Professional Documents
Culture Documents
(Article) A Case Study of ERP Implementation For Opto-Electronics Industry (2005)
(Article) A Case Study of ERP Implementation For Opto-Electronics Industry (2005)
1
Chan-Hsing Lo, 2Chih-Hung Tsai, and 1Rong-Kwei Li
1
Department of Industrial Engineering and Management
National Chiao-Tung University, Hsinchu, Taiwan, ROC.
2
Department of Industrial Engineering and Management
Ta-Hwa Institute of Technology, Hsin-Chu, Taiwan, ROC
E-mail: ietch@thit.edu.tw
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
13
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
example, purchase and sale management in opportunities it presents are the critical
distribution; production management, MRP factors for consideration in ERP
(Material Requirements Planning), quality implementation [13]. The T Opto-Electronics
control, management of products in process, Company is analyzed in this case study
cost management, material management, and focusing on the following three aspects: (1)
project design change management, which how to assess appropriate ERP software and
represents a complete manufacturing process the applicability of ERP software to
including research and development, enterprises in Taiwan; (2) ERP system
production, product management, and total implementation strategy and methodology;
quality control. In addition, ERP also and (3) problems that may be encountered
involves accounting, human resource, and during implementation process and the
decision-making resource management. The solutions. The results are intended to provide
ultimate goal of ERP is to improve future reference to the related enterprises in
enterprises’ operating cycle of planning, implementing ERP system.
implementing, auditing, and improving, and
to strengthen corporate internal control and
auditing capabilities [14, 21].
2. Literature Review
In a global market, companies are
exposed to competition from not only The APICS’s definition of ERP can be
traditional or local competitors but also summarized as: (1) ERP system is
worldwide players in the industry. Therefore, accounting-oriented; (2) ERP system focuses
it is imperative companies develop a on satisfying customer demand; (3) ERP
responsive, integrated, and succinct system plans on all corporate resources,
management procedure [4] to respond to any which is similar to the typical MRPII; and (4)
future challenges from global competition in ERP system utilizes many mature
21st century. The Opto-Electronics industry information technologies in 1990s. The
has been growing rapidly, and even the concept of “ERP” was first introduced by
industrial internal competition has become Gartner Group [6, 22] in early 1990s. The
quite intense. Only companies that can make Group believes ERP’s functions exceed
right decisions in a timely fashion based on MRP II’s. In addition to information
market trends can sustain their profitability technology included in APICS’s definition,
in fierce competition, hence, more and more ERP employs artificial intelligence, has
enterprises in Opto-Electronics industry have simulation capability, and can be applied to
implemented ERP system to increase their project management, integration of internal
competitiveness. However, ERP system functions, quality control, and external
implementation process involves a wide integration with clients and suppliers.
range of complicated resources and issues. Various reports can be produced as needed.
With no plan or supporting procedure, From operational perspective, based on
companies may spend tons of money, supply chain management (SCM) and
resource, and time on ERP implementation customer relationship management (CRM),
but not enjoy a bit of the benefit ERP system ERP effectively integrates enterprise internal
should have brought out [2, 3, 7, 8, 10, 11, and external resources in order to reduce
15, 16, 17]. In particular, implementing ERP operating costs and satisfy market demands.
in Taiwan costs dearly but few cases have In other words, ERP takes advantage of
succeeded. Due to industrial difference, the information technology to effectively utilize,
applicability of ERP system and the share, and allocate such corporate internal
14
A Case Study of ERP Implementation for Opto-Electronics Industry
resources as finance, accounting, demand for the period from 1970s to 21st
manufacturing, quality control, material century, we can study the needs and sources
purchase, sales, and human, aiming to satisfy of information system and technology
customer needs and utilize enterprise evolution by understanding the focus
resources more effectively while meet adjustment of enterprise operation and
product quality and specification management. The ERP system’s evolution
requirements based on timely analyses, thus course can be divided into four stages (as
ultimately increase profitability. Based on shown in Table 1) [20]:
the changes in market characteristics and
Prior to 1998, ERP system was referred predetermined goals. Many researches and
to as enterprise ‘internal’ decision-making practices have provided us sufficient proof
support system. However, after 1999, ERP that the failure of ERP applications in
represents an operation and management Taiwan is not attributable to technology,
system integrating enterprise both ‘internal’ fund, Internet, application software, or
and ‘external’ information. Some people just software implementation but enterprise
call it extended ERP (i.e. EERP). ERP mindset. To inspire enterprises’ sponsorship
system’s evolution and functions are shown by improving their knowledge and
in Figure 1. ERP has been promoted and understanding, increase their proactive
applied in Taiwan for almost 20 years. capabilities, and fully exert their functions as
During this period of time, our discussions the sponsor, shall improve the success in
and concerns have centered on the fact that ERP applications in Taiwan fundamentally
the applications of ERP in Taiwan were [9, 12, 14].
not successful, thus could not achieve
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
15
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
MRP MRP II
Accounts Receivable
Enterprise Resource Planning
Accounts Payable Finance and Accounting (ERP)
General Ledger
EDI
E-Commerce
Customer Relationship
Management (CRM)
16
A Case Study of ERP Implementation for Opto-Electronics Industry
An ERP system implementation is very successful. In many cases, the system was
expensive costing from millions to billions unable to deliver the expected performance
NT dollars. However, very few cases were after implementation. A checklist as shown
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
17
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
18
A Case Study of ERP Implementation for Opto-Electronics Industry
Implementation Strategy
Implementation Strategy
Computerized operation and Implementation Team Structure
and Plan
management process
Kick-Off Meeting
improvement
Operation Analysis (Training)
(OA)
(CRP)
Transition
(Customized Operation)
(End-User Training)
(End-User CRP)
(Production) (Data Preparation)
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
19
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
help clients handle various problems in the of shared working area and responsive
maximum feasible scope under mutual support between team members. The
predetermined time schedule. The ERP implementation team in this case is
software consultants encourage the structured as shown in Figure 3:
interaction among team members by means
20
A Case Study of ERP Implementation for Opto-Electronics Industry
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
21
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
22
A Case Study of ERP Implementation for Opto-Electronics Industry
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
23
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
24
A Case Study of ERP Implementation for Opto-Electronics Industry
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
25
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
leading role in implementation, the best tedious statistics and calculation jobs. In fact,
result is limited to introducing a set of new the system can reduce human errors in
rules and system not necessarily applicable computation and conveniently generate some
to the specific industry. statistics reports for management purposes.
However, introducing an ERP system will
Solution: When applying the system to a not necessarily cut labor, possibly due to
specific industry, a comprehensive original operators’ inability to produce
consulting team should be selected. It could statistics or output reports in a timely fashion
be comprised of either the experts in various as a result of lack of information.
fields from the same consulting firm or the
comprehensive experts well trained by the Solution: As a matter of fact, after ERP
software company. The consultants are software is installed, when all the factors
mainly responsible for integrating software mentioned above are excluded, users may
system into enterprise culture. The job feel their workload has been increased.
responsibility requires full communication However, on the other hand, the company’s
with the client’s senior management since overall profitability has been improved
the senior management understands their significantly. Take sales for example, sales is
own company’s process and structure as well the frontline work and the starting point of
as the company’s future needs. Software many information systems: receive order –
only plays the role of a tool in enterprise produce – sell – accounting. The workload of
resource planning. Enterprises are the frontline operators is not reduced but
specialized in various professional fields and increased to include some managerial
have the know-how particular to individual parameters. In addition, the process seems
industries. Therefore, if the consultants can like nothing quite different from handling
build up the solid foundation of mutual trust other document software, which thus causes
with clients and are willing to solve doubts about the benefits that ERP system
problems for clients, they can finally become can bring to the operation. However, by
the client’s most trustworthy partners. means of ERP system, other departments or
Consultants should be the enterprises’ management can easily check or manage the
partners but not the brokers wasting client’s most updated status of the orders received,
money. then arrange enterprise resources accordingly.
Therefore, the management should certainly
5.2 Thoughts on Several Misconceptions correct any misconception of
about Enterprise Software computerization can save all labor.
Implementation
5.2.2 Misconception 2: Can computers
Enterprises usually have several cure all?
misconceptions in implementing software,
which causes some disappointment from Problem Description: Many things cannot
unrealistic expectation. possibly be done without computers, but can
computers cure all? A common
5.2.1 Misconception 1: Can computeri- misconception in implementing ERP system
zation save labor? is that the software system can do everything.
However, after all, human brain is superior
Problem Description: When implementing to computer. As many enterprise cultures
ERP system, many enterprises expect the take quite some time to evolve, many
system to save labor in complicated and enterprise-operating processes finally get on
26
A Case Study of ERP Implementation for Opto-Electronics Industry
track only after several reforms and continuously test software functions. In this
renovations. Many problems and issues way, they can get themselves familiar with
occurred in implementing ERP software still the software and raise many operational
require human beings to make the judgment. questions. Then the consultants can focus the
training on those questions. Thus, a better
Solution: ERP software provides enterprises effect can be achieved in official transition.
multiple options of system application. So
selection is a judgment. Whether the choice 5.5 Defining System Variation
is correct or not is determined by the policies
or strategies taken on by the enterprise at the Generally speaking, when purchasing
specific point of time but not the jobs that software, most of the time only the
ERP system can replace. functional completeness can be evaluated. It
is not quite possible to conduct a complete
5.3 Enterprise-User Unable to Describe evaluation specific to enterprise operational
Needs or Requirements Correctly details. When actually implementing the
software, those functions that cannot be
Problem Description: At operation analysis provided by the software system due to
stage, the common problem is that most of industrial variance are listed as system
the time the Key-User cannot accurately variation items and will cost customization
describe the needs or requirements in full charge. However, some variations may not
detail or falls into the so-called “interview be attributable to industrial variance but
trap”. “Interview Trap” refers to the dilemma rather incomplete functionality. In this case,
that the needs or requirements are brought up the consultants should list the problem for
only when related questions are asked by modification but not as a part of the client’s
ERP system implementation consultants. requirements for customization.
Otherwise, the problems are hidden and later
become obstacles to satisfying enterprise
needs in the course of application 6. Conclusions
implementation. Even some would not be
revealed until the project is being closed. In the present highly competitive market,
enterprise resource integration and planning
Solution: ERP system implementation are very critical, especially to those
consultants must bring out the enterprise companies in existence for a long time.
needs or requirements completely when When companies expand their hierarchy and
conducting operation analysis and identify scale as needed by business growth, lack of
all the problems. integrated planning always causes duplicate
functions and ambiguously defined
5.4 The Timing of Education and Training responsibilities. The resulting enterprise
internal discord will affect enterprise
Problem Description: In general, software operating efficiency, and even enterprise
companies provide training before transition normal operation when accompanied by
happens. However, the training result is Y2K effect on enterprise resource utilization.
usually the worst before the users can get It therefore requires computer software and
their hands on the software. hardware updates. This is a great opportunity
for enterprise restructuring. Enterprise
Solution: In the course of ERP system resource integration involves a wide range of
implementation, users should be allowed to activities including selection of ERP
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
27
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
28
A Case Study of ERP Implementation for Opto-Electronics Industry
References
[1] APICS, APICS Dictionary, The 9th edition, [9] Shen, Yuan-huang and Hsu, Ping-yu, “ERP
1998. Implementation Effect Not Up to
Expectations?,” Data and Computers,
[2] Bingi, P., Sharma, M.K. and Godla, J.K., 2002/1, pp.52-57.
“Critical Issues Affecting an ERP
Implementation,” Information Systems [10] Chu, Hai-cheng and Lai, Chu-liang, “ERP
Management, Vol. 16, Issue. 5, pp.7-14, Crucial Success Factors (CSF) and Failure
1999. Causes Investigation,” Electronic Business
and Digital Lifestyle Discussion Panel,
[3] Holland, C.P. and Light, B., “A Critical Taiwan Electronics Business Institute, Shita
Success Factors Model for ERP University Data Control Department, 2002.
Implementation,” IEEE Software, Vol. 16,
Iss. 3, pp.30-36, 1999. [11] Hung, Yu-chung, Hsiao, Tsui-chen, and Hsu,
Chun-lin, “ERP Key Success Factor
[4] Mandal, P. and Gunasekaran, A., Analysis—A Case Study of Company P’s
“Application of SAP R/3 in on-line Implementation of SAP,” Electronic
inventory control,” International Journal of Business and Digital Lifestyle Discussion
Production Economics, Vol. 75, pp.47-55, Panel, Taiwan Electronics Business
2002. Institute, Shita University Data Control
Department, 2002.
[5] Motwani, J., Mirchandani, D., Madan, M.
and Gunasekaran, A., “Successful [12] Lien, Ya-hui and Wang, Chiang-liu,
implementation of ERP projects: Evidence “Surpassing Time Competitiveness,”
from two case studies,” International Chinese Production Capability Center,
Journal of Production Economics, Vol. 75, 1998.
pp.83-96, 2002.
[13] Chen, Chih-che, “Taiwan Enterprise Data
[6] Norris, G., Hurley, J.R., Hartley, K.M., Operation Requirement Analysis:
Dunleavy, J.R. and Balls, J.D., E-Business Manufacturing Version,” MIC Research
and ERP, John Wiley & Suns, 2000. Report, 2001/3.
[7] Summer, M., “Critical success factors in [14] Chen, Chih-che, “Using Traditional
enterprise wide information manage-ment Industry Electronic Analysis Enterprise
system projects,” Proceedings of the Electronic Strategy,” MIC Research Report,
SIGCPR’99, New Orleans, LA, USA, 2001/4.
pp.297-303, 1999.
[15] Lin, Feng-ju, “Research Regarding
[8] Welti, Norbert, Successful SAP R/3 Relationship between ERP Package
Implementation: Practical Management of Software Strategy Target Strategic Targets
ERP Project, Addison Wesley Longman, and Key Factors,” Taiwan University
1999. Business Research Masters Thesis, Taiwan,
1999.
International Journal of The Computer, the Internet and Management Vol. 13#1 (January – April, 2005) pp 13 - 30
29
Chan-Hsing Lo, Chih-Hung Tsa & Rong-Kwei Li
30