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A case study of ERP implementation based on

Taiwanese companies

Abstract
Enterprise Resource Planning (ERP) systems have long been used to facilitate
business efficiency. Many studies have identified factors relating to the success or
failure of ERP systems implementation. A case study discusses and compares
implementation process and result of two Taiwanese companies shows the preparation
and evaluation before implementation is helpful to avoid problems occurring during
the implementation process, and the performance of the project team is vital for the
success of the project. This study also discusses how the people affect implementation
in different situations. Case 1, the resistance comes from top management of family
enterprise, but the external consultant develops the second generation of this family as
the key man and finds him an assistant to tackle this problem. ERP system has been
successfully implemented to this company. Case 2, the chairman is the patent owner
of the primary product in this company, ERP has been successfully implemented in a
short time under his fully support. But due to his insist on preserving the original
operation process which he developed, this company adopts customised modules
rather than re-engineering the operation process during the implementation.
Keywords: ERP implementation, Case study, Taiwan

1. Introduction
The new economy breaks the boundaries between nations and makes the world
flat (Friedman, 2005). The evolution of transportation makes the world move faster
than ever; companies can now find cheaper suppliers easily from other countries on
the internet. This competition between companies in the same industry is no longer
limited to one country. Companies now need to be more responsive and agile in its
approach in dealing with the dynamic business environment, and therefore, the
Enterprise Resource Planning system (ERP), as a tool to manage and control the
operation process holistically has played an important role in the last decade.
From the 1970s MRP has been widely used in the manufacturing industry to
improve the efficiency, and it was developed and extended into MRPII in the 1980s.
Until the 1990s, ERP was generated from the same logic: companies want to take
advantage from the usage of technology (Brislen and Krishnakumar,1999). As the
world rapidly changed, many corporations lost their market due to a lack of
organisational reaction and flexibility in adjusting their business plans. But some
other corporations gained an economy of scale by mass production and a superior
global delivery system through established worldwide business systems at a very early
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stage. These corporations significantly reduced costs and increased the satisfaction of
their customers. The single reason that contributes to the success of these corporations
is the Enterprise Resources Planning systems.
The implementation of an ERP system not only reduces costs in many areas
within the corporation, but also provides immediate and precise information for the
managers. The information technology based on a real-time reactive system can
maximise business management by substantially shortening time and distance. The
ERP system can be described as a digital central nervous system; it can help a
manager to make the right decision with the necessary information provided as soon
as it is transferred from a nerve. According to the international job allocation has been
formulated, Taiwan will become a main producer for the global electronic and
information industry. The booming development within the Taiwanese ERP industry
can be explained by the power of big customers and Y2K (Market Intelligence Centre,
Taiwan, 2006). The Taiwanese electronic information and semi-conductor companies
play an important role in the global supply chain. But when facing global and
multinational competition, Taiwanese companies realise how important ERP is for
business management and compete for international orders. Big customers also forced
Taiwan OEM companies to implement the ERP system in order to ensure that they
benefit from ERP collaboration. The Y2K crisis, and a reduction of the investment
from an income tax policy carried out by Taiwan government, also facilitated the
adoption of new information system within Taiwan corporations.
Since most of the previous studies have been conducted in Western counties, this
research tries to survey the situation in Taiwan due to the mature ERP market in Asia
Pacific area. This research will discuss the factors that would affect the adoption of
ERP systems by a review of the literature; interviews with companies that have
successfully implemented ERP in the electronic manufacturing industry in Taiwan
will reveal how they put ERP systems into their enterprises.
1.1 Implementation of ERP
As a company implements more enterprise-based systems within its organisation,
the cost of integration will become more paramount. In other words, the more you
buy, the more you have to pay for integration. Two central reasons for most of the
cases of failure have been addressed by Ehie and Madsen (2005). First, companies not
able to realize a competitive advantage from ERP implementation is attributed to a
failure of proper technology usage to address the design and structure of an
organisation. Second, the costs overall were underestimated, with the training, postsale service and integration besides the ERP software itself, averaged merely 15% of
total ERP implementation. Ehie and Madsen (2005) argued that ERP implementation
should be viewed as a system that would change the company into a more efficient
and effective organisation. They found top management support is the most important
factor for the success of ERP implementation. Another five factors also have a strong
correlation: project management principles, feasibility/ evaluation of ERP project,
process re-engineering, cost/ budget issues and consulting service. Implementation is

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divided into five stages such as project management, business blueprint, realisation,
final preparation, and going live and support. Each of them is vital for the success of
ERP implementation.
1.2 The definition of a success ERP implementation
It became obvious that there were profound differences in how well companies
were using this set of tools. To help focus on this issue, Oliver Wight, the leading
pioneer in this field, developed the ABCD classification which includes 20 questions
which can evaluate the performance of MRPII (Table 1). In 1993, the checklist has
been improved to 72 overview and 449 questions which can be applied on evaluating
ERP systems implementation.
Table 1. Oliver Wights ABCD classification chart
Class A

Effectively used company-wide; generating significant improvements in

customer service, productivity, and costs.

Class B

Supported by top management; used by middle management to achieve

measurable quality improvements.

Class C

Operated primarily as better methods for ordering materials; contributing

to better inventory management.

Class D

Information inaccurate and poorly understood by users; providing little

help in running the business.

2. Methodology
This study is conducted by case study approach and focuses on the human factors
affecting ERP implementation. Therefore, technical problems will be discussed they
do not affect ERP implementation. This study has two cases in two data collection
methods. Case 1 is conducted by participant observation. Observer is the outside
professional in this case who served as the consultant of case company. He records the
process of the implementation he joined within 3 years. Basic company data such as
name, product, and financial report are not available due to confidential. Case 2 is
conducted by interview with semi-structured questionnaire as a post implementation
research. The details may not be as clear as case 1. In order to categorise the two
companies generally, this study consult the standards used by Taiwan (Small and
Medium Enterprise Administration, Ministry of Economic Affairs), U.S (APICS,
1995), UK and EU (Commission of the European Community, 1996), for nonTaiwanese readers ease of understanding the way this study identifying the size of
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enterprises. According to the standard of recognising the size of enterprises by Europe

and Taiwan, company A in case 1 is a medium-sized enterprise, company B in case 2
is a large enterprises. According to Oliver Wights ABCD classification, this study
defines both cases in this study can be considered as class A success cases of ERP
implementation. This study tries to present the implementation process and reveal the
whole story objectively.

3. Case Study
2.1 Case Company 1
Company A is a chemical engineering company established in 1977, it makes
150 million NT$ annual turnover and has 42 employees. The core management staffs
consist of the chairman, financial manager, and technology development. Sub staffs
involve production technology and business managers. All of them have worked as
important positions in the company for more than 20 years with great loyalty and are
very familiar with company culture. The common character of them is that they know
quite few about ERP. The timing of the ERP system implementation is when the
business is growing with great profitability. Due to lack of professional employees of
ERP implementation, company A adopted outside professional who was invited by the
chairman. The outside professional was well trusted and fully empowered by the
chairman.
The outside professional work as an external consultant, therefore he has shorter
working hour and not able to teach and supervise ERP system users step by step. The
outside professional uses the strategy that to find suitable people, and develop them as
middle interface or seeds. Finally, the son of top manager was found to be the key
man (We call him as SX in the following paragraphs). He was graduated from
technological university in information management, with great knowledge of
computer but lack of practical experience of ERP. Be the second generation of the top
manager, he has certain degree of power to encourage and supervise employees to
learn and use the system. The ERP system adopted by company A is a standard
module for small and medium-sized enterprises which has modules such as stock,
sales, financial & accounting, production management.
2.1.1 Difficulties in the beginning of implementation:
2.1.1.1 Opinions from the top management family members
The decisive influence for the system selection comes from the top management
family members. Facing the different opinions is the most frustration and intervention
for the outside professional. The result of giving way to these unprofessional opinions
is the partial imperfection of the system development. Hence, in the traditional studies
of ERP system implementation the support of top management plays a very important
role. The same situation happens in the family owned business, the support for the
outside professional from the top management were affected by the resistance of

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family members, especially when the top management is not familiar with ERP
system.
2.1.1.2 The other problems
The other resistance comes from the middle managers lack of enough knowledge
for ERP system and unfamiliar with the outside professional. This is so called the
psychological resistance of ERP implementation. Traditional studies in the past sorely
focus the discussion on the top management and the shop floor users but not middle
managers. But in this case, outside professional found that they play important role
which would reinforce the resistance of ERP users.
2.1.2

Difficulties during the implementation:

2.1.2.1 Basic jobs: Coding and data transformation

According to the limited understanding of outside professional toward the
company and the SX lacks of ability of execution. Outside professional has to spend
more time learning and understanding the job content of the company. This step has
been considered as the most crucial part of the success of the system implementation
from outside professionals view. That is, the correspondence analysis of professional
ERP knowledge with practice provides the basis for the judgments and the criterion
on decision making to outside professional. According to this part, indicates that the
effort and the knowledge of ERP system of outside professional have great influence
during the beginning of ERP implementation.
The crucial factor is outside professionals driving on ERP system
implementation is not only about the knowledge of profession and practice of ERP
system, but the outside professional is willing to understand and learn the job content
of the company. In comparison with other cases, many small and medium-sized
companies in Taiwan usually give the whole job to DSC (Data System Consulting
Co., Ltd.) or ATTN (Attention System Develop Co., Ltd.) but not able to get fully
support. How much does the consultant know the customer seems to be the crucial
factor of the success of ERP system implementation. The topic worth to be discussed
is that how the ERP system venders proceed knowledge transformation and assist
small and medium-sized enterprises to drive the ERP system implementation.
2.1.2.2 Education and training:
The resistance of ERP system users formed when the middle managers did not
fully support. Users attitude toward this situation is just waiting and sees aside. Thus,
outside professional made a strategy to develop a young man has the same degree as
SX (We call him KW in the following paragraphs). Both of them have basic computer
knowledge and understand the value of ERP system. And, they set up the
implementation as an opportunity to improve their competivity. Choosing SX and KW
as seeds is a success strategy of outside professional, not only affect users to decrease
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the resistance, but also learn from practice to perceive the value and purpose of ERP
system. The basic jobs of coding and education & training took a period of time but
its really critical to provide the consensus of RP users and let all the managers to feel
the real value of ERP system.
2.1.3 Important work after the implementation:
Institutionalisation is an important work after the implementation. Outside
professional has to resign the position of ERP system implementer, and assign all the
jobs to each organisation in company A. On the other hand, outside professional work
on the building of standard operating procedure, which includes documentation and
institutionalisation. He also reorganise the organisations partially and help SX and
KW to get promotion. Furthermore, he suggested raising the salary of ERP system
users. To sum up, outside professional gives company A an opportunity to integrate
with its ERP system, and bring the ERP system into full play.
2.2 Case Company 2
Established in 1998 in Tainan, Taiwan, company B is a professional
company producing collimation prism and diffusible membrane, which are
the key optical components of LCD back-lit modules. Company B is second only
to 3M in the world within this industry. Its authorised capital is NT$ 904 million, and
500 employees are active between Taiwan and China. Company B has set up its sub
companies in Suzhou, Xiamen, and Kunshan in 2006. Also, company B set up a
Guangzhou sub company in 2007. The core product, collimation prism, has around
10% market share (Display Search LCD market annual report, 2006), and most of the
collimation prisms are manufactured at the Tainan factory. The second generation
factory building was constructed at the end of 2007, which increased the factory
building area to 40,000 square metres. Raw material production increased fourfold,
and it can satisfy 50% of global needs when it is running at maximum production
(Display Search TFT LCD equipment report, 2006). Its customers include Samsung,
LG Philips, CHIMEI, and AU Optronics.

2.2.1 Background of ERP implementation

Company B has a competitive advantage in technology of its major
product collimation prism. But its major competitor, 3M, performs better at
cost control, efficiency, and supply chain management. In order to compete
with 3M and other competitors, company B decided to adopt an ERP
system. The other reason was due to the increasing sales and plans to enter
the Chinese market, company B decided to make use of an ERP system to
manage its sub companies in China, especially its ability to communicate
across the organisation with its different languages and currencies.
The project evaluation team leader was the manager of the information division

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appointed by the general manager. In order to ensure evaluation suitable for the whole
enterprise policy, the project team consisted of first class directors from units which
use an ERP system the most, such as finance, purchase, resource, sales divisions. Top
management fully empowered and supported the project team, and showed attention
and expressed expectations for the project at each of its company conferences. The
company has been established for ten years, and set up 4 subsidiary
companies in China. Before the subsidiary companies established, company
B had already planned to adopt ERP system to improve its competitive
advantage.
Company B chose the ERP systems from Data Systems consulting
company (DSC co.ltd, Taiwan), and the product is WORKFLOW ERP ver.6.
Users have to get used to new information systems, and the operation process change
seems to be a bigger problem. But users are confident to learn to use the new system
which shows the ambitious culture of the company. The method company B used
to implement ERP system was to plan all modules and then adopt them at
different stages. Company B has more than 20 add-on modules to support
the ERP system for different functions. But the business process of
company B that had to be re-engineered was around 10%. During
implementation, company B had problems in the process such as the user
units that did not state their needs clearly. It took company B 6 months to
implement the ERP system, which finally went live on January, 2004.
2.2.2 After Implementation
There are two major problems that occurred after the implementation.
One is technical, and the other is about people. Company B found some
problems in the production planning and work in progress (WIP) parts. For
example, one of the real cases of the DSC ERP system was that some
manufacturing orders were not used; finished and semi-finished products
were left in shop floor. But when inventory check in the end of every
month, the ERP system could not find the finished and semi-finished
products which were not made in the inventory of the system check lists. It
makes financial and accounting divisions difficult to check the inventory if
these finished and semi-finished goods if they are not on the check lists.
The reason why they could not find these products on the check list was
because the system did not encode the work in progress separately. In
reality, many products in different workshop exist in different production
process should be encoded as finished or semi-finished products but
encoded according to different working process. And the WIP check in
workshop should know not only what manufacturing process the product is,
but also what work order the product belongs to. Therefore the material
analysis and cost accounting adjustment will be reliable.
The other problem is the excessive involvement of the chairman
during the implementation. Due to centralising the power in himself, he

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controls most of the decisions of the company. In fact, he has limited

knowledge about ERP. But, during the implementation, when facing
situation such as the consultant suggests that working process has to be
changed to fit the ERP system, the chairman refuse to change original
process but to use add-on modules to solve this problem. This is the crucial
factor make the imperfection of the system and increase the cost and
budget.
In this case, the chairman was involved too much, which affects the efficiency of
the project team. If any problem happens, even the project leader has to consult the
chairman. Because of the chairmans high involvement, customised functions are also
applied very much in this case. In fact, the chairman preferred to adjust the system to
fit the original operation process. This also resulted in the low performance of the
ERP system. The consultancy did not explain the software functions clearly before
implementation. The project was also not well planned. Therefore, problems, such as
the chairman insisting on using the original material encoding method, which resulted
in the database not being able to transfer work in progress data for financial and
accounting division. DSC did not help company B to solve these technical problems,
so company B was not satisfied with the post sale service. Finally company B stopped
paying for maintenance and gave this job to its own information division. Company B
was not totally satisfied with the existing ERP system, but it does not have any plans
for change new systems.

4. Conclusion
This study contains two cases to record how they implement it, and what
problems they encountered. The most contribution this study found is that human
factor would affect the implementation process. All of them are very successful
companies in their own industry, and they all completed their projects in a short time.
This may be the result of referring templates and best practice from successful
companies.
Company A invited external consultant to educate and develop internal seeds
which helps them able to supervise the system users even when the consultant left.
Company B faced the least resistance because the chairmans fully involvement and
support. But company also used the most customised functions due to the high
involvement of chairman. He chose to change the system to fit the original operation
process which results to the excessive use of customised modules.
From the two cases above, this study finds that people play a more important role
than the technique which affects the perfection of ERP system. In general, a clear
project goal will make the project focus more on results of execution. Choosing the
right template will meet the balance between the implementation benefits and
execution results.
In all, the most important key success factor is people. Unless the key man who
has the real power on decision making has the basic knowledge of ERP system, and

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being objectively, even perfect ERP software and experienced consultants cannot
ensure the perfection of ERP implementation.

Reference
1.
American Production and Inventory Control Society (APICS),
Dictionary, Eighth edition, 1995.
2. Brislen, P. and Krishnakumar, K. 1999. What is ERP,
http://searchsap.techtarget.com/sDefinition/0,,sid21_gci213946,00.html , Last
Retrieved, 15 August 2008.
3. Commission of the European Community.,
Commission
recommendation of 3 April 1996 concerning the definition of small and mediumsized enterprises, in Official Journal, Numbers. L 107 30, April, 1996, pp. 4-9.
4. Display Search, TFT LCD equipment report 2006, Display Search,
Inc., 2006.
5. Everdingen Y., Hillegerberg J. and Waarts E. ERP adoption by
European midsize companies. Communications of the ACM, Vol. 43(4), 2000,
pp.2731.
6. Friedman T.L., The World is Flat: A Brief History of the 21st Century,
New York: St. Martin's Press, 2005.
7. Ike C. Ehie, Mogens Madsen, Identifying critical issues in enterprise
resource planning implementation, Computer in Industry, Vol. 56(6), August
2005, pp. 545-557.
8. Market Intelligence Centre, Taiwan, 2005 B2B e-business survey on
macro and domestic market, 2006.
9. Oliver Wight, The Oliver Wight ABCD Checklist for Operational
Excellence, John Wiley & sons,5th Edition, USA, 2000.
10. Small and Medium Enterprise Administration, Ministry of Economic
Affairs, Taiwan, http://www.moeasmea.gov.tw

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