
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