conceptual framework design for the

CONCEPTUAL FRAMEWORK DESIGN FOR THE

DEVELOPMENT OF AN ENTERPRISE RESOURCE PLANNING

SYSTEM FOR SMALL AND MEDIUM ENTERPRISES IN

SOUTHEAST ASIA

A Thesis

Submitted to the Faculty of Graduate Studies and Research

In Partial Fulfillment of the Requirements

For the Degree of

Master of Applied Science

In Industrial Systems Engineering

University of Regina

By

Punnamee Sachakamol

Regina, Saskatchewan, Canada

November, 2005

Copyright 2005: Punnamee Sachakamol

Reproduced with permission of the copyright owner. Further reproduction prohibited without permission.

CONCEPTUAL FRAMEWORK DESIGN FOR THE

DEVELOPMENT OF AN ENTERPRISE RESOURCE PLANNING

SYSTEM FOR SMALL AND MEDIUM ENTERPRISES IN

SOUTHEAST ASIA

A Thesis

Submitted to the Faculty of Graduate Studies and Research

In Partial Fulfillment of the Requirements

For the Degree of

Master of Applied Science

In Industrial Systems Engineering

University of Regina

By

Punnamee Sachakamol

Regina, Saskatchewan, Canada

November, 2005

Copyright 2005: Punnamee Sachakamol


1+1 Library and Bibliotheque et Archives Canada Archives Canada

Published Heritage Direction du Branch Patrimoine de redition

395 Wellington Street Ottawa ON KlA ON4 Canada

395, rue Wellington Ottawa ON KlA ON4 Canada

NOTICE: The author has granted a non-exclusive license allowing Library and Archives Canada to reproduce, publish, archive, preserve, conserve, communicate to the public by telecommunication or on the Internet, loan, distribute and sell theses worldwide, for commercial or non-commercial purposes, in microform, paper, electronic and/or any other formats.

The author retains copyright ownership and moral rights in this thesis. Neither the thesis nor substantial extracts from it may be printed or otherwise reproduced without the author's permission.

Your file Votre reference ISBN: 978-0-494-18910-8 Our file Notre reference ISBN: 978-0-494-18910-8

AVIS: L'auteur a accord& une licence non exclusive permettant a la Bibliotheque et Archives Canada de reproduire, publier, archiver, sauvegarder, conserver, transmettre au public par telecommunication ou par ('Internet, preter, distribuer et vendre des theses partout dans le monde, a des fins commerciales ou autres, sur support microforme, papier, electronique et/ou autres formats.

L'auteur conserve la propriete du droit d'auteur et des droits moraux qui protege cette these. Ni la these ni des extraits substantiels de celle-ci ne doivent etre imprimes ou autrement reproduits sans son autorisation.

In compliance with the Canadian Privacy Act some supporting forms may have been removed from this thesis.

While these forms may be included in the document page count, their removal does not represent any loss of content from the thesis.

1*1

Canada

Conformement a la loi canadienne sur la protection de la vie privee, quelques formulaires secondaires ont ete enleves de cette these.

Bien que ces formulaires aient inclus dans la pagination, it n'y aura aucun contenu manquant.


Library and Archives Canada

Bibliotheque et Archives Canada

Published Heritage Branch

395 Wellington Street Ottawa ON K1A 0N4 Canada

Your file Votre reference ISBN: 978-0-494-18910-8 Our file Notre reference ISBN: 978-0-494-18910-8

Direction du Patrimoine de I'edition

395, rue Wellington Ottawa ON K1A 0N4 Canada

NOTICE:The author has granted a nonexclusive license allowing Library and Archives Canada to reproduce, publish, archive, preserve, conserve, communicate to the public by telecommunication or on the Internet, loan, distribute and sell theses worldwide, for commercial or noncommercial purposes, in microform, paper, electronic and/or any other formats.

AVIS:L'auteur a accorde une licence non exclusive permettant a la Bibliotheque et Archives Canada de reproduire, publier, archiver, sauvegarder, conserver, transmettre au public par telecommunication ou par I'lnternet, preter, distribuer et vendre des theses partout dans le monde, a des fins commerciales ou autres, sur support microforme, papier, electronique et/ou autres formats.

The author retains copyright ownership and moral rights in this thesis. Neither the thesis nor substantial extracts from it may be printed or otherwise reproduced without the author's permission.

L'auteur conserve la propriete du droit d'auteur et des droits moraux qui protege cette these.Ni la these ni des extraits substantiels de celle-ci ne doivent etre imprimes ou autrement reproduits sans son autorisation.

In compliance with the Canadian Privacy Act some supporting forms may have been removed from this thesis.

While these forms may be included in the document page count, their removal does not represent any loss of content from the thesis.

Conformement a la loi canadienne sur la protection de la vie privee, quelques formulaires secondaires ont ete enleves de cette these.

Bien que ces formulaires aient inclus dans la pagination, il n'y aura aucun contenu manquant.

i * i

CanadaReproduced with permission of the copyright owner. Further reproduction prohibited without permission.

UNIVERSITY OF REGINA

FACULTY OF GRADUATE STUDIES AND RESEARCH

SUPERVISORY AND EXAMINING COMMITTEE

Punnamee Sachakamol, candidate for the degree of Master of Applied Science, has presented

a thesis titled, Conceptual Framework Design for the Development of an Enterprise

Resource Planning System for Small and Medium Enterprises in Southeast Asia, in an oral

examination held on November 24, 2005. The following committee members have found the

thesis acceptable in form and content, and that the candidate demonstrated satisfactory

knowledge of the subject material.

External Examiner: Dr. Lisa Fan, Department of Computer Science

Supervisor: Dr. Liming Dai, Faculty of Engineering

Committee Member: Dr. Amr Henni, Faculty of Engineering

Committee Member: Dr. Muhammad Ayub, Faculty of Engineering

Chair of Defense: Dr. Andrei Volodin, Department of Mathematics and Statistics


UNIVERSITY OF REGINA

FACULTY OF GRADUATE STUDIES AND RESEARCH

SUPERVISORY AND EXAMINING COMMITTEE

Punnamee Sachakamol, candidate for the degree of Master of Applied Science, has presented

a thesis titled, Conceptual Framework Design for the Development o f an Enterprise

Resource Planning System for Small and Medium Enterprises in Southeast Asia, in an oral

examination held on November 24, 2005. The following committee members have found the

thesis acceptable in form and content, and that the candidate demonstrated satisfactory

knowledge of the subject material.

External Examiner: Dr. Lisa Fan, Department of Computer Science

Supervisor: Dr. Liming Dai, Faculty of Engineering

Committee Member: Dr. Amr Henni, Faculty of Engineering

Committee Member: Dr. Muhammad Ayub, Faculty of Engineering

Chair of Defense: Dr. Andrei Volodin, Department of Mathematics and Statistics


Abstract

The Enterprise Resource Planning (ERP) system is one of the most widely

accepted systems in the management of manufacturing enterprises. Despite the

advantages of ERP systems, the existing ERP systems do not as of yet provide a clear and

successful management tool for small and medium sized enterprises (SMEs), especially

for SMEs in Southeast Asian countries. Also, the ERP systems do not provide convenient

and easy implementation for these SMEs. This research aims at identifying the strategic

and operational requirements of SMEs in the Southeast Asia region on the basis of the

existing quantitative and qualitative research, which have been shown to influence

Information System and Information Technology adoption in SMEs. The weaknesses of

the existing ERP systems in relation to their implementation in Southeast Asian SMEs

are evaluated and analyzed. The characteristics of the SMEs in this region are

investigated with the SMEs' specific requirements for higher flexibility, lower

hierarchical management, modular structure, and comprehension of the SMEs' short- and

long-term plans. A strategic change framework that emphasizes the proper

implementation of an ERP system in Southeast Asian SMEs and meets the requirements

of the SMEs is developed, including the establishment of a Novel ERP system (NERP)

for Southeast Asian SMEs. A comparison of NERP with the existing ERP systems is

performed. The application of the research results in the ERPs in SMEs in Southeast Asia

is also included in the present research.

I


Abstract

The Enterprise Resource Planning (ERP) system is one of the most widely

accepted systems in the management of manufacturing enterprises. Despite the

advantages of ERP systems, the existing ERP systems do not as of yet provide a clear and

successful management tool for small and medium sized enterprises (SMEs), especially

for SMEs in Southeast Asian countries. Also, the ERP systems do not provide convenient

and easy implementation for these SMEs. This research aims at identifying the strategic

and operational requirements of SMEs in the Southeast Asia region on the basis of the

existing quantitative and qualitative research, which have been shown to influence

Information System and Information Technology adoption in SMEs. The weaknesses of

the existing ERP systems in relation to their implementation in Southeast Asian SMEs

are evaluated and analyzed. The characteristics of the SMEs in this region are

investigated with the SMEs’ specific requirements for higher flexibility, lower

hierarchical management, modular structure, and comprehension of the SMEs’ short- and

long-term plans. A strategic change framework that emphasizes the proper

implementation of an ERP system in Southeast Asian SMEs and meets the requirements

of the SMEs is developed, including the establishment of a Novel ERP system (NERP)

for Southeast Asian SMEs. A comparison of NERP with the existing ERP systems is

performed. The application of the research results in the ERPs in SMEs in Southeast Asia

is also included in the present research.

I


Acknowledgements

First and above all, I am extremely appreciative of Dr. Liming Dai, my

supervisor, and his excellent supervision during the course of this research. Without his

inspiration, this research could not have been successfully completed.

Thanks to Dr. P. Piamsomboon for providing knowledge about Enterprise

Resource Planning development and programming.

I am grateful to the Faculty of Graduate Studies and Research and the Faculty of

Engineering at the University of Regina for providing the financial support and facilities

for my study.

Finally, I would like to thank my mother, father, brother, S. Lisawadi, and my

friends. Without their help, encouragement, and emotional support, this work could never

have been accomplished.

II


Acknowledgements

First and above all, I am extremely appreciative of Dr. Liming Dai, my

supervisor, and his excellent supervision during the course of this research. Without his

inspiration, this research could not have been successfully completed.

Thanks to Dr. P. Piamsomboon for providing knowledge about Enterprise

Resource Planning development and programming.

I am grateful to the Faculty of Graduate Studies and Research and the Faculty of

Engineering at the University of Regina for providing the financial support and facilities

for my study.

Finally, I would like to thank my mother, father, brother, S. Lisawadi, and my

friends. Without their help, encouragement, and emotional support, this work could never

have been accomplished.

II


Post Defence Acknowledgements

I would like to also profoundly thank the external examiner Dr. L. Fan for her

diligence and highly valued comments on the thesis. In addition I am thankful to the chair

of the defence Dr. A. Volodin for agreeing to be present at my defence on such short

notice. He was perfectly in command of the defence process and his insightful

contribution is greatly treasured. I would also like to express my gratitude to my

committee members, including Dr. A. Henni and Dr. M. Ayub, for their insightful

suggestions, which were helpful for improving the thesis work.

III


Post Defence Acknowledgements

I would like to also profoundly thank the external examiner Dr. L. Fan for her

diligence and highly valued comments on the thesis. In addition I am thankful to the chair

of the defence Dr. A. Volodin for agreeing to be present at my defence on such short

notice. He was perfectly in command of the defence process and his insightful

contribution is greatly treasured. I would also like to express my gratitude to my

committee members, including Dr. A. Henni and Dr. M. Ayub, for their insightful

suggestions, which were helpful for improving the thesis work.

Ill


Table of Contents

Page

Abstract

Acknowledgements II

Post Defence Acknowledgements III

Table of Contents IV

List of Tables VIII

List of Figures IX

List of Acronyms XI

Chapter 1 Introduction 1

1.1 Background 1

1.2 Research issue 2

1.3 Research objectives 3

1.4 Scope and limitations 5

1.5 Outline of the thesis 5

Chapter 2 Research Background 7

2.1 Definition of the Enterprise Resource Planning system 7

2.2 The evolution of ERP Systems 8

2.3 Advantages, disadvantages, and the implementation of an ERP system 9

2.3.1 Advantages of an ERP System 9

2.3.2 Disadvantages of an ERP System 11

2.3.3 The Implementation of an ERP system 12

IV


Table of Contents

Page

Abstract I

Acknowledgements II

Post Defence Acknowledgements III

Table of Contents IV

List of Tables VIII

List of Figures IX

List of Acronyms XI

Chapter 1 Introduction 1

1.1 Background 1

1.2 Research issue 2

1.3 Research objectives 3

1.4 Scope and limitations 5

1.5 Outline of the thesis 5

Chapter 2 Research Background 7

2.1 Definition of the Enterprise Resource Planning system 7

2.2 The evolution of ERP Systems 8

2.3 Advantages, disadvantages, and the implementation of an ERP system 9

2.3.1 Advantages of an ERP System 9

2.3.2 Disadvantages of an ERP System 11

2.3.3 The Implementation of an ERP system 12

IV


2.4 Criteria of ERP framework development 15

2.4.1 Integration of the System 15

2.4.2 Data Integration 16

2.5 ERP System development and implementation decision framework 16

2.5.1 Replacement of the existing system 17

2.5.2 Will the ERP system support the reengineering effort? 17

2.5.3 Utilizing the benefits of technology 18

2.5.4 Enterprise database integration 19

2.6 Enterprise Resource Planning architectural design 21

Chapter 3 Methodology 24

3.1 SMEs in Southeast Asian countries 24

3.1.1 Overview of SMEs in the region of Southeast Asia 25

3.1.2 Characteristics of SMEs in Southeast Asia 26

3.1.3 Benefits of an ERP system for SMEs in Southeast Asia 27

3.1.4 Practice Differences between North America's system and the system in Southeast Asia 29

3.2 Research design approach 31

3.3 Data collection techniques 32

3.4 Sources of data 33

3.5 Demographic profile of the representative companies 33

3.6 Data gathering tools 36

3.6.1 Surveys 37

3.6.2 Interviews 37

3.7 Research evaluation 37

V


2.4 Criteria of ERP framework development 15

2.4.1 Integration of the System 15

2.4.2 Data Integration 16

2.5 ERP System development and implementation decision framework 16

2.5.1 Replacement of the existing system 17

2.5.2 Will the ERP System support the reengineering effort? 17

2.5.3 Utilizing the benefits of technology 18

2.5.4 Enterprise database integration 19

2.6 Enterprise Resource Planning architectural design 21

Chapter 3 Methodology 24

3.1 SMEs in Southeast Asian countries 24

3.1.1 Overview of SMEs in the region of Southeast Asia 25

3.1.2 Characteristics of SMEs in Southeast Asia 26

3.1.3 Benefits of an ERP system for SMEs in Southeast Asia 27

3.1.4 Practice Differences between North America’s systemand the system in Southeast Asia 29

3.2 Research design approach 31

3.3 Data collection techniques 3 2

3.4 Sources of data 33

3.5 Demographic profile of the representative companies 33

3.6 Data gathering tools 36

3.6.1 Surveys 37

3.6.2 Interviews 37

3.7 Research evaluation 37

V


3.8 Analysis methodology 38

3.9 Transfer technology 40

Chapter 4 Conceptual Framework 41

4.1 The nature of ERP development and implementation processes 42

4.2 Enterprise Resource Planning development foundation 43

4.2.1 Fundamental business process 44

4.2.2 Consistency 46

4.2.3 Economics of Scale 47

4.2.4 Integration 47

4.3 Conceptual framework development 48

4.3.1 User specification 51

4.3.2 Organization specification 53

4.3.3 System specification 55

4.4 Discussion 58

4.4.1 Southeast Asian SME features 58

4.4.2 ERP Systems in Southeast Asian SMEs 60

4.4.3 Implications for business practitioners 60

4.5 Customized Novel ERP System for Southeast Asian SMEs 62


4.5.2 Main components and modules 68

4.5.3 Novel ERP system and conceptual framework design 73

4.5.4 Inventory and relevant cost policy decisions 84

4.5.5 Achieved functionality and features in NERP 88

VI


3.8 Analysis methodology 3 8

3.9 Transfer technology 40

Chapter 4 Conceptual Framework 41

4.1 The nature of ERP development and implementation processes 42

4.2 Enterprise Resource Planning development foundation 43

4.2.1 Fundamental business process 44

4.2.2 Consistency 46

4.2.3 Economics of Scale 47

4.2.4 Integration 47

4.3 Conceptual framework development 48


4.3.2 Organization specification 53

4.3.3 System specification 55

4.4 Discussion 58

4.4.1 Southeast Asian SME features 58

4.4.2 ERP Systems in Southeast Asian SMEs 60

4.4.3 Implications for business practitioners 60

4.5 Customized Novel ERP System for Southeast Asian SMEs 62


4.5.2 Main components and modules 68

4.5.3 Novel ERP system and conceptual framework design 73

4.5.4 Inventory and relevant cost policy decisions 84

4.5.5 Achieved functionality and features in NERP 88

VI


Chapter 5 Presentation, Interpretation and Analysis of data 95

5.1 Comparison of existing ERP systems and NERP 95

5.2 Data analysis 102

5.3 Comparison of estimation and practice 109

5.4 Respondents' perspectives on Enterprise Resource Planning and what is expected in the future 110

Chapter 6 Conclusion and future work 117

6.1 Conclusions 117

6.2 Recommendations for Future Work 120

References 123

Appendices A: Questionnaires 132

Appendices B: Statistical calculation 137

Appendices C: Management decision air in the system management 142

VII


Chapter 5 Presentation, Interpretation and Analysis of data 95

5.1 Comparison of existing ERP systems and NERP 95

5.2 Data analysis 102

5.3 Comparison of estimation and practice 109

5.4 Respondents’ perspectives on Enterprise Resource Planningand what is expected in the future 110

Chapter 6 Conclusion and future work 117

6.1 Conclusions 117

6.2 Recommendations for Future Work 120

References 123

Appendices A: Questionnaires 132

Appendices B: Statistical calculation 137

Appendices C: Management decision air in the system management 142

VII


List of Tables

Page

Table 4.1 Typical legacy system status of five selected SMEs in Southeast Asia 46

Table 5.1 Comparison between existing ERP systems and the NERP System 101

Table 5.2 General information of the participants 103

Table 5.3

Table 5.4

Table 5.5

Table 5.6

Relationships between satisfaction level, average score, and description 103

Overall system satisfaction comparison between the existing System and the NERP system 104

Software and module satisfaction factors, comparing the existing system and the NERP system 105

Platform choices for the development of an ERP system 106

Table 5.7 A Comparison of organizational and cultural factors of the existing system and NERP 107

Table 5.8 Satisfaction with the NERP system in 5 selected SMEs in Southeast Asia 107

Table 5.9 Satisfaction levels for each module and function in the NERP System 108

Table B-1 Typical demand experience during three replenishment cycles 137

Table B-2 Frequency of demand 138

Table B-3 Frequency of performance cycle (days) 139

Table B-4 Frequency distribution-demand and replenishment uncertainty 139

Table B-5 Table of loss integral for standardized normal distribution 140

VIII


List of Tables

Table 4.1 Typical legacy system status of five selected SMEs in Southeast Asia

Table 5.1

Table 5.2

Table 5.3

Table 5.4

Table 5.5

Table 5.6

Table 5.7

Table 5.8

Page

46

Comparison between existing ERP systems and the NERP System 101

General information of the participants 103

Relationships between satisfaction level, average score, and description 103

Overall system satisfaction comparison between the existing System and the NERP system 104

Software and module satisfaction factors, comparing the existing system and the NERP system 105

Platform choices for the development of an ERP system 106

A Comparison of organizational and cultural factors of the existing system and NERP 107

Satisfaction with the NERP system in 5 selected SMEs in Southeast Asia 107

Table 5.9 Satisfaction levels for each module and function in the NERP System 108

Table B-l Typical demand experience during three replenishmentcycles 137

Table B-2 Frequency of demand 138

Table B-3 Frequency of performance cycle (days) 139

Table B-4 Frequency distribution-demand and replenishmentuncertainty 139

Table B-5 Table of loss integral for standardized normaldistribution 140

VIII

with permission of the copyright owner. Further reproduction prohibited without permission.

List of Figures

Figure 4.1

Figure 4.2

Figure 4.3

Figure 4.4

Figure 4.5

Figure 4.6

Figure 4.7

Figure 4.8

Figure 4.9

Figure 4.10

Figure 4.11

Figure 4.12

Figure 4.13

Figure 4.14

Figure 4.15

Figure 4.16

Figure 4.17

Figure 4.18

Figure 4.19

Page

ERP lifecycle model (Markus & Tanis, 2000) 42

DeLone and McLean's Information System success model. 49

Ives, Hamilton, and Davis's Information System research model 50

Conceptual success framework for ERP implementation in Southeast Asia 52

Relationships within the Revenue Cycle 65

Relationships within the Expenditure Cycle 66

Relationships within the Production Cycle 67

ERP for SMEs' framework 69

Relationship between the five main modules and the information in the database 70

Relationship between main modules and sub-modules 72

Supplier common database interface 75

Sales Quotations with product information interface 76

Sales Order with cost and profit information interface 77

Material Purchase Request interface 78

Supplier Quotation interface 78

Product Issue and Raw Material Issue interface 80

Current Inventory interface 80

Production Scheduling interface 81

Process flow diagram 83

IX


List of Figures

Page

Figure 4.1 ERP lifecycle model (Markus & Tanis, 2000) 42

Figure 4.2 DeLone and McLean’s Information System success model. 49

Figure 4.3 Ives, Hamilton, and Davis’s Information System researchmodel 50

Figure 4.4 Conceptual success framework for ERP implementationin Southeast Asia 52

Figure 4.5 Relationships within the Revenue Cycle 65

Figure 4.6 Relationships within the Expenditure Cycle 66

Figure 4.7 Relationships within the Production Cycle 67

Figure 4.8 ERP for SMEs’ framework 69

Figure 4.9 Relationship between the five main modules andthe information in the database 70

Figure 4.10 Relationship between main modules and sub-modules 72

Figure 4.11 Supplier common database interface 75

Figure 4.12 Sales Quotations with product information interface 76

Figure 4.13 Sales Order with cost and profit information interface 77

Figure 4.14 Material Purchase Request interface 78

Figure 4.15 Supplier Quotation interface 78

Figure 4.16 Product Issue and Raw Material Issue interface 80

Figure 4.17 Current Inventory interface 80

Figure 4.18 Production Scheduling interface 81

Figure 4.19 Process flow diagram 83

IX


Figure 4.20

Figure 4.21

Figure B-1

Figure C-1

Figure C-2

Figure C-3

Figure C-4

Figure C-5

Architectural differences between thick and thin platform (Gartner, 2004) 92

Web-based and work station based system diagram and connection to NERP system

Normal distribution

Cost management module

Expected completion and delivery date

Production Scheduling and Scheduling Adjustment

Pending reminder

Inventory status, ROP and Q*

X

94

138

143

144

145

146

146


Figure 4.20 Architectural differences between thick and thin platform(Gartner, 2004) 92

Figure 4.21 Web-based and work station based system diagram andconnection to NERP system 94

Figure B-l Normal distribution 138

Figure C-l Cost management module 143

Figure C-2 Expected completion and delivery date 144

Figure C-3 Production Scheduling and Scheduling Adjustment 145

Figure C-4 Pending reminder 146

Figure C-5 Inventory status, ROP and Q* 146

X


List of Acronyms

ASP Adjunct Service Point

BPM Business Process Management

CAD Computer Aided Design

CASE Computer Aided Software Engineering

CRM Customer Relationship Management

DBMS Database Management System

ERP Enterprise Resource Planning

FTEs Full-Time Equivalents

GDP Gross Domestic Product

HR Human Resource

IDC Internet Data Centre

IS Information System

ISO International Organization for Standardization

IT Information Technology

J2EE Java 2 Enterprise Edition

LAN Local Area Network

LOB Line of Business

MRP Material Requirement Planning

MRPII Material Resource Planning

NERP Novel Enterprise Resource Planning

OLAP On-Line Analytical Processing

OS Operation System

XI


List of Acronyms

ASP Adjunct Service Point

BPM Business Process Management

CAD Computer Aided Design

CASE Computer Aided Software Engineering

CRM Customer Relationship Management

DBMS Database Management System

ERP Enterprise Resource Planning

FTEs Full-Time Equivalents

GDP Gross Domestic Product

HR Human Resource

IDC Internet Data Centre

IS Information System

ISO International Organization for Standardization

IT Information Technology

J2EE Java 2 Enterprise Edition

LAN Local Area Network

LOB Line of Business

MRP Material Requirement Planning

MRPII Material Resource Planning

NERP Novel Enterprise Resource Planning

OLAP On-Line Analytical Processing

OS Operation System

XI


OC Personal Computer

Q* Replenishment Quantity

ROP Reorder Point or Reorder Quantity Point

SMES Small and Medium Enterprises

SQL Structured Query Language

XML Extensive Mark-up Language

XII


OC Personal Computer

Q* Replenishment Quantity

ROP Reorder Point or Reorder Quantity Point

SMES Small and Medium Enterprises

SQL Structured Query Language

XML Extensive Mark-up Language

XII


Chapter 1

Introduction

1.1 Background

The Enterprise Resource Planning system (ERP) is simply the management

information system that incorporates and automates many of the business practices

related to the process and assembly features of a company. ERP systems are

characteristically comprised of manufacturing, logistics, distribution, inventory, shipping,

invoicing, and accounting. Many business activities can be aided by this system, such as

marketing, delivery, billing, production, inventory management, and Human Resource

management. ERPs are often called back office systems, which indicate that the

customers and the general public are not directly involved, as opposed to frontline office

systems such as customer relationship management systems that deal directly with the

customer. While ERP systems have been implemented in large corporations globally,

application of the ERP systems is still not a natural option for most small and medium

enterprises (SMEs) in Southeast Asia.

In most developing economies in Southeast Asia, manufacturing has been pointed

to as a major pillar of economic growth. For example, 25% and 35% of Singapore's and

Malaysia's GDP, respectively, are attributed to manufacturing (Department of Statistics

Report, 2000). Moreover, there are over 100,000 and 500,000 SMEs in Singapore and

Malaysia, respectively. Despite the thriving numbers of SMES in Southeast Asia, ERP

system implementation in SMEs in the region is still fairly low, with less than 50%

1


Chapter 1

Introduction

1.1 Background

The Enterprise Resource Planning system (ERP) is simply the management

information system that incorporates and automates many of the business practices

related to the process and assembly features of a company. ERP systems are

characteristically comprised of manufacturing, logistics, distribution, inventory, shipping,

invoicing, and accounting. Many business activities can be aided by this system, such as

marketing, delivery, billing, production, inventory management, and Human Resource

management. ERPs are often called back office systems, which indicate that the

customers and the general public are not directly involved, as opposed to frontline office

systems such as customer relationship management systems that deal directly with the

customer. While ERP systems have been implemented in large corporations globally,

application of the ERP systems is still not a natural option for most small and medium

enterprises (SMEs) in Southeast Asia.

In most developing economies in Southeast Asia, manufacturing has been pointed

to as a major pillar of economic growth. For example, 25% and 35% of Singapore’s and

Malaysia’s GDP, respectively, are attributed to manufacturing (Department of Statistics

Report, 2000). Moreover, there are over 100,000 and 500,000 SMEs in Singapore and

Malaysia, respectively. Despite the thriving numbers of SMES in Southeast Asia, ERP

system implementation in SMEs in the region is still fairly low, with less than 50%

1


acceptance (Gartner Group, 2000). According to Huin (2004), this low acceptance can be

attributed to the inadequate project management methodologies of the existing ERP

systems.

An ERP system is regarded by most SMEs in Southeast Asia as an expensive

management system. The prohibitive price of the ERP systems actually prevents SMEs

from using such systems in their companies. Another major concern of these companies

is the difficulty involved in integrating and implementing the ERP systems in the

companies' operations, a process in which vagueness and uncertainties are commonly

involved. A new system with an affordable price and the ability to meet the special needs

of these companies is therefore needed.

1.2 Research issue

There are numerous research studies in the current literature dealing with the

subject of ERP systems. A large amount of literature in this field advocates the benefits

of these systems. Anecdotal success stories are frequently presented. What is interesting

is that there is a lack of empirical study of the application and implementation of ERP

systems for SMEs, particularly for smaller businesses in Southeast Asian countries.

Therefore, it is not clear whether or not these companies have achieved the management

level promised by the ERP system developers. The main problem facing researchers is

identifying the unique characteristic requirements of ERP systems for SMEs in Southeast

Asian countries, in terms of business processes, integrated information technologies, and

reengineering processes. Linked to this is the problem of how relevant variables and

factors can be identified in order to build a framework that integrates the strengths as well

as improves the weak areas of the ERP systems customized for the specific region.

2


acceptance (Gartner Group, 2000). According to Huin (2004), this low acceptance can be

attributed to the inadequate project management methodologies of the existing ERP

systems.

An ERP system is regarded by most SMEs in Southeast Asia as an expensive

management system. The prohibitive price of the ERP systems actually prevents SMEs

from using such systems in their companies. Another major concern of these companies

is the difficulty involved in integrating and implementing the ERP systems in the

companies’ operations, a process in which vagueness and uncertainties are commonly

involved. A new system with an affordable price and the ability to meet the special needs

of these companies is therefore needed.

1.2 Research issue

There are numerous research studies in the current literature dealing with the

subject of ERP systems. A large amount of literature in this field advocates the benefits

of these systems. Anecdotal success stories are frequently presented. What is interesting

is that there is a lack of empirical study of the application and implementation of ERP

systems for SMEs, particularly for smaller businesses in Southeast Asian countries.

Therefore, it is not clear whether or not these companies have achieved the management

level promised by the ERP system developers. The main problem facing researchers is

identifying the unique characteristic requirements of ERP systems for SMEs in Southeast

Asian countries, in terms of business processes, integrated information technologies, and

reengineering processes. Linked to this is the problem of how relevant variables and

factors can be identified in order to build a framework that integrates the strengths as well

as improves the weak areas of the ERP systems customized for the specific region.

2


1.3 Research objectives

In an increasingly competitive business environment, SMEs are compelled to find

business solutions in order to enhance their information systems. The need for Enterprise

Resource Planning stems from the fact that it is the backbone of an integrated information

system. Thus, in order to compete with large and multinational enterprises, SMEs require

resource planning systems such as the ERP systems. However, it has been proven in

research that most of the time, small and medium enterprises cannot afford the price of a

packaged ERP system (Zhang et al., 2004).

Furthermore, it has been noted that the complexity of using existing ERP systems

has caused some firms to fail to implement the program properly. Most of the packaged

ERP systems do not include their source code; therefore customization and development

of the software corresponding to the needs of each enterprise are complicated for SMEs

with relatively limited resources. Also with the "One size fits all" ERP package, some

features are more than what is required for SMEs that may have just a few employees,

and would be satisfied with only the fundamental business framework software. These

problems posit a challenging research area for scholars in ERP systems: working to

provide an architectural design for an ERP system that is affordable, simple, and

corresponds to the problems presented by SMEs, especially SMEs in Southeast Asia. One

of the problems with the existing ERP system is its standardized design. Because of this,

it lacks the particularities that could resolve the problems in SMEs in Southeast Asia that

are just developing or are underdeveloped. An ERP software package suitable for SMEs

in Southeast Asia still needs to be properly developed.

3


1.3 Research objectives

In an increasingly competitive business environment, SMEs are compelled to find

business solutions in order to enhance their information systems. The need for Enterprise

Resource Planning stems from the fact that it is the backbone of an integrated information

system. Thus, in order to compete with large and multinational enterprises, SMEs require

resource planning systems such as the ERP systems. However, it has been proven in

research that most of the time, small and medium enterprises cannot afford the price of a

packaged ERP system (Zhang et al., 2004).

Furthermore, it has been noted that the complexity of using existing ERP systems

has caused some firms to fail to implement the program properly. Most of the packaged

ERP systems do not include their source code; therefore customization and development

of the software corresponding to the needs of each enterprise are complicated for SMEs

with relatively limited resources. Also with the “One size fits all” ERP package, some

features are more than what is required for SMEs that may have just a few employees,

and would be satisfied with only the fundamental business framework software. These

problems posit a challenging research area for scholars in ERP systems: working to

provide an architectural design for an ERP system that is affordable, simple, and

corresponds to the problems presented by SMEs, especially SMEs in Southeast Asia. One

of the problems with the existing ERP system is its standardized design. Because of this,

it lacks the particularities that could resolve the problems in SMEs in Southeast Asia that

are just developing or are underdeveloped. An ERP software package suitable for SMEs

in Southeast Asia still needs to be properly developed.

3


The general objective of this thesis is to study the distinctive characteristics and

requirements of ERP systems in SMEs in Southeast Asian countries. The specific goals

of this research are as follows:

1. To identify the differences and similarities of the typical companies representing

SMEs in Southeast Asia, including different information system software

requirements, assessment, system evaluation and the selection of software among

companies in Southeast Asia.

2. To perform a comprehensive systematic survey and detailed summary of the

companies in the area; typical SMEs in Southeast Asia are identified and selected

for the research.

3. From the analysis of the data collected in the survey, the principle requirements

needed by SMEs are identified for further development of a new ERP system.

4. To establish a new ERP system called the Novel ERP System (NERP), based on

the analysis of the survey and questionnaires, and to develop a new software

package which shows high flexibility and adaptability to the companies' original

software, and reflects the use of the software in these companies.

5. To compare the new and old systems in terms of cost, flexibility and suitability.

A prototype system is implemented on "Java," which is an open source computer

programming language. Java, a product of Sun Microsystems, is a computer

programming tool that allows programmers to run applications called "applets," which

offer scripting capabilities and server-side connectivity for creating interactive elements

and Web applications.

4


The general objective of this thesis is to study the distinctive characteristics and

requirements of ERP systems in SMEs in Southeast Asian countries. The specific goals

of this research are as follows:

1. To identify the differences and similarities of the typical companies representing

SMEs in Southeast Asia, including different information system software

requirements, assessment, system evaluation and the selection of software among

companies in Southeast Asia.

2. To perform a comprehensive systematic survey and detailed summary of the

companies in the area; typical SMEs in Southeast Asia are identified and selected

for the research.

3. From the analysis of the data collected in the survey, the principle requirements

needed by SMEs are identified for further development of a new ERP system.

4. To establish a new ERP system called the Novel ERP System (NERP), based on

the analysis of the survey and questionnaires, and to develop a new software

package which shows high flexibility and adaptability to the companies’ original

software, and reflects the use of the software in these companies.

5. To compare the new and old systems in terms of cost, flexibility and suitability.

A prototype system is implemented on “Java,” which is an open source computer

programming language. Java, a product of Sun Microsystems, is a computer

programming tool that allows programmers to run applications called “applets,” which

offer scripting capabilities and server-side connectivity for creating interactive elements

and Web applications.


1.4 Scope and limitations

In the methodology chapter, the methods used to collect both quantitative and

qualitative data will be explained. This will provide an insight into the source of the data.

The evaluation, validity and reliability of the data will also be described.

The conceptual framework part of the thesis will focus on methods that can be

used for the development of an ERP system for SMEs in Southeast Asia. The research

will be focused on the five selected companies, which can be further divided into three

types of companies, namely companies that have engaged in any kind of Information

System software (ERP, MRP), companies that have many individual legacy types of

software in their management system, and companies that mostly rely on paper based

documentation and business processes. Finally, this research will also provide application

oriented information for researchers and engineers who need to further their knowledge

in the area of Operation Management and Information Technology development in

general. The research will provide a design of a customized ERP system for specific

companies, taking into account various sizes, capital investment, human resources, the

location and contextual environment.

1.5 Outline of the thesis

This thesis consists of the following chapters. Chapter 2 provides the research

background of ERP system implementation. The relevant criteria that can be used to

guide the development of ERP systems in Southeast Asian SMEs are also described.

Chapter 3 explains the data collection methodology, including data evaluation and

validity. Chapter 4 gives a brief overview of the fundamentals of a conceptual model, and

5


1.4 Scope and limitations

In the methodology chapter, the methods used to collect both quantitative and

qualitative data will be explained. This will provide an insight into the source of the data.

The evaluation, validity and reliability of the data will also be described.

The conceptual framework part of the thesis will focus on methods that can be

used for the development of an ERP system for SMEs in Southeast Asia. The research

will be focused on the five selected companies, which can be further divided into three

types of companies, namely companies that have engaged in any kind of Information

System software (ERP, MRP), companies that have many individual legacy types of

software in their management system, and companies that mostly rely on paper based

documentation and business processes. Finally, this research will also provide application

oriented information for researchers and engineers who need to further their knowledge

in the area of Operation Management and Information Technology development in

general. The research will provide a design of a customized ERP system for specific

companies, taking into account various sizes, capital investment, human resources, the

location and contextual environment.

1.5 Outline of the thesis

This thesis consists of the following chapters. Chapter 2 provides the research

background of ERP system implementation. The relevant criteria that can be used to

guide the development of ERP systems in Southeast Asian SMEs are also described.

Chapter 3 explains the data collection methodology, including data evaluation and

validity. Chapter 4 gives a brief overview of the fundamentals of a conceptual model, and

5


outlines the suitability of the ERP system components in order to support the decision of

ERP systems implementation in Southeast Asian SMEs. Chapter 5 contains the analysis

resulting from the implementation of the Novel ERP system developed for SMEs in

Southeast Asia as integrated information and manufacturing system. Chapter 6 provides

conclusions of the thesis and gives recommendations for further research work.

6


outlines the suitability of the ERP system components in order to support the decision of

ERP systems implementation in Southeast Asian SMEs. Chapter 5 contains the analysis

resulting from the implementation of the Novel ERP system developed for SMEs in

Southeast Asia as integrated information and manufacturing system. Chapter 6 provides

conclusions of the thesis and gives recommendations for further research work.

6


Chapter 2

Research Background

2.1 Definition of the Enterprise Resource Planning system (ERP)

The ERP system is an integrated software package composed of a set of standard

functional modules (production, sales, human resources, finance, etc.) developed or

integrated by the vendor, that can be adapted to the specific needs of each customer

(Esteves-Sousa & Pastor-Collado, 2000).

Aside from the ERP system, standardized software such as Integrated Vendor

Solutions, Integrated Standard Software and Enterprise Application Systems, which aim

to provide a solution that links and automates all aspects of business through the

incorporation of core processes and administrative functions into one central system. This

system is popular in large, medium and small enterprises (Klaus, et al., 2000).

Companies and enterprises invest enormous sums of money into this software (Li,

1999). Businesses around the world invested around US$300 billion into ERP software

alone in the 1990s (James & Wollf, 2000). However, reports showed the companies to be

disappointed in the ERP systems. Companies such as FoxMeyer, Unisource worldwide,

Dell computers, Hershey Food Cooperation, Whirlpool and Gore-text cast serious doubts

on the credibility of ERP systems because of massive financial losses and lost business

opportunities (Calogero, 2000). According to AMR Research, the total revenue of the

ERP software and services market in 1999 was US$18.3 billion (Gilbert, 2000). ERP

systems implementation costs are often reported to be five to ten times the cost of

software licenses (Davenport, 2000).

7


Chapter 2

Research Background

2.1 Definition of the Enterprise Resource Planning system (ERP)

The ERP system is an integrated software package composed of a set of standard

functional modules (production, sales, human resources, finance, etc.) developed or

integrated by the vendor, that can be adapted to the specific needs of each customer

(Esteves-Sousa & Pastor-Collado, 2000).

Aside from the ERP system, standardized software such as Integrated Vendor

Solutions, Integrated Standard Software and Enterprise Application Systems, which aim

to provide a solution that links and automates all aspects of business through the

incorporation of core processes and administrative functions into one central system. This

system is popular in large, medium and small enterprises (Klaus, et al., 2000).

Companies and enterprises invest enormous sums of money into this software (Li,

1999). Businesses around the world invested around US$300 billion into ERP software

alone in the 1990s (James & Wollf, 2000). However, reports showed the companies to be

disappointed in the ERP systems. Companies such as FoxMeyer, Unisource worldwide,

Dell computers, Hershey Food Cooperation, Whirlpool and Gore-text cast serious doubts

on the credibility of ERP systems because of massive financial losses and lost business

opportunities (Calogero, 2000). According to AMR Research, the total revenue of the

ERP software and services market in 1999 was US$18.3 billion (Gilbert, 2000). ERP

systems implementation costs are often reported to be five to ten times the cost of

software licenses (Davenport, 2000).

7


Turban, et al. (1999) criticized one of the faults of earlier software applications in

their focus on one area or dimension of the organization (i.e. horizontal or vertical

functions only). This, according to the author, led to disintegration, due mainly to the lack

of coordinating information systems. Accordingly, a good decision can only be made if

there is an integration of the information system.

The need for the development of new ERP software is exemplified in the White

Paper of Exact Software (2004), which articulated that ERP systems currently run only

15-20% of the organization, and have never provided a solution for the entire enterprise

process. According to White Paper of Exact Software (2004), this failure is attributed to

the lack of philosophy behind ERP. It is seen as a technology that just addresses business

problems instead of being a process in which Business Process Management (BPM) is

necessary. It is thus postulated by Exact Software (2004) that technological solutions

should not occur simply by using the ERP systems, but rather an organizational shift

must also accompany the institution of ERP systems.

2.2 The evolution of ERP Systems

Most manufacturing systems in the 1960s were focused on inventory control.

Several software packages were designed at this time to handle inventory based on

traditional inventory concepts. In the 1970s inventory control was replaced by Material

Requirement Planning (MRP) systems, which translated the Master Schedule. MRP was

built for the end items into time-phased net requirements for sub-assemblies, components

and raw materials planning and procurement. In the following decade, MRP was

extended to shop floor and distribution management activities (MRP-II). In the early

8


Turban, et al. (1999) criticized one of the faults of earlier software applications in

their focus on one area or dimension of the organization (i.e. horizontal or vertical

functions only). This, according to the author, led to disintegration, due mainly to the lack

of coordinating information systems. Accordingly, a good decision can only be made if

there is an integration of the information system.

The need for the development of new ERP software is exemplified in the White

Paper of Exact Software (2004), which articulated that ERP systems currently run only

15-20% of the organization, and have never provided a solution for the entire enterprise

process. According to White Paper of Exact Software (2004), this failure is attributed to

the lack of philosophy behind ERP. It is seen as a technology that just addresses business

problems instead of being a process in which Business Process Management (BPM) is

necessary. It is thus postulated by Exact Software (2004) that technological solutions

should not occur simply by using the ERP systems, but rather an organizational shift

must also accompany the institution of ERP systems.

2.2 The evolution of ERP Systems

Most manufacturing systems in the 1960s were focused on inventory control.

Several software packages were designed at this time to handle inventory based on

traditional inventory concepts. In the 1970s inventory control was replaced by Material

Requirement Planning (MRP) systems, which translated the Master Schedule. MRP was

built for the end items into time-phased net requirements for sub-assemblies, components

and raw materials planning and procurement. In the following decade, MRP was

extended to shop floor and distribution management activities (MRP-II). In the early

8


1990s, Manufacturing Resource Planning (MRP-II) was further extended to cover areas

such as engineering, finance, purchasing, sales, human resources, and distribution. It was

during this time that enterprise resource planning (ERP) was first used.

A new generation of ERP systems is evolving to provide additional integration,

particularly with customers. These systems, identified as ERP II, integrate traditional

ERP with a Customer Relationship Management (CRM) system in order to better

integrate the requirements of key customers with the firm's supply chain plans (Bowers

ox at el, 2003).

2.3 Advantages, disadvantages, and the implementation of an ERP system

ERP systems aim to integrate all corporate information into one central database,

allowing information to be retrieved from many different organizational positions. In

principle, ERP systems allow any organizational object to be made visible. The major

question is: integration is surely at stake here. Is it possible to integrate the firm's

activities using information systems? Existing literatures on ERP systems have attempted

to address this question.

2.3.1 Advantages of an ERP System

The advantages of ERP systems have been well noted in the literature. Bancroft,

Seip, and Sprengel (1998) and Markus and Tanis (2000) share three advantages of ERP

systems: the ability to better meet various competitive goals, the desire to reengineer

business processes, and the ability to access integrated data. Following the completion of

these changes, researchers expected changes and improvements in terms of increased

9


1990s, Manufacturing Resource Planning (MRP-II) was further extended to cover areas

such as engineering, finance, purchasing, sales, human resources, and distribution. It was

during this time that enterprise resource planning (ERP) was first used.

A new generation of ERP systems is evolving to provide additional integration,

particularly with customers. These systems, identified as ERP II, integrate traditional

ERP with a Customer Relationship Management (CRM) system in order to better

integrate the requirements of key customers with the firm’s supply chain plans (Bowers

ox at el, 2003).

2.3 Advantages, disadvantages, and the implementation of an ERP system

ERP systems aim to integrate all corporate information into one central database,

allowing information to be retrieved from many different organizational positions. In

principle, ERP systems allow any organizational object to be made visible. The major

question is: integration is surely at stake here. Is it possible to integrate the firm’s

activities using information systems? Existing literatures on ERP systems have attempted

to address this question.

2.3.1 Advantages of an ERP System

The advantages of ERP systems have been well noted in the literature. Bancroft,

Seip, and Sprengel (1998) and Markus and Tanis (2000) share three advantages of ERP

systems: the ability to better meet various competitive goals, the desire to reengineer

business processes, and the ability to access integrated data. Following the completion of

these changes, researchers expected changes and improvements in terms of increased

9


business flexibility (Bancroft et al., 1998), the ability to make faster responses to business

changes (Bancroft et al., 1998), reduced cycle times and consolidated ordering, improved

marketplace agility, and workforce empowerment (Markus & Tanis, 2000).

In an article emphasizing some advantages and disadvantages of ERP, Yi (2002)

notes that ERP can streamline and modernize business processes, provide accurate real-

time information on how a government is performing from a number of perspectives,

improve services to citizens, and improve internal operations. Companies also use ERP

software to facilitate the exchange of information throughout an organization (Pitturo,

1999). In addition, Yi (2002) notes that an ERP system is beneficial because it links

stand-alone systems into an integrated whole; they also link traditionally stand-alone

departments.

One of the major strengths of the ERP software is its wide availability in the

market. Indeed, many leading firms have adopted SAP or other ERP software

implementations. For many firms, these software packages have allowed them to do

many things that were impossible with earlier, non-integrated software. On-Line

Analytical Processing (OLAP) software (Callaway, 1997) has also enabled managers to

compile and analyze their planned and actual results in a variety of ways.

Asbaugh and Miranda (2002) reported that the major difference between ERP

systems and their predecessors is the ERP system's linkage of financial and human

resource applications through a single database in a software application that is both rigid

and flexible. The authors explained that the rigidity comes from the need to standardize

processes and deter customers from modifying the underlying software source code (i.e.,

10


business flexibility (Bancroft et al., 1998), the ability to make faster responses to business

changes (Bancroft et al., 1998), reduced cycle times and consolidated ordering, improved

marketplace agility, and workforce empowerment (Markus & Tanis, 2000).

In an article emphasizing some advantages and disadvantages of ERP, Yi (2002)

notes that ERP can streamline and modernize business processes, provide accurate real

time information on how a government is performing from a number of perspectives,

improve services to citizens, and improve internal operations. Companies also use ERP

software to facilitate the exchange of information throughout an organization (Pitturo,

1999). In addition, Yi (2002) notes that an ERP system is beneficial because it links

stand-alone systems into an integrated whole; they also link traditionally stand-alone

departments.

One of the major strengths of the ERP software is its wide availability in the

market. Indeed, many leading firms have adopted SAP or other ERP software

implementations. For many firms, these software packages have allowed them to do

many things that were impossible with earlier, non-integrated software. On-Line

Analytical Processing (OLAP) software (Callaway, 1997) has also enabled managers to

compile and analyze their planned and actual results in a variety of ways.

Asbaugh and Miranda (2002) reported that the major difference between ERP

systems and their predecessors is the ERP system’s linkage of financial and human

resource applications through a single database in a software application that is both rigid

and flexible. The authors explained that the rigidity comes from the need to standardize

processes and deter customers from modifying the underlying software source code (i.e.,

10


customization), whereas flexibility relates to a customer's ability to "configure" the

software to collect specific data and achieve other business goals.

The primary function of the ERP system is that of integrating information from

diverse applications into a common database (Miranda, 1999). This wide-ranging scope

of the ERP system solved the dilemma of companies who could not afford to develop

their own software solutions for their particular problems. Due to its current popularity in

business circles, Gupta (2000) asserts that ERP is a trend for large and medium

enterprises. However, the author warns that while the short-term effects of the ERP

system can be beneficial, misuse of the software could contribute to the erosion of a

business.

2.3.2 Disadvantages of an ERP System

Despite its advantages, ERP implementation carries with it some risks. Pitturo

(1999) and Yi (2002) both suggest that instituting an ERP system in a company's system

is not as simple as putting software in the heart of the company's operations. Updating

the obsolete system and human resource department, providing an IT team that can

competently handle the ERP system and putting in trustworthy people to manage the

operations are critical for the company.

The failure of ERP systems to meet the expectations of companies and users has

been attributed by researchers to: the inability of the companies and enterprises to

implement the software well (Pitturo, 1999; Yi, 2002); the system's ability to carry out

only 15-20% of an enterprise's operation (White Paper of Exact Software, 2004);

intangible results of the investment (James and Wolf, 2000); a lack of analytic features

11


customization), whereas flexibility relates to a customer’s ability to "configure" the

software to collect specific data and achieve other business goals.

The primary function of the ERP system is that of integrating information from

diverse applications into a common database (Miranda, 1999). This wide-ranging scope

of the ERP system solved the dilemma of companies who could not afford to develop

their own software solutions for their particular problems. Due to its current popularity in

business circles, Gupta (2000) asserts that ERP is a trend for large and medium

enterprises. However, the author warns that while the short-term effects of the ERP

system can be beneficial, misuse of the software could contribute to the erosion of a

business.

2.3.2 Disadvantages of an ERP System

Despite its advantages, ERP implementation carries with it some risks. Pitturo

(1999) and Yi (2002) both suggest that instituting an ERP system in a company’s system

is not as simple as putting software in the heart of the company’s operations. Updating

the obsolete system and human resource department, providing an IT team that can

competently handle the ERP system and putting in trustworthy people to manage the

operations are critical for the company.

The failure of ERP systems to meet the expectations of companies and users has

been attributed by researchers to: the inability of the companies and enterprises to

implement the software well (Pitturo, 1999; Yi, 2002); the system’s ability to carry out

only 15-20% of an enterprise’s operation (White Paper of Exact Software, 2004);

intangible results of the investment (James and Wolf, 2000); a lack of analytic features

11


(Castro, 2000); a failure of technology to meet specifications (Barki et al., 1993);

application complexity (Barki et al., 1993); customization and integration complications

(Marinos et al., 2001); user-unfriendly applications (Markus & Tanis, 2000); the

misunderstanding of user requirements (Keil et al., 1998); and the inability to cope with

the changing business environment (White, 2002). The highest probability of successful

implementation of ERP software occurs when there is only a minimal need to change the

business processes and ERP software (O'Leary, 2000).

Moreover, Yi (2002) states that the current success rate of ERP system

implementation is less than 50 percent. This is due to the high cost of the implementation.

In addition to security and cost problems, another issue which confronts the effective

implementation of the ERP system stems from the fact that it determines how the entire

business should be managed (James & Wolf, 2000). This is usually the reason behind the

failure of many program operators to implement ERP, in that they attempt to modify the

software to suit ill-fitting business processes. Many revert from fully embracing the

benefits that ERP offers merely because of the inability of the software to support one of

their many crucial business processes (Piturro, 1999).

2.3.3 The Implementation of an ERP system

While the stream of research in ERP systems did increase, most of the focus of

these studies was on the implementation process and the implementation guidelines of

ERP (Kirchmer, 1999; Scott, 1999; Sumner, 1999). Overall, there are three strands of

literature on ERP systems implementation. The first strand of literature says that firms

implementing ERP systems must go through a learning curve and then benefit from their

12


(Castro, 2000); a failure of technology to meet specifications (Barki et al., 1993);

application complexity (Barki et al., 1993); customization and integration complications

(Marinos et al., 2001); user-unfriendly applications (Markus & Tanis, 2000); the

misunderstanding of user requirements (Keil et al., 1998); and the inability to cope with

the changing business environment (White, 2002). The highest probability of successful

implementation of ERP software occurs when there is only a minimal need to change the

business processes and ERP software (O’Leary, 2000).

Moreover, Yi (2002) states that the current success rate of ERP system

implementation is less than 50 percent. This is due to the high cost of the implementation.

In addition to security and cost problems, another issue which confronts the effective

implementation of the ERP system stems from the fact that it determines how the entire

business should be managed (James & Wolf, 2000). This is usually the reason behind the

failure of many program operators to implement ERP, in that they attempt to modify the

software to suit ill-fitting business processes. Many revert from fully embracing the

benefits that ERP offers merely because of the inability of the software to support one of

their many crucial business processes (Piturro, 1999).

2.3.3 The Implementation of an ERP system

While the stream of research in ERP systems did increase, most of the focus of

these studies was on the implementation process and the implementation guidelines of

ERP (Kirchmer, 1999; Scott, 1999; Sumner, 1999). Overall, there are three strands of

literature on ERP systems implementation. The first strand of literature says that firms

implementing ERP systems must go through a learning curve and then benefit from their

12


investment (e.g. Ross & Vitale, 2000). This strand of literature builds on the 'stage-

maturity model' (Nolan, 1979; Hirschheim et al., 1988), which in spite of its criticisms

(e.g. Benbassat et al., 1984; Holland and Light, 2001; King and Kraemer, 1984)

continues to have a lot of appeal, and is often used as a basis for consultants' advice on

ERP systems implementation (Deloitte Consulting, 1998; KPMG Consulting, 1997; PA

Consulting Group, 1999).

A second strand of literature on ERP systems is concerned with performance and

whether or not ERP systems work. Cautious tales suggesting that ERP systems will have

positive financial and productivity effects only if installed correctly (e.g. Davenport,

1995; Davenport, 1998; Davenport, 2000; Koch, 1997) often dominate this strand of

literature. Some find that ERP systems may drive general financial effects, divisional

performance, and even capital market reactions (e.g. Hayes et al., 2001; Hunton et al.,

2002; O'Leary, 2002). Others, however, remain sceptical (e.g. Poston & Grabski, 2001).

There are those who argue that the new ERP system technology illustrates the

potential to become complete calculation machines governing all activities and affairs of

the firm. Cooper and Kaplan (1998), for example, envision profound effects on

management control. Such effects, however, have as of yet been difficult to sustain with

the available empirical evidence. Surveys (Booth et al., 2000; Granlund and Malmi,

2002; Spathis & Constatinides, 2002) suggest that the impact of ERP systems remains

`very moderate,' partly because the systems are not typically designed with change in

mind. They replicate the structure of the existing systems. Others therefore suggest that

ERP systems are enormously powerful juggernauts that may not only become difficult to

control, but that also may eventually strike back (Ciborra, 2000; Hanseth et al., 2001).

13


investment (e.g. Ross & Vitale, 2000). This strand of literature builds on the ‘stage-

maturity model’ (Nolan, 1979; Hirschheim et al., 1988), which in spite of its criticisms

(e.g. Benbassat et al., 1984; Holland and Light, 2001; King and Kraemer, 1984)

continues to have a lot of appeal, and is often used as a basis for consultants’ advice on

ERP systems implementation (Deloitte Consulting, 1998; KPMG Consulting, 1997; PA

Consulting Group, 1999).

A second strand of literature on ERP systems is concerned with performance and

whether or not ERP systems work. Cautious tales suggesting that ERP systems will have

positive financial and productivity effects only if installed correctly (e.g. Davenport,

1995; Davenport, 1998; Davenport, 2000; Koch, 1997) often dominate this strand of

literature. Some find that ERP systems may drive general financial effects, divisional

performance, and even capital market reactions (e.g. Hayes et al., 2001; Hunton et al.,

2002; O’Leary, 2002). Others, however, remain sceptical (e.g. Poston & Grabski, 2001).

There are those who argue that the new ERP system technology illustrates the

potential to become complete calculation machines governing all activities and affairs of

the firm. Cooper and Kaplan (1998), for example, envision profound effects on

management control. Such effects, however, have as of yet been difficult to sustain with

the available empirical evidence. Surveys (Booth et al., 2000; Granlund and Malmi,

2002; Spathis & Constatinides, 2002) suggest that the impact of ERP systems remains

‘very moderate,’ partly because the systems are not typically designed with change in

mind. They replicate the structure of the existing systems. Others therefore suggest that

ERP systems are enormously powerful juggernauts that may not only become difficult to

control, but that also may eventually strike back (Ciborra, 2000; Hanseth et al., 2001).

13


The possibly disruptive effects of integrated information, which could cause

disintegration, frighten this set of authors.

In contrast, a third strand of literature is now emerging that is concerned with how

ERP technologies are made to work as 'systems'. Here the system is seen in the context

of numerous organizational concerns and conditions that play themselves out in complex

ways. Quattrone and Hopper (2001), for example, argue that the ERP system never

stabilizes and that change is constant. Caglio (2003) and Scapens and Jazayeri (2003)

relate the impact of the ERP system to the transformation of the roles of management

accountants, while Lodh and Gaffikin (2003) and Newell, Huang, Galliers, and Pan

(2003) follow the implementation of ERP through social and technical networks.

Unlike the first two strands of literature, authors in the third strand identify

noteworthy and sometimes huge effects of ERP systems both in the process of design and

in the process of use. They also begin to explain why the surveys are limited and thus

unable to capture the ERP systems' effects. To understand the impact of ERP systems

requires a heightened attention to controlling the practices across the firm. This strand of

literature suggests that clerical accounting work is shifted out of the accounting function

(Caglio, 2003; Quattrone and Hopper, 2001; Scapens and Jazayeri, 2003). The members

of the organization are said to become 'hybrid-accountants' (Burns & Baldvinsdottir,

1999), and they take on control-work that provides availability and accuracy, and shares

the ability of data (Koch, 1997). The accounting function is possibly unnecessary for

information production.

While an ERP system can prove a large advantage to an enterprise, strong

leadership, a clear implementation plan, a constant watch on the budget, and an explicit

14


The possibly disruptive effects of integrated information, which could cause

disintegration, frighten this set of authors.

In contrast, a third strand of literature is now emerging that is concerned with how

ERP technologies are made to work as ‘systems’. Here the system is seen in the context

of numerous organizational concerns and conditions that play themselves out in complex

ways. Quattrone and Hopper (2001), for example, argue that the ERP system never

stabilizes and that change is constant. Caglio (2003) and Scapens and Jazayeri (2003)

relate the impact of the ERP system to the transformation of the roles of management

accountants, while Lodh and Gaffikin (2003) and Newell, Huang, Galliers, and Pan

(2003) follow the implementation of ERP through social and technical networks.

Unlike the first two strands of literature, authors in the third strand identify

noteworthy and sometimes huge effects of ERP systems both in the process of design and

in the process of use. They also begin to explain why the surveys are limited and thus

unable to capture the ERP systems’ effects. To understand the impact of ERP systems

requires a heightened attention to controlling the practices across the firm. This strand of

literature suggests that clerical accounting work is shifted out of the accounting function

(Caglio, 2003; Quattrone and Hopper, 2001; Scapens and Jazayeri, 2003). The members

of the organization are said to become ‘hybrid-accountants’ (Bums & Baldvinsdottir,

1999), and they take on control-work that provides availability and accuracy, and shares

the ability of data (Koch, 1997). The accounting function is possibly unnecessary for

information production.

While an ERP system can prove a large advantage to an enterprise, strong

leadership, a clear implementation plan, a constant watch on the budget, and an explicit

14


stake in the project for business units are needed (Wagle, 1998). Ensuring from the outset

that a company has a strong business case and recognizes the most common pitfalls will

go a long way toward reducing these risks (Dempsey, et. al., 1998).

2.4 Criteria of ERP framework development

In order to promptly develop an ERP system framework suitable for SMEs in

Southeast Asian countries, a decision framework should be considered. Learning to

follow this framework provides assistance to organizations, in identifying common

challenges encountered by project teams when developing enterprise information

systems. By choosing the right team and partners, and by choosing the right system and

data design, companies can substantially increase the performance of their enterprise

system. The provisions that are the main criteria of ERP systems framework development

are as follows;

2.4.1 Integration of the System

All business procedures in an enterprise must be viewed from the market

perspective and optimized throughout all functional areas. To meet the challenges facing

large enterprises in today's constantly changing market, SMEs need an effective system

for all lines of business. Seldom do SMEs have the opportunity to implement a corporate-

wide integration strategy, particularly one that relates competitive systems to corporate

systems. SMEs typically make uniform decisions within a functional area, such as

corporate financial systems, and migrate to a standard solution for all functional areas,

provided that the benefits of dealing with one vendor or one solution outweigh any loss in

15


stake in the project for business units are needed (Wagle, 1998). Ensuring from the outset

that a company has a strong business case and recognizes the most common pitfalls will

go a long way toward reducing these risks (Dempsey, et. al., 1998).

2.4 Criteria of ERP framework development

In order to promptly develop an ERP system framework suitable for SMEs in

Southeast Asian countries, a decision framework should be considered. Learning to

follow this framework provides assistance to organizations, in identifying common

challenges encountered by project teams when developing enterprise information

systems. By choosing the right team and partners, and by choosing the right system and

data design, companies can substantially increase the performance of their enterprise

system. The provisions that are the main criteria of ERP systems framework development

are as follows;

2.4.1 Integration of the System

All business procedures in an enterprise must be viewed from the market

perspective and optimized throughout all functional areas. To meet the challenges facing

large enterprises in today's constantly changing market, SMEs need an effective system

for all lines of business. Seldom do SMEs have the opportunity to implement a corporate-

wide integration strategy, particularly one that relates competitive systems to corporate

systems. SMEs typically make uniform decisions within a functional area, such as

corporate financial systems, and migrate to a standard solution for all functional areas,

provided that the benefits of dealing with one vendor or one solution outweigh any loss in

15


functionality. SMEs are looking for complete and integrated solutions from one type of

software. In addition, SMEs have identified the fact that linking business (e.g., financial)

systems with an overall organizational system simplifies and accelerates tasks, improves

the flow of information, and facilitates scheduling and planning decisions based on

consistent data (Khurana, 2000).

2.4.2 Data Integration

Many SMEs recognize the importance of developing an effective enterprise data

strategy with their enterprise information system strategy. SMEs are interested in systems

that offer more sophisticated capabilities with a tighter integration of key business areas,

for example, supply-chain and sales-force automation. ERP system developers recognize

this, and now are adding data warehousing capabilities to their software tools. ERP

system developers are striving to achieve even tighter integration with data mining and

data warehousing. Enterprises are looking for new technological solutions to provide

them with the ability to stay ahead of their competitors. Vendors have begun offering free

extraction and data analysis tools to companies purchasing data warehouses (Kumar,

2000).

2.5 ERP System development and implementation decision framework

An enterprise wide strategy provides an organization with a more process-

oriented, streamlined information system. Consequently, this allows an enterprise to

expand its internal information processing and communication capabilities.

16


functionality. SMEs are looking for complete and integrated solutions from one type of

software. In addition, SMEs have identified the fact that linking business (e.g., financial)

systems with an overall organizational system simplifies and accelerates tasks, improves

the flow of information, and facilitates scheduling and planning decisions based on

consistent data (Khurana, 2000).

2.4.2 Data Integration

Many SMEs recognize the importance of developing an effective enterprise data

strategy with their enterprise information system strategy. SMEs are interested in systems

that offer more sophisticated capabilities with a tighter integration of key business areas,

for example, supply-chain and sales-force automation. ERP system developers recognize

this, and now are adding data warehousing capabilities to their software tools. ERP

system developers are striving to achieve even tighter integration with data mining and

data warehousing. Enterprises are looking for new technological solutions to provide

them with the ability to stay ahead of their competitors. Vendors have begun offering free

extraction and data analysis tools to companies purchasing data warehouses (Kumar,

2000).

2.5 ERP System development and implementation decision framework

An enterprise wide strategy provides an organization with a more process-

oriented, streamlined information system. Consequently, this allows an enterprise to

expand its internal information processing and communication capabilities.

16


2.5.1 Replacement of the existing system

There are a number of key considerations facing SMEs when deciding whether or

not to replace their current systems. Consider cost savings; a typical driving factor behind

the selection of an enterprise wide solution is the cost savings associated with the

reduction of redundant manual tasks. Enterprises that utilize integrated or best-of-breed

solutions reduce manual tasks significantly, and also reduce the cost of operation and

maintenance (Lee, 2000).

There are a number of other factors that SMEs consider when selecting an

enterprise solution. These include resource allocation, resource requirements, application

development costs, and the payback period. Enterprises have a significant reduction in

resources when making the transition into the new systems environment. SMEs that

decide to implement a new system require support from cross-functional areas. The

number of people required to implement a new application varies widely, depending on

the organization's needs. The number of full-time equivalents (FTEs) who participate in a

migration to the new application can range from as few as six people on a local site to

over one hundred on a worldwide scale.

2.5.2 Will the ERP System support the reengineering effort?

It is not technology that drives the decision to implement an enterprise-integrated

approach. Rather, it is the change of the ways in which many SMEs were conducting the

way they did business. In other words, change is important to supporting the reengineered

business. Reengineering and enterprise application implementation should occur

simultaneously for the organization to maximize the value of the implementation. Many

17


2.5.1 Replacement of the existing system

There are a number of key considerations facing SMEs when deciding whether or

not to replace their current systems. Consider cost savings; a typical driving factor behind

the selection of an enterprise wide solution is the cost savings associated with the

reduction of redundant manual tasks. Enterprises that utilize integrated or best-of-breed

solutions reduce manual tasks significantly, and also reduce the cost of operation and

maintenance (Lee, 2000).

There are a number of other factors that SMEs consider when selecting an

enterprise solution. These include resource allocation, resource requirements, application

development costs, and the payback period. Enterprises have a significant reduction in

resources when making the transition into the new systems environment. SMEs that

decide to implement a new system require support from cross-functional areas. The

number of people required to implement a new application varies widely, depending on

the organization's needs. The number of full-time equivalents (FTEs) who participate in a

migration to the new application can range from as few as six people on a local site to

over one hundred on a worldwide scale.

2.5.2 Will the ERP System support the reengineering effort?

It is not technology that drives the decision to implement an enterprise-integrated

approach. Rather, it is the change of the ways in which many SMEs were conducting the

way they did business. In other words, change is important to supporting the reengineered

business. Reengineering and enterprise application implementation should occur

simultaneously for the organization to maximize the value of the implementation. Many

17


SMEs are focused on technology-enabled reengineering. In these types of projects,

reengineering processes are constantly identifying how enterprise application packages

add value and the ability of these packages to be implemented. In most situations, the

business case replacing individual lines of business (LOB) systems is a component of an

overall business case to reengineer the organization. Most small firms transform their

existing stove-pipe systems to process-centric organizations (Khurana, 2000).

Other factors that are equally important in the decision to migrate to a new

environment include the elimination of redundant tasks, reduction of duplicate

information and reconciliation tasks, an overall new technology strategy, and the removal

of departmental functions. To identify the need for information access, another key

consideration for many enterprises is deciding whether or not to replace their current

systems. This is a difficulty for them in accessing their operational data. Many enterprises

never capitalize on the wealth of data amidst the maze of multiple legacy systems due to

poor data integrity and quality. Many SMEs replace their existing legacy systems because

they do not provide easy access to information. Enterprises are moving away from

isolated systems toward systems that can share data across different business units and

geographic regions (Huff, 1999).

2.5.3 Utilizing the benefits of technology

In the past, SMEs prolonged their existing systems until more mature client/server

products were available. Only during the past few years has there been any significant

consideration by enterprises of utilizing client/server technology on a large scale. An

increased focus of enterprises during the last few years on purchasing off-the-shelf

18


SMEs are focused on technology-enabled reengineering. In these types of projects,

reengineering processes are constantly identifying how enterprise application packages

add value and the ability of these packages to be implemented. In most situations, the

business case replacing individual lines of business (LOB) systems is a component of an

overall business case to reengineer the organization. Most small firms transform their

existing stove-pipe systems to process-centric organizations (Khurana, 2000).

Other factors that are equally important in the decision to migrate to a new

environment include the elimination of redundant tasks, reduction of duplicate

information and reconciliation tasks, an overall new technology strategy, and the removal

of departmental functions. To identify the need for information access, another key

consideration for many enterprises is deciding whether or not to replace their current

systems. This is a difficulty for them in accessing their operational data. Many enterprises

never capitalize on the wealth of data amidst the maze of multiple legacy systems due to

poor data integrity and quality. Many SMEs replace their existing legacy systems because

they do not provide easy access to information. Enterprises are moving away from

isolated systems toward systems that can share data across different business units and

geographic regions (Huff, 1999).

2.5.3 Utilizing the benefits of technology

In the past, SMEs prolonged their existing systems until more mature client/server

products were available. Only during the past few years has there been any significant

consideration by enterprises of utilizing client/server technology on a large scale. An

increased focus of enterprises during the last few years on purchasing off-the-shelf

18


client/server packages or developing in-house software is a factor in the selection of an

enterprise-wide solution.

Many of these SMEs in Southeast Asia are interested in taking advantage of the

benefits of their client/server architecture. Some of these enterprises are looking to

change the way they do business in order to reap the benefits of client/server applications.

An important factor in making the transition to an integrated package is to exploit the

client/server capabilities. The graphical user interfaces and distributed computing

resources offer benefits and functional capabilities that are not available in the existing

legacy systems (i.e., having the same look and feel across the organization). Another

reason to make the transition to an integrated package is the potential for tight integration

between the vendor's packaged solution and its data warehouse capabilities. Some

enterprises indicated that they would prefer to have a wait-and-see attitude toward

standardizing one vendor's solution (Huff, 1999).

2.5.4 Enterprise database integration

Ideally, SMEs are striving to achieve a single enterprise database management

system (DBMS) standard. Realistically, most SMEs are supporting multiple legacy and

new databases, due to business requirements. Consequently, SMEs are striving to

simplify their DBMS environment by reducing the number of products they support,

rather than trying to set a single enterprise DBMS standard.

Before selecting data integration technologies, an organization should map out its

current and future data environment/topology. This will provide the SMEs with the

location of key corporate data and user performance requirements for each DBMS. As a

19


client/server packages or developing in-house software is a factor in the selection of an

enterprise-wide solution.

Many of these SMEs in Southeast Asia are interested in taking advantage of the

benefits of their client/server architecture. Some of these enterprises are looking to

change the way they do business in order to reap the benefits of client/server applications.

An important factor in making the transition to an integrated package is to exploit the

client/server capabilities. The graphical user interfaces and distributed computing

resources offer benefits and functional capabilities that are not available in the existing

legacy systems (i.e., having the same look and feel across the organization). Another

reason to make the transition to an integrated package is the potential for tight integration

between the vendor's packaged solution and its data warehouse capabilities. Some

enterprises indicated that they would prefer to have a wait-and-see attitude toward

standardizing one vendor's solution (Huff, 1999).

2.5.4 Enterprise database integration

Ideally, SMEs are striving to achieve a single enterprise database management

system (DBMS) standard. Realistically, most SMEs are supporting multiple legacy and

new databases, due to business requirements. Consequently, SMEs are striving to

simplify their DBMS environment by reducing the number of products they support,

rather than trying to set a single enterprise DBMS standard.

Before selecting data integration technologies, an organization should map out its

current and future data environment/topology. This will provide the SMEs with the

location of key corporate data and user performance requirements for each DBMS. As a

19


result of documenting the enterprise data landscape, a sound data integration architecture

and data strategy can be completed. Data Conversion Strategy Enterprises develop data

conversion strategies in order to understand some of the challenges and differences in

technology between legacy systems and integrated enterprise systems when converting

data. Many enterprises have old legacy systems based on a database design and system

design that have characteristics including the following: the system operations are

primarily hard coded; data integrity is difficult to maintain; data redundancy is high; and

data integration is low. Also, legacy data usually does not come from just one system. It

can come from many sources that are not all under one business area's control.

Conversion to the new enterprise application is a very complex activity that requires

significant time and resources (Hayes, 2001).

There are many options for data migration (Reck, 2000). Choosing which option

is best depends on how much effort an enterprise is willing to put into data migration, as

well as what type of programming expertise is available in-house. Possible solutions for

transferring legacy data over to the new system include manual loading of the data into

the new system, writing programs/codes to extract and load the data, utilizing target

system vendors' integration solutions for specific application areas (CAD, MRP, data

management), and using computer-aided software engineering (CASE) tools that will

handle one or more data sources when mapping from legacy systems to new systems

(Reck, 2000).

20


result of documenting the enterprise data landscape, a sound data integration architecture

and data strategy can be completed. Data Conversion Strategy Enterprises develop data

conversion strategies in order to understand some of the challenges and differences in

technology between legacy systems and integrated enterprise systems when converting

data. Many enterprises have old legacy systems based on a database design and system

design that have characteristics including the following: the system operations are

primarily hard coded; data integrity is difficult to maintain; data redundancy is high; and

data integration is low. Also, legacy data usually does not come from just one system. It

can come from many sources that are not all under one business area's control.

Conversion to the new enterprise application is a very complex activity that requires

significant time and resources (Hayes, 2001).

There are many options for data migration (Reck, 2000). Choosing which option

is best depends on how much effort an enterprise is willing to put into data migration, as

well as what type of programming expertise is available in-house. Possible solutions for

transferring legacy data over to the new system include manual loading of the data into

the new system, writing programs/codes to extract and load the data, utilizing target

system vendors' integration solutions for specific application areas (CAD, MRP, data

management), and using computer-aided software engineering (CASE) tools that will

handle one or more data sources when mapping from legacy systems to new systems

(Reck, 2000).

20


2.6 Enterprise Resource Planning architectural design

The capability of ERP systems is largely dependent on the information

technology, as well as the architectural design and options that are available in the

implementation process. This is because the architectural design for every company may

differ, depending on the industry and the size of the company. Several ERP system

architectural designs have been proposed for use. For instance, Sprott (2000) and Mustafa

and Mejabi (1999) proposed the combination of the best module class from different

vendors, such as the combination of the BAAN production module and the SAP R/3

finance module. On the other hand, Fellner and Turowski (1999) suggested the use of

extensible mark-up language (XML) an architectural design with interface definition

languages that have more powerful technologies to build application systems.

From the controversies plaguing the credibility of the ERP system as a tool in

improving enterprises, there is a need for ERP system developers to prove that the

contention that ERP systems are ineffective is incorrect. This can only be done by

improving the features of the ERP systems and providing other avenues for improvement.

This study contends that ERP system solutions for small and large enterprises should be

separated. Instead of the "one size fits all" approach, the researcher suggests that ERP

systems should start customizing their features to fit certain company sizes and

industries. In this way, the ERP software might prove to be more effective.

For instance, according to Avai (1998), several market trends influence the

architecture of the leading ERP systems, including integrated databases, Client/server

architecture, Three-tier thin client/server architecture, Web Client/server, Web

enablement and Electronic Commerce technologies, and Open systems environment.

21


2.6 Enterprise Resource Planning architectural design

The capability of ERP systems is largely dependent on the information

technology, as well as the architectural design and options that are available in the

implementation process. This is because the architectural design for every company may

differ, depending on the industry and the size of the company. Several ERP system

architectural designs have been proposed for use. For instance, Sprott (2000) and Mustafa

and Mejabi (1999) proposed the combination of the best module class from different

vendors, such as the combination of the BAAN production module and the SAP R/3

finance module. On the other hand, Fellner and Turowski (1999) suggested the use of

extensible mark-up language (XML) an architectural design with interface definition

languages that have more powerful technologies to build application systems.

From the controversies plaguing the credibility of the ERP system as a tool in

improving enterprises, there is a need for ERP system developers to prove that the

contention that ERP systems are ineffective is incorrect. This can only be done by

improving the features of the ERP systems and providing other avenues for improvement.

This study contends that ERP system solutions for small and large enterprises should be

separated. Instead of the “one size fits all” approach, the researcher suggests that ERP

systems should start customizing their features to fit certain company sizes and

industries. In this way, the ERP software might prove to be more effective.

For instance, according to Avai (1998), several market trends influence the

architecture of the leading ERP systems, including integrated databases, Client/server

architecture, Three-tier thin client/server architecture, Web Client/server, Web

enablement and Electronic Commerce technologies, and Open systems environment.

21


From these specifications, several factors need to be taken into consideration, according

to Weill (1996). This process involves the search for a framework that assesses the gaps

between architecture requirements and current IT environments to develop

implementation strategies. Avai (1998) and Weill (1996) propose that in providing an

architectural design for ERP systems, the following considerations must be incorporated:

(1) network infrastructure; (2) server platform; (3) database management system; (4) data

ownership; (5) client platform; (6) Web technology; (7) prerequisite user skills; and (8)

IT capacity. This is in accordance with the researchers' observation that many enterprise

architecture efforts have failed because management often views ERP system

implementation as a stand-alone project, unwilling to invest in enterprise infrastructure.

Thus, while successful ERP system implementation is often determined by business and

organizational changes, architectural choices deserve thorough consideration during the

system procurement phase, because the selection of ERP systems have technical and non-

technical impacts on the enterprise as well as the success of the ERP implementation.

Moreover, for companies to maximize the potential of ERP systems, customized

ERP systems are needed for each company (Pitturo, 1999). For instance, a company that

distributes specialty coffees to chains such as Starbucks would probably need inventory

management, sales management and distribution, but could live without manufacturing

and bill of materials modules. Buying from a vendor with customized ERP systems gives

a company a boost up the learning curve and cuts down on customization costs.

An important observation is made by Champy (1997), who notes that companies

should design their package first, implying that the business should be matched to the

software rather than vice versa. While other companies resorted to the building of their

22


From these specifications, several factors need to be taken into consideration, according

to Weill (1996). This process involves the search for a framework that assesses the gaps

between architecture requirements and current IT environments to develop

implementation strategies. Avai (1998) and Weill (1996) propose that in providing an

architectural design for ERP systems, the following considerations must be incorporated:

(1) network infrastructure; (2) server platform; (3) database management system; (4) data

ownership; (5) client platform; (6) Web technology; (7) prerequisite user skills; and (8)

IT capacity. This is in accordance with the researchers’ observation that many enterprise

architecture efforts have failed because management often views ERP system

implementation as a stand-alone project, unwilling to invest in enterprise infrastructure.

Thus, while successful ERP system implementation is often determined by business and

organizational changes, architectural choices deserve thorough consideration during the

system procurement phase, because the selection of ERP systems have technical and non

technical impacts on the enterprise as well as the success of the ERP implementation.

Moreover, for companies to maximize the potential of ERP systems, customized

ERP systems are needed for each company (Pitturo, 1999). For instance, a company that

distributes specialty coffees to chains such as Starbucks would probably need inventory

management, sales management and distribution, but could live without manufacturing

and bill of materials modules. Buying from a vendor with customized ERP systems gives

a company a boost up the learning curve and cuts down on customization costs.

An important observation is made by Champy (1997), who notes that companies

should design their package first, implying that the business should be matched to the

software rather than vice versa. While other companies resorted to the building of their

22


own software in order to fit their business, the literature suggests that this largely depends

on the design of the software. According to Waggle (1999), the development of ERP

systems resulted in three IT capabilities in ERP system purchases: the desire to replace

aging mainframe systems with more modem, enterprise-wide client-server architectures,

the replacement of legacy systems that no longer meet the firm's needs, and the desire to

reduce information system costs by buying rather than building software. Thus, the

evolution of the ERP system architecture evolved from a centralized (mainframe-based)

architecture to client server architecture (Levis and von Schilling, 1994). Accordingly,

client-server architectures have been touted as a "modern" enterprise-wide infrastructure

(Levis and Von, 1994) that results in a more flexible, scalable infrastructure (Duane,

1997).

23


own software in order to fit their business, the literature suggests that this largely depends

on the design of the software. According to Waggle (1999), the development of ERP

systems resulted in three IT capabilities in ERP system purchases: the desire to replace

aging mainframe systems with more modem, enterprise-wide client-server architectures,

the replacement of legacy systems that no longer meet the firm’s needs, and the desire to

reduce information system costs by buying rather than building software. Thus, the

evolution of the ERP system architecture evolved from a centralized (mainframe-based)

architecture to client server architecture (Levis and von Schilling, 1994). Accordingly,

client-server architectures have been touted as a "modem" enterprise-wide infrastructure

(Levis and Von, 1994) that results in a more flexible, scalable infrastructure (Duane,

1997).

23


Chapter 3

Methodology

This research is primarily focused on the representative Small-and Medium-sized

Enterprises (SMEs) selected from the region of Southeast Asia. The unique

characteristics and requirements of the companies in this region have been studied and

summarized. The surveys and questionnaires were sent to the representative companies in

this region, and then the feedback and data were collected and analyzed for the research

to develop an ERP system framework. The validation and evaluation of the data were

input into the software created, and tested by the representative companies in the region.

3.1 SMEs in Southeast Asian countries

Small and medium enterprises or small-and medium-sized enterprises are

companies whose headcount or turnover falls below certain limits. SMEs, in contrast to

big businesses, have a reputation for innovation. For this reason, and because of their

difficulties in attracting capital, national and regional fostering of SMEs commonly

occurs. Intense competition in the marketplace is forcing SMEs to examine the different

methods by which they could enhance or retain their competitive advantage. Several

SMEs have generated sustained competitive advantages through a continuous stream of

incremental, overarching, and discontinuous innovations. Central to the notion of

technology as a competitive advantage for nations, firms, and industries is the significant

24


Chapter 3

Methodology

This research is primarily focused on the representative Small-and Medium-sized

Enterprises (SMEs) selected from the region of Southeast Asia. The unique

characteristics and requirements of the companies in this region have been studied and

summarized. The surveys and questionnaires were sent to the representative companies in

this region, and then the feedback and data were collected and analyzed for the research

to develop an ERP system framework. The validation and evaluation of the data were

input into the software created, and tested by the representative companies in the region.

3.1 SMEs in Southeast Asian countries

Small and medium enterprises or small-and medium-sized enterprises are

companies whose headcount or turnover falls below certain limits. SMEs, in contrast to

big businesses, have a reputation for innovation. For this reason, and because of their

difficulties in attracting capital, national and regional fostering of SMEs commonly

occurs. Intense competition in the marketplace is forcing SMEs to examine the different

methods by which they could enhance or retain their competitive advantage. Several

SMEs have generated sustained competitive advantages through a continuous stream of

incremental, overarching, and discontinuous innovations. Central to the notion of

technology as a competitive advantage for nations, firms, and industries is the significant

24


role of small-to medium-sized companies as a source of innovation during the early

stages of new and emerging technologies (Abernathy and Utterback 1978).

3.1.1 Overview of SMEs in the region of Southeast Asia

The apparent failure of ERP Systems to meet the expectations of companies and

observers in enhancing their internal and external operations has led to a refocusing of an

ERP system framework design that is customized for SMEs and the specific industry and

country in which it will be used. In the research of Pitturo (1999) and Yi (2002), they

suggest that the inability of companies and enterprises to implement the system

effectively attributed to the failure of ERP systems in working to meet the expectations of

companies and users. James and Wolf (2000) assert that its failure is its ability to run

only 15-20% of the enterprise's processes, while Castro (2000) attributes it to the lack of

analytical features of the designs. White (2002) suggests that it is in its inability to cope

with the changing business environment.

In SMEs, an ERP system has been regarded as expensive, as well as an

investment that is a big gamble. First, the price of an ERP system is simply too much to

bear for many SMEs, particularly in Southeast Asia. The prohibitive price of the ERP

system prevents other SMEs from making use of such an information system in their

companies. Second, the difficulty in integrating and implementing the ERP in their

company's operations is rigorous and involves many uncertainties. These problems are

just some of the difficulties that enterprises have encountered in the process of integrating

ERP into their company's operations.

25


role of small-to medium-sized companies as a source of innovation during the early

stages of new and emerging technologies (Abernathy and Utterback 1978).

3.1.1 Overview of SMEs in the region of Southeast Asia

The apparent failure of ERP Systems to meet the expectations of companies and

observers in enhancing their internal and external operations has led to a refocusing of an

ERP system framework design that is customized for SMEs and the specific industry and

country in which it will be used. In the research of Pitturo (1999) and Yi (2002), they

suggest that the inability of companies and enterprises to implement the system

effectively attributed to the failure of ERP systems in working to meet the expectations of

companies and users. James and Wolf (2000) assert that its failure is its ability to run

only 15-20% of the enterprise’s processes, while Castro (2000) attributes it to the lack of

analytical features of the designs. White (2002) suggests that it is in its inability to cope

with the changing business environment.

In SMEs, an ERP system has been regarded as expensive, as well as an

investment that is a big gamble. First, the price of an ERP system is simply too much to

bear for many SMEs, particularly in Southeast Asia. The prohibitive price of the ERP

system prevents other SMEs from making use of such an information system in their

companies. Second, the difficulty in integrating and implementing the ERP in their

company’s operations is rigorous and involves many uncertainties. These problems are

just some of the difficulties that enterprises have encountered in the process of integrating

ERP into their company’s operations.

25


3.1.2 Characteristics of SMEs in Southeast Asia

According to Carson (1995), SMEs have different characteristics from those of

larger companies. In addition to size, there are a number of qualitative characteristics

which serve to underline the difference. These characteristics may lead to disadvantages

and advantages in the process of globalization. These attributes are summarized as

follows:

o Scope of operations; SMEs serve predominantly a local or regional market rather

than a national or international market.

o Ownership; there is a dependence on a limited number of people, and the

enterprise is generally owned by one person, or at most, a very few people. This

makes the advantages of long term thinking, both stable and risky. Regarding

their advantages, the drawbacks are static thinking, which limits the experience

and knowledge of the owner(s), difficulties to adapt corporate culture to new

situations and challenges, and potential conflicts between corporate objectives and

the personal objectives of the owner. (Recklies 2001)

o Independence, in the sense that they are not part of a large enterprise system, such

as a small division of any metro company. It also means that the firm's owner has

authority and effective control over the business.

o Management style; small firms are generally managed in a personalized fashion.

Managers of small firms tend to know all of the employees personally, they

participate in all aspects of managing the business, and there is no general sharing

of the decision-making process. (Wu, 2003)

26


3.1.2 Characteristics of SMEs in Southeast Asia

According to Carson (1995), SMEs have different characteristics from those of

larger companies. In addition to size, there are a number of qualitative characteristics

which serve to underline the difference. These characteristics may lead to disadvantages

and advantages in the process of globalization. These attributes are summarized as

follows:

o Scope of operations; SMEs serve predominantly a local or regional market rather

than a national or international market,

o Ownership; there is a dependence on a limited number of people, and the

enterprise is generally owned by one person, or at most, a very few people. This

makes the advantages of long term thinking, both stable and risky. Regarding

their advantages, the drawbacks are static thinking, which limits the experience

and knowledge of the owner(s), difficulties to adapt corporate culture to new

situations and challenges, and potential conflicts between corporate objectives and

the personal objectives of the owner. (Recklies 2001)

o Independence, in the sense that they are not part of a large enterprise system, such

as a small division of any metro company. It also means that the firm’s owner has

authority and effective control over the business,

o Management style; small firms are generally managed in a personalized fashion.

Managers of small firms tend to know all of the employees personally, they

participate in all aspects of managing the business, and there is no general sharing

of the decision-making process. (Wu, 2003)

26


o Small companies tend to have close relationships with customers and business

partners, and they seem to have the ability to cooperate successfully to the mutual

advantage of these partnerships.

o These firms appear to have simple structures which benefit them in high

flexibility, high adaptability, short reaction times, and cross-functional

communication and cooperation within the organization.

3.1.3 Benefits of an ERP system for SMEs in Southeast Asia

The distinguishing characteristics of SMEs represent both advantages and

disadvantages to SMEs' competitiveness and growth. For instance, compared with large

firms, a relatively small customer base makes it possible for small firms to react more

quickly to customer needs, while a lack of resources and technical experts will prevent

them from entering into the international market. However, ERP systems prefer to

conduct business with the assistance of a computer, database integration, and information

technologies, which can effectively develop the SMEs' advantages and reduce the

drawbacks. In general, small enterprises in Southeast Asia can benefit from an ERP

system in the following ways:

• Organizational and managerial efficiency

• Continuous monitoring of compliance

• Improvement of the enterprise's image

By implementing an ERP system, SMEs are able to improve the management and

organizational efficiency of the whole company. First, they can improve their ability to

manage and control their informational performance by continuously monitoring their

27


o Small companies tend to have close relationships with customers and business

partners, and they seem to have the ability to cooperate successfully to the mutual

advantage of these partnerships,

o These firms appear to have simple structures which benefit them in high

flexibility, high adaptability, short reaction times, and cross-functional

communication and cooperation within the organization.

3.1.3 Benefits of an ERP system for SMEs in Southeast Asia

The distinguishing characteristics of SMEs represent both advantages and

disadvantages to SMEs’ competitiveness and growth. For instance, compared with large

firms, a relatively small customer base makes it possible for small firms to react more

quickly to customer needs, while a lack of resources and technical experts will prevent

them from entering into the international market. However, ERP systems prefer to

conduct business with the assistance of a computer, database integration, and information

technologies, which can effectively develop the SMEs’ advantages and reduce the

drawbacks. In general, small enterprises in Southeast Asia can benefit from an ERP

system in the following ways:

• Organizational and managerial efficiency

• Continuous monitoring of compliance

• Improvement of the enterprise's image

By implementing an ERP system, SMEs are able to improve the management and

organizational efficiency of the whole company. First, they can improve their ability to

manage and control their informational performance by continuously monitoring their

27


activities, systematically registering and evaluating informational effects, and

periodically verifying the effectiveness of the whole system. Most of them were not

familiar with systematic and planned management; for these enterprises, the adoption of a

virtuous management cycle aimed at the continuous improvement of their performance

has been a significant step forward, and not only with respect to informational issues. The

management cycle suggested by ISO 14001 has taught some SMEs how to improve their

overall management approach; being able to plan improvement strategies, implement the

necessary actions and verify them by means of a thorough assessment has been a positive

result for many SMEs (Hillary, 1995).

A second benefit emerged from an improved definition of responsibilities and

tasks, achieved via the drafting of formal documents (charts, job descriptions, etc.); this

enabled employees to identify responsible personnel to whom they could refer in relation

to informational aspects and problems. This led SMEs to more effective management of

informational risks. Where it was drafted according to a 'slim line' and 'tailored-to-size'

approach, documentation also represented a significant benefit, by the very act of

formalizing procedures; SMEs could rationalize their activities and improve efficiency

and quality. In many of these small firms, staffs has begun to perform their jobs more

efficiently, simply by following procedures and instructions that they previously ignored

because they were not written and formalized.

Training and informing personnel also accrued benefits in terms of efficiency. By

improving skills and raising employee awareness, SMEs obtained positive management

results. Innovative ways of informing and training employees on informational issues

other than the traditional approach were tested in some pilot projects. Examples of these

28


activities, systematically registering and evaluating informational effects, and

periodically verifying the effectiveness of the whole system. Most of them were not

familiar with systematic and planned management; for these enterprises, the adoption of a

virtuous management cycle aimed at the continuous improvement of their performance

has been a significant step forward, and not only with respect to informational issues. The

management cycle suggested by ISO 14001 has taught some SMEs how to improve their

overall management approach; being able to plan improvement strategies, implement the

necessary actions and verify them by means of a thorough assessment has been a positive

result for many SMEs (Hillary, 1995).

A second benefit emerged from an improved definition of responsibilities and

tasks, achieved via the drafting of formal documents (charts, job descriptions, etc.); this

enabled employees to identify responsible personnel to whom they could refer in relation

to informational aspects and problems. This led SMEs to more effective management of

informational risks. Where it was drafted according to a 'slim line' and 'tailored-to-size'

approach, documentation also represented a significant benefit, by the very act of

formalizing procedures; SMEs could rationalize their activities and improve efficiency

and quality. In many of these small firms, staffs has begun to perform their jobs more

efficiently, simply by following procedures and instructions that they previously ignored

because they were not written and formalized.

Training and informing personnel also accrued benefits in terms of efficiency. By

improving skills and raising employee awareness, SMEs obtained positive management

results. Innovative ways of informing and training employees on informational issues

other than the traditional approach were tested in some pilot projects. Examples of these

28


new methods are 'co-training' among different small enterprises operating in the same

area or sector and training 'on the job,' by directly testing informational procedures with

the relevant personnel working on the process. A clear example of the benefits achieved

from personnel training is demonstrated by some SMEs that decided to implement a

waste management program. Even where these small enterprises had been previously

separating their waste for collection before ERP systems implementation, they made

positive improvements (and related economic benefits) only when they adopted correct

procedures and appointed adequately trained personnel to implement them (Hillary,

1995).

3.1.4 Practice Differences between North America's system and the system in

Southeast Asia

The large difference between the ERP systems implementation success rate in

North American and Southeast Asian countries produces a need for research examining

generic and unique factors that affect ERP system implementation in Southeast Asia,

since foreign ERP vendors have an ERP system market share of more than 90% (IDC,

1998) in Southeast Asia. Furthermore, Southeast Asian culture is quite different from that

of North America, which can be seen in terms of the four dimensions of national culture

developed by Hofstede (2001), and the unique characteristics of SMEs in Southeast Asia

mentioned in the previous two sections. The dimension of uncertainty avoidance is also

highly relevant to information systems implementation.

In the existing research, the emphasis attached to specific practice varies from

place to place, reflecting different cultures, the differences between high and low GDP

29


new methods are 'co-training' among different small enterprises operating in the same

area or sector and training 'on the job,’ by directly testing informational procedures with

the relevant personnel working on the process. A clear example of the benefits achieved

from personnel training is demonstrated by some SMEs that decided to implement a

waste management program. Even where these small enterprises had been previously

separating their waste for collection before ERP systems implementation, they made

positive improvements (and related economic benefits) only when they adopted correct

procedures and appointed adequately trained personnel to implement them (Hillary,

1995).

3.1.4 Practice Differences between North America’s system and the system in

Southeast Asia

The large difference between the ERP systems implementation success rate in

North American and Southeast Asian countries produces a need for research examining

generic and unique factors that affect ERP system implementation in Southeast Asia,

since foreign ERP vendors have an ERP system market share of more than 90% (IDC,

1998) in Southeast Asia. Furthermore, Southeast Asian culture is quite different from that

of North America, which can be seen in terms of the four dimensions of national culture

developed by Hofstede (2001), and the unique characteristics of SMEs in Southeast Asia

mentioned in the previous two sections. The dimension of uncertainty avoidance is also

highly relevant to information systems implementation.

In the existing research, the emphasis attached to specific practice varies from

place to place, reflecting different cultures, the differences between high and low GDP

29


per capita countries, different reward programs, work environment, and work

performances between countries in Southeast Asia and North America, as reported by

Doug Ross at el. (2003).

More important than designing individual reward programs is getting the overall

reward design right and providing the appropriate flexibility needed to fit the employee.

In North America, linking pay to performance is a basis for any reward strategy. In

Southeast Asia, where there is a lower payroll, a competitive guaranteed reward package

appears to be more important. Effective total rewards and performance accountability are

the dimensions with the strongest links to a positive value contribution in both North

America and Southeast Asia.

Maintaining a mutually respectful, flexible workplace environment is naturally

important (Zhang et al., 2004). The questionnaire results indicate that it is a good

concept, but that it is also linked to many more key practices, including trust in

leadership, leadership support, avoiding perquisites based on status, flexibility in work

schedule, and feedback to the employee. The creation of a flexible workplace culture

appears to be more important in North American enterprises than enterprises in Southeast

Asia. In addition, the most successful firms in Southeast Asia are those that adjust their

employees' practices to create a focused workplace, where management and workforce

focuses are on customers and where employees are strongly advocated in the firm's

products and services.

In developed countries, practices such as excessive job security have been

consistently identified as contributing to an overly paternalistic environment where

employees become dependent on the company and cannot afford to move on. The

30


per capita countries, different reward programs, work environment, and work

performances between countries in Southeast Asia and North America, as reported by

Doug Ross at el. (2003).

More important than designing individual reward programs is getting the overall

reward design right and providing the appropriate flexibility needed to fit the employee.

In North America, linking pay to performance is a basis for any reward strategy. In

Southeast Asia, where there is a lower payroll, a competitive guaranteed reward package

appears to be more important. Effective total rewards and performance accountability are

the dimensions with the strongest links to a positive value contribution in both North

America and Southeast Asia.

Maintaining a mutually respectful, flexible workplace environment is naturally

important (Zhang et al., 2004). The questionnaire results indicate that it is a good

concept, but that it is also linked to many more key practices, including trust in

leadership, leadership support, avoiding perquisites based on status, flexibility in work

schedule, and feedback to the employee. The creation of a flexible workplace culture

appears to be more important in North American enterprises than enterprises in Southeast

Asia. In addition, the most successful firms in Southeast Asia are those that adjust their

employees’ practices to create a focused workplace, where management and workforce

focuses are on customers and where employees are strongly advocated in the firm’s

products and services.

In developed countries, practices such as excessive job security have been

consistently identified as contributing to an overly paternalistic environment where

employees become dependent on the company and cannot afford to move on. The

30


research identified that providing a secure working environment, coupled with effective

performance management, can be effective both in North American and Southeast Asian

countries.

In countries where the GDP per capita is low, including most countries in

Southeast Asia, enterprises are normally less developed in their application of business

processes and information technology management practices. Their major concern is to

get the fundamentals right, ensuring, for example, that accurate payroll and effective

recruitment and performance management practices are in place. In contrast, enterprises

in North America, with a high GDP per capita, tend to purchase and implement the

system developed by a vendor in this region and are more strategically focused.

3.2 Research design approach

Five case studies are conducted in the present research using a descriptive

approach and a structure focused comparison. The researcher collected current and

contemporary data on the strengths, weaknesses, threats and opportunities of ERP

software on SMEs in Southeast Asian SMEs.

The case study methodology of Yin (1994) is used for this research, in order to

provide a holistic and in-depth investigation of the strengths, weaknesses, and threats of

the ERP software needed by SMEs in Southeast Asia. This is because the case study

methodology uses multiple sources of data for verifying the results of the study. This

research is focused on the following three methods of data gathering: (1) official records

of the financial and technical documents of the five selected SMEs in Southeast Asia; (2)

information collected in the survey and questionnaires completed by the employees and

31


research identified that providing a secure working environment, coupled with effective

performance management, can be effective both in North American and Southeast Asian

countries.

In countries where the GDP per capita is low, including most countries in

Southeast Asia, enterprises are normally less developed in their application of business

processes and information technology management practices. Their major concern is to

get the fundamentals right, ensuring, for example, that accurate payroll and effective

recruitment and performance management practices are in place. In contrast, enterprises

in North America, with a high GDP per capita, tend to purchase and implement the

system developed by a vendor in this region and are more strategically focused.

3.2 Research design approach

Five case studies are conducted in the present research using a descriptive

approach and a structure focused comparison. The researcher collected current and

contemporary data on the strengths, weaknesses, threats and opportunities of ERP

software on SMEs in Southeast Asian SMEs.

The case study methodology of Yin (1994) is used for this research, in order to

provide a holistic and in-depth investigation of the strengths, weaknesses, and threats of

the ERP software needed by SMEs in Southeast Asia. This is because the case study

methodology uses multiple sources of data for verifying the results of the study. This

research is focused on the following three methods of data gathering: (1) official records

of the financial and technical documents of the five selected SMEs in Southeast Asia; (2)

information collected in the survey and questionnaires completed by the employees and

31


management of the companies; and (3) personal interviews with the employees and

management of the companies.

3.3 Data collection techniques

Current research gathers ERP systems-related information through surveys and

interviews. Critical financial, IT, and administrative analysis of the statistical data and

documents collected from the five enterprises selected are consequently performed. Both

qualitative and quantitative techniques are used in collecting and analyzing the data.

Thus, the study is both qualitative (interviews and critical analysis of statistics and

documents) and quantitative (survey) in nature.

The researcher treats the five companies as separate cases. Each company is

evaluated comprehensively and thoroughly. The case study methodology proposed by

Yin (1994) is used. The four stages of the process include: (1) Designing the case studies;

(2) Conducting the case studies; (3) Analyzing the case study evidence; and (4)

Developing conclusions, recommendations and implications. From the analysis of these

cases, a Structured Focused Comparison is conducted, as proposed by Benett and George

(1979, 1997). The case studies are first conducted individually, using the same variables

and factors in all five companies. After the case studies are completed, a comparative

approach is conducted in order to create a generalized pattern and conclusion for the

companies in general. The results of the case studies are then employed for the proposed

blueprint of the architectural design.

32


management of the companies; and (3) personal interviews with the employees and

management of the companies.

3.3 Data collection techniques

Current research gathers ERP systems-related information through surveys and

interviews. Critical financial, IT, and administrative analysis of the statistical data and

documents collected from the five enterprises selected are consequently performed. Both

qualitative and quantitative techniques are used in collecting and analyzing the data.

Thus, the study is both qualitative (interviews and critical analysis of statistics and

documents) and quantitative (survey) in nature.

The researcher treats the five companies as separate cases. Each company is

evaluated comprehensively and thoroughly. The case study methodology proposed by

Yin (1994) is used. The four stages of the process include: (1) Designing the case studies;

(2) Conducting the case studies; (3) Analyzing the case study evidence; and (4)

Developing conclusions, recommendations and implications. From the analysis of these

cases, a Structured Focused Comparison is conducted, as proposed by Benett and George

(1979, 1997). The case studies are first conducted individually, using the same variables

and factors in all five companies. After the case studies are completed, a comparative

approach is conducted in order to create a generalized pattern and conclusion for the

companies in general. The results of the case studies are then employed for the proposed

blueprint of the architectural design.

32


3.4 Sources of data

The primary sources of data will come from the survey, questionnaires, and

interviews of both managers and employees of the five selected SMEs in Southeast Asia.

The secondary sources shall come from the financial, IT and administrative documents of

the five corresponding companies. Moreover, published articles in ERP systems and IT

journals, articles, magazines, news articles, and books relating to ERP systems shall also

be used. This will serve as the basis for the researcher's assumptions and comparative

data for the results of the survey and the interviews. Furthermore, the researcher shall use

the information from the published literature to clarify whether the results of the research

support or reject assumptions and arguments provided by earlier researchers.

3.5 Demographic profile of the representative companies

The respondents consist of managers and employees of the five representatives

SMEs in Southeast Asian countries. In this section they will be assigned alphabetical

letters, and they will be presented with a brief description in order to provide basic

information about the distinctive features of each company. Additionally the majority of

the respondents have been working for years, and the majority of the respondents are

college graduate. 53% of the respondents have less than two years of service, while the

remaining 47% are those who have been in service for three to five years.

The intended respondents shall be given an alphabetical letter in place of their

name, in order to respect the confidentiality of their identity and any information that

they do not wish to disclose. The respondents' cooperation was eagerly sought, and they

were assured that the data gathered would be treated in the strictest confidence, so that

33


3.4 Sources of data

The primary sources of data will come from the survey, questionnaires, and

interviews of both managers and employees of the five selected SMEs in Southeast Asia.

The secondary sources shall come from the financial, IT and administrative documents of

the five corresponding companies. Moreover, published articles in ERP systems and IT

journals, articles, magazines, news articles, and books relating to ERP systems shall also

be used. This will serve as the basis for the researcher’s assumptions and comparative

data for the results of the survey and the interviews. Furthermore, the researcher shall use

the information from the published literature to clarify whether the results of the research

support or reject assumptions and arguments provided by earlier researchers.

3.5 Demographic profile of the representative companies

The respondents consist of managers and employees of the five representatives

SMEs in Southeast Asian countries. In this section they will be assigned alphabetical

letters, and they will be presented with a brief description in order to provide basic

information about the distinctive features of each company. Additionally the majority of

the respondents have been working for years, and the majority of the respondents are

college graduate. 53% of the respondents have less than two years of service, while the

remaining 47% are those who have been in service for three to five years.

The intended respondents shall be given an alphabetical letter in place of their

name, in order to respect the confidentiality of their identity and any information that

they do not wish to disclose. The respondents’ cooperation was eagerly sought, and they

were assured that the data gathered would be treated in the strictest confidence, so that

33


they could be more open. This was done in the hopes that it would promote trust between

the researcher and the respondents. This part of the study is important because only the

respondents can supply the most important data needed to fulfil the objectives of this

study.

Company A

Company A was established in 1968, and is a distributor of electronic components

and devices through offices in Singapore, Japan, Shanghai, and Hong Kong. The

company has a total workforce of 50 employees. In 1998, this firm started operating in

Singapore, and since then, the company's business volume has grown by leaps and

bounds. In order to keep up with this growth and development, Company A began in

2003 to seek a system that could meet its customers' increasing demands, while at the

same time remaining productive as the business expands. According to the Director of

the company, "Company A aims to be the global distribution player in the region, and the

company interest in implementing an integrated ERP system made good sense. Since the

customer demands were varying constantly, the company needed a flexible system that

could be scaled as the business develops and yet is resilient to meet the changing needs of

users at different times."

Company B

Company B's products might be every audiophile's dream, but its software was

far from being ideal, hindering operational effectiveness and threatening to disrupt the

company's expansion and development plans. The Company has US$0.9 million yearly

34


they could be more open. This was done in the hopes that it would promote trust between

the researcher and the respondents. This part of the study is important because only the

respondents can supply the most important data needed to fulfil the objectives of this

study.

Company A

Company A was established in 1968, and is a distributor of electronic components

and devices through offices in Singapore, Japan, Shanghai, and Hong Kong. The

company has a total workforce of 50 employees. In 1998, this firm started operating in

Singapore, and since then, the company’s business volume has grown by leaps and

bounds. In order to keep up with this growth and development, Company A began in

2003 to seek a system that could meet its customers’ increasing demands, while at the

same time remaining productive as the business expands. According to the Director of

the company, “Company A aims to be the global distribution player in the region, and the

company interest in implementing an integrated ERP system made good sense. Since the

customer demands were varying constantly, the company needed a flexible system that

could be scaled as the business develops and yet is resilient to meet the changing needs of

users at different times.”

Company B

Company B’s products might be every audiophile’s dream, but its software was

far from being ideal, hindering operational effectiveness and threatening to disrupt the

company’s expansion and development plans. The Company has US$0.9 million yearly

34


in revenue. Company B is employs 25 staff members in Indonesia, and 15 in Malaysia.

Indonesia is the headquarters of the company, and there are offices and service centres in

six Malaysian states. The company implements SAP, which provides accurate and real-

time information on the company's stock level.

Company C

Company C is a business media company which established itself in less than

favourable circumstances, as a push of disparate legacy systems threatened to damage the

business's future plans for development and growth. The Group Finance Director of

Company C asserted that "the company's IT systems were failing in order to keep pace

with the company rapid growth, and putting lots of pressure on the internal resources.

One of the company's core business aims is to "exceed customer expectations". It was

clear that if the company didn't move rapidly, it would soon start to fall short of the

company's expectations." With 45 staff members and global revenues of US$2.0 million,

Company C operates from its two regional bases in Bangkok and Malaysia, and is a

regional leader in business conferences and trade exhibitions. Company C is also known

for its training solutions and as a publisher of specialized print and online magazines.

Company C has a strong corporate culture based on creativity, innovation, quality,

integrity and fun. Each year, it organizes over 100 conferences, 7 major exhibitions and

conducts more than 80 training seminars around the world.

35


in revenue. Company B is employs 25 staff members in Indonesia, and 15 in Malaysia.

Indonesia is the headquarters of the company, and there are offices and service centres in

six Malaysian states. The company implements SAP, which provides accurate and real

time information on the company’s stock level.

Company C

Company C is a business media company which established itself in less than

favourable circumstances, as a push of disparate legacy systems threatened to damage the

business’s future plans for development and growth. The Group Finance Director of

Company C asserted that “the company’s IT systems were failing in order to keep pace

with the company rapid growth, and putting lots of pressure on the internal resources.

One of the company’s core business aims is to “exceed customer expectations”. It was

clear that if the company didn’t move rapidly, it would soon start to fall short of the

company’s expectations.” With 45 staff members and global revenues of US$2.0 million,

Company C operates from its two regional bases in Bangkok and Malaysia, and is a

regional leader in business conferences and trade exhibitions. Company C is also known

for its training solutions and as a publisher of specialized print and online magazines.

Company C has a strong corporate culture based on creativity, innovation, quality,

integrity and fun. Each year, it organizes over 100 conferences, 7 major exhibitions and

conducts more than 80 training seminars around the world.

35


Company D

Company D has experienced steady growth with US$ 500,000 annual income and

49 employees. Since 1985, when it was founded in Thailand, it has had the objective of

conceiving, designing and producing special oil-dynamic components for power

transmissions on farm tractors and similar machines. Now Company D is facing

challenges that require expertise that can only sometimes be provided by their foreign

consultants. This poses problems for the clients since consultants are hesitant to interact

with the Asian clients. Thus Company D has had to implement training and measures to

lessen the vulnerability and dependence of the business on its foreign consultants.

Company E

The fifth SME for the study is Company E, which was established in 1976 as a

provider of quality products in the marine industry. Heavy market competition forced

Company E to make organizational changes geared towards improving efficiency. They

installed Material Resource Planning (MRP) software. Following this, they also merged

two separate departments to form a new operations division.

All five of these SMEs in Southeast Asia are aiming for continued development

and growth plans, and three of the companies believe that through the implementation of

an ERP System they can reach this goal and improve even further.

3.6 Data gathering tools

From the case study plan, two instruments are created, reflecting the multi-

method approach: (1) a survey, and (2) semi-structured interviews.

36


Company D

Company D has experienced steady growth with US$ 500,000 annual income and

49 employees. Since 1985, when it was founded in Thailand, it has had the objective of

conceiving, designing and producing special oil-dynamic components for power

transmissions on farm tractors and similar machines. Now Company D is facing

challenges that require expertise that can only sometimes be provided by their foreign

consultants. This poses problems for the clients since consultants are hesitant to interact

with the Asian clients. Thus Company D has had to implement training and measures to

lessen the vulnerability and dependence of the business on its foreign consultants.

Company E

The fifth SME for the study is Company E, which was established in 1976 as a

provider of quality products in the marine industry. Heavy market competition forced

Company E to make organizational changes geared towards improving efficiency. They

installed Material Resource Planning (MRP) software. Following this, they also merged

two separate departments to form a new operations division.

All five of these SMEs in Southeast Asia are aiming for continued development

and growth plans, and three of the companies believe that through the implementation of

an ERP System they can reach this goal and improve even further.

3.6 Data gathering tools

From the case study plan, two instruments are created, reflecting the multi

method approach: (1) a survey, and (2) semi-structured interviews.

36


3.6.1 Surveys

A survey illustrating the strengths, weaknesses, threats and opportunities of the

five SMEs in Southeast Asian countries was conducted. A purposive sampling design

was made where the researcher selected only those who were knowledgeable and

involved in the use and implementation of ERP in the enterprise. The general sample size

utilized in the study consisted of fifty (50) respondents, ten (10) for each enterprise. To

evaluate the information gathered, a percentile system is used.

3.6.2 Interviews

Interviews provided an in-depth illustration of the extent of the success or failure

of the enterprise in using ERP systems. They also supplied the information that was

missing in the survey and the statistical and document analysis. Moreover, the interviews

were the primary tool in providing clarifications and verification of the results of the

survey conducted, and in evaluating the suggested features of the ERP software.

Primarily, the researcher utilized the semi-structured interview process to allow the

researcher to probe deeper into issues and ideas that could be crucial for the study.

3.7 Research evaluation

To be able to achieve a high level of credibility for the conclusions presented in

this thesis, it is important to demonstrate that the research was designed and conducted in

such a way that the phenomenon investigated is accurately identified and described.

(Ryan et al, 1992).

37


3.6.1 Surveys

A survey illustrating the strengths, weaknesses, threats and opportunities of the

five SMEs in Southeast Asian countries was conducted. A purposive sampling design

was made where the researcher selected only those who were knowledgeable and

involved in the use and implementation of ERP in the enterprise. The general sample size

utilized in the study consisted of fifty (50) respondents, ten (10) for each enterprise. To

evaluate the information gathered, a percentile system is used.

3.6.2 Interviews

Interviews provided an in-depth illustration of the extent of the success or failure

of the enterprise in using ERP systems. They also supplied the information that was

missing in the survey and the statistical and document analysis. Moreover, the interviews

were the primary tool in providing clarifications and verification of the results of the

survey conducted, and in evaluating the suggested features of the ERP software.

Primarily, the researcher utilized the semi-structured interview process to allow the

researcher to probe deeper into issues and ideas that could be crucial for the study.

3.7 Research evaluation

To be able to achieve a high level of credibility for the conclusions presented in

this thesis, it is important to demonstrate that the research was designed and conducted in

such a way that the phenomenon investigated is accurately identified and described.

(Ryan et al, 1992).

37


For validation purposes, the researcher initially selected five respondents

companies. After the questions were answered, the researcher would ask the respondents

for any suggestions or necessary corrections to ensure further improvement and validity

of the instrument. The researcher examined the content of the interview questions to

determine the reliability of the instrument. The researchers excluded irrelevant questions

and changed words that would be deemed difficult by the respondents to much simpler

terms. The researcher also tallied, scored and tabulated all of the responses in the

provided interview questions.

Concerning the reliability of the thesis, there are a number of potential sources of

errors. The research project is executed using five different companies and

interpretations, and the analysis is based on personal interviews in conjunction with

survey questionnaires. However, by using clear and well-structured questions, the

research has taken the steps necessary to improve the research project's reliability.

3.8 Analysis methodology

The documentary or content analysis technique is used to analyze all of the

necessary and pertinent data gathered during the study. Content analysis is a research tool

used to determine the presence of certain words or concepts within texts or a set of texts,

wherein researchers measure and analyze the meanings and relationships of such words

and concepts. Inferences can then be made about the messages within the texts, the writer

of the text, the audience, as well as the culture and time of which the text is a part.

Content analysis is the objective, systematic and quantitative description of the manifest

content of communication (Berelson, 1952). Accordingly, content analysis is currently in

38


For validation purposes, the researcher initially selected five respondents

companies. After the questions were answered, the researcher would ask the respondents

for any suggestions or necessary corrections to ensure further improvement and validity

of the instrument. The researcher examined the content of the interview questions to

determine the reliability of the instrument. The researchers excluded irrelevant questions

and changed words that would be deemed difficult by the respondents to much simpler

terms. The researcher also tallied, scored and tabulated all of the responses in the

provided interview questions.

Concerning the reliability of the thesis, there are a number of potential sources of

errors. The research project is executed using five different companies and

interpretations, and the analysis is based on personal interviews in conjunction with

survey questionnaires. However, by using clear and well-structured questions, the

research has taken the steps necessary to improve the research project’s reliability.

3.8 Analysis methodology

The documentary or content analysis technique is used to analyze all of the

necessary and pertinent data gathered during the study. Content analysis is a research tool

used to determine the presence of certain words or concepts within texts or a set of texts,

wherein researchers measure and analyze the meanings and relationships of such words

and concepts. Inferences can then be made about the messages within the texts, the writer

of the text, the audience, as well as the culture and time of which the text is a part.

Content analysis is the objective, systematic and quantitative description of the manifest

content of communication (Berelson, 1952). Accordingly, content analysis is currently in

38


wide use in diverse fields, ranging from marketing and media studies, to literature and

rhetoric, ethnography and cultural studies, gender and age issues, sociology and political

science, psychology and cognitive science.

Like other research techniques, content analysis must be objective. There should

be no bias involved in the selection and classification of content to be analyzed, in its

sampling design, or in its interpretation of results. To be objective, as much as possible,

all items and aspects in the content to be analyzed were placed in appropriate categories.

In this way, the perception of the researcher was not influenced by factors other than the

true outcome or true frequency counts of the variables involved.

The content analysis that was carried out was systematic, and follows steps in the

scientific method such as recognizing and determining the problem, forming a hypothesis

or hypotheses, doing library work, designing the study, developing the instruments,

collecting the data, analyzing the data and making conclusions and recommendations.

In line with this, the data is analyzed based on the descriptive statistics performed

in data processing. What is more, the content analysis of the documentary materials in

this study was quantitative because the interpretations and conclusions of the findings

depended almost entirely on the output in processing the frequency counts of the

perceptions of the respondents. The occurrences of the perception of the respondents

were tallied one by one; the analysis and interpretation depended upon the frequency of

the occurrences. To further enhance the perception of the respondents, they were also

given time for an interview that was carried out in order to hear their respective insights

into the topic. The interview results were then used to justify their answers.

39


wide use in diverse fields, ranging from marketing and media studies, to literature and

rhetoric, ethnography and cultural studies, gender and age issues, sociology and political

science, psychology and cognitive science.

Like other research techniques, content analysis must be objective. There should

be no bias involved in the selection and classification of content to be analyzed, in its

sampling design, or in its interpretation of results. To be objective, as much as possible,

all items and aspects in the content to be analyzed were placed in appropriate categories.

In this way, the perception of the researcher was not influenced by factors other than the

true outcome or true frequency counts of the variables involved.

The content analysis that was carried out was systematic, and follows steps in the

scientific method such as recognizing and determining the problem, forming a hypothesis

or hypotheses, doing library work, designing the study, developing the instruments,

collecting the data, analyzing the data and making conclusions and recommendations.

In line with this, the data is analyzed based on the descriptive statistics performed

in data processing. What is more, the content analysis of the documentary materials in

this study was quantitative because the interpretations and conclusions of the findings

depended almost entirely on the output in processing the frequency counts of the

perceptions of the respondents. The occurrences of the perception of the respondents

were tallied one by one; the analysis and interpretation depended upon the frequency of

the occurrences. To further enhance the perception of the respondents, they were also

given time for an interview that was carried out in order to hear their respective insights

into the topic. The interview results were then used to justify their answers.

39


3.9 Transfer technology

After the survey and questionnaires have been sent out to the representative

companies, the data collected from them will be evaluated, validated and analyzed. Then

with a combination of results and content analysis, the ERP system implementation will

be developed. Once the conceptual framework has been constructed, the Novel ERP

(NERP) system based on the results of the empirical research and framework design

which will be further discussed in the next chapters, will be programmed using Java.

Furthermore, NERP is tested and evaluated by all five selected SMEs in Southeast Asia,

after which another survey and questionnaires will be given out. Once the NERP system

is tested and verified to be the best system for each of the companies (i.e. once they fill in

the required database), the system can move into the operational environment for a short

period of time (with testing taking place at the companies). However, the system

structure and usability may have to be modified in order to run parallel with the existing

system, or integrated with the company's current software.

40


3.9 Transfer technology

After the survey and questionnaires have been sent out to the representative

companies, the data collected from them will be evaluated, validated and analyzed. Then

with a combination of results and content analysis, the ERP system implementation will

be developed. Once the conceptual framework has been constructed, the Novel ERP

(NERP) system based on the results of the empirical research and framework design

which will be further discussed in the next chapters, will be programmed using Java.

Furthermore, NERP is tested and evaluated by all five selected SMEs in Southeast Asia,

after which another survey and questionnaires will be given out. Once the NERP system

is tested and verified to be the best system for each of the companies (i.e. once they fill in

the required database), the system can move into the operational environment for a short

period of time (with testing taking place at the companies). However, the system

structure and usability may have to be modified in order to run parallel with the existing

system, or integrated with the company’s current software.

40


Chapter 4

Conceptual Framework

Maintaining the "legacy" of an obsolete system is often costly and problematic.

Vendors stop supporting older versions of their software once the new version is put on

the market. If the software is home-grown, the company must have the staff to support it.

Installing a new system seems like a better alternative, but purchasing software raises

completely different questions. Improvements are likely, but new software without proper

planning and thought about related process improvements and training has only a limited

impact on an organization. Enterprise resource planning systems (ERPs) offer a

comprehensive solution to an organization's system needs (Wah, 2000).

This chapter focuses on designing a framework for the development of an ERP

system for Southeast Asian SMEs and eventually a monitoring and decision-making

support system for companies in Southeast Asia. Conventionally, the framework of an

ERP system follows a specific life cycle in its development. The present research follows

such a life cycle in order to develop a conceptual framework for Novel software. The

framework's life cycle has the following phases: feasibility study, knowledge acquisition,

implementation, testing and validation, and technology transfer (Turban, 1992). The

feasibility study has been mentioned in the previous chapters while knowledge

acquisition and implementation will be introduced in this chapter. Testing and validation

of the system will be presented in the next chapter.

41


Chapter 4

Conceptual Framework

Maintaining the "legacy” of an obsolete system is often costly and problematic.

Vendors stop supporting older versions of their software once the new version is put on

the market. If the software is home-grown, the company must have the staff to support it.

Installing a new system seems like a better alternative, but purchasing software raises

completely different questions. Improvements are likely, but new software without proper

planning and thought about related process improvements and training has only a limited

impact on an organization. Enterprise resource planning systems (ERPs) offer a

comprehensive solution to an organization's system needs (Wah, 2000).

This chapter focuses on designing a framework for the development of an ERP

system for Southeast Asian SMEs and eventually a monitoring and decision-making

support system for companies in Southeast Asia. Conventionally, the framework of an

ERP system follows a specific life cycle in its development. The present research follows

such a life cycle in order to develop a conceptual framework for Novel software. The

framework’s life cycle has the following phases: feasibility study, knowledge acquisition,

implementation, testing and validation, and technology transfer (Turban, 1992). The

feasibility study has been mentioned in the previous chapters while knowledge

acquisition and implementation will be introduced in this chapter. Testing and validation

of the system will be presented in the next chapter.

41


4.1 The nature of ERP development and implementation processes

In examining the changes in all business activities when implementing ERP, a

discussion of an ERP system life cycle model is helpful. Overall, despite the variation of

life cycle models, their content illustrates more or less the same tendencies. The model

developed by Markus and Tanis (2000) is one of the most widely used ERP system life

cycle models. The authors segment the ERP system integration process into four phases

characterized by different activities combined with varying types of changes in business

operations. See Figure 4.1 below.

Shakedown Onward and Upward

Figure 4.1 ERP lifecycle model (Markus & Tanis, 2000)

In the first phase, the company considers adopting an ERP system. If there is

positive resonance, the selection of software and hardware will ensue. During this phase,

changes are incremental; they evolve, but are not translated into action yet. In the second

phase, existing and future business processes are modelled, creating a business blueprint.

This activity provides a major challenge because the processes are frequently not

precisely known, hence there is difficulty in comprehending and drawing the business

blueprint. Moreover, the activity is made more complex since the processes are often not

standardized. In this phase, problems are due to the ERP software designs which are

made for generic processes (Piturro, 1999). Another problem is that managers have to

make the decision whether or not to redesign the company's processes or to customize

the ERP software. Because of this, many companies have reengineered their business

processes when implementing an ERP system, and radical changes have occurred

42


4.1 The nature of ERP development and implementation processes

In examining the changes in all business activities when implementing ERP, a

discussion of an ERP system life cycle model is helpful. Overall, despite the variation of

life cycle models, their content illustrates more or less the same tendencies. The model

developed by Markus and Tanis (2000) is one of the most widely used ERP system life

cycle models. The authors segment the ERP system integration process into four phases

characterized by different activities combined with varying types of changes in business

operations. See Figure 4.1 below.

Onward and UpwardChartering Shakedown!Project

Figure 4.1 ERP lifecycle model (Markus & Tanis, 2000)

In the first phase, the company considers adopting an ERP system. If there is

positive resonance, the selection of software and hardware will ensue. During this phase,

changes are incremental; they evolve, but are not translated into action yet. In the second

phase, existing and future business processes are modelled, creating a business blueprint.

This activity provides a major challenge because the processes are frequently not

precisely known, hence there is difficulty in comprehending and drawing the business

blueprint. Moreover, the activity is made more complex since the processes are often not

standardized. In this phase, problems are due to the ERP software designs which are

made for generic processes (Piturro, 1999). Another problem is that managers have to

make the decision whether or not to redesign the company’s processes or to customize

the ERP software. Because of this, many companies have reengineered their business

processes when implementing an ERP system, and radical changes have occurred

42


(Macvittie, 2001). Toward the end of this phase, the ERP system is activated and used in

daily business operations.

The third phase describes the period from 'going live' until 'normal operation' or

`routine use' has been reached. In this phase, the project team fine tunes the performance

of the system and realizes changes in processes and procedures. This can either occur in a

radical manner or in an incremental one, depending on the decisions of the project stage

and other factors, such as inertia to change, company culture, and organizational

structure, to name but a few (Mennel, 2002).

Lastly, in the onward and upward phase, the organization seeks to achieve

continuous business improvement, which incorporates incremental changes. According to

Markus and Tanis (2000) the implementation of an ERP system is a never-ending

procedure of change with no specific outcome. After the fourth stage and the beginning

of the upgrade to the existing system, the ERP life cycle process starts all over again.

However, this time, the changes might be less radical (Mennel, 2002). In this research,

the primary focus is on stage two of the life cycle, which concentrates on the

development and design of an ERP software framework that is customized and suitable

for Southeast Asian SMEs.

4.2 Enterprise Resource Planning development foundation

When the firms introduced extensive computing in order to control and monitor

operations, many of the modules and functions worked fine until time passed and they

needed additional modules or more sophisticated features because the current version was

obsolete. When additional functionality was needed, other applications were developed or

43


(Macvittie, 2001). Toward the end of this phase, the ERP system is activated and used in

daily business operations.

The third phase describes the period from ‘going live’ until ‘normal operation’ or

‘routine use’ has been reached. In this phase, the project team fine tunes the performance

of the system and realizes changes in processes and procedures. This can either occur in a

radical manner or in an incremental one, depending on the decisions of the project stage

and other factors, such as inertia to change, company culture, and organizational

structure, to name but a few (Mennel, 2002).

Lastly, in the onward and upward phase, the organization seeks to achieve

continuous business improvement, which incorporates incremental changes. According to

Markus and Tanis (2000) the implementation of an ERP system is a never-ending

procedure of change with no specific outcome. After the fourth stage and the beginning

of the upgrade to the existing system, the ERP life cycle process starts all over again.

However, this time, the changes might be less radical (Mennel, 2002). In this research,

the primary focus is on stage two of the life cycle, which concentrates on the

development and design of an ERP software framework that is customized and suitable

for Southeast Asian SMEs.

4.2 Enterprise Resource Planning development foundation

When the firms introduced extensive computing in order to control and monitor

operations, many of the modules and functions worked fine until time passed and they

needed additional modules or more sophisticated features because the current version was

obsolete. When additional functionality was needed, other applications were developed or

43


purchased. These added modules frequently used inconsistent processes, conflicting

assumptions, and redundant data. In some cases, functional systems were developed

internally by the firms to fit the internal work processes. For SMEs, this investment in an

ERP system is typically rationalized through four factors: business processes,

consistency, economics of scale and integration. These are the four main areas that this

thesis has used as guidance throughout the development of a framework of an ERP

system for SMEs in Southeast Asia.

4.2.1 Fundamental business process

The fundamental necessity of value creation in an organization is having a

process. A business process is a group of logically related tasks that takes input and

transforms it to create output that delivers customer value. A business process is

composed of serial and parallel activities that are needed to deliver value to an

organization's customers. Business processes involve the flow of materials, information,

and business commitments within and outside of process boundaries, and are typically:

o Very dynamic, and must respond to changing customer demands and market

conditions

o Widely distributed, and span across boundaries within and between businesses.

o Long running, with a single process instance running for months or even years.

o Dependent on the judgment of humans. People perform tasks that are too difficult to

delegate to a computer for automation, or tasks that require personal interaction with

customers.

44


purchased. These added modules frequently used inconsistent processes, conflicting

assumptions, and redundant data. In some cases, functional systems were developed

internally by the firms to fit the internal work processes. For SMEs, this investment in an

ERP system is typically rationalized through four factors: business processes,

consistency, economics of scale and integration. These are the four main areas that this

thesis has used as guidance throughout the development of a framework of an ERP


4.2.1 Fundamental business process

The fundamental necessity of value creation in an organization is having a

process. A business process is a group of logically related tasks that takes input and

transforms it to create output that delivers customer value. A business process is

composed of serial and parallel activities that are needed to deliver value to an

organization’s customers. Business processes involve the flow of materials, information,

and business commitments within and outside of process boundaries, and are typically:

o Very dynamic, and must respond to changing customer demands and market

conditions

o Widely distributed, and span across boundaries within and between businesses,

o Long running, with a single process instance running for months or even years,

o Dependent on the judgment of humans. People perform tasks that are too difficult to

delegate to a computer for automation, or tasks that require personal interaction with

customers.

44


There are many ways to categorize a business process. This research will only

focus on standardized business processes, which represent a single way of doing an

activity, in which all employees do the activity the same way all of the time, across

multiple strategic business units. The advantages of standardization are lower process

overhead, less complicated information systems, and more transparency among business

units. In addition, a standardized process can be extended to represent a consistent way of

doing things that can span organizational boundaries (Momentum Software, 2003).

In an ERP system, the basics of business processes are applied to the core or

internal design of the system in many areas, such as the sales department, purchasing

department, inventory control department, and manufacturing department. In the sales

and purchasing departments, it may be necessary for employees to obtain a sales

quotation from a customer, and a supplier quotation from the vendors before issuing the

sales order and purchase order. In the inventory department, employees should fill out a

form to request any components, raw materials or products they withdraw from the

warehouse, so that the company can record any inventory motion in their stock. Last of

all, in the manufacturing department, an employee should inform the system or the

company when they inspect infected products or when products are available to ship to

customers. If the ERP system includes processing paperwork for a new employee or

payroll processing for the company, it is difficult to make these business processes visible

or descriptive; therefore defining them in a documented and logical manner is important.

45


There are many ways to categorize a business process. This research will only

focus on standardized business processes, which represent a single way of doing an

activity, in which all employees do the activity the same way all of the time, across

multiple strategic business units. The advantages of standardization are lower process

overhead, less complicated information systems, and more transparency among business

units. In addition, a standardized process can be extended to represent a consistent way of

doing things that can span organizational boundaries (Momentum Software, 2003).

In an ERP system, the basics of business processes are applied to the core or

internal design of the system in many areas, such as the sales department, purchasing

department, inventory control department, and manufacturing department. In the sales

and purchasing departments, it may be necessary for employees to obtain a sales

quotation from a customer, and a supplier quotation from the vendors before issuing the

sales order and purchase order. In the inventory department, employees should fill out a

form to request any components, raw materials or products they withdraw from the

warehouse, so that the company can record any inventory motion in their stock. Last of

all, in the manufacturing department, an employee should inform the system or the

company when they inspect infected products or when products are available to ship to

customers. If the ERP system includes processing paperwork for a new employee or

payroll processing for the company, it is difficult to make these business processes visible

or descriptive; therefore defining them in a documented and logical manner is important.

45


4.2.2 Consistency

Many firms or divisions of firms involved in the research either developed legacy

systems or purchased software packages to meet their own specific requirements and

processes. Similarly, many acquisitions and mergers that have occurred when SMEs have

grown globally have brought together firms with incompatible legacy systems. The result

was many different systems that providing different and, in many cases, inconsistent

processing. Table 4.1 illustrates a situation in which each firm has different Financial

(FS), Human Resource (HR), Inventory (IV), Production (PD), and Stock Management

(SM) software (modules). The table illustrates the situation in many firms, where some

system components are common across companies while others, such as the financial

component, are unique for each company. The result is that there is inconsistent and

conflicting information and multiple systems that are difficult to maintain and complex to

interpret, since the timing and processes may be different for each.

Company Company Company Company Company A

Financial FS 1 FS2 FS3 FS4 FS5 Human Resource HR1 HR2 HR3 HR4 HR5 Inventory IV 1 IV2 IV2 IV3 IV 1 Production PD 1 PD2 PD3 PD4 PD5 Stock SM1 SM2 SM3 SM2 SM4 Management

Table 4.1 Typical legacy system status of five selected small companies in Southeast Asia

Thus, the second major task of an ERP system for SMEs in Southeast Asia is to

create a system that utilizes consistent data and processes for firms. In the typical

application, the data can be modified with appropriate security and controls using the

transactions available. Likewise, consistent processes allow global customers, employees,

and suppliers to use the same order entry procedure, regardless of where they enter the

46


4.2.2 Consistency

Many firms or divisions of firms involved in the research either developed legacy

systems or purchased software packages to meet their own specific requirements and

processes. Similarly, many acquisitions and mergers that have occurred when SMEs have

grown globally have brought together firms with incompatible legacy systems. The result

was many different systems that providing different and, in many cases, inconsistent

processing. Table 4.1 illustrates a situation in which each firm has different Financial

(FS), Fluman Resource (HR), Inventory (IV), Production (PD), and Stock Management

(SM) software (modules). The table illustrates the situation in many firms, where some

system components are common across companies while others, such as the financial

component, are unique for each company. The result is that there is inconsistent and

conflicting information and multiple systems that are difficult to maintain and complex to

interpret, since the timing and processes may be different for each.

CompanyA

CompanyB

CompanyC

CompanyD

CompanyE

Financial FS1 FS2 FS3 FS4 FS5Human Resource HR1 HR2 HR3 HR4 HR5Inventory IV1 IV2 IV2 IV3 IV1Production PD1 PD2 PD3 PD4 PD5StockManagement SMI SM2 SM3 SM2 SM4

Table 4.1 Typical legacy system status of five selected small companies in Southeast Asia

Thus, the second major task of an ERP system for SMEs in Southeast Asia is to

create a system that utilizes consistent data and processes for firms. In the typical

application, the data can be modified with appropriate security and controls using the

transactions available. Likewise, consistent processes allow global customers, employees,

and suppliers to use the same order entry procedure, regardless of where they enter the

46


order. Such a unified perspective offers senior management a consistent and integrated

view of the firm.

4.2.3 Economics of Scale

Bowersox et al., (2003) states that as firms merge and expand globally,

management makes increasing demands to take advantage of global scale economies

through resource validation. An ERP system for SMEs in Southeast Asia should offer

firms potential economies of scale in several ways. First, a single centralized processor or

network of decentralized processors with common configured hardware offers the

potential for substantial procurement and maintenance scale economies. Second, the

centralized ERP systems approach offers significant software scale economy benefits

since only a limited number of software licenses are necessary, with all divisions and

regions using the same application. Another beneficial result is that of the reduced

personnel required to implement and maintain a common ERP system. Finally, the

centralized ERP systems approach increases the potential for a multidivisional firm to

implement shared resources and services across divisions. The ability to review the

production, storage, and transportation resource requirement of multiple divisions in the

common system increases the potential for the sharing of critical resources.

4.2.4 Integration

Enhancing system integration both within the firms and enterprises and between

suppliers and customers is surely another "must have" for ERP development for SMEs in

Southeast Asia. Internal integration results from a common integrated database and the

47


order. Such a unified perspective offers senior management a consistent and integrated

view of the firm.

4.2.3 Economics of Scale

Bowersox et al., (2003) states that as firms merge and expand globally,

management makes increasing demands to take advantage of global scale economies

through resource validation. An ERP system for SMEs in Southeast Asia should offer

firms potential economies of scale in several ways. First, a single centralized processor or

network of decentralized processors with common configured hardware offers the

potential for substantial procurement and maintenance scale economies. Second, the

centralized ERP systems approach offers significant software scale economy benefits

since only a limited number of software licenses are necessary, with all divisions and

regions using the same application. Another beneficial result is that of the reduced

personnel required to implement and maintain a common ERP system. Finally, the

centralized ERP systems approach increases the potential for a multidivisional firm to

implement shared resources and services across divisions. The ability to review the

production, storage, and transportation resource requirement of multiple divisions in the

common system increases the potential for the sharing of critical resources.

4.2.4 Integration

Enhancing system integration both within the firms and enterprises and between

suppliers and customers is surely another “must have” for ERP development for SMEs in

Southeast Asia. Internal integration results from a common integrated database and the

47


implementation of common processes across divisions and regions. Typical common

processes included in ERP systems are order entry, order processing, and warehouse

management. Such commonality offers the capability to merge processes and provide

major customers with a common and consistent interface with the firm.

4.3 Conceptual framework development

DeLone and McLean (1992) conducted an extensive literature review on hundreds

of empirical studies published in a number of top Information System journals. One of

the most important of these classifies the dimensions of an Information System success

into six categories, as shown in Figure 4.2. In this figure, system quality and information

quality singularly and jointly affect both use and user satisfaction, while use and user

satisfaction have a positive or negative impact on the other. Use and user satisfaction are

direct antecedents of individual impact. Lastly, this impact on individual performances

should eventually affect the organization's performance.

Moreover, in an involuntary situation of using an integrated manufacturing

system, user satisfaction leads to use, rather than use stimulating user satisfaction

(Baroudi and Davis 1986). Thus, DeLone and McLean's model has a causal and temporal

relationship between each stage. They claim that the causal relationships that exist

between the stages of communication also pertain to the categories of measurement.

Furthermore, ERP research now accepts that technical system quality is necessary, but

not sufficient to ensure its success; however, the DeLone and McLean model might be

seen as suggesting that technical system quality is sufficient.

48


implementation of common processes across divisions and regions. Typical common

processes included in ERP systems are order entry, order processing, and warehouse

management. Such commonality offers the capability to merge processes and provide

major customers with a common and consistent interface with the firm.

4.3 Conceptual framework development

DeLone and McLean (1992) conducted an extensive literature review on hundreds

of empirical studies published in a number of top Information System journals. One of

the most important of these classifies the dimensions of an Information System success

into six categories, as shown in Figure 4.2. In this figure, system quality and information

quality singularly and jointly affect both use and user satisfaction, while use and user

satisfaction have a positive or negative impact on the other. Use and user satisfaction are

direct antecedents of individual impact. Lastly, this impact on individual performances

should eventually affect the organization’s performance.

Moreover, in an involuntary situation of using an integrated manufacturing

system, user satisfaction leads to use, rather than use stimulating user satisfaction

(Baroudi and Davis 1986). Thus, DeLone and McLean’s model has a causal and temporal

relationship between each stage. They claim that the causal relationships that exist

between the stages of communication also pertain to the categories of measurement.

Furthermore, ERP research now accepts that technical system quality is necessary, but

not sufficient to ensure its success; however, the DeLone and McLean model might be

seen as suggesting that technical system quality is sufficient.

48


Organizational Impact

Information Quality

Figure 4.2 DeLone and McLean's Information System success model.

User satisfaction is defined as "the extent to which users believe the information

system available to them meets their information requirements" (Ives et al., 1980). Based

on descriptions and evaluations of five existing management information research

frameworks, Ives et al. (1980) proposed inserting a more comprehensive research model

into the framework. There are three information system environments: (1) user

environment, which is described by the characteristics of the user, user's organization,

and user's task; (2) information system development environment, which includes the

development methods and techniques, design personnel and their characteristics, and the

organization and management of the information system; and (3) information system

operation environment, which incorporates the resources necessary for its operations.

The information subsystem is the output of the development process. This process

is comprised of the interactions between the information system and the environments.

The classes of process variables are: (1) the use process, which focuses on the usage of

the system by the primary user, and is usually measured by the task accomplishment

leading to an effect on the productivity and decision making quality; (2) the development

process, which yields the information system by selecting and applying organizational

resources within environmental constraints; and (3) the operation process, which is the

physical operation of the information system and is primarily a function of the operations

49


InformationQuality

IndividualImpact

UserSatisfaction.<■.... i . a n a a . - w i a .M

SystemQuality Use

OrganizationalImpact

Figure 4.2 DeLone and McLean’s Information System success model.

User satisfaction is defined as “the extent to which users believe the information

system available to them meets their information requirements” (Ives et al., 1980). Based

on descriptions and evaluations of five existing management information research

frameworks, Ives et al. (1980) proposed inserting a more comprehensive research model

into the framework. There are three information system environments: (1) user

environment, which is described by the characteristics of the user, user’s organization,

and user’s task; (2) information system development environment, which includes the

development methods and techniques, design personnel and their characteristics, and the

organization and management of the information system; and (3) information system

operation environment, which incorporates the resources necessary for its operations.

The information subsystem is the output of the development process. This process

is comprised of the interactions between the information system and the environments.

The classes of process variables are: (1) the use process, which focuses on the usage of

the system by the primary user, and is usually measured by the task accomplishment

leading to an effect on the productivity and decision making quality; (2) the development

process, which yields the information system by selecting and applying organizational

resources within environmental constraints; and (3) the operation process, which is the

physical operation of the information system and is primarily a function of the operations

49


resource, with interfaces at the boundaries of other environments in the form of personal

interactions.

All three of the environments, the three processes and the information subsystem

exist within an organizational environment and an external environment. In their model

(Figure 4.3), Ives et al. claim that the environmental characteristics define the resources

and constraints, which dictate the scope and form of each information subsystem (Ives et

al., 1980).

The External Environment

The Organizational Environment

User Environment

IS Development Environment

IS Operations Environment

The User ( Process

The Operation Process

The Information Subsystem

(ISS)

Figure 4.3 Ives, Hamilton, and Davis's Information System research model

50


resource, with interfaces at the boundaries of other environments in the form of personal

interactions.

All three of the environments, the three processes and the information subsystem

exist within an organizational environment and an external environment. In their model

(Figure 4.3), Ives et al. claim that the environmental characteristics define the resources

and constraints, which dictate the scope and form of each information subsystem (Ives et

al., 1980).

The External Environment

The Organizational Environment

UserEnvironment

The \ Information V Subsystem i

(ISS) /

DevelopmentEnvironment

The Operation Process

IS Operations Environment

Figure 4.3 Ives, Hamilton, and Davis’s Information System research model

50


From DeLone and McLean' IS success model, the dependent variables that

measure ERP system implementation success is defined. The theoretical bases for this

study include Ives et al.'s information system research model combined with prior ERP

literature to serve as the basis for independent variable identification, and the McLean

and DeLone's information success model to serve as the basis for dependent variable

definition.

Through combining and adapting constraints, benefits, and characteristics of

SMEs with the existing literature, the strategic change framework is developed and

depicted in Figure 4.4. This framework emphasizes the proper implementation of an ERP

system in Southeast Asian SMEs, and can be categorized into three main parts: user

specification, system specification and organizational specification.

4.3.1 User specification

According to Zhang et al. (2004), the people element greatly impacts

organizational information system implementation and deployment. They reminded that a

lack of care about stakeholders within organizations will result in disaster. As such, a lack

of user education and training and user involvement in the processes of ERP system

implementation can also lead to failure. There are three main factors to consider when

developing an effective ERP system framework for SMEs in Southeast Asia: education

and training, user involvement, and user characteristics.

51


From DeLone and McLean’ IS success model, the dependent variables that

measure ERP system implementation success is defined. The theoretical bases for this

study include Ives et al.’s information system research model combined with prior ERP

literature to serve as the basis for independent variable identification, and the McLean

and DeLone’s information success model to serve as the basis for dependent variable

definition.

Through combining and adapting constraints, benefits, and characteristics of

SMEs with the existing literature, the strategic change framework is developed and

depicted in Figure 4.4. This framework emphasizes the proper implementation of an ERP

system in Southeast Asian SMEs, and can be categorized into three main parts: user

specification, system specification and organizational specification.


According to Zhang et al. (2004), the people element greatly impacts

organizational information system implementation and deployment. They reminded that a

lack of care about stakeholders within organizations will result in disaster. As such, a lack

of user education and training and user involvement in the processes of ERP system

implementation can also lead to failure. There are three main factors to consider when

developing an effective ERP system framework for SMEs in Southeast Asia: education

and training, user involvement, and user characteristics.

51


ERP System Advantages

Disadvantages Implementation

Practice Differences in Regions Unique Requirements in Southeast Asia

ERP Constraints in Southeast Asian SMEs Lack of Resources

Employee Expertise Uncertainty of External Communication

ERP Implementation Framework

User Specification

User Involvement User Characteristics

Education and Training

Organization Specification

Responsiveness Cost Management

Organizational Culture Top Management Support

Reengineering Business Process

System Specification

TimeCosts

Intuitive System Role-based Portals Information Quality

Personal Productivity Platform Deployment

Software Responsiveness

Figure 4.4: Conventual framework for ERP imnlementation in Southeast Ash

52


ERP SystemAdvantages

D isadvantagesImplementation

Practice Differences in Regions Unique Requirements in Southeast Asia

ERP Constraints in Southeast Asian SMEsLack of R esources

Employee Expertise Uncertainty of External Communication

ERP Implementation Framework

User Specification

User Involvement User Characteristics

Education and Training

Organization Specification

R esponsiveness Cost M anagem ent

Organizational Culture Top M anagem ent Support

Reengineering Business Process

System Specification

Time Costs

Intuitive System Role-based Portals Information Quality

Personal Productivity Platform Deployment

Software R esponsiveness

Figure 4.4: Conceptual framework for ERP implementation in Southeast Asia

52


Education and training refers to the process of providing management and

employees with the logic and overall concepts of the ERP system (Mandal and

Gunasekaran, 2002). With a good knowledge of the system flow, business processes in

the company and good training on software usage, users can make the system perform to

meet expectations.

User involvement refers to the participation in the system development and

implementation processes by representatives of the target user groups (Zhang et al.,

2004). People need to use systems that work the way they do, so if the user is involved in

the design and development stages of the ERP system, it will greatly increase the

familiarity and effectiveness of the system.

According to the Ives et al (1980) research model, the characteristics of different

users may also affect the ERP system design and development, including education level,

sexes, and age, as well as technical-oriented or business-oriented users. Therefore, the

ERP system developer should consider these factors when designing a successful ERP

system for Southeast Asian countries.

4.3.2 Organization specification

Five dimensions of organizational initiative propositions are identified as follows,

and include reengineering business processes, top management support, organizational

culture, cost management and responsiveness:

(1) Reengineering focuses on changing existing business practices. Strategic

reengineering addresses this situation by focusing on designing the organization to

compete. This is accomplished by undertaking strategic initiatives at the start of the

53


Education and training refers to the process of providing management and

employees with the logic and overall concepts of the ERP system (Mandal and

Gunasekaran, 2002). With a good knowledge of the system flow, business processes in

the company and good training on software usage, users can make the system perform to

meet expectations.

User involvement refers to the participation in the system development and

implementation processes by representatives of the target user groups (Zhang et al.,

2004). People need to use systems that work the way they do, so if the user is involved in

the design and development stages of the ERP system, it will greatly increase the

familiarity and effectiveness of the system.

According to the Ives et al (1980) research model, the characteristics of different

users may also affect the ERP system design and development, including education level,

sexes, and age, as well as technical-oriented or business-oriented users. Therefore, the

ERP system developer should consider these factors when designing a successful ERP

system for Southeast Asian countries.

4.3.2 Organization specification

Five dimensions of organizational initiative propositions are identified as follows,

and include reengineering business processes, top management support, organizational

culture, cost management and responsiveness:

(1) Reengineering focuses on changing existing business practices. Strategic

reengineering addresses this situation by focusing on designing the organization to

compete. This is accomplished by undertaking strategic initiatives at the start of the

53


reengineering process. These initiatives seek to provide an understanding of the markets,

competitors, and the position of the organization within the industry.

(2) The CEO of each participating company is involved in most strategic decisions and

major operational decision-making processes in the SMEs. ERP system implementation

needs top management commitment and support, starting with the initiation of the idea

and continuing until its successful implementation (Bingi, Sharma, &Godla, 1999; T.H.

Davenport, 1998; Xu, Nord, Brown, &Nord, 2002).

(3) Living and operating in different cultures will definitely lead to differences in

organizational culture, which varies between the Southeast Asian and North America

regions, and large enterprises and small enterprises.

(4) A full cost management model must be supported by an ERP system to provide a

comprehensive visibility of all costs in the business at the organizational level.

(5) A business needs to be in a position to respond to new requirements, and the

organizational system needs to be ready for it. This has two significant implications on

organizational systems: the first is flexibility, in that changes to Southeast Asian SMEs

are easy to apply as the business adapts to new requirements; the second is that the

enterprises are in a position to promptly accept enhancements that may be necessary to

support local rule or policy changes.

Smaller organizations tend to be more flexible than larger ones, because their

organizational structures are less rigid and can be changed more easily. This also applies

to their business processes. Because of this, and also because they face greater

environmental uncertainty due to lesser influence (Gable & Stewart, 1999), smaller

organizations have the need, and also the means, to be more flexible. As the information

54


reengineering process. These initiatives seek to provide an understanding of the markets,

competitors, and the position of the organization within the industry.

(2) The CEO of each participating company is involved in most strategic decisions and

major operational decision-making processes in the SMEs. ERP system implementation

needs top management commitment and support, starting with the initiation of the idea

and continuing until its successful implementation (Bingi, Sharma, &Godla, 1999; T.H.

Davenport, 1998; Xu, Nord, Brown, &Nord, 2002).

(3) Living and operating in different cultures will definitely lead to differences in

organizational culture, which varies between the Southeast Asian and North America

regions, and large enterprises and small enterprises.

(4) A full cost management model must be supported by an ERP system to provide a

comprehensive visibility of all costs in the business at the organizational level.

(5) A business needs to be in a position to respond to new requirements, and the

organizational system needs to be ready for it. This has two significant implications on

organizational systems: the first is flexibility, in that changes to Southeast Asian SMEs

are easy to apply as the business adapts to new requirements; the second is that the

enterprises are in a position to promptly accept enhancements that may be necessary to

support local rule or policy changes.

Smaller organizations tend to be more flexible than larger ones, because their

organizational structures are less rigid and can be changed more easily. This also applies

to their business processes. Because of this, and also because they face greater

environmental uncertainty due to lesser influence (Gable & Stewart, 1999), smaller

organizations have the need, and also the means, to be more flexible. As the information

54


systems in use must be aligned with the business strategy and the current business

processes, they must also offer more flexibility in order to fulfil this requirement.

SMEs are usually much more informal and unstructured in their management

style or definition of strategy than larger companies. This allows them to compete in a

very dynamic and competitive environment through high flexibility and responsiveness.

This is a major reason for SMEs to be always close to their markets and customers.

4.3.3 System specification

In this section eight key areas of influence in the evolution of business practices

are considered, including changes based on a survey of these areas. It then looks at the

methods through which ERP systems support these areas. The requirements of the ERP

system are different from company to company, but the following eight areas seem to

highlight the areas of ERP system specification for SMEs in Southeast Asia, from which

a specific and detailed requirement checklist can be created (Neville, 2004).

1. Time. Almost every aspect of business is under time pressure. Customers are

demanding, and time is money. Efficiency is measured in time, and

manufacturing operations have to operate faster and cheaper then ever before.

SMEs', manufacturers have to work within ever shortening order lead times. This

means an ERP system for SMEs has to support de-coupled manufacturing and

delivery date forecasting, as well as demand management.

2. Costs. Costs are always under pressure; they always were, and always will be.

Most companies are now faced with the more difficult task of achieving more

with the same or less, and that will involve rethinking the ways in which things

55


systems in use must be aligned with the business strategy and the current business

processes, they must also offer more flexibility in order to fulfil this requirement.

SMEs are usually much more informal and unstructured in their management

style or definition of strategy than larger companies. This allows them to compete in a

very dynamic and competitive environment through high flexibility and responsiveness.

This is a major reason for SMEs to be always close to their markets and customers.

4.3.3 System specification

In this section eight key areas of influence in the evolution of business practices

are considered, including changes based on a survey of these areas. It then looks at the

methods through which ERP systems support these areas. The requirements of the ERP

system are different from company to company, but the following eight areas seem to

highlight the areas of ERP system specification for SMEs in Southeast Asia, from which

a specific and detailed requirement checklist can be created (Neville, 2004).

1. Time. Almost every aspect of business is under time pressure. Customers are

demanding, and time is money. Efficiency is measured in time, and

manufacturing operations have to operate faster and cheaper then ever before.

SMEs’,manufacturers have to work within ever shortening order lead times. This

means an ERP system for SMEs has to support de-coupled manufacturing and

delivery date forecasting, as well as demand management.

2. Costs. Costs are always under pressure; they always were, and always will be.

Most companies are now faced with the more difficult task of achieving more

with the same or less, and that will involve rethinking the ways in which things

55


are done. An ERP system for SMEs must never be a constraint; it must provide

positive support to process optimization and cost management. A full cost model

should be supported by an ERP system to provide the comprehensive visibility of

all costs in the business, for example, initial costs, production cost, setup cost,

profit, and utilities cost. Another aspect of cost is the ERP cost itself. Packaged

ERP software is always too expensive for SMEs, especially SMEs in Southeast

Asian countries. The developer of the ERP system should bear in mind that

programming the software with free programming languages, free database

programming languages and open-source codes is very important and essential for

the development of an ERP system for Southeast Asian SMEs.

3. Responsiveness. A business in Southeast Asia needs to be in a position to respond

to new requirements, and the ERP system needs to be ready for it. This has two

significant implications for ERP systems: the first is flexibility, in that changes to

the ERP must be easy to apply as the business adapts to new requirements; the

second is that the ERP software must be in a position to promptly provide the

ERP enhancement that may be necessary in order to support local rule changes.

4. Personal Productivity. People need to use systems that work the way they do, so

an ERP system must be configurable to support business processes and individual

roles. Ease of use is more than user-friendly screens, it is about minimizing the

cost of doing a job, through the automation of data collection, minimizing

keystrokes and providing the information where and when it is needed.

5. Platform deployment. Browser-based (web-based or thin client) applications are

assumed to provide low-footprint clients with centralized support. On the other

56


are done. An ERP system for SMEs must never be a constraint; it must provide

positive support to process optimization and cost management. A full cost model

should be supported by an ERP system to provide the comprehensive visibility of

all costs in the business, for example, initial costs, production cost, setup cost,

profit, and utilities cost. Another aspect of cost is the ERP cost itself. Packaged

ERP software is always too expensive for SMEs, especially SMEs in Southeast

Asian countries. The developer of the ERP system should bear in mind that

programming the software with free programming languages, free database

programming languages and open-source codes is very important and essential for

the development of an ERP system for Southeast Asian SMEs.

3. Responsiveness. A business in Southeast Asia needs to be in a position to respond

to new requirements, and the ERP system needs to be ready for it. This has two

significant implications for ERP systems: the first is flexibility, in that changes to

the ERP must be easy to apply as the business adapts to new requirements; the

second is that the ERP software must be in a position to promptly provide the

ERP enhancement that may be necessary in order to support local rule changes.

4. Personal Productivity. People need to use systems that work the way they do, so

an ERP system must be configurable to support business processes and individual

roles. Ease of use is more than user-friendly screens, it is about minimizing the

cost of doing a job, through the automation of data collection, minimizing

keystrokes and providing the information where and when it is needed.

5. Platform deployment. Browser-based (web-based or thin client) applications are

assumed to provide low-footprint clients with centralized support. On the other

56


hand, the thick client or so-called old fashioned Server/client platform is more

reliable, and it is easier to maintain for companies with local centralized support.

Fortunately, the technology exists in a realistic new hybrid platform; a slim

platform offers advantages from both thick and thin platforms, while reducing

their disadvantages. SMEs should take into account the performance, cost,

technology, and implementation limitations of running transactional systems on

different platforms.

6. Intuitive Systems. The new ERP environment means there is more data captured

at the source, and there is a wider direct use of systems to improve operational

efficiency. SMEs should no longer expect all system users to be IT experts,

particularly if they may not be with them for long, may not be direct employees or

may not even speak the local language, which are unique requirements, especially

for countries in Southeast Asia. An ERP system for SMEs in this region should be

intuitive for use in the context of the job to be done, as every company, every job

and every individual has differences.

7. Role-based portals. Once an individual performs one repetitive clerical task, a

menu-driven ERP system is acceptable. A good ERP for SMEs should allow

tasks, transactions and supporting applications, whether internal or external, to be

readily accessible from a single portal with a minimal number of keystrokes.

8. Information Quality. Since ERP system modules are intricately linked to one

another, inaccurate data input into one module will adversely affect the

functioning of the other modules. The quality of data input should equal the

quality of data output.

57


hand, the thick client or so-called old fashioned Server/client platform is more

reliable, and it is easier to maintain for companies with local centralized support.

Fortunately, the technology exists in a realistic new hybrid platform; a slim

platform offers advantages from both thick and thin platforms, while reducing

their disadvantages. SMEs should take into account the performance, cost,

technology, and implementation limitations of running transactional systems on

different platforms.

6. Intuitive Systems. The new ERP environment means there is more data captured

at the source, and there is a wider direct use of systems to improve operational

efficiency. SMEs should no longer expect all system users to be IT experts,

particularly if they may not be with them for long, may not be direct employees or

may not even speak the local language, which are unique requirements, especially

for countries in Southeast Asia. An ERP system for SMEs in this region should be

intuitive for use in the context of the job to be done, as every company, every job

and every individual has differences.

7. Role-based portals. Once an individual performs one repetitive clerical task, a

menu-driven ERP system is acceptable. A good ERP for SMEs should allow

tasks, transactions and supporting applications, whether internal or external, to be

readily accessible from a single portal with a minimal number of keystrokes.

8. Information Quality. Since ERP system modules are intricately linked to one

another, inaccurate data input into one module will adversely affect the

functioning of the other modules. The quality of data input should equal the

quality of data output.

57


4.4 Discussion

As proposed in the previous section, organizational specification, user

specification, and ERP system specification, as well as the characteristics of SMEs and

ERP systems themselves impact the development of an ERP system conceptual

framework among SMEs in Southeast Asia. This section includes further discussion on

the previous section of this chapter.

4.4.1 Southeast Asian SME features

SME features can be specified as follows: low levels of organizational hierarchy,

CEO involvement in operational decisions, "blurred" departmental walls, short lead-time

in manufacturing, and high staff turnover. In his study of Southeast Asian SMEs, Huin

(2004) found that the average number of structural hierarchies found in SMEs is

relatively low. The CEO is involved in most strategic decisions and major operational

decision-making processes in the SME. At the middle level are two distinct groups of

direct operational managers: the professionals and the "up-graders." The former have

professional education and rich experience, while most members of the latter group are

managers with years of related work experience and an intimate knowledge of the

operational tasks. At the execution level are the professionals. With globalization and

increasing competition, more professionals are hired for these line execution jobs. This

group is usually made up of IT experts, and spearheads the ERP project adoption.

SMEs also have "blurred" department walls, a fact which often results in a

conflict of interests. The overlap of departmental boundaries can, indeed, result in some

58


4.4 Discussion

As proposed in the previous section, organizational specification, user

specification, and ERP system specification, as well as the characteristics of SMEs and

ERP systems themselves impact the development of an ERP system conceptual

framework among SMEs in Southeast Asia. This section includes further discussion on

the previous section of this chapter.

4.4.1 Southeast Asian SME features

SME features can be specified as follows: low levels of organizational hierarchy,

CEO involvement in operational decisions, “blurred" departmental walls, short lead-time

in manufacturing, and high staff turnover. In his study of Southeast Asian SMEs, Huin

(2004) found that the average number of structural hierarchies found in SMEs is

relatively low. The CEO is involved in most strategic decisions and major operational

decision-making processes in the SME. At the middle level are two distinct groups of

direct operational managers: the professionals and the “up-graders.” The former have

professional education and rich experience, while most members of the latter group are

managers with years of related work experience and an intimate knowledge of the

operational tasks. At the execution level are the professionals. With globalization and

increasing competition, more professionals are hired for these line execution jobs. This

group is usually made up of IT experts, and spearheads the ERP project adoption.

SMEs also have “blurred” department walls, a fact which often results in a

conflict of interests. The overlap of departmental boundaries can, indeed, result in some

58


benefits for the SMEs. However, managers must contain the "blurred" department wall

issue when managing a more formal and structured system such as ERP.

Production modes in Southeast Asian SMEs can also affect the adoption and

implementation of an ERP system. The interdependency between US- and Europe-based

first- and second-tier companies and Southeast Asian-based third-tier companies impacts

how the SME's internal and external supply chain network is designed. To maintain a

competitive advantage, the operational characteristics of SMEs often differ from those

found in larger corporations, which have better control over their sales and production

forecasts. All of this has strong implications on how and whether generic ERP systems

can be adopted and implemented by Southeast Asian SMEs.

Planning and forecasting in SMEs have a direct effect on the decision to adopt

and employ ERP systems. Because Southeast Asian SMEs often operate as third-tier

supporting manufacturers, the finished items produced largely depend on what the larger

manufacturers are selling. As a result, the yearly planning forecast only serves as a rough

guide to the direction of sales and production rather than the true production plans of the

enterprise. Consequently, this could disrupt the entire project implementation, since the

master production scheduling process is the primary driver in ERP.

In many Southeast Asian countries, the industrial sector has exhibited tremendous

growth in the last decade. According to the Singapore Economic Development Board, the

region had the highest foreign direct investment worldwide prior to 1997/1998. In

countries with a relatively small population, such as Singapore and Malaysia, labour has

become a crucial input. However, there has been an increasing labour turnover rate in

SMEs in the region. This partly reflects how Southeast Asian SMEs manage their labour

59


benefits for the SMEs. However, managers must contain the “blurred” department wall

issue when managing a more formal and structured system such as ERP.

Production modes in Southeast Asian SMEs can also affect the adoption and

implementation of an ERP system. The interdependency between US- and Europe-based

first- and second-tier companies and Southeast Asian-based third-tier companies impacts

how the SME’s internal and external supply chain network is designed. To maintain a

competitive advantage, the operational characteristics of SMEs often differ from those

found in larger corporations, which have better control over their sales and production

forecasts. All of this has strong implications on how and whether generic ERP systems

can be adopted and implemented by Southeast Asian SMEs.

Planning and forecasting in SMEs have a direct effect on the decision to adopt

and employ ERP systems. Because Southeast Asian SMEs often operate as third-tier

supporting manufacturers, the finished items produced largely depend on what the larger

manufacturers are selling. As a result, the yearly planning forecast only serves as a rough

guide to the direction of sales and production rather than the true production plans of the

enterprise. Consequently, this could disrupt the entire project implementation, since the

master production scheduling process is the primary driver in ERP.

In many Southeast Asian countries, the industrial sector has exhibited tremendous

growth in the last decade. According to the Singapore Economic Development Board, the

region had the highest foreign direct investment worldwide prior to 1997/1998. In

countries with a relatively small population, such as Singapore and Malaysia, labour has

become a crucial input. However, there has been an increasing labour turnover rate in

SMEs in the region. This partly reflects how Southeast Asian SMEs manage their labour

59


resources. Also, as labour is considered a principal input in ERP projects, high labour

turnover rates could negatively impact ERP implementation in SMEs.

4.4.2 ERP Systems in Southeast Asian SMEs

Despite the fact that ERP software has been around for years, and is set as a

standard in operating equipment in most companies in the US and Europe, the

applications of ERP systems are not popular among business organizations in Southeast

Asia. ERP is barely heard of among the scores of financial managers of SMEs in the

region, let alone implemented. A delay in ERP's use comes from the million-dollar price

tags and lengthy installation periods, even when consideration is given to the benefits of

an ERP system. There are many instances where these financial managers have turned to

less expensive, function-specific software more willingly than to a full-blown ERP

system implementation.

4.4.3 Implications for business practitioners

Enterprise resource planning is just an instrument, a resource with a very high

potential at best. Usually, as indicated in this thesis, ERP systems can also be an

obstruction. Therefore, SME managers should strive to acquire knowledge sufficient to

understanding the business improvement opportunities that an ERP system can provide.

This involves ensuring that managers consult with and are surrounded by knowledgeable

experts and to secure that ERP system ventures have a strategic fit and purpose.

Managers should also be prepared to be involved in large investments, with a relatively

60


resources. Also, as labour is considered a principal input in ERP projects, high labour

turnover rates could negatively impact ERP implementation in SMEs.

4.4.2 ERP Systems in Southeast Asian SMEs

Despite the fact that ERP software has been around for years, and is set as a

standard in operating equipment in most companies in the US and Europe, the

applications of ERP systems are not popular among business organizations in Southeast

Asia. ERP is barely heard of among the scores of financial managers of SMEs in the

region, let alone implemented. A delay in ERP’s use comes from the million-dollar price

tags and lengthy installation periods, even when consideration is given to the benefits of

an ERP system. There are many instances where these financial managers have turned to

less expensive, function-specific software more willingly than to a full-blown ERP

system implementation.

4.4.3 Implications for business practitioners

Enterprise resource planning is just an instrument, a resource with a very high

potential at best. Usually, as indicated in this thesis, ERP systems can also be an

obstruction. Therefore, SME managers should strive to acquire knowledge sufficient to

understanding the business improvement opportunities that an ERP system can provide.

This involves ensuring that managers consult with and are surrounded by knowledgeable

experts and to secure that ERP system ventures have a strategic fit and purpose.

Managers should also be prepared to be involved in large investments, with a relatively

60


obscure pay-back and pay-back period. However, this does not mean committing to ERP

systems investments without scrutiny.

Southeast Asian SMEs managers also consider the value of uniqueness.

Uniqueness can come from the system and/or the use of the system, but uniqueness is

always in relation to competitors' cost, regardless of the protection strategy. Managers

must understand what system uniqueness is worth to them, and asks themselves: is the

ERP system a strategic resource? Or is it something needed simply to stay in the game?

Furthermore, ERP system investments challenge not just the finances of the firm, but also

the existing knowledge bases and culture. Managers must make sure they are prepared to

pursue the potential improvements in the face of these challenges.

In selecting an ERP system for an organization, it is important that SME

managers consider that there are also steps and enterprise evaluations that should be

made. Davenport (1996) recommends the consideration of two important factors in

selecting ERP software: (1) given the organizational, technological and behavioral impact

of ERP systems, a broad perspective of the ERP systems adoption implementation

process is needed; and (2) certain issues specific to these systems have to be taken into

account, such as the unsuitability, most of the time, of ERP system software

modifications in meeting institutionalized business operations and the extent of business

processes requiring re-engineering prior to the implementation of the software.

Included in the first consideration is a clear enterprise vision that this choice will

clarify the goals of the organization (Holland & Light, 1999). This is particularly

important for SMEs who need to maximize their resources and invest wisely. This is the

reason why Stefanou (1999) suggests that organizational constraints should first be

61


obscure pay-back and pay-back period. However, this does not mean committing to ERP

systems investments without scrutiny.

Southeast Asian SMEs managers also consider the value of uniqueness.

Uniqueness can come from the system and/or the use of the system, but uniqueness is

always in relation to competitors' cost, regardless of the protection strategy. Managers

must understand what system uniqueness is worth to them, and asks themselves: is the

ERP system a strategic resource? Or is it something needed simply to stay in the game?

Furthermore, ERP system investments challenge not just the finances of the firm, but also

the existing knowledge bases and culture. Managers must make sure they are prepared to

pursue the potential improvements in the face of these challenges.

In selecting an ERP system for an organization, it is important that SME

managers consider that there are also steps and enterprise evaluations that should be

made. Davenport (1996) recommends the consideration of two important factors in

selecting ERP software: (1) given the organizational, technological and behavioral impact

of ERP systems, a broad perspective of the ERP systems adoption implementation

process is needed; and (2) certain issues specific to these systems have to be taken into

account, such as the unsuitability, most of the time, of ERP system software

modifications in meeting institutionalized business operations and the extent of business

processes requiring re-engineering prior to the implementation of the software.

Included in the first consideration is a clear enterprise vision that this choice will

clarify the goals of the organization (Holland & Light, 1999). This is particularly

important for SMEs who need to maximize their resources and invest wisely. This is the

reason why Stefanou (1999) suggests that organizational constraints should first be

61


evaluated and addressed. Managers should also address internal problems, such as

resistance to change, prestige, job security feelings and departmental politics that may

hinder the success of the change.

4.5 Customized Novel ERP System for Southeast Asian SMEs

In developing a Novel ERP system (NERP) for the SMEs in the region discussed

previously, a unified view of data, streamlined processes, improved data integrity,

common application architecture, and the complexity of implementing an ERP system

must all be taken into consideration. It should be noted that the challenge of system

development may be overlooked by keeping the existing systems running during the

phased transition process. The system should therefore be constructed to ensure a smooth

transition during the implementation and testing processes. Based on the framework

proposed in previous sections, a Novel ERP system that satisfies the requirements and

meets the needs of SMEs in Southeast Asia has been created.


After the data has been gathered and the surveys and questionnaires received,

studies of the data and survey results need to be performed in order to explore the

common needs and identify the common problems of the chosen enterprises. Three

common processes required for the ERP systems are summarized in the detailed analysis

of collected data from the representative SMEs in Southeast Asia. These three common

processes are the revenue process, expenditure process, and production process. All three

62


evaluated and addressed. Managers should also address internal problems, such as

resistance to change, prestige, job security feelings and departmental politics that may

hinder the success of the change.

4.5 Customized Novel ERP System for Southeast Asian SMEs

In developing a Novel ERP system (NERP) for the SMEs in the region discussed

previously, a unified view of data, streamlined processes, improved data integrity,

common application architecture, and the complexity of implementing an ERP system

must all be taken into consideration. It should be noted that the challenge of system

development may be overlooked by keeping the existing systems running during the

phased transition process. The system should therefore be constructed to ensure a smooth

transition during the implementation and testing processes. Based on the framework

proposed in previous sections, a Novel ERP system that satisfies the requirements and

meets the needs of SMEs in Southeast Asia has been created.


After the data has been gathered and the surveys and questionnaires received,

studies of the data and survey results need to be performed in order to explore the

common needs and identify the common problems of the chosen enterprises. Three

common processes required for the ERP systems are summarized in the detailed analysis

of collected data from the representative SMEs in Southeast Asia. These three common

processes are the revenue process, expenditure process, and production process. All three

62


seem to have a causal relationship with each other, and they appear to have complex

interior relationships with the sub-processes.

The revenue process starts with two ways of communication and information

gathering between sales agents and customers. After the negotiation or sales quotation are

completed, the sales invoice is issued, and the decision of whether to purchase the raw

material or start production is made. Once the companies have the required amount of

products/raw material, it will be shipped to the customer with a shipping invoice and

sales invoice. The sales receipt and sales report will be obtainable once the products are

paid for by the customer, and the sales commission transaction will be sent to the human

resources department for their record.

The expenditure process is casually related to the revenue process at the time

when companies run short of products or raw materials. If the inventory shortage report

or internal order has been created from the purchase order transaction, the purchase

quotation is sent to the suppliers. When the negotiation is completed, the purchase order

is sent to the original department that placed the order. Once the purchase invoice is paid,

the purchase receipt and shipping invoice are sent out from the supplier. The received

products/raw materials are then recorded in the inventory or used in the production

process.

The production process varies from company to company, and therefore only

common tasks and processes will be covered in this research. Every product starts with

the design process, followed by the initial cost estimation. After that comes a decision

from management. If the product design is approved, the cost estimation, including the

raw material cost, production cost, initial cost, utilities cost, and labour cost are

63


seem to have a causal relationship with each other, and they appear to have complex

interior relationships with the sub-processes.

The revenue process starts with two ways of communication and information

gathering between sales agents and customers. After the negotiation or sales quotation are

completed, the sales invoice is issued, and the decision of whether to purchase the raw

material or start production is made. Once the companies have the required amount of

products/raw material, it will be shipped to the customer with a shipping invoice and

sales invoice. The sales receipt and sales report will be obtainable once the products are

paid for by the customer, and the sales commission transaction will be sent to the human

resources department for their record.

The expenditure process is casually related to the revenue process at the time

when companies run short of products or raw materials. If the inventory shortage report

or internal order has been created from the purchase order transaction, the purchase

quotation is sent to the suppliers. When the negotiation is completed, the purchase order

is sent to the original department that placed the order. Once the purchase invoice is paid,

the purchase receipt and shipping invoice are sent out from the supplier. The received

products/raw materials are then recorded in the inventory or used in the production

process.

The production process varies from company to company, and therefore only

common tasks and processes will be covered in this research. Every product starts with

the design process, followed by the initial cost estimation. After that comes a decision

from management. If the product design is approved, the cost estimation, including the

raw material cost, production cost, initial cost, utilities cost, and labour cost are

63


calculated as an expense. Afterwards, production planning, production scheduling, raw

material requirement, and labour management are determined for the preparation of the

production process. Once the products are introduced into the market, demand forecasts

are calculated based on customer demand. After all of this, the cost estimation process,

planning and scheduling process, and labour scheduling will be repeated again to

optimize the profit.

These processes can then be summarized in three cycles for easier demonstration,

namely the revenue cycle, expenditure cycle, and production cycle.

64


calculated as an expense. Afterwards, production planning, production scheduling, raw

material requirement, and labour management are determined for the preparation of the

production process. Once the products are introduced into the market, demand forecasts

are calculated based on customer demand. After all of this, the cost estimation process,

planning and scheduling process, and labour scheduling will be repeated again to

optimize the profit.

These processes can then be summarized in three cycles for easier demonstration,

namely the revenue cycle, expenditure cycle, and production cycle.

64


Commission

1.0

Sales

Information Gathered

Answer all 1 Questions

(Information)

Purchase

Payment Documents

4.0

Sales Receipt

Purchasing Production Needed? Needed?

Expenditure Cycle

Shipping Invoice

Sales Receipt-

Products Information

30

Sales invoice

Figure 4.5 Relationships within the Revenue Cycle

The revenue cycle covers all of the sales activities that are under the four main

cycles. This includes the sale process, which is divided into Sale Quotation and Sale

Order. It also includes the shipping process, which is in the Picking List and Delivery

Order. Net is the payment process consisting of the sales invoice and payment

confirmation. Finally, there is the sales receipt which gives the customer receipts. Figure

4.5 shows how this cycle operates.

65


Com m ission

InformationG athered

ProductionN eeded?

PurchasingN eeded?

A nsw er all Q uestions

(Information)

ProductsInformationP u rch ase

Shipping Invoice

S a le s R eceiptS a le s ti

Paym ent D ocum ents

S a le s Ri

CycleCycle

Shipping

2 0

Figure 4.5 Relationships within the Revenue Cycle

The revenue cycle covers all of the sales activities that are under the four main

cycles. This includes the sale process, which is divided into Sale Quotation and Sale

Order. It also includes the shipping process, which is in the Picking List and Delivery

Order. Net is the payment process consisting of the sales invoice and payment

confirmation. Finally, there is the sales receipt which gives the customer receipts. Figure

4.5 shows how this cycle operates.

65


Purchase Order Copies

Departments

A

Inventory Shortage Report


Product Reserve

Revenue Cycle

1.

Products Received

Report to Inventory

1.0

Purchase Quotation

2.0

Purchase., •..: Order

10

ReceiVe

Purchase Current ''Stock


Raw Materiah

RI:eduction Cycle

Products Received

Shipping Invoice

Report

_Y Sales Invoices 4.0

Purchase Invoice.

Payment

5.0

::.purchase Receipt

Supplier

Payment

Figure 4.6 Relationship of Expenditure Cycle

The expenditure cycle, as shown in figure 4.6, covers all purchasing activities,

including components and raw materials. In this cycle, five main processes are occurring,

these being: the Purchase Quotation process, which gives the Purchase Quotation and the

item's information; the Purchase Order process, which presents the Purchase Order for

raw materials and components; the receiving process, which receives the shipments from

suppliers; the purchase invoice process, which checks the invoice from the supplier; and

finally, the purchase receipt process, which is where the receipt for the payment of the

products is carried out.

66


1.0

Departments Inventory ShortageReport *■ Puri

«* Purchase

Purchase Order Copies2.0

Product Reserve

— r \

Order

RevenueCycle

vis


Raw Material

PurchaseOrder

Copies

Products Received

Report to Inventory

3.0

Receive

Products Received

Inventory

Shipping Invoice

-R eport-

.4.0

Sales Invoices

Purchase Invoice1

Payment

▼. . 50

Purchase ReceiptPayment

Figure 4.6 Relationship of Expenditure Cycle

The expenditure cycle, as shown in figure 4.6, covers all purchasing activities,

including components and raw materials. In this cycle, five main processes are occurring,

these being: the Purchase Quotation process, which gives the Purchase Quotation and the

item’s information; the Purchase Order process, which presents the Purchase Order for

raw materials and components; the receiving process, which receives the shipments from

suppliers; the purchase invoice process, which checks the invoice from the supplier; and

finally, the purchase receipt process, which is where the receipt for the payment of the

products is carried out.

66


Accounting And Report

Revenue Cycle

Purchase Quotation

C stomeri ..) Demand rder Forecasted

Components Requirement

Investment

I

Human Resources Labor Planning

And Scheduling

Report

Production Order and Labor Cost Raw Material

Requirement

Report and Accounting

Initial Cost Labor

Scheduling Production Raw Materials And

Production Costs

Figure 4.7 Relationships within the Production Cycle

Finally there is the production cycle, which includes all production activities, as

well as information technology, forecasting, inventory control, production planning,

master scheduling, and products design. This information can be gleaned from Figure 4.7.

This cycle revolves around four main processes, the first of which is the design process.

This process is responsible for designing products as they are needed by the customer, as

well as quality control. The second process is planning and scheduling, which works

toward efficiency in planning for needed products, forecast and demand, and scheduling

of production. The third process is the production itself, which varies from enterprise to

enterprise. Finally is the initial cost process, which plans, controls, and inspects

production; it is also used for calculating income and losses.

67


R evenueCycleCycle

Purchase Quotation

CustomerOrder

DemandForecasted

omponents / equipment : ■ Human

Labor Planning And Scheduling

Investment

Report

Production Order and Raw Material Requirement

Labor Cost

LaborScheduling

, Accounting I And Report Raw Materials

AndProduction Costs

Initial Cost Production

Report and Accounting

Figure 4.7 Relationships within the Production Cycle

Finally there is the production cycle, which includes all production activities, as

well as information technology, forecasting, inventory control, production planning,

master scheduling, and products design. This information can be gleaned from Figure 4.7.

This cycle revolves around four main processes, the first of which is the design process.

This process is responsible for designing products as they are needed by the customer, as

well as quality control. The second process is planning and scheduling, which works

toward efficiency in planning for needed products, forecast and demand, and scheduling

of production. The third process is the production itself, which varies from enterprise to

enterprise. Finally is the initial cost process, which plans, controls, and inspects

production; it is also used for calculating income and losses.

67


4.5.2 Main components and modules

There are three components needing to be constructed in developing a customized

Novel ERP system for SMEs in Southeast Asia. These three components consist of the

system overview, the fundamental database requirement and design, and the ERP system

framework and modules.

From the existing research, survey results, and summaries of revenue, expenditure

and production cycles, the main modules for ERP systems in Southeast Asian SMEs are

constructed. As far as the revenue cycle, expenditure cycle, and production cycle are

concerned, the same ideas are implemented for software development, and become the

sales module, purchasing module, and production module, respectively. Thus, to make

the linkage of these three modules more effective, the inventory module is individually

created in order to support all information regarding inventory transactions. Furthermore,

the human resource module is also exclusively designed to correspond with all

information relating to customers, employees and suppliers.

System Overview

This component of the system, as shown in figure 4.8, consists of five modules,

including the sales module, purchasing module, inventory module, production module,

and human resource module. Each module has its corresponding function in the system,

as follows:

68


4.5.2 Main components and modules

There are three components needing to be constructed in developing a customized

Novel ERP system for SMEs in Southeast Asia. These three components consist of the

system overview, the fundamental database requirement and design, and the ERP system

framework and modules.

From the existing research, survey results, and summaries of revenue, expenditure

and production cycles, the main modules for ERP systems in Southeast Asian SMEs are

constructed. As far as the revenue cycle, expenditure cycle, and production cycle are

concerned, the same ideas are implemented for software development, and become the

sales module, purchasing module, and production module, respectively. Thus, to make

the linkage of these three modules more effective, the inventory module is individually

created in order to support all information regarding inventory transactions. Furthermore,

the human resource module is also exclusively designed to correspond with all

information relating to customers, employees and suppliers.

System Overview

This component of the system, as shown in figure 4.8, consists of five modules,

including the sales module, purchasing module, inventory module, production module,

and human resource module. Each module has its corresponding function in the system,

as follows:

68


• Sales module: the sales module is basically needed to keep track of payments,

work orders and related accounting, such as sales orders, sales quotations, and

invoices.

• Purchasing module: this module is generally swamped with purchase inventory

and vendor information. Keeping track of vendor payments and paying bills

before credit collection agencies call is a major source of tension in this module.

• Inventory module: this module maintains product names and identification

numbers, reorder levels, and unit and weight information, including inventory

adjustments, assembly information and alternate parts/service information.

• Production module: this production module primarily focuses on the production

process, manufacturing process selection, the simulation process of prototype

products and the bills of material management.

• Human resource management module: the human resource management module

manages employee databases, which include employee names, wages, staff grades

and roles, addresses, email addresses, and contact phone numbers.

Management Team (Decision Making)

ERP Output (Reporis/Documents)

ERP for SMEs System Framework

ERP Database\ (System

Database)

Purchasing Module

Human Resoube

Inventory Production Module Module.

Sales Module

Figure 4.8 ERP for SMEs' framework

69


• Sales module: the sales module is basically needed to keep track of payments,

work orders and related accounting, such as sales orders, sales quotations, and

invoices.

• Purchasing module: this module is generally swamped with purchase inventory

and vendor information. Keeping track of vendor payments and paying bills

before credit collection agencies call is a major source of tension in this module.

• Inventory module: this module maintains product names and identification

numbers, reorder levels, and unit and weight information, including inventory

adjustments, assembly information and alternate parts/service information.

• Production module: this production module primarily focuses on the production

process, manufacturing process selection, the simulation process of prototype

products and the bills of material management.

• Human resource management module: the human resource management module

manages employee databases, which include employee names, wages, staff grades

and roles, addresses, email addresses, and contact phone numbers.

Management Team (Decision Making)

jnt Team -TrjU>_. ERP OutputMaking) (Reports'Documents)

r IERP for SMEs System Framework

PurchasingModule

1 Inventory I Module ■

I ERP Databasew^-wrV; (System

Database)

— 1Production

Module

HumanResouce

SalesModule

Figure 4.8 ERP for SMEs’ framework

69


Fundamental Database Requirements and Design

The database design was specially conducted sequentially to fulfil the information

and database requirements of Southeast Asian SMEs. For simplicity and reliability, the

basic information needed for SMEs will be stored. There will be 13 categories of

necessary information (data), as shown in Figure 4.9.

To increase the productivity and reengineering of the SME's system, the

information needed for each category has been designed and considered for the

enterprise's information and organization, employee information, customer information,

supplier information, raw material information, parts information, product information,

machine information, operation information, bill of material information, VAT

information, foreign exchange information, etc.

Suppplier

Purchasing Module

VAT

Employee

Distribution

Forex

Machine

VAT

Operation

Figure 4.9 Relationship between the five main modules and the information in the database

70


Fundamental Database Requirements and Design

The database design was specially conducted sequentially to fulfil the information

and database requirements of Southeast Asian SMEs. For simplicity and reliability, the

basic information needed for SMEs will be stored. There will be 13 categories of

necessary information (data), as shown in Figure 4.9.

To increase the productivity and reengineering of the SME’s system, the

information needed for each category has been designed and considered for the

enterprise’s information and organization, employee information, customer information,

supplier information, raw material information, parts information, product information,

machine information, operation information, bill of material information, YAT

information, foreign exchange information, etc.

SaleVAT

Module

Inventory ProductionModuleModule

DistributionModule Module

Puichasing \

Suppplier

Machine

Routing BOM

Forex

Product

VAT

Part

Raw

Employee

Figure 4.9 Relationship between the five main modules and the information in the database

70


ERP System's Framework and Modules

In a Novel ERP System's framework and modules, each module has a

relationship with its sub-modules. This relationship can be clearly seen in Figure 4.10.

Each module is divided again into sub-modules. The Sales module consists of the

sale quotation module, sale order module, and sale return requests module. The

Purchasing module, on the other hand, has the material purchase request module,

supplier's quotation module, purchase order module, and the purchase return request

module. Next is the Inventory module, with the raw material issues module, raw material

receipt module, raw material stock adjustment module, product issue module, product

receipt module, and the product stock adjustment module. Following this is the

production module, with the internal work order module, production scheduling module,

material requisition module, scheduling adjustment module, and the production run

module. Finally, we have the Delivery module, with its picking list module, delivery

order module, and delivery module.

71


ERP System’s Framework and Modules

In a Novel ERP System’s framework and modules, each module has a

relationship with its sub-modules. This relationship can be clearly seen in Figure 4.10.

Each module is divided again into sub-modules. The Sales module consists of the

sale quotation module, sale order module, and sale return requests module. The

Purchasing module, on the other hand, has the material purchase request module,

supplier’s quotation module, purchase order module, and the purchase return request

module. Next is the Inventory module, with the raw material issues module, raw material

receipt module, raw material stock adjustment module, product issue module, product

receipt module, and the product stock adjustment module. Following this is the

production module, with the internal work order module, production scheduling module,

material requisition module, scheduling adjustment module, and the production run

module. Finally, we have the Delivery module, with its picking list module, delivery

order module, and delivery module.

71


Inventory Module — Raw Material

Product Issue

Sates Module

Sale Quotation

Sale Order

Sale Return

Product Stock Adjustment

Raw Material Is‘s

Raw Material Requistion

Raw Material '4 , Receipt

Purchasing Module

Supplier's Quotation

Raw Material rchase Request

Purchase Return Request

Raw Material Stock Adjustment

Internal Work Order

Production Scheduling

Production Run

* Product Retei

Fig

ure

4.1

0 R

elat

ion

ship

bet

wee

n m

ain m

od

ule

s an

d s

ub

-mo

du

les

Inventory Module - Raw Material

Delivery Module

Picking List

Delivery Order

WmSm

Sales Module

Sale Quotation

Sale Order

Sale Return

Product Stock Adjustment

RawMatenal i *Raw Matenal Stock Adjustment

Production Module

Internal Work Order

Raw Matenal Requistion

Production r Scheduling h

SchedulingProduction Run

....... ........■■■■■I ~ ~ ----------------

Purchasing Module

Supplier’sQuotation

JE

Purchase Order i

-£------------

Raw Matenal Purchase Request

Purchase Return Request

s■oo

■os05s•a©S

e<u

£X

<Nr>

e.2.2"S£o

0)J-53©D

Rep

rodu

ced

with

pe

rmis

sion

of

the

copy

right

ow

ner.

Furth

er

repr

oduc

tion

proh

ibite

d w

ithou

t pe

rmis

sion

.

4.5.3 Novel ERP System and conceptual framework design

This section includes a brief explanation of how the Novel ERP system will work,

including its flow processes, graphical user interface, calculation, algorithm design and

the relationship between the design of the Novel software and the framework mentioned

in the previous section.

Novel ERP (NERP) for Southeast Asian SMEs

NERP facilitates inventory management, giving early warning of the parts and

work orders needed to complete customer orders on time. Thus, in using this system

inventory carrying costs can be decreased and a larger percentage of orders can be

delivered on time. NERP facilitates managing the real-time schedule and the cost of

custom sales orders. It offers a truly complete and integrated manufacturing management

system for SMEs in Southeast Asia. Designed using Java platforms, NERP is multi-user

and is easily installed into any computer and any network. In a small system, there is no

need to dedicate a PC to the server function. One PC can be both a client for one user and

the server for all other users. This reduces the start-up costs dramatically compared to

most other ERP systems.

Main features

NERP software allows SMEs to:

• track inventory; it counts and tracks serial/lot numbers both automatically and

manually.

• manage orders; this includes sales, production, purchasing, and requisitions.

73


4.5.3 Novel ERP System and conceptual framework design

This section includes a brief explanation of how the Novel ERP system will work,

including its flow processes, graphical user interface, calculation, algorithm design and

the relationship between the design of the Novel software and the framework mentioned

in the previous section.

Novel ERP (NERP) for Southeast Asian SMEs

NERP facilitates inventory management, giving early warning of the parts and

work orders needed to complete customer orders on time. Thus, in using this system

inventory carrying costs can be decreased and a larger percentage of orders can be

delivered on time. NERP facilitates managing the real-time schedule and the cost of

custom sales orders. It offers a truly complete and integrated manufacturing management

system for SMEs in Southeast Asia. Designed using Java platforms, NERP is multi-user

and is easily installed into any computer and any network. In a small system, there is no

need to dedicate a PC to the server function. One PC can be both a client for one user and

the server for all other users. This reduces the start-up costs dramatically compared to

most other ERP systems.

Main features

NERP software allows SMEs to:

• track inventory; it counts and tracks serial/lot numbers both automatically and

manually.

• manage orders; this includes sales, production, purchasing, and requisitions.

73


• calculate expected finishing dates and delivery dates for customers; this increases

customer satisfaction.

• get early shortage warnings.

• schedule production; this can be rearranged manually if needed.

• eliminate double data entry.

• display most of the products' related costs, initial cost, raw material cost, setup

cost, utilities cost, holding cost, and profit; this aids in the decision-making

process.

• lower start-up costs due to its ease of use and basic user interface design.

Access Levels

Each command on the tool bar on the main menu is considered a separate module

that directs the user to distinct functions and database information. Two levels of access

exist to control user rights to modules. The basic user level of access permits activities

such as data entry, order entry and production. The highest level is reserved for database

reviewers. In this access level, the database reviewer checks all database changes

proposed by the basic users for accuracy and correctness. The database reviewer has the

authority to change or delete entries made by other users and gives final approval for all

changes affecting the database. No special expertise in database management software or

programming is necessary for any user access level in NERP. The different access levels

exist primarily to manage the flow of data more efficiently.

74


• calculate expected finishing dates and delivery dates for customers; this increases

customer satisfaction.

• get early shortage warnings.

• schedule production; this can be rearranged manually if needed.

• eliminate double data entry.

• display most of the products’ related costs, initial cost, raw material cost, setup

cost, utilities cost, holding cost, and profit; this aids in the decision-making

process.

• lower start-up costs due to its ease of use and basic user interface design.

Access LevelsEach command on the tool bar on the main menu is considered a separate module

that directs the user to distinct functions and database information. Two levels of access

exist to control user rights to modules. The basic user level of access permits activities

such as data entry, order entry and production. The highest level is reserved for database

reviewers. In this access level, the database reviewer checks all database changes

proposed by the basic users for accuracy and correctness. The database reviewer has the

authority to change or delete entries made by other users and gives final approval for all

changes affecting the database. No special expertise in database management software or

programming is necessary for any user access level in NERP. The different access levels

exist primarily to manage the flow of data more efficiently.

74


Common Database Module

For new customers, new products, new raw materials, or new suppliers whose

information does not exist in the database, the system will allow users to add more

common or shared data, such as supplier information, product information, customer

information and raw material information. As a result, users can easily update the latest

information to the system, and the information added to the database will be shared with

every computer connected via the same system. This additional information will then be

reviewed by the database reviewers for the final quality checks and the incorporation of

approved changes into the database.

User D • admin

5uppVer ID 12 New I

Supplier Name' 15uppller 13

Address

45 Ohio

MobilePhOne

Phorve 19876543

FAX 1

E-mail 1EVohio.com

Contactor Keine kr. B

Mobile Phone 1021111111

13Ing Address

456 Ohio

[labile Phone 1024444444

Phone 1025555555

FAX 1026666666

18illing136Polio.com

Phone 1022222222

FADS - - 1023333333 E-ma/1 1MrEI04ohto.corn

Figure 4.11 Supplier common databases interface

75

Irrf;E:rt

Uptlete . 1


Common Database Module

For new customers, new products, new raw materials, or new suppliers whose

information does not exist in the database, the system will allow users to add more

common or shared data, such as supplier information, product information, customer

information and raw material information. As a result, users can easily update the latest

information to the system, and the information added to the database will be shared with

every computer connected via the same system. This additional information will then be

reviewed by the database reviewers for the final quality checks and the incorporation of

approved changes into the database.

n drimin

Supplier ID f T

Supplier Name- jSupplier B

Address

3 4 5 O h io

P hone [ ”

Phone j9376543~

FAX IE-mail js® ohio.c

Contactor Name fp'r. B

}021111111FAX jo23333333

nillin n A JJfc, —billing A ddress

4 5 6 O h io

Phone I02T 44444T

P hone jo25555555

FAX [026666666

E-mail jBillingB@ohio.(

022222222

E-mail

Figure 4.11 Supplier common databases interface

75


Sales Module

The Sales module is the starting point for every transaction, and users can either

start the process from Sales Quotation or Sales Order. For the regular customers who

normally purchase products from the company, their records will be stored in the

database and they can go straight to Sales Order. On the other hand, for new customers or

when a new product is being purchased, the transactions must go through Sales Quotation

in order to confirm the price and discount before proceeding to Sales Order. The top

portions of the Sales Order and Sales Quotation interfaces are different, due to the fact

that the Sales Order will automatically estimate the completion data and delivery date for

the customer. However, the bottom portion for both screens will be identical. Figure 4.12

shows the Sales Quotation interface with ordered products, the cost before tax and the

cost after tax. Figure 4.13 shows a Sales Order referred from previous sales quotations

(SaQ-00001) in Figure 4.12 including the comparison between the initial cost and profit,

estimated completion date, and expected delivery date.

saQ.xooi oet18/05

Figure 4.12 Sales Quotations with product information interface

76


Sales Module

The Sales module is the starting point for every transaction, and users can either

start the process from Sales Quotation or Sales Order. For the regular customers who

normally purchase products from the company, their records will be stored in the

database and they can go straight to Sales Order. On the other hand, for new customers or

when a new product is being purchased, the transactions must go through Sales Quotation

in order to confirm the price and discount before proceeding to Sales Order. The top

portions of the Sales Order and Sales Quotation interfaces are different, due to the fact

that the Sales Order will automatically estimate the completion data and delivery date for

the customer. However, the bottom portion for both screens will be identical. Figure 4.12

shows the Sales Quotation interface with ordered products, the cost before tax and the

cost after tax. Figure 4.13 shows a Sales Order referred from previous sales quotations

(SaQ-00001) in Figure 4.12 including the comparison between the initial cost and profit,

estimated completion date, and expected delivery date.

13 *; . w. * '1L.! >c > '-1*1U ser ID: a d m in S a v e j

Q jO tabon ID j SaQ-OOOof b a te j 08/18/05

Customer Name ,v 5h 3

Sales Name — — j

Delivery D ate [08/24/05 “

Discount j i f %

T#* p 7 % ( G 5 T ) r 1 4 % (G S T + PST)

A ddress Product | c o s t and P rufl | Note ]

Product ID jp.D-00Q03 “ jLamp 3 Add

Unit UnitPrice quantit i*

OT Note Update

Jbox | 5 D C X , 8 | o [Sample Delete

Product ID Product Nemo Unit U rttPnce($) Ouerr-> OT I Note ■

PrD-00002 F i n e Cabinets Box 80 00 99 0; Sample

PrD-00001 TANK.10X 54,QH.Single Box 100.00 70 SO! Sample

Total Net $ ] 2932().t)() Total t | 31372.10

Figure 4.12 Sales Quotations with product information interface

76


!:•-11Soles Order

user adrnin

Order ID

Refer From

Customer Name

Sales Name

5a0-00001

}Sale Quotation zi

Date

Quotation ID

08/18105

Discount., J 0.00 %

TAX p 7% GS ) 14NY, ( + PST

product Coif and' Profit I Note I

liter

Save

Customer Order Date 108/18/05

Estimate Completion Date 108124/05

Expected Delivery Date 108124/05

num l,OST .

PrOOlotcl ki., , Product Neale , Qty/SF ' . Cast Labor Cost OT Cost Setup Toth

PrD-00001 TANK, 10X54, Q1, Single 73.50 1,837.50 1,085.75 1,000.00 20.00 3,923.25 PrD-00002 Filing Cabinets 103.95 2,595.63 935.55 0.00 15.00 3 546.18 PrD-00003 Lamp 50.40 4,50828 1,360.80 0.00 35.00 5,904.08

'44-- , ,.. • L „,,:,.i..- " .

. rrOTI .

PrOclUPtio • Product Witte ' : I City/SF Initial Cost Sale cost I Profit

PrD-00001 TANK, 10X54, Gil, Single 73.50 3,92325 7,000.00 3,076.75 PrD-00002 Filling Cabinets 103.95 3,545.18 7,920.00 4,373.82 PrO-00003 Lamp 50.40 5,904.08 14,400.00 8,495.92

Figure 4.13 Sales Order with cost and profit information interface

Purchase Module

The Purchase module is very similar to the Sales module; the only difference

between these two modules is that the responsibilities of the customer are located in the

Purchase Module. Once the raw materials in the warehouse are running short, the system

will remind the user to create a "Material Purchase Request." After that, the system will

ask the supplier to create a "Supplier Quotation" to confirm the cost, discount, and

quantity of the raw materials. The last process is the "Purchase Order," which is referred

from Supplier Quotation and is sent to the supplier for the raw material for the company

order.

77


Order >:iU ser ID a d m i n

O rder ID

S av e

SaO-OOOOl D ate

R efer From | s a le Quotation 3 Q uotatlon ID

Custom er Name |b , Jo sh

Sales Name

Discount f ^ 0 0 %

TAX f ? 7 % ( G S T ) p 14% ( GSr + PST )

A d d ress 1 Product Cost an d Profit I Note 1

08/18/05

Customer O rder D ate j o s / l i / o i f

T j Estim ate Completion D ate jog/24/o s

Expected Delivery D ate jcs/24/05

Hnitial C o st------

P roduct ID Product Name Qty/SF RM Cost Labor Cost QT Cost Setup Total

PrD-00001 TANK. 10X54, GH, Single 73.50 1,837.50 1.065.75 1,000 00 20.00 3,923.25PrD-00002 Filling Cabinets 103.95 2.595.63 935.55 0.00 15.00 3,546.18PrD-00003 .... L a m p......... 50.40 4,508.28 1,360 80 0.00 35.00 5,904.08

-“Profit.......... ...............

Product ID Product Name Qly/SF Initial Cost Sale Cost Profit

PrD-00001 TANK, 10X54, QH, Single 73.50 3,923.25 7,000.00 3,076.75PrD-00002 Filling Cabinets 103.95 3,546.18 7,920.00 4,373.82PrD-00003 L am p.................... 50 40 5,904 08 14,400 00 8,495.92

Figure 4.13 Sales Order with cost and profit information interface

Purchase Module

The Purchase module is very similar to the Sales module; the only difference

between these two modules is that the responsibilities of the customer are located in the

Purchase Module. Once the raw materials in the warehouse are running short, the system

will remind the user to create a “Material Purchase Request.” After that, the system will

ask the supplier to create a “Supplier Quotation” to confirm the cost, discount, and

quantity of the raw materials. The last process is the “Purchase Order,” which is referred

from Supplier Quotation and is sent to the supplier for the raw material for the company

order.

77


RMaterial Purchase Request

User ID admit]

ID I PuM-00002

Estimate Date

, Raw Material 1 Note I

Date I 08,18705

RN ID 1RaM-00011 (File Folders

Quantity I 500

11117113

Save

Add

Update

Remove

km 6 RM Name Unit Quantity

ReM-00008 Plastic Drawer Labels EA 400 RaM-00009 Hanging Folder Bars EA 400 ReM-00010 Fie Folder Labels Box 500 RW-00011 File Folders Box 500

Figure 4.14 Material Purchase Request interface

4Suppliers Quotation

User ID: adman

Quotation ID 1PuS-000131 Date 08/18/05'

Supplier Name 'Supplier A

Delivery Date 108/25/05

Discount

TAX p 7% ( G5T ) r 14°? ( G5T + PST ) As'

Address Raw Material , Note]

IE

Material ID 'Rem-00009

.UnitPrice Unit

...

•

Hanging Folder Bars

1,48

Amount

1400 110% Discount

Note.

III El 13

Save

Update I

Delete .1

MateriatD MaterledName I Und 1-Initl IOe(9).,0 Amount Note

RaM-00008 Plastic Drawer Labels EA .38 400 10% Discount F.v_,.,,.11.,, ,•,, lien.-wi l F.-.'.1, r E : EA .. 41A1 1 J` Dc. int

RaM-00010 File Folder Labels Box .39 500 15% discount ReM-00011 File Folders Box .16 500 25% discount

Total Net $ 64.25 Total 496,75

Figure 4.15 Supplier Quotation interface

78


id restimate Date f"

PuM-00002

, Raw Material ] Note) g-j: J: ?

RMID (RaM-00011 3 |F H e Folders

Quantity

Date 08/18105 Save

H Add

500Update

Remove

RM ID RM Name Unit Quantity

RaM-00008 Plastic Drawer Labels EA 400RaM-00009 Hanging Folder Bars EA 400RaM-00010 File Folder Labels Box 500RaM-00011 File Folders: : Box 500

Figure 4.14 Material Purchase Request interface

User ID Save

Quotation ID JpuS-00001

Supplier Name (supplier A

Delivery Date |08/25/05

Discount M %

• TAX ■ F 7% ( GST ) r 14% ( GST + PST)

Date |08 /18/05

"£3

Address Raw Material | Note |

Material ID (RaM-00009

Unit UnitPricettt

li l - .. u n .H.jnancjing roiaer bars

Amount

-

Note

Add

Update

EA (.48 jaoo ji0 % Discount Delete j

MateriallD MaterlalName Unit UnitPrlce($) I Amount j Note I

RaM-00008 Plastic Drawer Labels EA I .381 4001 10% Discount |■ H M H r n E S S m M H R H

RaM-00010 File Folder Labels:: Box ................ .39 500 15% discountRaM-00011 File Folders Box .16 500 25% discount

Total Net t (464.25 Total $ (496.75

Figure 4.15 Supplier Quotation interface

78


Inventory Module

The inventory module has been categorized into 4 main parts: issuing, receiving,

stock adjustments, and current inventory. Product Issuing and Raw Material Issuing will

occur when the customer orders the products with the quantity existing in the warehouse,

and the production department requests raw material to produce the products as required

by Sales Order, respectively. The Product and Raw Material receipt modules will be

activated when the production department finishes producing the products and delivering

to the warehouse, and the supplier has delivered the requested raw material to the

company. Most of the company's inventory management will rely upon the computer

system; however manual stock adjustment should occur at least once over a certain

period of time, and therefore the product stock adjustment and raw material stock

adjustment will take place when the manual inventory count happens. Finally, Current

Inventory is the user interface that shows the current quantity of both the products and the

raw material that the company has in their warehouse. The current inventory interface

displays useful information for the company, including serial numbers, names, initial

costs, quantity on hand, quantity on order, dynamic reorder points, and order quantity.

79


Inventory Module

The inventory module has been categorized into 4 main parts: issuing, receiving,

stock adjustments, and current inventory. Product Issuing and Raw Material Issuing will

occur when the customer orders the products with the quantity existing in the warehouse,

and the production department requests raw material to produce the products as required

by Sales Order, respectively. The Product and Raw Material receipt modules will be

activated when the production department finishes producing the products and delivering

to the warehouse, and the supplier has delivered the requested raw material to the

company. Most of the company’s inventory management will rely upon the computer

system; however manual stock adjustment should occur at least once over a certain

period of time, and therefore the product stock adjustment and raw material stock

adjustment will take place when the manual inventory count happens. Finally, Current

Inventory is the user interface that shows the current quantity of both the products and the

raw material that the company has in their warehouse. The current inventory interface

displays useful information for the company, including serial numbers, names, initial

costs, quantity on hand, quantity on order, dynamic reorder points, and order quantity.

79


.14 P unl tir.t Issue

User 6 : -admin

Date )asst S Save

ProdUCUSsUer kc,

Product I Note I

Roloat IPr13-00003

Ottertly nerd 39 }striae

Prockict0.1340-00003

Mdteriel Issue

User p : min*

Product Name

Lamp

19 I

Requimtions Form

Raw Material Issuer I

Raw Material I Note 1

Rin-000132

Box U►nt entiGu y. Nola

391 Sva

08/113105 Save I

Raw Withal 0 Raw Materiel Name WA.* 1 Note ReA1-04013 Leap LA EA 3.0 Ralt ats••' EA 34I RaM•00131.5- ElitikArShoft 6A, 303 ReA4-00010 BIllieterrillie IIAC' RIO Reif-000W gertrad !MM.. EA V Reet41001e: 44 EA la 1444-0001,9 -1,4 -/05ciew EA :so 6elAboor20 Black'Oet 'EA. 3D R64013021 6444A44144y Ek 3.0

Veei CA: 3a 84144023 One=vieyjectoei, . Ek 30 64460024 . Wanti As seirialtf :LEA ftz (tgS400025: - lacOsiige Lem* Cilia FT" '661:1 •841420244 • Stbr6ard plug Tereidel ..70,C 31:1

Figure 4.16 Product Issue and Raw Material Issue interface

r-Lrjr:tirront Inventory PIM.

Raw Mater

11) None. Und Cost Oty on Order Oty on Hood Fr ROP

.4-ReM-00001 Polyethylene Resin LB 180 0.00 18.00 40/5 087 ReM-00002 Fastener EA 0.25 080 50.00 70.46 0.6

:

'

ReM-00003 Fbanglass Raring KG 1.19 0.00 87.80 14.41 0.10 RaM.00004 Pleetle Tube EA 4.75 000 95.00 4.82 0L4 Rak4-00005 Tar* ease EA 0.43 0.00 95.00 1535 0.04 ReM-00008 Pyroll Meg Carbon LB 085 0.00 99.95 109 0.00 Rail-00007 Hanging File Folder Pkg 1.75 0.00 100.00 292.04 926 ReM-00008 Plastic Drawer Labels EA 0.38 0.00 100.00 396.36 3.70 RaM-00009 Hanging Freely Bars EA 0.48 0.00 100.00 35287 3.70 ReM-00010 Fle Folder Labels Box 039 000 100.00 437.43 4.63 RAI-00011 Fie Folders Box 0.18 ODO 100.00 68284 4.83 RaM400012 Condoling Lock EA 1.33 0.00 100.00 105.93 0.93 RaM-00013 Lamp LA EA 2905 0.00 100.00 0.79 0.04

" Rail-00014 Base Assembly EA 1635 0.00 0.00 105 0.04 Rak1-00015 Firished Shell EA 1.30 0.00 100.00 3.72 004 Rei4-000115 =Steel Tubing he 0.05 000 100.00 9684 107 ReM-00017 60 Steel Male EA 9.25 0.00 100.00 1.40 0.04 R41-04111n Huh R m 1110 1 Rn 1

Product..

0 ,

Name ,. Uni bast , :,'Oty,on Order Qly um Hand Oly. on Oeinand R')°

Pr0-00001 TANK, 10)(54, OH, Single Box 39.50 73.00 100.03 0130 10.06 004 PrO-001302 Filing Cabinets Box 33.97 99.00 10080 ODO 122.17 023 ND-00003 Lamp Box 11645 51.00 100.00 0.00 4.25 0.04

Figure 4.17 Current Inventory interface

80


product ID |prD-0Q0O3 ^jiLatrfp

Unit Quantity Note

J I e i m : : : ]■ Update

Box j 39'jSample..........a n . .

ProdUct ID Product Name .Untt Quantty- I Note J, PrD-00003 Lamp Box 39| Sample !

f ^ R a w M a t e r i a l fssin?

n-,t, ID ddniin

! I Raw Material Name Unit - entity Note____ RaM:goqi.3_____

RaM-00014 _ RaM-6o6i:5

Lamp LA <EA/- 3:0BaseAssembly EA 3:0flriished.Shaft; EA 3:0

RaM-000i6 3̂ 8 Sleel Tubing Inc, 78:0RaM-dD0l7:; 6b;:SteS Plate; •EA' 3.0RaM-00018 : Hub. EA '30Ral^-00019 '1#--20ScreW EA 18.0RaW-b0020: Bldcksbade EA. 3:0RaM-00021 Socket Aisembly^ EA 3:0RaM-00022 ;Ste^ Holder fEA:- 30RaNi-00023;- bhe-vvdy Socket; •'EA:- 3:0R afci® 24 VMdrig ;As^rnb.ly“ . EA 3:0iaW-00025; i e^Gal^e LampCOrd v p r 33:0,RaM-pd026;: Steuiidard plug Terminal ;;e a ; '30

Figure 4.16 Product Issue and Raw Material Issue interface

^ C u r r e n t I n v e n to r y 0 3

ID Name Unit Cost Qty on Order Qty on Hand | Q* ROP

1 RaM-00001 Polyethylene Resin LB 1.00 0.00 18.001 40.75 0.67; RaM-00002 Fastener EA 0.25 0,00 90.00 28.46 0.08

RaM-0Q0Q3 Fiberglass Roving KG 1.19 0 0 0 87.80 14.41 0.10: RaM-00004 Plastic Tube EA 4.75 0.00 95.00 4.62 0.04

RaM-00005 Tank, B ase EA 0.43 0.00 95.00 15.35 0.04RaM-00006 Pyrofill Fiber Carbon LB 0.85 0.00 99.95 1.09 0.00

; RaM-00007 Hanging File Folder Pkq 1.75 0.00 100.00 292.04 9,26RaM-00008 Plastic Drawer Labels EA 0.38 0.00 100.00 396.36 3.70RaM-00009 Hanging Folder Bars EA 0.48 0.00 100.00! 352.67 3.70RaM-00010 File Folder Labels Box 0.39 o:oo 100.00 437.43 4.63

; RaM-00011 File Folders Box 0.T6 0:00 100.00 682.94 4.63RaM-00012 Controlling Lock EA 1.33 0.00 100.00 105.93 0.93RaM-00013 Lamp LA EA : 29,05 0.00 100.00 0.79 0.04RaM-00014 B ase Assembly EA 16.35 0:00 0.00 1.05 0.04

;; RaM-00015 Finished Shaft EA 1.30 0:00 100.00 3.72 0.04RaM-00016 3/8 Steel Tubing Inc 0.05 0.00 100.00 96.84 1.07RaM-00017 6D Steel Plate EA 9.25 0.00 100.00 1.40 0.04

; .... RaM-nnnjB.... ........................Huh:...... ............... .........F A ......... ................. s n n n n n in n n n l 1 9n n n 4

P ro d u c t-----------

ID Name Unit Cost Qty Dn Order Qty or Hand Qty on Demand Q* ROP

Wl !

0.04 ;PrD-00001 TANK, 10X54, QH, Single 39.50 73.002.17 0.93

0.04116.45 51.00

Figure 4.17 Current Inventory interface

80


Production Module

The Production module consists of 6 sub-modules: Internal order, Production

Scheduling, Scheduling Adjustment, Raw Material Requisition, Production Run, and

Production Completion. For an order from within the company or made-to-stock

products, the Internal Order module will be used, and afterwards every order will be

posted on the Production Scheduling Interface as the order is entered. The user can

change or modify this scheduling by using the Scheduling Adjustment interface. After the

production department has received the production scheduling, the system will ask the

user to request the required raw material from the warehouse. Then the Production Run

module can be started. Last of all, the completed products will be automatically sent to

Production Completion.

Production Scheduling

- Production Plan

Order ID Order Type Date Delivery

SaleOrder 081:4 ,1:15 1005/05

Customer Status

Mr. 1.....111311. 1

Samaria Run SaleOrder 08/20/05 Lulu Requesting Rawmaterial

Product Warne

TAW, 10X54, OH, %vie Hang Cabinets

Lamp

Order City Finish City. Inittal Cost 'tale Cost ' Prof 1

70.00 0.00 Box 13,92325 7,030.00 3,076.75 99.00 0.00 Box 3,546.18 7,920.00 4,373.82 48.00 0.00 Box 5,904.08 14,400.00 8,495.92

Close

Figure 4.18 Production Scheduling interface

81


Production Module

The Production module consists of 6 sub-modules: Internal order, Production

Scheduling, Scheduling Adjustment, Raw Material Requisition, Production Run, and

Production Completion. For an order from within the company or made-to-stock

products, the Internal Order module will be used, and afterwards every order will be

posted on the Production Scheduling Interface as the order is entered. The user can

change or modify this scheduling by using the Scheduling Adjustment interface. After the

production department has received the production scheduling, the system will ask the

user to request the required raw material from the warehouse. Then the Production Run

module can be started. Last of all, the completed products will be automatically sent to

Production Completion.

i n t r o d u c t i o n S( l n - d i i l i n :

1Production P la n ------ —

O rder ID O rder Type D ate Delivery C ustom er S ta tu s |

S a 0 -0 0 0 0 2 S aleO rd e r 1 0/05/05 Mr. s a m a n ta Run

S aQ -00003 S aleO rder 08/20/05 Mr. Lulu R equesting Raw m aterial

~ Production Detail

P roduct ID Product Name O rder Qty Finish Qty Unit Initial C ost S a le C ost Profit

PrD-00001 TANK, 10X 54. QH, Single 70.00 0.00 Box 3,923 .25 7,000 .00 3 ,076.75

PrD-00002 Filling C abinets 99.00 0 .00 Box 3,546 .18 7,920.00 4,373.82

PrD-00003 Lamp 48.00 0 .00 Box 5 ,904.08 14,400.00 8,495.92

f

Figure 4.18 Production Scheduling interface

81


Pending Remind Systems

The Pending Remind system in the NERP system alerts executives and users

when the system detects that the threshold value that has been set for a particular attribute

has been exceeded or else there is a transaction waiting to proceed. On the main screen,

the system will remind the user of the transactions pending processing, and once the user

creates the particular pending transaction, it will automatically be removed from the main

screen. The transactions that the system can remind the users of are:

• Sales Quotation Pending; there is (are) Sales quotations(s) that are waiting to be

created in Sales Order.

• Material Purchase Request Pending; there is a shortage of raw material waiting to be

entered into the Supplier Quotation

• Supplier Quotation Pending; there is (are) Supplier Quotation(s) that is (are) ready to

be entered into Purchase Order and sent to the suppliers.

• Purchase Order Pending; A Purchase Order has been created and is waiting for the

material from suppliers.

Process Flow Diagram

Figure 4.19 shows the summary of the process flow diagram in the NERP

software, including its common database and inventory database.

82


Pending Remind Systems

The Pending Remind system in the NERP system alerts executives and users

when the system detects that the threshold value that has been set for a particular attribute

has been exceeded or else there is a transaction waiting to proceed. On the main screen,

the system will remind the user of the transactions pending processing, and once the user


screen. The transactions that the system can remind the users of are:

• Sales Quotation Pending; there is (are) Sales quotations(s) that are waiting to be

created in Sales Order.

• Material Purchase Request Pending; there is a shortage of raw material waiting to be

entered into the Supplier Quotation

• Supplier Quotation Pending; there is (are) Supplier Quotation(s) that is (are) ready to

be entered into Purchase Order and sent to the suppliers.

• Purchase Order Pending; A Purchase Order has been created and is waiting for the

material from suppliers.

Process Flow Diagram

Figure 4.19 shows the summary of the process flow diagram in the NERP

software, including its common database and inventory database.

82


COMMON DATABASE

Supplier Raw Material Product Customer

ales rder

4

Raw Material Requisition

(Raw Materials on hand are enough? /' Request

P 1 1 Sales Quotation 14

SUPPLIER

ena urchase

YES

Raw Material Issues

Produgtion Scheduling

Change Production Schedule?

NO

Production Run

:Production Completion

YES Sched-u-ling Adjustment

Product Issue

CUSTOMER

Supplier Quotation

..Purchaatitkdee

Raw Material i Receipt

PROCESS FLOW

DIAGRAM

i•-i( CUSTOMER

INVENTORY

Current Inventory Raw Material Stock Adjustment

Product Stock' Adjustment

Figure 4.19 Process flow diagram

83


COMMON DATABASE

Supplier ; RawMaterial Product Customer

internalOrder

SalesOrder <-■- i Sales Quotation

I....

1 Raw Material Requisition SUPPLIER

Raw Materials on hand .‘ are enough? ’ NC>I

YES

Material Purchase Request

! Raw Material Issues

CUSTOMER

SupplierQuotation

Purchase Order

Raw Material Receipt

| Production Scheduling

PROCESS FLOW

DIAGRAM

i ̂ ___

j Production Completion ► Product Issue ; <- CUSTOMER

Change Production Schedule?

NO y ____

VYES-SchedulingAdjustment

Production Run

INVENTORY

Ti ITCurrent inventory Adjustment

Raw Material Stock j | | Product StockAdjustment

j [

Figure 4.19 Process flow diagram

83


4.5.4 Inventory and relevant costs policy decision

Inventories are stockpiles of raw materials, supplies, components, works in

progress, and finished goods that appear at numerous points throughout a firm's

production and logistics channel. These inventories can cost a large amount of a

company's the production value per year. Therefore, carefully managing inventory levels

makes good economic sense. Inventory management involves balancing product

availability or customer service on the one hand, with the cost of providing a given level

of product availability on the other. Since there may be more than one way of meeting the

customer service target, this research seeks to minimize inventory-related costs at each

level of customer service.

In order to optimize the data output from the NERP system, give the most

accurate shortage warnings, estimate replenishment quantity, and calculate reordering

points, the equations for the calculation are identified. Taking into account the dynamic

demands from various customers, the statistical variables are added to the equations in

order to standardize the normal distribution of the demand and production rates. A

detailed illustration of the calculation and an example can be found in Appendix B.

Determining the Safety Stock with Uncertainty

Although it is useful to understand inventory relationships under conditions of

certainty, a formulation of inventory policy must realistically consider uncertainty. One

of the main functions of inventory management is to plan safety stock to protect against

out-of-stocks items. Two types of uncertainty have a direct impact upon inventory policy.

84


4.5.4 Inventory and relevant costs policy decision

Inventories are stockpiles of raw materials, supplies, components, works in

progress, and finished goods that appear at numerous points throughout a firm’s

production and logistics channel. These inventories can cost a large amount of a

company’s the production value per year. Therefore, carefully managing inventory levels

makes good economic sense. Inventory management involves balancing product

availability or customer service on the one hand, with the cost of providing a given level

of product availability on the other. Since there may be more than one way of meeting the

customer service target, this research seeks to minimize inventory-related costs at each

level of customer service.

In order to optimize the data output from the NERP system, give the most

accurate shortage warnings, estimate replenishment quantity, and calculate reordering

points, the equations for the calculation are identified. Taking into account the dynamic

demands from various customers, the statistical variables are added to the equations in

order to standardize the normal distribution of the demand and production rates. A

detailed illustration of the calculation and an example can be found in Appendix B.

Determining the Safety Stock with Uncertainty

Although it is useful to understand inventory relationships under conditions of

certainty, a formulation of inventory policy must realistically consider uncertainty. One

of the main functions of inventory management is to plan safety stock to protect against

out-of-stocks items. Two types of uncertainty have a direct impact upon inventory policy.

84


The first of these is demand uncertainty, which is the rate of sales during inventory

replenishment. The second of these, performance cycle uncertainty, is concerned with

inventory replenishment time variations. Dealing with both demand and performance

cycle uncertainty requires combining two independent variables. The exact compounding

of two independent variables involves multinomial expansion. This type of procedure

requires extensive calculation. A direct method of doing this is to determine the standard

deviations of demand and performance cycle uncertainty, and then to approximate the

combined standard deviation using the convolution formula (Bowersox et al., 2003):

a-, = AITSs2 + D2 St2 (1)

Where

a-, = Standard deviation of combined probabilities;

T = Average performance cycle time;

St = Standard deviation of the performance cycle;

D = Average daily sales;

Ss = Standard deviation of daily sales.

The fill rate represents the magnitude of a stock-out rather than the probability.

The case fill rate is the percentage of units that can be filled when requested from the

available inventory. The mathematical formulation of the relationship is:

Where

SL

f(k)

SL = 1 f (Oct

Q (2)

= The stock*out magnitude (the product availability level):

= A function of the normal loss curve which provides the area in a right tail of

a normal distribution;

85


The first of these is demand uncertainty, which is the rate of sales during inventory

replenishment. The second of these, performance cycle uncertainty, is concerned with

inventory replenishment time variations. Dealing with both demand and performance

cycle uncertainty requires combining two independent variables. The exact compounding

of two independent variables involves multinomial expansion. This type of procedure

requires extensive calculation. A direct method of doing this is to determine the standard

deviations of demand and performance cycle uncertainty, and then to approximate the

combined standard deviation using the convolution formula (Bowersox et al., 2003):

Where

<7C = Standard deviation of combined probabilities;

T = Average performance cycle time;

St = Standard deviation of the performance cycle;D = Average daily sales;

Ss = Standard deviation of daily sales.

The fill rate represents the magnitude of a stock-out rather than the probability.

The case fill rate is the percentage of units that can be filled when requested from the

available inventory. The mathematical formulation of the relationship is:

WhereSL = The stock*out magnitude (the product availability level):

f(k) - A function of the normal loss curve which provides the area in a right tail of

(1)

a normal distribution;

85


Q = The replenishment order quantity.

The calculated value of f(k) is then compared with the values in Appendix B in

order to find the one that most closely approximates the calculated value.

SS = k* a-,

Where

SS = Safety stock in units;

k = The k factor that corresponds with f(k).

Initial Production Cost and Profit

(3)

In the Sales Quotation and Sales Order modules, the system can easily display the

detailed initial cost and profit for users in order to determine the percentage of discount,

the amount of production, and overtime work, and then optimize the profit as they desire.

Since this system is only a framework, only major costs will be used in calculations.

Some minor costs such as the utilities cost and wasted material cost are excluded from

these models.

Initial Cost = RMC + LC + SC + OTC (4)

Where

RMC = Raw Material Cost * (Q+SS);

LC = Labour Cost/Hour * production hours * Q;

SC = Setup Cost;

OTC = Overtime cost/hour overtime required (hours).

Profit = Sales Cost — Initial Cost

86

(5)


Q = The replenishment order quantity.

The calculated value of f(k) is then compared with the values in Appendix B in

order to find the one that most closely approximates the calculated value.

SS = k * a c (3)

WhereSS = Safety stock in units;

k = The k factor that corresponds with f(k).

Initial Production Cost and Profit

In the Sales Quotation and Sales Order modules, the system can easily display the

detailed initial cost and profit for users in order to determine the percentage of discount,

the amount of production, and overtime work, and then optimize the profit as they desire.

Since this system is only a framework, only major costs will be used in calculations.

Some minor costs such as the utilities cost and wasted material cost are excluded from

these models.

Initial Cost = RMC + LC + SC + OTC (4)

Where

RMC - Raw Material Cost * (Q+SS);LC = Labour Cost/Hour * production hours * Q;

SC = Setup Cost;

OTC = Overtime cost/hour * overtime required (hours).

Profit = Sales Cost - Initial Cost (5)

86


Repetitive Order Quantities

The system will automatically calculate the dynamic optimal order quantity and

reorder point every time that the current stock changes. By updating these two values

with the most recent demands from customers and real-time order values from suppliers,

the result is a more accurate optimal order quantity and reorder point. It can be shown

mathematically that an optimal order quantity (Q*) exists where the procurement cost and

carrying cost are in balance. The formula for this economic order quantity (EOQ) is:

112 Q* =

DS

KT (6)

Where

D= Item's annual demand occurring at a certain and constant rate over time, units/year;

S = Procurement Cost, dollars/order;

I = Carrying costs as a percentage of item value, percent/year;

C= Item value carried in inventory, dollar/unit.

The reorder point is the quantity to which inventory is allowed to drop before a

replacement order is placed. Since there is generally a time lapse between when the order

is placed and when the items are available in inventory, the demand that occurs over this

lead time must be anticipated. The reorder point (ROP) is

ROP = d * LT'

Where

ROP = reorder point quantity, units;

d = demand rate, in time units;

LT = average lead time, in time units.

87

(7)


Repetitive Order Quantities

The system will automatically calculate the dynamic optimal order quantity and

reorder point every time that the current stock changes. By updating these two values

with the most recent demands from customers and real-time order values from suppliers,

the result is a more accurate optimal order quantity and reorder point. It can be shown

mathematically that an optimal order quantity (Q*) exists where the procurement cost and

carrying cost are in balance. The formula for this economic order quantity (EOQ) is:

Where

D= Item’s annual demand occurring at a certain and constant rate over time, units/year;

.S' = Procurement Cost, dollars/order;

I = Carrying costs as a percentage of item value, percent/year;C= Item value carried in inventory, dollar/unit.

The reorder point is the quantity to which inventory is allowed to drop before a

replacement order is placed. Since there is generally a time lapse between when the order

is placed and when the items are available in inventory, the demand that occurs over this

lead time must be anticipated. The reorder point (ROP) is

(6)

ROP = d* LT' (7)

Where

ROP = reorder point quantity, units;

d = demand rate, in time units;

LT = average lead time, in time units.

87


The demand occasionally depends positively on the amount of displayed stock,

especially in the case of novelty or impulse purchase items. Such inventory-level

dependence on the demand rate has been incorporated into some proposed continuous

review inventory control models. A time-phased procurement system such as NERP has

no specific safety stock; likewise, the safety stock will vary and change dynamically

depending on the demand. The basic notion of time phasing is that parts and

subassemblies need not be carried in inventory as long as they arrive when they are

needed.

Three basic approaches can be used to introduce safety stocks into a system coping

with dynamic demand. First, a common practice is to put safety time into the requirement

plan. A second approach is to increase the requisition by a quantity specified by some

estimate of expected forecasted error. The third method is to utilize the previously

introduced statistical techniques for setting safety stocks directly onto the components

rather than onto the items of top-level demand. To conclude, the statistically involved

safety stocks are identified and included in the calculation of replenishment quantity and

initial cost estimation for NERP in this research.

4.5.5 Achieved functionality and features in NERP

Supply Chain Management Integration

The NERP system has a nearly full supply chain management integration, which

means partnering with customers and suppliers with the intent to maximize

responsiveness and flexibility, while eliminating paperwork, waste and cost throughout

88


The demand occasionally depends positively on the amount of displayed stock,

especially in the case of novelty or impulse purchase items. Such inventory-level

dependence on the demand rate has been incorporated into some proposed continuous

review inventory control models. A time-phased procurement system such as NERP has

no specific safety stock; likewise, the safety stock will vary and change dynamically

depending on the demand. The basic notion of time phasing is that parts and

subassemblies need not be carried in inventory as long as they arrive when they are

needed.

Three basic approaches can be used to introduce safety stocks into a system coping

with dynamic demand. First, a common practice is to put safety time into the requirement

plan. A second approach is to increase the requisition by a quantity specified by some

estimate of expected forecasted error. The third method is to utilize the previously

introduced statistical techniques for setting safety stocks directly onto the components

rather than onto the items of top-level demand. To conclude, the statistically involved

safety stocks are identified and included in the calculation of replenishment quantity and

initial cost estimation for NERP in this research.

4.5.5 Achieved functionality and features in NERP

Supply Chain Management Integration

The NERP system has a nearly full supply chain management integration, which

means partnering with customers and suppliers with the intent to maximize

responsiveness and flexibility, while eliminating paperwork, waste and cost throughout

88


the supply chain. The system allows users to communicate with both customers and

suppliers with a fast response, existing database, history of activities, and required

information.

Manually Entered Orders

By storing all of the common databases in the main data warehouse, the

information of both customers and suppliers can be easily restored to present on the

NERP system's screen. For example, when a customer calls to place an order, the NERP

system is sufficiently responsive to allow the customer service representative to quickly

and accurately enter the order by easily bringing up the customer's data and typical order

history onto the screen. The system will also provide a firm shipping date, completion

date, and a total price for the order with and without tax. The same method applies to

suppliers, also.

Sales force automation

Sales force automation normally refers to assisted selling outside of the company.

Langenwalter (2002) stated that MRP II (Manufacturing Resource Planning) systems

were extremely weak in supporting salespeople in the field. The NERP system permits a

field salesperson with a laptop with Internet access to have full access to all authorized

functionality in the software, no matter where he or she happens to be. This feature helps

the salesperson impress the customer.

89


the supply chain. The system allows users to communicate with both customers and

suppliers with a fast response, existing database, history of activities, and required

information.

Manually Entered Orders

By storing all of the common databases in the main data warehouse, the

information of both customers and suppliers can be easily restored to present on the

NERP system’s screen. For example, when a customer calls to place an order, the NERP

system is sufficiently responsive to allow the customer service representative to quickly

and accurately enter the order by easily bringing up the customer’s data and typical order

history onto the screen. The system will also provide a firm shipping date, completion

date, and a total price for the order with and without tax. The same method applies to

suppliers, also.

Sales force automation

Sales force automation normally refers to assisted selling outside of the company.

Langenwalter (2002) stated that MRP II (Manufacturing Resource Planning) systems

were extremely weak in supporting salespeople in the field. The NERP system permits a

field salesperson with a laptop with Internet access to have full access to all authorized

functionality in the software, no matter where he or she happens to be. This feature helps

the salesperson impress the customer.

89


Relational Database

Databases have been a staple of business computing since the beginning of the

digital era. In fact, the relational database was born in 1970 when E.F. Codd, a researcher

at IBM, wrote a paper outlining the process. Since then, relational databases have grown

in popularity and become a standard in business processes. Originally, databases were

flat, which means the information was stored in one long text file called a tab delimited

file.

A Relational Database has been applied to the NERP system. A relational

database is a database with relationships between its tables of records based on common

fields. Relational databases use tables to store information, and are created using a special

programming language, structured query language (SQL), which is the standard language

for database interoperability. SQL is the foundation for all popular database applications

available today, from Access to Oracle. For the NERP system, the database management

system is written in MySQL which claims to be the world's most popular open source

database. It is an extremely reliable, high performance and scalable database for cost-

effectively delivering business-critical applications. MySQL gives corporate developers

an array of enterprise features to make them more productive in developing, deploying

and maintaining the most demanding enterprise application, including high volume, Web

and data warehouses.

Platform choices

In the distributed PC, or thick, computing model, which is the predominant style

of network computing, the software is maintained at the PC level, giving individual users

90


Relational Database

Databases have been a staple of business computing since the beginning of the

digital era. In fact, the relational database was born in 1970 when E.F. Codd, a researcher

at IBM, wrote a paper outlining the process. Since then, relational databases have grown

in popularity and become a standard in business processes. Originally, databases were

flat, which means the information was stored in one long text file called a tab delimited

file.

A Relational Database has been applied to the NERP system. A relational

database is a database with relationships between its tables of records based on common

fields. Relational databases use tables to store information, and are created using a special

programming language, structured query language (SQL), which is the standard language

for database interoperability. SQL is the foundation for all popular database applications

available today, from Access to Oracle. For the NERP system, the database management

system is written in MySQL which claims to be the world’s most popular open source

database. It is an extremely reliable, high performance and scalable database for cost-

effectively delivering business-critical applications. MySQL gives corporate developers

an array of enterprise features to make them more productive in developing, deploying

and maintaining the most demanding enterprise application, including high volume, Web

and data warehouses.

Platform choices

In the distributed PC, or thick, computing model, which is the predominant style

of network computing, the software is maintained at the PC level, giving individual users

90


the freedom and flexibility to load their own software, customize applications and more

easily take those applications with them when on the move. However, by allowing this

freedom and flexibility to exist, organizations introduce a significant cost and level of

complexity if those systems go unmanaged. This is because PC computing models

involve indirect costs that most organizations do not account for in their total cost

estimates. For many small organizations, having unmanaged and fully configurable cost

management is not accounted for in their total cost estimates (Gartner, 2004).

From the research conducted by the Gartner group (2004), the "thin client" is a

logical, not physical, construct. Thin-client applications are executed on a server and do

not require client-resident installation: the graphical user interface is rendered to the

client. The prevailing myth is that client-side applications are moving to thin clients.

Most Web-based applications are HTML-only, which deliver a weak user interface with

poor performance over remote networks.

For our NERP system, neither thick nor thin server platforms may best suit the

requirements for SMEs, but features from each are used. The NERP system allows

operation both on the Web-based server and the server/clients server, depending on the

requirement and application of the companies with so-called "Slim Platforms." From the

results of Gartner's research, we can see that the slim platforms have the following

strengths: they are delivered as needed, have central management, client-side execution,

rich experience, and can support Java, Windows, WTS and .NET. Figure 4.20 represents

the architectural difference between Thin, Thick and Slim platforms (Gartner, 2004).

91


the freedom and flexibility to load their own software, customize applications and more

easily take those applications with them when on the move. However, by allowing this

freedom and flexibility to exist, organizations introduce a significant cost and level of

complexity if those systems go unmanaged. This is because PC computing models

involve indirect costs that most organizations do not account for in their total cost

estimates. For many small organizations, having unmanaged and fully configurable cost

management is not accounted for in their total cost estimates (Gartner, 2004).

From the research conducted by the Gartner group (2004), the “thin client” is a

logical, not physical, construct. Thin-client applications are executed on a server and do

not require client-resident installation: the graphical user interface is rendered to the

client. The prevailing myth is that client-side applications are moving to thin clients.

Most Web-based applications are HTML-only, which deliver a weak user interface with

poor performance over remote networks.

For our NERP system, neither thick nor thin server platforms may best suit the

requirements for SMEs, but features from each are used. The NERP system allows

operation both on the Web-based server and the server/clients server, depending on the

requirement and application of the companies with so-called “Slim Platforms.” From the

results of Gartner’s research, we can see that the slim platforms have the following

strengths: they are delivered as needed, have central management, client-side execution,

rich experience, and can support Java, Windows, WTS and .NET. Figure 4.20 represents

the architectural difference between Thin, Thick and Slim platforms (Gartner, 2004).

91


Defining Client Architectures as a Continuum of Choices

THIN SLIM THICK

Online User Interface Intermittently Connected

Rich Local, Offline Capability Ad Hoc Online/Offline

HTML HTML+ WTS+ .NET ODADS Java

And Media Persistent Legacy

Plug-ins/ Applets Graphic

Applets Terminal

Conventional Applications i.e. , MS Office

Server-Based Dynamic Network Splitting and Application, Component Distribution of Full

Remote Display Applications

Full OS and Full Applications Configured

as Server

Full OS and Full Applications Distributed Local Data File

System/LAN Access Multipoint Data Sync

Gartner

Figure 4.20 Architectural differences between thick and thin platforms (Gartner, 2004)

Web application Server

The Internet is the technical basis for another major change in the ERP system in

Southeast Asian SMEs. The NERP system is designed to move from a typical client-

server orientation to Internet-centric designs. The role of Web application servers as

application integration platforms placed in the NERP system is only now emerging as a

vital element of a company's enterprise strategy. The Web application server is the means

by which users can turn their NERP system outward to create functions such as product

cost/profit presentment over the web, self-service order tracing, transaction pending, and

checking on the status of specific inventory. A Web application server not only brings

about the ability to add mid-tier business logic to the platform, but can also act as a

security screen against sensitive parts of the NERP application, a load-balance of Web-

92


Defining Client Architectures as a Continuum of Choices

Intelmittently Connected Ad Hoc Online/Offline

SLIM T1

Online User Interface Rich Local, Offline Capability

AndLegacyG raphicTerminal

MediaPlug-ins/Applets

HTML HTML+ WTS+ .NET ODADS Java

PersistentApplets

ConventionalApplicationsi.e., MS Office

Server-Based Application,

Remote Display

Dynamic Network Splitting and Component Distribution of Full

Applications

Full OS and Full Applications Distributed Local Data File

System/LAN Access Multipoint Data SyncFull OS and Full

Applications Configured as Server Gartner

Figure 4.20 Architectural differences between thick and thin platforms (Gartner, 2004)

Web application Server

The Internet is the technical basis for another major change in the ERP system in

Southeast Asian SMEs. The NERP system is designed to move from a typical client-

server orientation to Internet-centric designs. The role of Web application servers as

application integration platforms placed in the NERP system is only now emerging as a

vital element of a company’s enterprise strategy. The Web application server is the means

by which users can turn their NERP system outward to create functions such as product

cost/profit presentment over the web, self-service order tracing, transaction pending, and

checking on the status of specific inventory. A Web application server not only brings

about the ability to add mid-tier business logic to the platform, but can also act as a

security screen against sensitive parts of the NERP application, a load-balance of Web-

92


request traffic, and an integration point of verification systems and databases outside of

the NERP system.

The NERP system is written in Java 2 Enterprise Edition (J2EE) by deploying the

web-based applications and Work Station applications with an interpreter tool offered via

the Internet. The Java application offers many advantages for the NERP system,

including a compact, consistent and portable directory structure, the ability to segregate

applications and provide a unique environment for each application, and the fact that

resources can be tied together with web-based and work station based components. By

programming the NERP system in Java, the software has become Web enabled, allowing

users to connect remotely to the Java virtual server.

Figure 4.21 shows two aspects of connection and platforms via the NERP system,

the web based application and the work station application. In the upper portion of the

model, the field salesperson's computer (laptop) and the supplier's computer are so

tightly linked to the NERP system that the sales agent's computer can compute and

promise future production and delivery on-line, using information from the supplier sent

to the server to determine material and capacity availability of any necessary items. The

users of the NERP system can also make a purchase order via the supplier's web

application, which will greatly eliminate all middlemen in the distribution channel.

The lower portion of the model shows the work station application or NERP

system in the server/client platform. The processing of work is divided between two types

of computers. The "Client" is the work station computer that contains the NERP system.

This computer performs display functions and often carries out computations as well. The

"server" is the more central computer that contains the database. Every transaction

93


request traffic, and an integration point of verification systems and databases outside of

the NERP system.

The NERP system is written in Java 2 Enterprise Edition (J2EE) by deploying the

web-based applications and Work Station applications with an interpreter tool offered via

the Internet. The Java application offers many advantages for the NERP system,

including a compact, consistent and portable directory structure, the ability to segregate

applications and provide a unique environment for each application, and the fact that

resources can be tied together with web-based and work station based components. By

programming the NERP system in Java, the software has become Web enabled, allowing

users to connect remotely to the Java virtual server.

Figure 4.21 shows two aspects of connection and platforms via the NERP system,

the web based application and the work station application. In the upper portion of the

model, the field salesperson’s computer (laptop) and the supplier’s computer are so

tightly linked to the NERP system that the sales agent’s computer can compute and

promise future production and delivery on-line, using information from the supplier sent

to the server to determine material and capacity availability of any necessary items. The

users of the NERP system can also make a purchase order via the supplier’s web

application, which will greatly eliminate all middlemen in the distribution channel.

The lower portion of the model shows the work station application or NERP

system in the server/client platform. The processing of work is divided between two types

of computers. The “Client” is the work station computer that contains the NERP system.

This computer performs display functions and often carries out computations as well. The

“server” is the more central computer that contains the database. Every transaction

93


activity carried out in the workstation will be stored in the server computer, which acts as

the main database storage area. The Java virtual server will therefore be created from the

physical server and serve as the server for remotely computers' web application versions

of the NERP system.

Supplier's NERP

Workstation

Field Sales People's NERP

Laptop

Web Application

7.

NERP

Workstations

ISP

NERP

ISP

Workstations

Web Application

NERP ISP

• Java •

Virtual Server/

/ ISP

Web Application

Server •

V NERP NERP

I

Physical Server/

Database Storage/

Work Station

Application Server

Workstations

Figure 4.21 Web-based and work station based system diagram and the connection to NERP system

94


activity carried out in the workstation will be stored in the server computer, which acts as

the main database storage area. The Java virtual server will therefore be created from the

physical server and serve as the server for remotely computers’ web application versions

of the NERP system.

Supplier’s NERP

Field Sales People’s NERP

Laptop

Web Application

NERP

NERP

ISP z ISP z i —*kServer

JavaVirtualServer/

WebApplication

NERP i -

NERP

Workstations

Workstations

jS '

IsWorkstation

Web Application

ISP

% ISP

NERP

. !Ill

Server

PhysicalServer/

DatabaseStorage/

WorkStation

Application

NtKr

L “ "tr

Workstations

Figure 4.21 Web-based and work station based system diagram and the connection to NERP system

94


Chapter 5

Presentation, Interpretation and Analysis of data

This chapter presents the results of the survey and interviews, and the document

analysis of the design of a Novel ERP system for five Southeast Asian SMEs. It also

presents the effects of the requested requirements of the ERP system in terms of financial

management, manufacturing, sales and distribution, customer relations, human resources,

organization and culture, and hosted software studies. This chapter is divided into four

sections. The first section shows a comparison of the existing ERP system and NERP,

while the second section evaluates the major strengths and weaknesses of Novel ERP

software for SMEs in Southeast Asia. The third section evaluates the perception of the

potential needs of the Novel ERP system, and its effects on Southeast Asian SMEs,

looking in particular at a comparison between theory and practice. The forth and last

section presents the opinions of the respondents regarding the Enterprise Resource

Planning market and what they can anticipate from it in the future.

5.1 Comparison of existing ERP systems and NERP

Holland (2005) has conducted research on the most suitable solution for business

operations that have multiple platforms and software packages and want that want to run

financials, operations, and ecommerce transactions. At first he considered making custom

middleware to carry out the data transition between the disparate systems, but it appears

that a complete ERP solution was most suitable. The limited conditions, assumptions, and

objectives for suitable software are Supply Chain modules, Customer Relationship

95


Chapter 5

Presentation, Interpretation and Analysis of data

This chapter presents the results of the survey and interviews, and the document

analysis of the design of a Novel ERP system for five Southeast Asian SMEs. It also

presents the effects of the requested requirements of the ERP system in terms of financial

management, manufacturing, sales and distribution, customer relations, human resources,

organization and culture, and hosted software studies. This chapter is divided into four

sections. The first section shows a comparison of the existing ERP system and NERP,

while the second section evaluates the major strengths and weaknesses of Novel ERP

software for SMEs in Southeast Asia. The third section evaluates the perception of the

potential needs of the Novel ERP system, and its effects on Southeast Asian SMEs,

looking in particular at a comparison between theory and practice. The forth and last

section presents the opinions of the respondents regarding the Enterprise Resource

Planning market and what they can anticipate from it in the future.

5.1 Comparison of existing ERP systems and NERP

Holland (2005) has conducted research on the most suitable solution for business

operations that have multiple platforms and software packages and want that want to run

financials, operations, and ecommerce transactions. At first he considered making custom

middleware to carry out the data transition between the disparate systems, but it appears

that a complete ERP solution was most suitable. The limited conditions, assumptions, and

objectives for suitable software are Supply Chain modules, Customer Relationship

95


Management modules, Financial modules, as well as being remotely accessible and cost

effective for a small to medium sized business. Integrated with the results from Holland

(2005), five ERP packages have been chosen to be studied and compared with the NERP

system.

OpenPro ERP

One of the older web-based ERP systems, OpenPro ERP utilizes open-source

technologies to provide both software and hosted ERP solutions. OpenPro ERP has

various packages available to companies of varying sizes as well as a strong reselling

network, with over 72 companies nationwide.

Being a lover of open-source software, OpenPro ERP is a very viable product for

a complete ERP solution. The only concern lies with its unprofessional website and

unattractive user interface. However, these are only minor issues, and OpenPro ERP is a

great solution for a small-or medium sized ERP requirement, especially because of its

cost.

The primary Modules of OpenPro ERP are as follows:

o Financial - Complete reporting and analysis available.

o Supply Chain - Order Entry, Purchasing, Inventory Control, Point of Sale,

Sales Analysis, and Customer Service Management.

o Sales Force Automation — Salespeople can track leads, opportunities, and

manage their existing accounts.

o Time Clock / Payroll — Employees can clock in/out and accurately process

their payroll

96


Management modules, Financial modules, as well as being remotely accessible and cost

effective for a small to medium sized business. Integrated with the results from Holland

(2005), five ERP packages have been chosen to be studied and compared with the NERP

system.

OpenPro ERP

One of the older web-based ERP systems, OpenPro ERP utilizes open-source

technologies to provide both software and hosted ERP solutions. OpenPro ERP has

various packages available to companies of varying sizes as well as a strong reselling

network, with over 72 companies nationwide.

Being a lover of open-source software, OpenPro ERP is a very viable product for

a complete ERP solution. The only concern lies with its unprofessional website and

unattractive user interface. However, these are only minor issues, and OpenPro ERP is a

great solution for a small-or medium sized ERP requirement, especially because of its

cost.

The primary Modules of OpenPro ERP are as follows:

o Financial - Complete reporting and analysis available,

o Supply Chain - Order Entry, Purchasing, Inventory Control, Point of Sale,

Sales Analysis, and Customer Service Management,

o Sales Force Automation - Salespeople can track leads, opportunities, and

manage their existing accounts,

o Time Clock / Payroll - Employees can clock in/out and accurately process

their payroll

96


NetSuite Full Edition

A completely web-based ERP and CRM integrated system, NetSuite Full Edition

has most of the features of the Oracle product with a price that is more affordable. It has a

long list of clients and success stories, as well as a long and capable list of features and

modules.

NetSuite Full Edition's response is timely, their product offering is complete, and

their price is inexpensive compared to other services. The only negative side to NetSuite

Full Edition is their pricing for additional modules. Their website does not clearly explain

what is included and what is additional, so the price could rise rapidly. For example, the

Web Analytics module costs an additional $199/month, which translates to $7,200 over

three years.

The primary Modules of NetSuite Full Edition are as follows:

o Financial — Standard functions. Also includes multi-level companies and

fiscal budgeting.

o Inventory — Complete inventory management that is integrated with server

platforms so that changes are instantly reflected for customers and

salespeople. Also has advanced order fulfilment & integration with UPS.

o Purchasing & Vendor Management

o Sales Force Automations — Helps salespeople track leads, opportunities,

and dive deeper into existing accounts.

o Marketing Automation — Tracks the success of online, offline, and direct

marketing campaigns. It also uses promotion codes to apply limited time

pricing and referral offers.

97


NetSuite Full Edition

A completely web-based ERP and CRM integrated system, NetSuite Full Edition

has most of the features of the Oracle product with a price that is more affordable. It has a

long list of clients and success stories, as well as a long and capable list of features and

modules.

NetSuite Full Edition’s response is timely, their product offering is complete, and

their price is inexpensive compared to other services. The only negative side to NetSuite

Full Edition is their pricing for additional modules. Their website does not clearly explain

what is included and what is additional, so the price could rise rapidly. For example, the

Web Analytics module costs an additional $ 199/month, which translates to $7,200 over

three years.

The primary Modules of NetSuite Full Edition are as follows:

o Financial - Standard functions. Also includes multi-level companies and

fiscal budgeting.

o Inventory - Complete inventory management that is integrated with server

platforms so that changes are instantly reflected for customers and

salespeople. Also has advanced order fulfilment & integration with UPS.

o Purchasing & Vendor Management

o Sales Force Automations - Helps salespeople track leads, opportunities,

and dive deeper into existing accounts,

o Marketing Automation - Tracks the success of online, offline, and direct

marketing campaigns. It also uses promotion codes to apply limited time

pricing and referral offers.

97


Axis Accounting (Local ERP Integrator)

Axis Accounting is a reputable ERP consultancy firm with extensive experience

with multiple software platforms such as Epicor and Microsoft. Axis provides complete

financial and ERP solutions to clients on Windows networks.

Axis Accounting acts as a local vendor, often giving fast response and capable of

coming on-site for immediate expert support. However, the need for additional

infrastructure is a major deterrent for this project. There are additional costs for servers

and desktops, as well as additional fees associated with Citrix. This can quickly result in

increased expenses.

Suggested Software Solutions (Modules):

o Microsoft Great Plains — Financial Management, Supply Chain

Management, Customer Relationship Management, E-Business, and

Business Analytics

o Best Software, Platinum for Windows (PFW) — PFW is a comprehensive

ERP system for small-to medium-sized businesses. The package contains

modules for financials, distribution, payroll, human resource management,

project management, business intelligence, eCommerce, and customer

relationship management.

Intacct ERP OnDemand

As the 'best of breed' web-based ERP, Intacct focuses primarily on Financial and

Supply Chain management. The service is designed to integrate easily with other third

98


Axis Accounting (Local ERP Integrator)

Axis Accounting is a reputable ERP consultancy firm with extensive experience

with multiple software platforms such as Epicor and Microsoft. Axis provides complete

financial and ERP solutions to clients on Windows networks.

Axis Accounting acts as a local vendor, often giving fast response and capable of

coming on-site for immediate expert support. However, the need for additional

infrastructure is a major deterrent for this project. There are additional costs for servers

and desktops, as well as additional fees associated with Citrix. This can quickly result in

increased expenses.

Suggested Software Solutions (Modules):

o Microsoft Great Plains - Financial Management, Supply Chain

Management, Customer Relationship Management, E-Business, and

Business Analytics

o Best Software, Platinum for Windows (PFW) - PFW is a comprehensive

ERP system for small-to medium-sized businesses. The package contains

modules for financials, distribution, payroll, human resource management,

project management, business intelligence, eCommerce, and customer

relationship management.

Intacct ERP OnDemand

As the ‘best of breed’ web-based ERP, Intacct focuses primarily on Financial and

Supply Chain management. The service is designed to integrate easily with other third

98


party systems, and they have an extensive list of vendors they work with, including the

CRM leader Salesforce.com and payroll leaders such as ADP.

While a little slow on the original customer service inquiry, they surged back with

a clear goal of providing the 'best' system for financial and supply chain management.

Also, while they lack modules that other systems provide, their open approach to

integrating with any other third party system leads to maximum flexibility for future

expansion.

The primary Modules of Intacct are as follows:

o Financial — Powerful set of tools and Cash Management.

o Supply Chain — Consists of Inventory, Sales Order Management, Billing,

and Purchasing.

Oracle eBusiness Suite (Special Edition)

Despite being well-known as one of the largest software providers for large

companies, Oracle is trying to limit their software's functions and features to suit the

needs of smaller enterprises.

Oracle has the brand name and the history, but the price is extremely inflated

compared to similar offers on the market. Their ASP hosting price is very high and their

web-based platform is even higher. While they indicated that they would negotiate, they

also made it clear that they were not interested in many 'small' businesses. They do,

however, have many modules that help run the advanced parts of a business, including a

scorecard application that helps improve efficiency in the operations.

The primary Modules of Oracle eBusiness Suite are as follows:

99


party systems, and they have an extensive list of vendors they work with, including the

CRM leader Salesforce.com and payroll leaders such as ADP.

While a little slow on the original customer service inquiry, they surged back with

a clear goal of providing the ‘best’ system for financial and supply chain management.

Also, while they lack modules that other systems provide, their open approach to

integrating with any other third party system leads to maximum flexibility for future

expansion.

The primary Modules of Intacct are as follows:

o Financial - Powerful set of tools and Cash Management,

o Supply Chain - Consists of Inventory, Sales Order Management, Billing,

and Purchasing.

Oracle eBusiness Suite (Special Edition)

Despite being well-known as one of the largest software providers for large

companies, Oracle is trying to limit their software’s functions and features to suit the

needs of smaller enterprises.

Oracle has the brand name and the history, but the price is extremely inflated

compared to similar offers on the market. Their ASP hosting price is very high and their

web-based platform is even higher. While they indicated that they would negotiate, they

also made it clear that they were not interested in many ‘small’ businesses. They do,

however, have many modules that help run the advanced parts of a business, including a

scorecard application that helps improve efficiency in the operations.

The primary Modules of Oracle eBusiness Suite are as follows:

99


o Financial — Complete management of financials, including performance

metrics, cash management, collections, planning and budgeting, payables,

receivables, and much more.

o Inventory — Complete management of the inventory, including

demand/supply forecasting.

o Purchasing , Order Management

o Sales — Helps the team to manage leads, identify sales opportunities, and

improve the entire sales process.

o Telesales (phone related) and Field sales (field related)

Table 5.1 shows a comparison between the five ERP software vendors mentioned

above and the NERP system. None of the five existing ERP vendors include the cost of

either the Operation System (OS) or the Database Management System (DBMS) in their

ERP system. As a result, the companies must spend a large amount of additional money

on both the OS and the DBMS. On the other hand, the NERP system is written in Java,

which can run on almost every OS belonging to the companies. If NERP is run on a free

OS such as Linux, there will be no cost for the OS. Similar to the OS, the DBMS in the

NERP system is written in MySQL, which is a free DBMS language and can be

interpreted by almost every supporting OS and machine. Both JAVA and MySQL can be

easily downloaded from their companies' websites.

100


o Financial - Complete management of financials, including performance

metrics, cash management, collections, planning and budgeting, payables,

receivables, and much more,

o Inventory - Complete management of the inventory, including

demand/supply forecasting,

o Purchasing , Order Management

o Sales - Helps the team to manage leads, identify sales opportunities, and

improve the entire sales process,

o Telesales (phone related) and Field sales (field related)

Table 5.1 shows a comparison between the five ERP software vendors mentioned

above and the NERP system. None of the five existing ERP vendors include the cost of

either the Operation System (OS) or the Database Management System (DBMS) in their

ERP system. As a result, the companies must spend a large amount of additional money

on both the OS and the DBMS. On the other hand, the NERP system is written in Java,

which can run on almost every OS belonging to the companies. If NERP is run on a free

OS such as Linux, there will be no cost for the OS. Similar to the OS, the DBMS in the

NERP system is written in MySQL, which is a free DBMS language and can be

interpreted by almost every supporting OS and machine. Both JAVA and MySQL can be

easily downloaded from their companies’ websites.

100


Software OpenPro NetSuite Axis Intacct Oracle NERP

Cost (annually)

# of Modules

Cost

3 modules

$1,440

Full

$12,400

Custom

$20,000

Custom

N/A

Full

$118,000

4 Modules

Very Low

# Hosted Service

Cost

5 Users

$2,400

5 Users

N/A

5 Users

$32,000

5 Users

$24,000

10 Users

$20,000

10-20

Very Low

Training

Implementation

N/A

$6,000

N/A

$12,400

Yes

$32,000

N/A

$20,000

N/A

$140,000

N/A

Very Low

First Year Cost $9,840 $24,800 $84,000 $44,000 $278,000 Very Low

Ongoing Cost $3,840 $12,400 $52,000 $24,000 $138,000 Very Low

Cost (3 years) $17,520 $49,600 $188,000 $92,000 $554,000 Very Low

Web-based Yes Yes No Yes Yes Yes

Financials Yes Yes Yes Yes Yes Yes

Supply Chain Yes Yes Yes Yes Yes Yes

Operation

System No No No No No No

Cost of Database

Management

System included

No No No No No Yes

Table 5.1 Comparison between existing ERP systems and the NERP system

Another major contrast can be seen in the features of the software. The NERP

system consists of every basic feature required by SMEs in Southeast Asia, including

order entry, sales, purchasing, inventory, information tracking, customer management,

vendor management and scheduling. In spite of these features, NERP does not have the

same high level of complexity for each feature that the existing ERP vendors have. The

101


Software OpenPro NetSuite Axis Intacct Oracle NERP

Cost (annually)

# of Modules 3 modules Full Custom Custom Full 4 Modules

Cost $1,440 $12,400 $20,000 N/A $118,000 Very Low

# Hosted Service 5 Users 5 Users 5 Users 5 Users 10 Users 10-20

Cost $2,400 N/A $32,000 $24,000 $20,000 Very Low

Training N/A N/A Yes N/A N/A N/A

Implementation $6,000 $12,400 $32,000 $20,000 $140,000 Very Low

First Year Cost $9,840 $24,800 $84,000 $44,000 $278,000 Very Low

Ongoing Cost $3,840 $12,400 $52,000 $24,000 $138,000 Very Low

Cost (3 years) $17,520 $49,600 $188,000 $92,000 $554,000 Very Low

Web-based Yes Yes No Yes Yes Yes

Financials Yes Yes Yes Yes Yes Yes

Supply Chain Yes Yes Yes Yes Yes Yes

Operation

SystemNo No No No No No

Cost of Database

Management

System included

No No No No No Yes

Table 5.1 Comparison between existing ERP systems and the NERP system

Another major contrast can be seen in the features of the software. The NERP

system consists of every basic feature required by SMEs in Southeast Asia, including

order entry, sales, purchasing, inventory, information tracking, customer management,

vendor management and scheduling. In spite of these features, NERP does not have the

same high level of complexity for each feature that the existing ERP vendors have. The

101


NERP system does not focus primarily on a few modules of the software, like Intacct,

which only focuses on financial and supply chain modules. Nor does it purchase software

packaged by other vendors and integrate it with its own software, like Axis. It also does

not consist of sophisticated modules, like Oracle. The NERP system is more similar to

OpenPro and NetSuite in terms of available modules; however, NERP is much cheaper

than NetSuite and has an easier graphical user interface than OpenPro.

The most important difference between these five types of ERP software and the

NERP system is found in the software's architectural design. These five existing ERP

systems have designs based on North American SMEs, which have different

characteristic requirements, software requirements, and user requirements than Southeast

Asian SMEs, as was stated in an earlier section of this research.

5.2 Data analysis

Using a survey and questionnaires, 50 people in five selected SMEs in Southeast

Asia, have been asked questions that are used to determine important factors in

developing and evaluating the integrated manufacturing computer system for SMEs.

These responses have been graded on a scale of 1 to 5, where 5 means that the function is

extremely important to the software, and the feature works incredibly well in the

software. 1, on the other hands, means it is not at all important to the software, or else

that the feature works very weakly in the software. Table 5.1 shows the results of the

survey.

From the results shown in Table 5.2, the number of males and females responding

to the survey is very similar, being 46% and 54%, respectively. As can be seen clearly in

102


NERP system does not focus primarily on a few modules of the software, like Intacct,

which only focuses on financial and supply chain modules. Nor does it purchase software

packaged by other vendors and integrate it with its own software, like Axis. It also does

not consist of sophisticated modules, like Oracle. The NERP system is more similar to

OpenPro and NetSuite in terms of available modules; however, NERP is much cheaper

than NetSuite and has an easier graphical user interface than OpenPro.

The most important difference between these five types of ERP software and the

NERP system is found in the software’s architectural design. These five existing ERP

systems have designs based on North American SMEs, which have different

characteristic requirements, software requirements, and user requirements than Southeast

Asian SMEs, as was stated in an earlier section of this research.

5.2 Data analysis

Using a survey and questionnaires, 50 people in five selected SMEs in Southeast

Asia, have been asked questions that are used to determine important factors in

developing and evaluating the integrated manufacturing computer system for SMEs.

These responses have been graded on a scale of 1 to 5, where 5 means that the function is

extremely important to the software, and the feature works incredibly well in the

software. 1, on the other hands, means it is not at all important to the software, or else

that the feature works very weakly in the software. Table 5.1 shows the results of the

survey.

From the results shown in Table 5.2, the number of males and females responding

to the survey is very similar, being 46% and 54%, respectively. As can be seen clearly in

102


the table, most of the companies participating in the survey are small- (1-10 employees)

and medium-sized (11-50 employees), and 80% of the companies have a turnover of less

than US $2.0 million. The major market area of these companies is local, occasionally

reaching the international level.

Factors Quantity Percentile Sex

Male 23 46 Female 27 54

Total 50 100.0 Number of Employees in Companies

1-10 20 40 11-50 30 60 51-250 0 0

Total 50 100.0 Company's Turnover (US$)

$0.1-0.5 M 10 20 $0.5-1.0 M 20 40 $1.0-2.0 M 10 20 Over $2.0 M 10 20

Total 50 100.0 Market Area

Local 20 40 Regional 10 20 National 10 20 International 10 20

Total 50 100.0 Table 5.2 General information of the participants

Satisfaction Level Averag Description 1 2 3 4 5

1.00-1.49 1.50-2.49 2.50-3.49 3.50-4.49 4.50-5.00

Much below average (MBA) Below average (BA)

Average (A) Above average (AA)

Much above average (MAA) Table 5.3 Relationships between satisfaction level, average score, and description

103


the table, most of the companies participating in the survey are small- (1-10 employees)

and medium-sized (11-50 employees), and 80% of the companies have a turnover of less

than US $2.0 million. The major market area of these companies is local, occasionally

reaching the international level.

Factors Quantity PercentileSex

Male 23 46Female 27 54

Total 50 100.0Number of Employees in Companies

1-10 20 4011-50 30 6051-250 0 0

Total 50 100.0Company’s Turnover (US$)

$0.1-0.5 M 10 20$0.5-1.0 M 20 40$ 1.0-2.0 M 10 20Over $2.0 M 10 20

Total 50 100.0Market Area

Local 20 40Regional 10 20National 10 20International 10 20

Total 50 100.0Table 5.2 General information of the participants

Satisfaction Level Average Description1 1.00-1.49

1.50-2.492.50-3.493.50-4.494.50-5.00

Much below average (MBA)2 Below average (BA)3 Average (A)4 Above average (AA)5 Much above average (MAA)

Table 5.3 Relationships between satisfaction level, average score, and description


System Overall Specification Factors Current NERP

Mean 3.63 4.56

Std. 0.89 0.51

Avg. AA MAA

P-value

0.01 1. Adaptability

2. Flexibility Current 3.38 0.96 A NERP 4.31 0.70 AA 0.01

3. Overall Cost Current 3.81 1.17 AA NERP 4.69 0.48 MAA 0.004

4. Efficiency of Internal Business Current 4.06 0.77 AA Processes NERP 4.69 0.48 MAA 0.000 5. Ease of use Current 3.69 0.79 AA

NERP 4.56 0.51 MAA 0.000

Total Current NERP

3.71 4.56

0.75 0.48

AA MAA 0.000

Table 5.4 Overall system satisfaction comparison between the existing system and NERP

As can be apprehended from the results in table 5.4, users have higher satisfaction

with the NERP system than with the existing system for every factor. The average

satisfaction level for the existing system is only just above average, while it is much

above average for the NERP system.

Table 5.5 illustrates the extent to which the different factors proposed have

affected the current software and Novel ERP software implementation and evaluation in

the five SMEs in Southeast Asia. For the current system column and the Novel ERP

system column the results represent how effectively these features can be used in the

software.

For the accounting module and function, the existing system can perform much

better than the NERP system, due to the fact that the NERP system does not focus much

on the financial and accounting methods of the companies. This is because that

information is very private and varies from company to company.

104


S\stem Overall Specification Factors Mean Std. Avg. P-value1. Adaptability Current

NERP3.634.56

0.890.51

AAMAA 0.01

2. Flexibility CurrentNERP

3.384.31

0.960.70

AAA 0.01

3. Overall Cost Current 3.81 1.17 AANERP 4.69 0.48 MAA 0.004

4. Efficiency of Internal Business Current 4.06 0.77 AAProcesses NERP 4.69 0.48 MAA 0.0005. Ease of use Current 3.69 0.79 AA

NERP 4.56 0.51 MAA 0.000

Total Current 3.71 0.75 AANERP 4.56 0.48 MAA 0.000

Table 5.4 Overall system satisfaction comparison between the existing system and NERP

As can be apprehended from the results in table 5.4, users have higher satisfaction

with the NERP system than with the existing system for every factor. The average

satisfaction level for the existing system is only just above average, while it is much

above average for the NERP system.

Table 5.5 illustrates the extent to which the different factors proposed have

affected the current software and Novel ERP software implementation and evaluation in

the five SMEs in Southeast Asia. For the current system column and the Novel ERP

system column the results represent how effectively these features can be used in the

software.

For the accounting module and function, the existing system can perform much

better than the NERP system, due to the fact that the NERP system does not focus much

on the financial and accounting methods of the companies. This is because that

information is very private and varies from company to company.

104


Software and Module Expectation Factors

N Min. Max. Mean Std. Avg.

1. Accounting Current NERP

50 50

3 3

5 5

4.29 3.85

0.69 0.62

AA AA

2. Customer and Supplier Current 50 3 5 3.87 0.61 AA Relations NERP 50 3 5 4.24 0.66 AA

3. Information Management Current NERP

50 50

3 3

5 5

3.99 4.24

0.75 0.66

AA AA

4. Intuitive System Current NERP

50 50

3 3

5 5

3.12 4.24

0.62 0.66

A AA

5. Inventory Management Current NERP

50 50

3 3

5 5

4.18 4.34

0.64 0.73

AA AA

6. Manufacturing and Logistics Current NERP

50 50

3 3

5 5

4.01 4.12

0.62 0.70

AA AA

7. Personal Productivity Current NERP

50 50

3 3

5 5

3.44 4.06

0.66 0.83

A AA

8. Openness Current NERP

50 50

3 3

5 5

3.26 4.06

0.62 0.43

A AA

9. Sales Current NERP

50 50

3 3

5 5

4.02 4.06

0.79 0.43

AA AA

10. Time Current NERP

50 50

3 3

5 5

3.82 3.78

0.73 0.58

AA AA

Total Current NERP

50 50

3 3

5 5

3.8 4.1

0.67 0.63

AA AA

Table 5.5 Software and module satisfaction factors, comparing the existing system and the NERP

system

The manufacturing module, sales module, and software response correspondence

time have the same satisfaction level for both systems. A possible reason behind this

similarity is that manufacturing varies in every company, and sales transactions occurring

in SMEs are mostly from regular customers with small orders. Given that SMEs may

have limited hardware, manpower, and financial capabilities, the software corresponding

time is mostly based on hardware performance and human expertise.

This comparison of the results of the current system and the Novel ERP system

prove that beginning with the conceptual framework design, these five SMEs in

105


Software and Module Expectation Factors ' N Min. Max. Mean Std. Avg.

1. Accounting CurrentNERP

5050

33

55

4.293.85

0.690.62

AAAA

2. Customer and Supplier Current 50 3 5 3.87 0.61 AARelations NERP 50 3 5 4.24 0.66 AA

3. Information Management CurrentNERP

5050

33

55

3.994.24

0.750.66

AAAA

4. Intuitive System CurrentNERP

5050

33

55

3.124.24

0.620.66

AAA

5. Inventory Management CurrentNERP

5050

33

55

4.184.34

0.640.73

AAAA

6. Manufacturing and Logistics CurrentNERP

5050

33

55

4.014.12

0.620.70

AAAA

7. Personal Productivity CurrentNERP

5050

33

55

3.444.06

0.660.83

AAA

8. Openness Current 50 3 5 3.26 0.62 ANERP 50 3 5 4.06 0.43 AA

9. Sales Current 50 3 5 4.02 0.79 AANERP 50 3 5 4.06 0.43 AA

10. Time Current 50 3 5 3.82 0.73 AANERP 50 3 5 3.78 0.58 AA

Total Current 50 3 5 3.8 0.67 AANERP 50 3 5 4.1 0.63 AA

Table 5.5 Software and module satisfaction factors, comparing the existing system and the NERP

system

The manufacturing module, sales module, and software response correspondence

time have the same satisfaction level for both systems. A possible reason behind this

similarity is that manufacturing varies in every company, and sales transactions occurring

in SMEs are mostly from regular customers with small orders. Given that SMEs may

have limited hardware, manpower, and financial capabilities, the software corresponding

time is mostly based on hardware performance and human expertise.

This comparison of the results of the current system and the Novel ERP system

prove that beginning with the conceptual framework design, these five SMEs in

105


Southeast Asia have found that the Novel ERP system is better than their existing system

in most ways. With a higher satisfaction mean of 4.1 for the NERP system over a mean

of only 3.8 for the existing system, there is at least one system that can satisfy the needs

and requirements of these SMEs in Southeast Asia

Platform Specification Factors

N Min. Max. Mean Std. Avg.

1. Local Area Network 50 3 5 4.38 0.62 AA 2. Web-based 50 3 5 4.31 0.79 AA 3. Mobile Device 50 2 5 3.02 0.83 A

Total 50 .2.67 5 3.90 0.75 AA Table 5.6 Platform choices for the development of an ERP system

As can be seen in Table 5.6, users agree that the Local Area Network (LAN)

connection and a Web-based server are very important for the manufacturing system.

However, if the application can be operated via a mobile device, the satisfaction level

increases to above average. Although there are currently limited resources, sizes, and

technology, the mobile device applications are slowly growing in Southeast Asian SMEs,

and will play an important role in the future development of the system.

Our Novel ERP system has been created using the Java programming language

combined with MySQL database programming. Both of these computer languages are

free of charge, open source and popular with expert software developers. Also, Java

applets-or the applications that are created in Java-can easily operate in a web-based

platform, server/clients platforms, single stand desktops and a combination of all three.

These features of Java and MySQL make the Novel ERP system capable of running in

most supported platforms free of charge.

Table 5.7 shows a comparison of the organizational and cultural factors of the

existing systems and the NERP system developed based on our framework. This

106


Southeast Asia have found that the Novel ERP system is better than their existing system

in most ways. With a higher satisfaction mean of 4.1 for the NERP system over a mean

of only 3.8 for the existing system, there is at least one system that can satisfy the needs

and requirements of these SMEs in Southeast Asia

Platform Specification Factors N Min. Max. Mean Std. \vj».

1. Local Area Network 50 3 5 4.38 0.62 AA2. Web-based 50 3 5 4.31 0.79 AA3. Mobile Device 50 2 5 3.02 0.83 A

Total 50 2.67 5 3.90 0.75 AATable 5.6 Platform choices for the development of an ERP system

As can be seen in Table 5.6, users agree that the Local Area Network (LAN)

connection and a Web-based server are very important for the manufacturing system.

However, if the application can be operated via a mobile device, the satisfaction level

increases to above average. Although there are currently limited resources, sizes, and

technology, the mobile device applications are slowly growing in Southeast Asian SMEs,

and will play an important role in the future development of the system.

Our Novel ERP system has been created using the Java programming language

combined with MySQL database programming. Both of these computer languages are

free of charge, open source and popular with expert software developers. Also, Java

applets-or the applications that are created in Java-can easily operate in a web-based

platform, server/clients platforms, single stand desktops and a combination of all three.

These features of Java and MySQL make the Novel ERP system capable of running in

most supported platforms free of charge.

Table 5.7 shows a comparison of the organizational and cultural factors of the

existing systems and the NERP system developed based on our framework. This

106


framework can greatly increase the centralization and reengineering processes of these

companies by conducting research on the most necessary business fundamental processes

required for SMEs, and centralizing them with the same front-end software for every user

connected to only one database server. Also, with the same software being used by every

user, the routine work performance can easily be increased. On the other hand, the NERP

system cannot make major improvements in responsiveness to the market, level of

production automation, and top management support, due to the fact that they require

time to display their full potential, and have only been given two weeks for a trial run.

Organizational and Cultural Factors

N Min. Nlay. Mean SW. AN g.

1. Centralization Current NERP

50 50

3 3

5 5

4.38 4.94

0.62 0.75

AA MAA

2. Responsiveness Current NERP

50 50

3 3

5 5

4.31 4.34

0.79 0.74

AA AA

3. Work Routines Current NERP

50 50

3 3

5 5

4.25 4.56

0.58 0.73

AA MAA

4. Level of Production Current 50 3 5 4.14 1.23 AA Automation NERP 50 3 5 4.10 0.95 AA

5. Top Management Support Current NERP

50 50

3 3

5 5

4.06 4.00

0.66 0.62

AA AA

6. Reengineering Current NERP

50 50

3 3

5 5

3.73 4.25

1.22 0.62

AA AA

Total Current NERP

50 50

3 3

5 5

4.15 4.36

0.85 0.74

AA AA

Table 5.7 A comparison of organizational and cultural factors of the existing system and NERP

Satisfaction N Min. Max. Mean Std. Avg. 1. Satisfaction with NERP 50 3 5 4.51 0.52 MAA 2. Usefulness of NERP in future development

50 3 5 4.70 0.65 MAA

Total 50 3 5 4.60 0.58 MAA Table 5.8 Satisfaction with the NERP system in 5 selected SMEs in Southeast Asia

107


framework can greatly increase the centralization and reengineering processes of these

companies by conducting research on the most necessary business fundamental processes

required for SMEs, and centralizing them with the same front-end software for every user

connected to only one database server. Also, with the same software being used by every

user, the routine work performance can easily be increased. On the other hand, the NERP

system cannot make major improvements in responsiveness to the market, level of

production automation, and top management support, due to the fact that they require

time to display their full potential, and have only been given two weeks for a trial run.

Organizational and Cultural Factors N Min. Max. Mean Std. Avg.

1. Centralization CurrentNERP

5050

33

55

4.384.94

0.620.75

AAMAA

2. Responsiveness Current 50 3 5 4.31 0.79 AANERP 50 3 5 4.34 0.74 AA

3. Work Routines Current 50 3 5 4.25 0.58 AANERP 50 3 5 4.56 0.73 MAA

4. Level of Production Current 50 3 5 4.14 1.23 AAAutomation NERP 50 3 5 4.10 0.95 AA

5. Top Management Support Current 50 3 5 4.06 0.66 AANERP 50 3 5 4.00 0.62 AA

6. Reengineering Current 50 3 5 3.73 1.22 AANERP 50 3 5 4.25 0.62 AA

Total Current 50 3 5 4.15 0.85 AANERP 50 3 5 4.36 0.74 AA

Table 5.7 A comparison of organizational and cultural factors of the existing system and NERP

Satisfaction N Min. Max. Mean Std. Avg.1. Satisfaction with NERP 50 3 5 4.51 0.52 MAA2. Usefulness of NERP in future development 50 3 5 4.70 0.65 MAA

Total 50 3 5 4.60 0.58 MAATable 5.8 Satisfaction with the NERP system in 5 selected SMEs in Southeast Asia

107


Table 5.8 shows that the level of satisfaction with the NERP system is well above

average. The same goes for the usefulness of the NERP system for future development

and improvement of Southeast Asian ERPs for SMEs. The participants in the survey very

much appreciated the NERP system, and believed that it could be improved to better suit

their needs.

Modules N Min. Max. Mean Std. Avg.

1. Sales Module 50 3 5 4.41 0.51 AA 2. Purchasing Module 50 3 5 4.06 0.83 AA 3. Inventory Module 50 3 5 3.94 0.75 AA 4. Production Module 50 3 5 3.75 1.00 AA 5. Transaction Reminding Module

50 3 5 4.50 0.76 MAA

6. Q* and ROP Calculation 50 3 5 4.63 0.52 MAA 7. Initial and Profit Cost Analysis

50 3 5 4.05 0.60 AA

8.Production Scheduling and Estimation

50 3 5 4.33 0.71 AA

Total 50 3 5 4.21 0.71 AA Table 5.9 Satisfaction level for each module and function in the NERP System

Table 5.9 shows the satisfaction level for each function and module in the NERP

system. As can be seen from this table, the two functions that users appreciated the most

were the transaction reminding module, and the calculation of the dynamic Q* and ROP.

Some employees stated that they could easily check the trend of their inventory by

looking at the Q* and ROP numbers. Some stated that the consistency, accuracy, and

speed of the data flow were visibly increased with the activation of the transaction

reminding module. The two lowest satisfaction level modules were the production

module and the inventory module. These low satisfaction levels occurred because of the

differences and uniqueness of the production operations of each company, which includes

their inventory of stock.

108


Table 5.8 shows that the level of satisfaction with the NERP system is well above

average. The same goes for the usefulness of the NERP system for future development

and improvement of Southeast Asian ERPs for SMEs. The participants in the survey very

much appreciated the NERP system, and believed that it could be improved to better suit

their needs.

Modules N Min. Max. Mean Std. Avg,1. Sales Module 50 3 5 4.41 0.51 AA2. Purchasing Module 50 3 5 4.06 0.83 AA3. Inventory Module 50 3 5 3.94 0.75 AA4. Production Module 50 3 5 3.75 1.00 AA5. Transaction Reminding Module 50 3 5 4.50 0.76 MAA

6. Q* and ROP Calculation 50 3 5 4.63 0.52 MAA7. Initial and Profit Cost 50 3 £ 4.05 0.60 AAAnalysis8.Production Scheduling and Estimation 50 3 5 4.33 0.71 AA

Total 50 3 5 4.21 0.71 AATable 5.9 Satisfaction level for each module and function in the NERP System

Table 5.9 shows the satisfaction level for each function and module in the NERP

system. As can be seen from this table, the two functions that users appreciated the most

were the transaction reminding module, and the calculation of the dynamic Q* and ROP.

Some employees stated that they could easily check the trend of their inventory by

looking at the Q* and ROP numbers. Some stated that the consistency, accuracy, and

speed of the data flow were visibly increased with the activation of the transaction

reminding module. The two lowest satisfaction level modules were the production

module and the inventory module. These low satisfaction levels occurred because of the

differences and uniqueness of the production operations of each company, which includes

their inventory of stock.

108


5.3 Comparison of estimation and practice

There are different categories that can be pointed out as being theoretically

influenced by a Novel ERP System. These categories are: Accounting, Costs,

Manufacturing and Logistics, Customer and Supplier Relations, Information

Management, and Organization and Culture. These are also the same areas in the study

through which five SME companies in Southeast Asia measured their expectations of the

ERP System. The expectations of the five companies vary between and within the

categories. Manufacturing and Logistics are the categories for which Company A and D

had great expectations. On the other hand, Company E was concerned with the effects in

the category of Costs.

The analysis shows that the significance of each of the six aspects differs between

the original estimation and actual practice. In the Accounting category, the empirical

data reveals that Financial Reports is the aspect of which a majority of the responding

SME companies in Southeast Asia had high expectations. This is principally due to the

integrated nature of the system, and the elimination of multiple and redundant data and

sources. SMEs also wanted to make it easier to receive reports from the system, and to

have the reports present more accurate figures. In the category of Costs, most SMEs in

Southeast Asia expected an effect on Administrative Costs. This is primarily due to the

expectations that administrative work would be more effective using a Novel ERP

system. For example, in the case of Company C, the company was struggling with the

problem of controlling the volume and timing of discounts given to customers of the

company. Also, the company had difficulty logging and monitoring the discounts given

to customers, which was a large administrative cost for the company. Upon the

109


5.3 Comparison of estimation and practice

There are different categories that can be pointed out as being theoretically

influenced by a Novel ERP System. These categories are: Accounting, Costs,

Manufacturing and Logistics, Customer and Supplier Relations, Information

Management, and Organization and Culture. These are also the same areas in the study

through which five SME companies in Southeast Asia measured their expectations of the

ERP System. The expectations of the five companies vary between and within the

categories. Manufacturing and Logistics are the categories for which Company A and D

had great expectations. On the other hand, Company E was concerned with the effects in

the category of Costs.

The analysis shows that the significance of each of the six aspects differs between

the original estimation and actual practice. In the Accounting category, the empirical

data reveals that Financial Reports is the aspect of which a majority of the responding

SME companies in Southeast Asia had high expectations. This is principally due to the

integrated nature of the system, and the elimination of multiple and redundant data and

sources. SMEs also wanted to make it easier to receive reports from the system, and to

have the reports present more accurate figures. In the category of Costs, most SMEs in

Southeast Asia expected an effect on Administrative Costs. This is primarily due to the

expectations that administrative work would be more effective using a Novel ERP

system. For example, in the case of Company C, the company was struggling with the

problem of controlling the volume and timing of discounts given to customers of the

company. Also, the company had difficulty logging and monitoring the discounts given

to customers, which was a large administrative cost for the company. Upon the

109


implementation of a Novel ERP system, Company C expected that the system would

streamline not only the administrative work of the company, but also their business

operations. It would also provide the company with tighter financial control.

In the Manufacturing and Logistics categories, Company A and Company B

expected effects on Purchasing Management, Warehouse Management, Production

Planning, Production Flexibility and Order Management. SMEs saw the possibility to

create a more efficient process within this category, due to the integrated approach of the

Novel ERP system. For example, for Company A, in the areas of purchasing and order

processing, the data entered is sorted by category and by department. The company

expected that such meticulous and thorough categorization would allow sales, purchasing

and orders to be tracked easily upon the implementation of the Novel ERP system. The

company also expected to have easy data access, which would be crucial in ensuring the

efficiency and transparency of the company.

SMEs in Southeast Asia had fewer expectations in the other categories, including

Customer and Suppliers Relations, Information Management and Organization, and

Culture.

5.4 Respondents' perspectives on Enterprise Resource Planning and what is

expected in the future

The researcher asked the respondents about their opinions regarding the

Enterprise Resource Planning market and what they could anticipate in the future.

Respondents expressed hopes that Enterprise resource planning would attempt to

integrate all departments and functions across a company into a single computer system

110


implementation of a Novel ERP system, Company C expected that the system would

streamline not only the administrative work of the company, but also their business

operations. It would also provide the company with tighter financial control.

In the Manufacturing and Logistics categories, Company A and Company B

expected effects on Purchasing Management, Warehouse Management, Production

Planning, Production Flexibility and Order Management. SMEs saw the possibility to

create a more efficient process within this category, due to the integrated approach of the

Novel ERP system. For example, for Company A, in the areas of purchasing and order

processing, the data entered is sorted by category and by department. The company

expected that such meticulous and thorough categorization would allow sales, purchasing

and orders to be tracked easily upon the implementation of the Novel ERP system. The

company also expected to have easy data access, which would be crucial in ensuring the

efficiency and transparency of the company.

SMEs in Southeast Asia had fewer expectations in the other categories, including

Customer and Suppliers Relations, Information Management and Organization, and

Culture.

5.4 Respondents’ perspectives on Enterprise Resource Planning and what is

expected in the future

The researcher asked the respondents about their opinions regarding the

Enterprise Resource Planning market and what they could anticipate in the future.

Respondents expressed hopes that Enterprise resource planning would attempt to

integrate all departments and functions across a company into a single computer system

110


that could serve all of the different departments' particular needs. Moreover, the ERP

system would automate the tasks involved in performing a business process, such as

order fulfilment, which involves taking an order from a customer, shipping it, and billing

it. Respondents also explained that with ERP, when a customer service representative

takes an order from a customer he or she would have all of the information necessary to

complete the order.

The most broadly deployed ERP systems worldwide, not just in Southeast Asia,

are those which track financial data. They include applications such as a general ledger,

accounts receivable, and several others. SMEs in Southeast Asia, including Companies

A, B, C, D, and E are trying to improve and streamline their finance and accounting

applications, attempting to make them more flexible, more tightly integrated, and more

functionally complete. The respondents were able to cite relevant points regarding the

relevance of ERP systems. Respondents explained that human resource applications such

as payroll, personnel and applicant tracking systems are extremely important in today's

ERP market in Southeast Asia. Moreover, SMEs in Southeast Asia are realizing that

their employees represent their most significant assets, and they are investing more than

ever into the systems in order to help them provide better service and more flexible

programs for these employees. As a result of this process, the study found that the

management reporting functions which focus on areas such as hiring trends and turnover

analysis are taking on greater importance in the process of managing small and medium

enterprises in Southeast Asia.

Most of the respondents explained that their company looked to Enterprise

Resource Planning software in order to streamline their business process, increase

111


that could serve all of the different departments’ particular needs. Moreover, the ERP

system would automate the tasks involved in performing a business process, such as

order fulfilment, which involves taking an order from a customer, shipping it, and billing

it. Respondents also explained that with ERP, when a customer service representative

takes an order from a customer he or she would have all of the information necessary to

complete the order.

The most broadly deployed ERP systems worldwide, not just in Southeast Asia,

are those which track financial data. They include applications such as a general ledger,

accounts receivable, and several others. SMEs in Southeast Asia, including Companies

A, B, C, D, and E are trying to improve and streamline their finance and accounting

applications, attempting to make them more flexible, more tightly integrated, and more

functionally complete. The respondents were able to cite relevant points regarding the

relevance of ERP systems. Respondents explained that human resource applications such

as payroll, personnel and applicant tracking systems are extremely important in today’s

ERP market in Southeast Asia. Moreover, SMEs in Southeast Asia are realizing that

their employees represent their most significant assets, and they are investing more than

ever into the systems in order to help them provide better service and more flexible

programs for these employees. As a result of this process, the study found that the

management reporting functions which focus on areas such as hiring trends and turnover

analysis are taking on greater importance in the process of managing small and medium

enterprises in Southeast Asia.

Most of the respondents explained that their company looked to Enterprise

Resource Planning software in order to streamline their business process, increase

111


productivity, reduce costs and distribute shared information across the enterprise. In

addition, the availability and reliability of the ERP environment has become critical to

business productivity and success in this new era. According to the respondent, the new

services that SMEs will have to deliver in order to be competitive and productive in the

future are management skills, specific business knowledge, e-business knowledge, and

outsourcing capabilities.

On the other hand, when the researcher asked some experts about the process of

the ERP system, they said that in order to understand the function of ERP, the ERP

developer must understand the problems they are designed to solve. Respondents

explained that every SME collects, generates, and stores vast quantities of data. In most

companies, however, that data is not kept in a single database. Instead, the information is

spread across a large number of computer systems. According to the respondents,

maintaining these different systems leads to large costs for storing and rationalizing

redundant data, as well as reformatting data from one system for use in another. The

respondents explained that if a company's sales and ordering systems cannot

communicate with its production system, then its productivity and customer

responsiveness will suffer. In addition, if its sales and marketing systems are

incompatible with its financial systems, then management is left to make significant

decisions based on character rather than a detailed understanding and recognition of

product and customer profitability.

All five of the SMEs in Southeast Asia that were interviewed and participated in

the study also saw their ERP acquisition and implementation from a technical point of

view. In most cases, the companies had old systems which they wanted to replace. The

112


productivity, reduce costs and distribute shared information across the enterprise. In

addition, the availability and reliability of the ERP environment has become critical to

business productivity and success in this new era. According to the respondent, the new

services that SMEs will have to deliver in order to be competitive and productive in the

future are management skills, specific business knowledge, e-business knowledge, and

outsourcing capabilities.

On the other hand, when the researcher asked some experts about the process of

the ERP system, they said that in order to understand the function of ERP, the ERP

developer must understand the problems they are designed to solve. Respondents

explained that every SME collects, generates, and stores vast quantities of data. In most

companies, however, that data is not kept in a single database. Instead, the information is

spread across a large number of computer systems. According to the respondents,

maintaining these different systems leads to large costs for storing and rationalizing

redundant data, as well as reformatting data from one system for use in another. The

respondents explained that if a company’s sales and ordering systems cannot

communicate with its production system, then its productivity and customer

responsiveness will suffer. In addition, if its sales and marketing systems are

incompatible with its financial systems, then management is left to make significant

decisions based on character rather than a detailed understanding and recognition of

product and customer profitability.

All five of the SMEs in Southeast Asia that were interviewed and participated in

the study also saw their ERP acquisition and implementation from a technical point of

view. In most cases, the companies had old systems which they wanted to replace. The

112


respondents explained some of the reasons for changing the system, particularly the wish

to acquire a completely integrated system like the ERP program. This was needed in

order to achieve quicker information flow, and to be able to develop the company's

processes and eliminate the capacity problem with the old system of ERP, the difficulty

in getting any meaningful and significant business information, a lack of functionality

and flexibility, and the difficulty in maintaining the older ERP system. These are only a

few of the factors which respondents shared regarding their reasons for changing

systems.

The researcher also thought that it would be interesting to know what kind of

advantages the companies expected to have with the ERP system. According to the

respondents, one of the many expected advantages is an integrated system that would

help the company avoid extra work. The company would only have to place the data into

the central ERP database rather than entering data first into the financial system and then

into the MRP system. Another point is that through an ERP system there would be a

faster flow of information, and it would also decrease inventory times. Interestingly, the

ERP system has the advantage of decreasing IT costs, because the vendors and not the

company itself offer systems development. In this situation, this decrease in IT costs

proves more effective and successful for the company in the long run. Respondents also

explained that ERP has the advantage of being better control of the company. This

means that by being able to monitor one of the company's information flows at a time,

the ERP system enables a general view of the company's information flow.

The respondents also illustrated some of the effects of implementing an ERP

system. According to the respondents from Southeast Asian SMEs, the implementation

113


respondents explained some of the reasons for changing the system, particularly the wish

to acquire a completely integrated system like the ERP program. This was needed in

order to achieve quicker information flow, and to be able to develop the company’s

processes and eliminate the capacity problem with the old system of ERP, the difficulty

in getting any meaningful and significant business information, a lack of functionality

and flexibility, and the difficulty in maintaining the older ERP system. These are only a

few of the factors which respondents shared regarding their reasons for changing

systems.

The researcher also thought that it would be interesting to know what kind of

advantages the companies expected to have with the ERP system. According to the

respondents, one of the many expected advantages is an integrated system that would

help the company avoid extra work. The company would only have to place the data into

the central ERP database rather than entering data first into the financial system and then

into the MRP system. Another point is that through an ERP system there would be a

faster flow of information, and it would also decrease inventory times. Interestingly, the

ERP system has the advantage of decreasing IT costs, because the vendors and not the

company itself offer systems development. In this situation, this decrease in IT costs

proves more effective and successful for the company in the long run. Respondents also

explained that ERP has the advantage of being better control of the company. This

means that by being able to monitor one of the company’s information flows at a time,

the ERP system enables a general view of the company’s information flow.

The respondents also illustrated some of the effects of implementing an ERP

system. According to the respondents from Southeast Asian SMEs, the implementation

113


of the ERP system has had positive and negative effects. With regards to the positive

effects, respondents explained that it is much easier to buy an existing system than to

develop the company's own system. Moreover, there have been a lot of complaints over

the years that ERPs take too long to implement. Some respondents, however, assert that

this depends upon the ERP system that the company wants to implement. In today's

modern world, the vendors have developed methods and other means by which to shorten

the time of implementation. The respondents also explained that the cheap development

cost is also a positive result of the implementation of an ERP. Before, the ERP vendors

put about 5-15 percent of their revenues into their Research and Development department

into order to develop a system that would be equally good, but very costly. Through the

implementation of an ERP system there would be safe cost estimations. In other words,

to invest in an existing system makes it easier to estimate the total cost of the system and

its implementation. If the company develops its own system, it is difficult to estimate

how much the company will spend or invest in the system.

The previous sections of this thesis suggest that ERP systems must be

harmoniously integrated with the firms' business functions. This means that building

ERP systems alone does not guarantee success. Users must be trained and supported

before the technology is accepted and implemented. According to some respondents in

the study, based on their experiences of maximizing benefits and minimizing the risks, it

is important to: (1) get senior support; (2) work with the staff to develop a detailed list of

requirements for what is needed in ERP; (3) train and re-train staff; and (4) know the

processes. Respondents also pointed out that not understanding the basic process

produced a less than effective set of performance measures. In addition, respondents also

114


of the ERP system has had positive and negative effects. With regards to the positive

effects, respondents explained that it is much easier to buy an existing system than to

develop the company’s own system. Moreover, there have been a lot of complaints over

the years that ERPs take too long to implement. Some respondents, however, assert that

this depends upon the ERP system that the company wants to implement. In today’s

modern world, the vendors have developed methods and other means by which to shorten

the time of implementation. The respondents also explained that the cheap development

cost is also a positive result of the implementation of an ERP. Before, the ERP vendors

put about 5-15 percent of their revenues into their Research and Development department

into order to develop a system that would be equally good, but very costly. Through the

implementation of an ERP system there would be safe cost estimations. In other words,

to invest in an existing system makes it easier to estimate the total cost of the system and

its implementation. If the company develops its own system, it is difficult to estimate

how much the company will spend or invest in the system.

The previous sections of this thesis suggest that ERP systems must be

harmoniously integrated with the firms’ business functions. This means that building

ERP systems alone does not guarantee success. Users must be trained and supported

before the technology is accepted and implemented. According to some respondents in

the study, based on their experiences of maximizing benefits and minimizing the risks, it

is important to: (1) get senior support; (2) work with the staff to develop a detailed list of

requirements for what is needed in ERP; (3) train and re-train staff; and (4) know the

processes. Respondents also pointed out that not understanding the basic process

produced a less than effective set of performance measures. In addition, respondents also

114


identified the fact that managing information about the processes was a key success

factor. Indeed, understanding business processes is crucial to organizational success.

From this analysis, understanding the conceptual fundamentals of a process or a system

can be accomplished through the integration of an ERP system and its concepts into a

business school curriculum, and, in turn, industry must adopt a more process-oriented

approach in its ERP training programs.

Companies should not lament the cost of their investment, as the skills and

capabilities they acquire during the ERP installation process will allow them to improve

their ERP applications incrementally.

According to the respondents, it is necessary to revisit the business' reasons for

needing an ERP system in order to see where further efficiencies and savings can be

realized. Initiatives include refining the system, searching for nice-to-have features,

analyzing captured data, and extending uniformity. James and Woods (2000) suggest four

initiatives for achieving competitive advantage: sell-side e-commerce, electronic

procurement, continuous-relationship marketing, and supply chain optimization.

Since the overall implementation and maintenance of ERP faces major obstacles,

it would indeed be helpful if SMEs would concentrate more on: (1) profiling the solid

business functional gains and methods to determine the success of their business; (2)

appointing accountability and authority for these goals and; (3) securing that the entire

management is dedicated together in reaching for the identified goals. Because the

successful implementation of ERP depends partly, if not wholly, on the level of skills of a

company's personnel, it is of utmost importance that companies allot time and money to

115


identified the fact that managing information about the processes was a key success

factor. Indeed, understanding business processes is crucial to organizational success.

From this analysis, understanding the conceptual fundamentals of a process or a system

can be accomplished through the integration of an ERP system and its concepts into a

business school curriculum, and, in turn, industry must adopt a more process-oriented

approach in its ERP training programs.

Companies should not lament the cost of their investment, as the skills and

capabilities they acquire during the ERP installation process will allow them to improve

their ERP applications incrementally.

According to the respondents, it is necessary to revisit the business’ reasons for

needing an ERP system in order to see where further efficiencies and savings can be

realized. Initiatives include refining the system, searching for nice-to-have features,

analyzing captured data, and extending uniformity. James and Woods (2000) suggest four

initiatives for achieving competitive advantage: sell-side e-commerce, electronic

procurement, continuous-relationship marketing, and supply chain optimization.

Since the overall implementation and maintenance of ERP faces major obstacles,

it would indeed be helpful if SMEs would concentrate more on: (1) profiling the solid

business functional gains and methods to determine the success of their business; (2)

appointing accountability and authority for these goals and; (3) securing that the entire

management is dedicated together in reaching for the identified goals. Because the

successful implementation of ERP depends partly, if not wholly, on the level of skills of a

company’s personnel, it is of utmost importance that companies allot time and money to

115


train them, in order to equip them with the technical capabilities needed to support the

ERP system.

116


train them, in order to equip them with the technical capabilities needed to support the

ERP system.

116


Chapter 6

Conclusion and Future work

6.1 Conclusions

This research contributes to the existing research on ERP systems and how they

can be improved so that they may be effectively implemented by Southeast Asian SMEs.

The quest for improved ERP software packages has been ongoing, which evidently

shows the need for more efforts towards enhancing the characteristics of the software

packages. This research attempts to discover the features that may make an ERP system

work better for SMEs in Southeast Asia. Moreover, the research seeks to contribute to the

literature by outlining the features of SMEs in Southeast Asia, as well as the strengths

and weaknesses of ERP characteristics used in existing ERP systems. The research posits

that it is time for ERP developers to take into consideration the peculiarities in company

size and uniqueness of operations and management in different cultural environments.

Based on the survey and analyses performed in the research, it is conclusive that

most of the time, small and medium enterprises cannot afford the cost of ERP software

packages available in the market. Furthermore, it has been noted in the survey feed-back

that the complexity of using the existing ERP software packages has caused many SMEs

to fail in implementing the program. All of these problems pose a challenging research

area for researchers and engineers in the areas of ERP system development: to provide an

architectural design for ERP software that is affordable, simple, and corresponds to the

problems presented by SMEs in Southeast Asia. With the data and information collected

in the research, the researcher deems that one of the problems with the existing ERP

117


Chapter 6

Conclusion and Future work

6.1 Conclusions

This research contributes to the existing research on ERP systems and how they

can be improved so that they may be effectively implemented by Southeast Asian SMEs.

The quest for improved ERP software packages has been ongoing, which evidently

shows the need for more efforts towards enhancing the characteristics of the software

packages. This research attempts to discover the features that may make an ERP system

work better for SMEs in Southeast Asia. Moreover, the research seeks to contribute to the

literature by outlining the features of SMEs in Southeast Asia, as well as the strengths

and weaknesses of ERP characteristics used in existing ERP systems. The research posits

that it is time for ERP developers to take into consideration the peculiarities in company

size and uniqueness of operations and management in different cultural environments.

Based on the survey and analyses performed in the research, it is conclusive that

most of the time, small and medium enterprises cannot afford the cost of ERP software

packages available in the market. Furthermore, it has been noted in the survey feed-back

that the complexity of using the existing ERP software packages has caused many SMEs

to fail in implementing the program. All of these problems pose a challenging research

area for researchers and engineers in the areas of ERP system development: to provide an

architectural design for ERP software that is affordable, simple, and corresponds to the

problems presented by SMEs in Southeast Asia. With the data and information collected

in the research, the researcher deems that one of the problems with the existing ERP

117


software is due to its standardized design, which lacks the particularities that could

resolve ERP adoption and implementation problems in SMEs in Southeast Asia.

A new ERP system called NERP is developed in the present research. The

development of the NERP system in this thesis is based on an extensive review of

existing literature, studies of unique characteristics of the companies, an investigation

into the companies' requirements, and the data collected through the surveys and

questionnaires. to develop a framework. The framework of a NERP system in this thesis

can serve as a guideline for ERP system development for management software, in this

case being applied to small- to medium-size companies in Southeast Asia. The statistical

technique involved in the calculation of the safety stock is used to optimize the initial

cost and replenishment quantity of the products, while the free programming languages

are used to optimize the cost of implementation. Evaluation of the NERP system that was

developed is performed on the basis of the surveys and feedbacks following actual

installation and usage of the system at the companies' sites. The responses of the SMEs

are positive towards the cost, framework, modules, and application of the Novel ERP

system developed.

Accomplishments of the present research can be concluded as follows:

o The main problems of implementing the existing management and manufacturing

software in SMEs in Southeast Asian countries as well as the specialty needs of

the SMEs for integrated manufacturing software (ERP), are identified through the

detailed analysis of a comprehensive systematic survey.

o An ERP conceptual framework is developed on the basis of in depth analysis of

the data collected from the survey. As well, the key implementation success

118


software is due to its standardized design, which lacks the particularities that could

resolve ERP adoption and implementation problems in SMEs in Southeast Asia.

A new ERP system called NERP is developed in the present research. The

development of the NERP system in this thesis is based on an extensive review of

existing literature, studies of unique characteristics of the companies, an investigation

into the companies’ requirements, and the data collected through the surveys and

questionnaires, to develop a framework. The framework of a NERP system in this thesis

can serve as a guideline for ERP system development for management software, in this

case being applied to small- to medium-size companies in Southeast Asia. The statistical

technique involved in the calculation of the safety stock is used to optimize the initial

cost and replenishment quantity of the products, while the free programming languages

are used to optimize the cost of implementation. Evaluation of the NERP system that was

developed is performed on the basis of the surveys and feedbacks following actual

installation and usage of the system at the companies’ sites. The responses of the SMEs

are positive towards the cost, framework, modules, and application of the Novel ERP

system developed.

Accomplishments of the present research can be concluded as follows:

o The main problems of implementing the existing management and manufacturing

software in SMEs in Southeast Asian countries as well as the specialty needs of

the SMEs for integrated manufacturing software (ERP), are identified through the

detailed analysis of a comprehensive systematic survey,

o An ERP conceptual framework is developed on the basis of in depth analysis of

the data collected from the survey. As well, the key implementation success

118


factors that can be used in evaluation and further development of an ERP system

for SMEs in Southeast Asia are specified. This provides a guideline for

framework design in developing a customized and suitable ERP system for

Southeast Asian SMEs.

o The new ERP system, NERP, which is based on a review of existing literature, a

revision of existing ERP system packages, and the survey's data analysis is

established. The NERP system shows high flexibility, suitability and satisfaction

according to the feedback from representatives of the Southeast Asian companies

that implemented the NERP system.

o The NERP system can be used as an integrating manufacturing software and

management software for inexperienced users, and can also be used for

monitoring and managing inventory and stocks. The system provides users with

appropriate recommendations for decision making based on the priority of the

tasks users have to perform before proceeding to next process.

o A Web application server and platform are introduced and implemented in the

NERP system. The NERP system can therefore be operated in both a web-based

environment and a workstation environment. This provides significant advantages

for the users of NERP since it equips the system with high flexibility and allows

the system to run without an Internet Service Provider. This reduces the cost of

operation. Nevertheless, the system can also be run via a Local Area Network

(LAN) connection, which is connected through a server for the storage of

databases. On the other hand, web application offers competitive advantages to

the customers and suppliers. With the web application, the users may perform

119


factors that can be used in evaluation and further development of an ERP system

for SMEs in Southeast Asia are specified. This provides a guideline for

framework design in developing a customized and suitable ERP system for

Southeast Asian SMEs.

o The new ERP system, NERP, which is based on a review of existing literature, a

revision of existing ERP system packages, and the survey’s data analysis is

established. The NERP system shows high flexibility, suitability and satisfaction

according to the feedback from representatives of the Southeast Asian companies

that implemented the NERP system,

o The NERP system can be used as an integrating manufacturing software and

management software for inexperienced users, and can also be used for

monitoring and managing inventory and stocks. The system provides users with

appropriate recommendations for decision making based on the priority of the

tasks users have to perform before proceeding to next process,

o A Web application server and platform are introduced and implemented in the

NERP system. The NERP system can therefore be operated in both a web-based

environment and a workstation environment. This provides significant advantages

for the users of NERP since it equips the system with high flexibility and allows

the system to run without an Internet Service Provider. This reduces the cost of

operation. Nevertheless, the system can also be run via a Local Area Network

(LAN) connection, which is connected through a server for the storage of

databases. On the other hand, web application offers competitive advantages to

the customers and suppliers. With the web application, the users may perform

119


paperless orders, access from off site, and stay in contact with remote suppliers.

The users are allowed to choose either workstation or web applications on the

basis of needs and budget.

o A comparison between NERP and the existing ERP system in the market, taking

into account the cost, implementation, operation system, database management

system, and modules is carried out. Even though the NERP system is small and

has less complex software than other ERP systems on the market, it has the

essential efficient and most needed modules for SMEs in Southeast Asia. This has

been well supported by the SMES who implemented NERP.

o As indicated in Chapter 4.6 and Appendix C, the user interface of the NERP

system is clear and user-friendly enough to guide the user through the whole

company's process. Also, it helps the users to carry out further development or

refinement of the system.

6.2 Recommendations for future work

In the future, it is essential to further validate the model for the Novel ERP system

for Southeast Asian SMEs which is presented in this research. There are many more

validation techniques that can be used to test and validate the framework. Furthermore,

additional case studies, company feedback, suggestions, and more companies cooperating

in the project are essential factors in obtaining stronger evidence and a more suitable ERP


There are an increasing number of developments in the field of Enterprise

Resource Planning using an internet-based technology, server/client technology and

120


paperless orders, access from off site, and stay in contact with remote suppliers.

The users are allowed to choose either workstation or web applications on the

basis of needs and budget,

o A comparison between NERP and the existing ERP system in the market, taking

into account the cost, implementation, operation system, database management

system, and modules is carried out. Even though the NERP system is small and

has less complex software than other ERP systems on the market, it has the

essential efficient and most needed modules for SMEs in Southeast Asia. This has

been well supported by the SMES who implemented NERP.

o As indicated in Chapter 4.6 and Appendix C, the user interface of the NERP

system is clear and user-friendly enough to guide the user through the whole

company’s process. Also, it helps the users to carry out further development or

refinement of the system.

6.2 Recommendations for future work

In the future, it is essential to further validate the model for the Novel ERP system

for Southeast Asian SMEs which is presented in this research. There are many more

validation techniques that can be used to test and validate the framework. Furthermore,

additional case studies, company feedback, suggestions, and more companies cooperating

in the project are essential factors in obtaining stronger evidence and a more suitable ERP


There are an increasing number of developments in the field of Enterprise

Resource Planning using an internet-based technology, server/client technology and

120


hybrid systems, and the effectiveness of the ERP system can be increased using such

technology. The system allows users to access available information quickly and share

their knowledge on the Internet. Also, the system helps users locate and obtain

information on the Web by taking commands from users. Several sources support hybrid

platform technology. Huuptmann (1999) introduces the integration of existing

manufacturing software with mixed-media databases using large databases of text,

images, videos, and audio files on the server to provide information to users.

The typical network dependent type of solution is to create one huge database

server at the main office, and share the data throughout all the regional and retail offices.

The advantage of this system is that it is possible to easily share information with other

"connected" users in an integrated fashion. However, there are many downfalls to this

type of solution; for example, it is expensive to create and maintain, and if the main

server were to go down, the entire division would be paralysed until the connection was

re-established. A new idea to be considered for future research is that all of the

information should be securely stored at each satellite office so that in the event of a

server disconnection, the work flow will not be affected. Each satellite office can

continue working efficiently while the affected office (or user) runs autonomously. This

is great for offices that are forced to connect via a slow Internet connection, or for outside

sales staff that have to leave the network to do their jobs. Once the disconnected office or

user reconnects, the broken link will then automatically synchronize and be updated.

Additional modules such as forecasting, scheduling, and job design should be

added to the system for more effective results. The forecasting module would enhance

inventory management, estimation of quantity replenishment, calculation of cost, and

121


hybrid systems, and the effectiveness of the ERP system can be increased using such

technology. The system allows users to access available information quickly and share

their knowledge on the Internet. Also, the system helps users locate and obtain

information on the Web by taking commands from users. Several sources support hybrid

platform technology. Huuptmann (1999) introduces the integration of existing

manufacturing software with mixed-media databases using large databases of text,

images, videos, and audio files on the server to provide information to users.

The typical network dependent type of solution is to create one huge database

server at the main office, and share the data throughout all the regional and retail offices.

The advantage of this system is that it is possible to easily share information with other

“connected” users in an integrated fashion. However, there are many downfalls to this

type of solution; for example, it is expensive to create and maintain, and if the main

server were to go down, the entire division would be paralysed until the connection was

re-established. A new idea to be considered for future research is that all of the

information should be securely stored at each satellite office so that in the event of a

server disconnection, the work flow will not be affected. Each satellite office can

continue working efficiently while the affected office (or user) runs autonomously. This

is great for offices that are forced to connect via a slow Internet connection, or for outside

sales staff that have to leave the network to do their jobs. Once the disconnected office or

user reconnects, the broken link will then automatically synchronize and be updated.

Additional modules such as forecasting, scheduling, and job design should be

added to the system for more effective results. The forecasting module would enhance

inventory management, estimation of quantity replenishment, calculation of cost, and

121


evaluation of demand. A job design module would evenly distribute the work force

throughout the entire production process. Also, better algorithm, logic, simulation and

calculation for the production scheduling would definitely help to increase the efficacy of

the production order arrangement.

Even in situations where everything follows a perfect plan and design, an element

of uncertainty is always present. Therefore, some uncertainty management tools should

be added to the design of this system, as well as to the calculation of the demand and

operation process. Fuzzy logic algorithm, roughly set algorithm, and genetic algorithm, to

name a few, are great examples of uncertainty tools whose addition could be considered

in further research.

122


evaluation of demand. A job design module would evenly distribute the work force

throughout the entire production process. Also, better algorithm, logic, simulation and

calculation for the production scheduling would definitely help to increase the efficacy of

the production order arrangement.

Even in situations where everything follows a perfect plan and design, an element

of uncertainty is always present. Therefore, some uncertainty management tools should

be added to the design of this system, as well as to the calculation of the demand and

operation process. Fuzzy logic algorithm, roughly set algorithm, and genetic algorithm, to

name a few, are great examples of uncertainty tools whose addition could be considered

in further research.

122


References

Abernathy, W. and Utterback, J. (1978). Patterns of Industrial Innovation. Technology Review 80(7), 41-47.

Avai, C.S.S. (1998). Technology Architecture Choices for Enterprise Financial Systems. Government Finance Review, 21-24.

Ballou, R.H. (2004). Business Logistics/Supply Chain Management. 5th ed. Pearson Prentice Hall Publications.

Bancroft, N., Seip, H., and Sprengel, A. (1998). Implementing SAP R/3: How to Introduce a Large System into a Large Organization. (2nd ed.) Manning Publications.

Barki, H., Rivard, S., and Talbot, J. (1993). A Keyword Classification Scheme for IS Research Literature: An Update. MIS Quarterly 6, 209-226.

Baroudi, J.J. and Davis, G.B. (1986). An empirical study of the impact of user involvement on system usage and information satisfaction. Communications of the ACM 29, 232-238.

Benbassat, I., Dexter, A.S., Drury, D.H., and Goldstein, R.C. (1984). A critique of the stage hypothesis: theory and empirical evidence. Communications of the Association for Computing Machinery 27(5), 476-485.

Bennett, A. and George, A. (1977). Research Design Tasks in Case Study Methods, Paper presented at the MacArthur Foundation Workshop on Case Study Methods. Belfer Center for Science and International Affairs (BCSIA), Harvard University, October 17-19, 1997.

Berelson, B. (1952). Content analysis in communication research. Glencoe, III.: Free Press.

Bingi, P., Sharma, M., and Godla, J. (1999). Critical factors affecting an ERP implementation. Information Systems Management 16(3), 7-15.

Booth, P., Matovsky, Z., and Wieder, B. (2000). Integrated information systems (ERP-systems) and accounting practice. The Australian Experience. Paper presented at the 3rd European Conference on Accounting and Information Systems. Munich, Germany: 27-28 March.

Bowersox, D.J., Closs, D.J., and Cooper, M.B. (2003). Supply Chain Logistics Management. McGraw-Hill Publications.

123


References

Abernathy, W. and Utterback, J. (1978). Patterns of Industrial Innovation. Technology Review 80(7), 41-47.

Avai, C.S.S. (1998). Technology Architecture Choices for Enterprise Financial Systems. Government Finance Review, 21-24.

Ballou, R.H. (2004). Business Logistics/Supply Chain Management. 5th ed. Pearson Prentice Hall Publications.

Bancroft, N., Seip, H., and Sprengel, A. (1998). Implementing SAP R/3: How to Introduce a Large System into a Large Organization. (2nd ed.) Manning Publications.

Barki, H., Rivard, S., and Talbot, J. (1993). A Keyword Classification Scheme for IS Research Literature: An Update. MIS Quarterly 6, 209-226.

Baroudi, J.J. and Davis, G.B. (1986). An empirical study of the impact of user involvement on system usage and information satisfaction. Communications of the ACM 29,232-238.

Benbassat, I., Dexter, A.S., Drury, D.H., and Goldstein, R.C. (1984). A critique of the stage hypothesis: theory and empirical evidence. Communications of the Association for Computing Machinery 27(5), 476—485.

Bennett, A. and George, A. (1977). Research Design Tasks in Case Study Methods, Paper presented at the MacArthur Foundation Workshop on Case Study Methods. Belfer Center for Science and International Affairs (BCSIA), Harvard University, October 17-19,1997.

Berelson, B. (1952). Content analysis in communication research. Glencoe, III.: Free Press.

Bingi, P., Sharma, M., and Godla, J. (1999). Critical factors affecting an ERP implementation. Information Systems Management 16(3), 7-15.

Booth, P., Matovsky, Z., and Wieder, B. (2000). Integrated information systems (ERP- systems) and accounting practice. The Australian Experience. Paper presented at the 3rd European Conference on Accounting and Information Systems. Munich, Germany: 27-28 March.

Bowersox, D.J., Closs, D.J., and Cooper, M.B. (2003). Supply Chain Logistics Management. McGraw-Hill Publications.

123


Burns, J. and Baldvinsdottir, G. (1999). Hybrid accountants: Where do they belong and what (are they expected) to do?. Paper presented at the Conference on management accounting change—a European perspective. Manchester: 14-17 April 1999.

Caglio, A. (2003). Enterprise resource planning systems and accountants: towards hybridization?, European Accounting Review 12(1), 123-153.

Callaway, E. (1997). ERP: test for success. PCWeek 14(53), 69-70.

Calogero, B. (2000). Who is to blame for ERP failure? Sunsaver, June.

Carson, D. (1995). Marketing and Entrepreneurship in SMEs: An Innovative Approach. Prentice Hall International (UK) Limited.

Castro, B. (2002). Integrating CRM with ERP. A Baseline Consulting Group White Paper. Retrieved 04 October 2004. Available at http://www.crm2day.com/library/EpuFpyFyAFCHowgKgW.php.

Champy, J. (1996). Packaged Systems: One Way to Force Change. Computerworld December 22,61.

Ciborra, C. (2000). From control to drift—the dynamics of corporate information structures. Oxford: Oxford University Press.

Cooper, R and Kaplan, R.S. (1998). The promise —and peril—of integrated cost systems. Harvard Business Review, 109-119.

Dan, 0. and Magnus, 0. (2000). ERP-More than just Ones and Zeros-Investigating the Costs and Benefits of Enterprise Resource Planning Systems. Accounting and Finance, Graduate Business School, School of Economics and Commercial Law, Goteborg Univerity.

Davenport, T. (1995). SAP: big change comes in big packages. In CIO Magazine. Retrieved March 14,2005 from www.cio.com/archive/101595 davenpor_content.html.

Davenport, T.H. (1996). Holistic Management of Megapackage Change: The Case of SAP. Proceedings of the Second Americas Conference on Information Systems, Phoenix, Arizona, 51a-51c.

Davenport, T.H. (1998). Putting the enterprise into the enterprise system—if you're not careful the dream of information integration can turn into a nightmare. Harvard Business Review, 121-131.

124


Burns, J. and Baldvinsdottir, G. (1999). Hybrid accountants: Where do they belong and what (are they expected) to do?. Paper presented at the Conference on management accounting change—a European perspective. Manchester: 14-17 April 1999.

Caglio, A. (2003). Enterprise resource planning systems and accountants: towards hybridization?, European Accounting Review 12(1), 123-153.

Callaway, E. (1997). ERP: test for success. PCWeek 14(53), 69-70.

Calogero, B. (2000). Who is to blame for ERP failure? Sunsaver, June.

Carson, D. (1995). Marketing and Entrepreneurship in SMEs: An Innovative Approach. Prentice Hall International (UK) Limited.

Castro, B. (2002). Integrating CRM with ERP. A Baseline Consulting Group White Paper. Retrieved 04 October 2004. Available at http://www.crm2dav.com/librarv/EpuFpvFyAFCHowgKgW.php.

Champy, J. (1996). Packaged Systems: One Way to Force Change. Computerworld December 22, 61.

Ciborra, C. (2000). From control to drift—the dynamics of corporate information structures. Oxford: Oxford University Press.

Cooper, R and Kaplan, R.S. (1998). The promise —and peril—of integrated cost systems. Harvard Business Review, 109-119.

Dan, O. and Magnus, O. (2000). ERP-More than just Ones and Zeros-Investigating the Costs and Benefits of Enterprise Resource Planning Systems. Accounting and Finance, Graduate Business School, School of Economics and Commercial Law, Goteborg Univerity.

Davenport, T. (1995). SAP: big change comes in big packages. In CIO Magazine. Retrieved March 14, 2005 from www.cio.com/archive/101595_davenpor_content.html.

Davenport, T.H. (1996). Holistic Management of Megapackage Change: The Case of SAP. Proceedings of the Second Americas Conference on Information Systems, Phoenix, Arizona, 51a-51c.

Davenport, T.H. (1998). Putting the enterprise into the enterprise system—if you’re not careful the dream of information integration can turn into a nightmare. Harvard Business Review, 121-131.

124


http://www.crm2dav.com/librarv/EpuFpvFyAFCHowgKgW.php

http://www.cio.com/archive/101595_davenpor_content.html

Davenport, T.H. (2000). Mission Critical-- Realizing the Promise of Enterprise Systems. Harvard Business School Press. Boston, Massachusetts.

Davenport, T.H. (2000). Long live ERP. In CIO Magazine. Retrieved March 14, 2005 from www2.cio.com/archive/0301000_davenport_content.html.

Davenport, T.H. (2000). In search of ERP paybacks. Computerworld 34(8), 42+.

Deloitte Consulting. (1998). ERP's second wave—maximizing the value of ERP-enabled processes. New York: Deloitte Consulting.

DeLone, W.H. and McLean, E.R. (1992). Information Systems success: The quest for the dependent variable. Information Systems Research 3, 60-95.

Dempsey, J., Dvorak, R., Holen, E., Mark, D., and Meehan III, W. (1998). A hard and soft look at IT investments. The McKinsey Quarterly 1, 126-137.

Department of Statistics Report. (2000). Ministry of Trade & Industry, Singapore.

Doane, M. (1997). In the Path of the Whirlwind. The Consulting Alliance, Sioux Falls, SD.

Doug, R. (2003). Linking Human Capital Management to Business Value — A World Wide View. HR insights 11. Watson Wyatt Worldwide.

Edward, W.N.B. and Nelson K.H.T. (2003). A Preliminary Empirical Study of the Diffusion of ERP Systems in Austrian and British SMEs. Working Papers on Information Processing and Information Management.

Esteves-Sousa, J. and Pastor-Collado, J. (2000). Towards the unification of critical success factors or ERP implementations. Published in 10th Annual Business Information Technology (BIT) 2000 Conference, Manchester, England.

Eskilsson, H., Nysstrom, C., and Windler, M. (2003). ERP System Effects — A Comparison of Theory and Practice. School of Economics and Commercial Law, Gotebork University.

Exact Software. (2004). Business Process Management: Taking ERP Beyond Departmental and Data-Centric Boundaries. CRM Today. Retrieved 04 October 2004. Available at http://www.crm2day.com/library/EplZ1kFkykpLUrvmGR.php.

Fellner, K. and Turowski, K. (1999). Component Framework Supporting Inter-company Cooperation. Proceedings of the Third International Enterprise Distributed Object Computing Conference (EDOC'99), Atkinson, C., et al. (eds.), Mannheim, Germany, 164-171.

125


Davenport, T.H. (2000). Mission Critical— Realizing the Promise of Enterprise Systems. Harvard Business School Press. Boston, Massachusetts.

Davenport, T.H. (2000). Long live ERP. In CIO Magazine. Retrieved March 14, 2005 from www2.cio.com/archive/0301000_davenport_content.html.

Davenport, T.H. (2000). In search of ERP paybacks. Computerworld 34(8), 42+.

Deloitte Consulting. (1998). ERP’s second wave—maximizing the value of ERP-enabled processes. New York: Deloitte Consulting.

DeLone, W.H. and McLean, E.R. (1992). Information Systems success: The quest for the dependent variable. Information Systems Research 3, 60-95.

Dempsey, J., Dvorak, R., Holen, E., Mark, D., and Meehan III, W. (1998). A hard and soft look at IT investments. The McKinsey Quarterly 1,126-137.

Department of Statistics Report. (2000). Ministry of Trade & Industry, Singapore.

Doane, M. (1997). In the Path of the Whirlwind. The Consulting Alliance, Sioux Falls, SD.

Doug, R. (2003). Linking Human Capital Management to Business Value - A World Wide View. HR insights 11. Watson Wyatt Worldwide.

Edward, W.N.B. and Nelson K.H.T. (2003). A Preliminary Empirical Study of the Diffusion of ERP Systems in Austrian and British SMEs. Working Papers on Information Processing and Information Management.

Esteves-Sousa, J. and Pastor-Collado, J. (2000). Towards the unification of critical success factors or ERP implementations. Published in 10th Annual Business Information Technology (BIT) 2000 Conference, Manchester, England.

Eskilsson, H., Nysstrom, C., and Windier, M. (2003). ERP System Effects - A Comparison of Theory and Practice. School of Economics and Commercial Law, Gotebork University.

Exact Software. (2004). Business Process Management: Taking ERP BeyondDepartmental and Data-Centric Boundaries. CRM Today. Retrieved 04 October 2004. Available at http://www.crm2day.com/librarv/EplZlkFkykpLUrvmGR.php.

Fellner, K. and Turowski, K. (1999). Component Framework Supporting Inter-company Cooperation. Proceedings of the Third International Enterprise Distributed Object Computing Conference (EDOC'99), Atkinson, C., et al. (eds.), Mannheim, Germany, 164-171.

125


http://www.crm2day.com/librarv/EplZlkFkykpLUrvmGR.php

Gable, G. and Stewart, G. (1999). SAP R/3 Implementation Issues for Small to Medium Enterprises. Paper presented at the Fifth Americas Conference on Information Systems, Milwaukee, Wisconsin.

Gartner Group. (2000). A Report on the ASEAN ERP Markets. Gartner Dataquest Group, Inc.

George, A. L. (1979). Case studies and theory development: The method of structured focused comparison. In P. G. Lauren (Ed.), Diplomatic history: New approaches, 42-68. New York: Free Press.

Gilbert, A. (2000). ERP Vendors Look For Rebound After Slowdown: Fourth-quarter revenue gains indicate possible resurgence in 2000," in Information Week, Feb. 14. Retrieved March 17,2005 from http://wvvw.informationweek.com/773/vaerp.htm.

Granlund, M. and Malmi, T. (2002). Moderate impact of ERPS on management accounting: a lag or permanent outcome?. Management Accounting Research 13, 299-321.

Gupta, A. (2000). Enterprise resource planning: The emerging organizational value systems. Industrial Management and Data Systems 100(3), 114-119.

Hanseth, 0., Ciborra, C.U., arid Braa, K. (2001). The control devolution: ERP and the side effects of globalization. Advances in Information Systems Fall 32(4), 34-46.

Hauptmann, G.A. (1999). Integrating and Using Large Databases of Text, Images, Video, and Audio. IEEE Intelligent Systems July/August, 34-35.

Hayes, D.C., Hunton, J., and Reck, J. (2001). Market reaction to ERP implementation announcements, Journal of Information Systems 15(1), 3-18.

Hillary, R. (1995). Small Firms and the ERP Birmingham, UK: The Groundwork Foundation.

Hillier, F.S. and Lieberman, G.J. (2001). Introduction to Operations Research. 7th ed. McGraw-Hill Publications.

Hofstede, G. (2001). Culture's Consequences: Comparing Values, Behaviours, Institutions, and Organizations across Nations, second ed. Sage, London, England.

Holland, C.P. and Light, B. (2001). A stage maturity model for enterprise resource planning systems use, The DATA BASE for Advances in Information Systems 32(2), 34-45.

126


Gable, G. and Stewart, G. (1999). SAP R/3 Implementation Issues for Small to Medium Enterprises. Paper presented at the Fifth Americas Conference on Information Systems, Milwaukee, Wisconsin.

Gartner Group. (2000). A Report on the ASEAN ERP Markets. Gartner Dataquest Group, Inc.

George, A. L. (1979). Case studies and theory development: The method of structured focused comparison. In P. G. Lauren (Ed.), Diplomatic history: New approaches, 42-68. New York: Free Press.

Gilbert, A. (2000). ERP Vendors Look For Rebound After Slowdown: Fourth-quarter revenue gains indicate possible resurgence in 2000," in Information Week, Feb.14. Retrieved March 17,2005 from http://www.informationweek.com/773/vaerp.htm.

Granlund, M. and Malmi, T. (2002). Moderate impact of ERPS on management accounting: a lag or permanent outcome?. Management Accounting Research 13, 299-321.

Gupta, A. (2000). Enterprise resource planning: The emerging organizational value systems. Industrial Management and Data Systems 100(3), 114-119.

Hanseth, O., Ciborra, C.U., arid Braa, K. (2001). The control devolution: ERP and the side effects of globalization. Advances in Information Systems Fall 32(4), 34-46.

Hauptmann, G.A. (1999). Integrating and Using Large Databases of Text, Images, Video, and Audio. IEEE Intelligent Systems July/August, 34-35.

Hayes, D.C., Hunton, J., and Reck, J. (2001). Market reaction to ERP implementation announcements, Journal of Information Systems 15(1), 3-18.

Hillary, R. (1995). Small Firms and the ERP Birmingham, UK: The Groundwork Foundation.

Hillier, F.S. and Lieberman, G.J. (2001). Introduction to Operations Research. 7th ed. McGraw-Hill Publications.

Hofstede, G. (2001). Culture’s Consequences: Comparing Values, Behaviours, Institutions, and Organizations across Nations, second ed. Sage, London, England.

Holland, C.P. and Light, B. (2001). A stage maturity model for enterprise resource planning systems use, The DATA BASE for Advances in Information Systems 32(2), 34^15.

126


http://www.informationweek.com/773/vaerp.htm

Holland, N. (2005). ERP Software — Run your entire business. Centresource Technology and Business (RSS), 2005.

Huff, P. (1999). Are there differences in liquidity and solvency measures based on company size? American Business Review 17 (2), 96-106.

Huin, S. F. (2004). Managing deployment of ERP systems in SMEs using multi-agents. International Journal of Project Management 22(6), 511-517.

Hunton, J.E., McEwen, R.A., and Wier, B. (2002). The reaction of financial analysts to enterprise resource planning (ERP) implementation plans. Journal of Information systems 16(1), 31-41.

IDC (1998). Worldwide Software Forecast Summary (1998-2003). International Data Corporation, Framingham, MA.

Ives, B., Hamilton, S., and Davis, G.B. (1980). A framework for research in computer-based management information systems. Management Science 26, 910-934.

James, D. and Wolf, M. (2000). A Second Wind for ERP. The McKinsey Quarterly: 100-107.

Keil, M., Cule, P.E., Lyytinen, K., and Schmidt, R.C. (1998). A framework for identifying software project risks. Communications of the ACM 41(11), 76-83. ACM Press, New York, NY, USA.

Khurana, I. (2000). Restructuring and firm value: The effects of firm profitability and restructuring purpose. Journal of Business, Finance and Accounting (November/December): 1107-1130.

King, J.L. and Kraemer, K.L. (1984). Evolution and organizational information systems: an assessment of Nolan's stage model. Communications of the Association for Computing Machinery 27(5), 466-475.

Kirchmer, M. (1999). Business process oriented implementation of standard software: how to achieve competitive advantage efficiently and effectively. Berlin etc.: Springer.

Klaus, H., Rosemann, M., and Gable, G. (2000). What is ERP? Information Systems Frontiers 2(2), 141-162.

Koch, C. (1997). The big uneasy. In CIO Magazine. Retrieved March 14, 2005 from www.cio.com/archive/101597 uneasy_content.html.

KPMG Consulting. (1997). Profit-focused software package implementation. Research Report. London: KPMG Management Consulting.

127


Holland, N. (2005). ERP Software - Run your entire business. Centresource Technology and Business (RSS), 2005.

Huff, P. (1999). Are there differences in liquidity and solvency measures based on company size? American Business Review 17 (2), 96-106.

Huin, S. F. (2004). Managing deployment of ERP systems in SMEs using multi-agents. International Journal of Project Management 22(6), 511-517.

Hunton, J.E., McEwen, R.A., and Wier, B. (2002). The reaction of financial analysts to enterprise resource planning (ERP) implementation plans. Journal of Information systems 16(1), 31-41.

IDC (1998). Worldwide Software Forecast Summary (1998-2003). International Data Corporation, Framingham, MA.

Ives, B., Hamilton, S., and Davis, G.B. (1980). A framework for research in computer- based management information systems. Management Science 26, 910-934.

James, D. and Wolf, M. (2000). A Second Wind for ERP. The McKinsey Quarterly: 100- 107.

Keil, M., Cule, P.E., Lyytinen, K., and Schmidt, R.C. (1998). A framework for identifying software project risks. Communications of the ACM 41(11), 76-83. ACM Press, New York, NY, USA.

Khurana, I. (2000). Restructuring and firm value: The effects of firm profitability and restructuring purpose. Journal of Business, Finance and Accounting (November/December): 1107-1130.

King, J.L. and Kraemer, K.L. (1984). Evolution and organizational information systems: an assessment of Nolan’s stage model. Communications of the Association for Computing Machinery 27(5), 466-475.

Kirchmer, M. (1999). Business process oriented implementation of standard software: how to achieve competitive advantage efficiently and effectively. Berlin etc.: Springer.

Klaus, H., Rosemann, M., and Gable, G. (2000). What is ERP? Information Systems Frontiers 2(2), 141-162.

Koch, C. (1997). The big uneasy. In CIO Magazine. Retrieved March 14, 2005 from www.cio.com/archive/101597_uneasy_content.html.

KPMG Consulting. (1997). Profit-focused software package implementation. Research Report. London: KPMG Management Consulting.

127


http://www.cio.com/archive/101597_uneasy_content.html

Kumar K. and Van H.J. (2000). ERP Experiences and Evolution.

Kumar, V., Maheshwari, B., and Kumar, U. (2002). ERP Systems Implementation: Best Practices in Canadian Government Organizations. Government Information Quarterly 19(2), 147-172.

Langenwalter, G.A. (2000). Enterprise Resources Planning and Beyond; Integrating Your Entire Organization. The St.Lucie Press/APICS Series on Resource Management.

Lee, A. S. (2000). Researchable directions for ERP and other new information technologies. MIS Quarterly 24(1).

Levis, J. and Von, S.P. (1994). Lessons Learned from Three Implementations: Knocking Down Barriers to Client-Server." Information Systems Management 11(3), 15-22.

Li, C. (1999). ERP packages: what's next? Information Systems Management 16(3), 31-36.

Lodh, S.C. and Gaffikin, M.J.R. (2003). Implementation of an integrated accounting and cost management system using the SAP system: a field study. European Accounting Review 12(1), 85-121.

Marinos, T., Zahir, I., O'Keefe, R.M., and Ray, J.P. (2001). ERP Problems and Application Integration Issues: An Empirical survey. HICSS.

Markus, L. M. and Tanis, C. (2000). The Enterprise Systems Experience - From Adoption to Success. In R. Zmud (Ed.), Framing The Domains of IT Management Research: Glimpsing The Future through The Past 173-207. Cincinnati, Ohio: Pinnaflex Educational Resources.

McVittie, L. (2001). Buckle up: Implementing ERP takes time and Patience. March 2001. Available at www.networkcomputing.com.

Mennel, A. (2002). The Effect of Training on ERP Acceptance: an Empirical Study. Unpublished thesis, University of Maastricht.

Miranda, R. (1999). The Rise of ERP in the Public Sector. Government Finance Review 9-17.

Momentum Software. (2003). Process Driven Organization. ProcessDriven.org. Retrieved 08 January 2005. Available at http://www.processdriven.org/process driven organization.html

Mustafa, Y. and Mejabi, 0. (1999). An Approach for Developing Flexible MRP Systems. Information Systems Management 16(2), 58-63.

128


Kumar K. and Van HJ. (2000). ERP Experiences and Evolution.

Kumar, V., Maheshwari, B., and Kumar, U. (2002). ERP Systems Implementation: Best Practices in Canadian Government Organizations. Government Information Quarterly 19(2), 147-172.

Langenwalter, G.A. (2000). Enterprise Resources Planning and Beyond; Integrating Your Entire Organization. The St.Lucie Press/APICS Series on Resource Management.

Lee, A. S. (2000). Researchable directions for ERP and other new information technologies. MIS Quarterly 24(1).

Levis, J. and Von, S.P. (1994). Lessons Learned from Three Implementations: Knocking Down Barriers to Client-Server.” Information Systems Management 11(3), 15-22.

Li, C. (1999). ERP packages: what's next? Information Systems Management 16(3), 31- 36.

Lodh, S.C. and Gaffikin, M.J.R. (2003). Implementation of an integrated accounting and cost management system using the SAP system: a field study. European Accounting Review 12(1), 85-121.

Marinos, T., Zahir, I., O’Keefe, R.M., and Ray, J.P. (2001). ERP Problems and Application Integration Issues: An Empirical survey. HICSS.

Markus, L. M. and Tanis, C. (2000). The Enterprise Systems Experience - From Adoption to Success. In R. Zmud (Ed.), Framing The Domains of IT Management Research: Glimpsing The Future through The Past 173-207. Cincinnati, Ohio: Pinnaflex Educational Resources.

McVittie, L. (2001). Buckle up: Implementing ERP takes time and Patience. March 2001. Available at www.networkcomputing.com.

Mennel, A. (2002). The Effect of Training on ERP Acceptance: an Empirical Study. Unpublished thesis, University of Maastricht.

Miranda, R. (1999). The Rise of ERP in the Public Sector. Government Finance Review 9-17.

Momentum Software. (2003). Process Driven Organization. ProcessDriven.org.Retrieved 08 January 2005. Available at http://www.processdriven.org/nrocess driven organization.html

Mustafa, Y. and Mejabi, O. (1999). An Approach for Developing Flexible MRP Systems. Information Systems Management 16(2), 58-63.

128


http://www.networkcomputing.com

http://www.processdriven.org/nrocess

Neville, M. (2004). ERP has moved on. Paper presented at eWorld Manufacturing and Supply Chain, June.

Newell, S., Huang, J.C., Galliers, R.D., and Pan, S.L. (2003). Implementing enterprise resource planning and knowledge management systems in tandem: fostering efficiency and innovation complementarily. Information and Organization 13,25-52.

Nolan, L.R. (1979). Managing the crisis in data processing, Harvard Business Review 57(2), 115-126.

O'Leary, D.E. (2002). Knowledge management across the enterprise resource planning life cycle, International Journal of Accounting Information Systems 3,99-110.

PA Consulting Group. (1999). PA Value Mining—What happened to the business value of the ERP-system? PA Consulting Group—Research Report.

Parr, A. and Shanks, G. (2000). A model of ERP project implementation. Journal of Information Technology 15(4), 289-304.

Pitturo, M. (1999). How Midsize Companies Are Buying ERP. Journal of Accountancy 188(3), 41-48.

Poston, R. and Grabski, S. (2000). The Impact of Enterprise Resource Planning Systems on Firm Performance. Paper presented at the 21st International Conference on Information Systems, Brisbane, Australia.

Quattrone, P. and Hopper, T. (2001). What does organizational change mean? Speculation on a taken for granted category, Management Accounting Research 12,403-435.

Reck, L. (2000). Information systems outsourcing announcements: Investigating the impact on the market value of contract granting firms. Journal of Information Systems 14(2), 22-35.

Recklies, D. (2001). Small Business: Size as a change or Handicap. Retrieved 20 May 2004. Available at http://www.themanager.org.

Ross, J. and Vitale, M.R. (2000). The ERP revolution: surviving vs thriving. Information Systems Frontiers 2(2), 233-240.

Ryan, B., Scapens, R.W., and Theobald, M. (1992), Research method and methodology in finance and accounting, Academic, London.

129


Neville, M. (2004). ERP has moved on. Paper presented at eWorld Manufacturing and Supply Chain, June.

Newell, S., Huang, J.C., Galliers, R.D., and Pan, S.L. (2003). Implementing enterprise resource planning and knowledge management systems in tandem: fostering efficiency and innovation complementarily. Information and Organization 13, 25- 52.

Nolan, L.R. (1979). Managing the crisis in data processing, Harvard Business Review 57(2), 115-126.

O’Leary, D.E. (2002). Knowledge management across the enterprise resource planning life cycle, International Journal of Accounting Information Systems 3,99-110.

PA Consulting Group. (1999). PA Value Mining—What happened to the business value of the ERP-system? PA Consulting Group—Research Report.

Parr, A. and Shanks, G. (2000). A model of ERP project implementation. Journal of Information Technology 15(4), 289-304.

Pitturo, M. (1999). How Midsize Companies Are Buying ERP. Journal of Accountancy 188(3), 41-48.

Poston, R. and Grabski, S. (2000). The Impact of Enterprise Resource Planning Systems on Firm Performance. Paper presented at the 21st International Conference on Information Systems, Brisbane, Australia.

Quattrone, P. and Hopper, T. (2001). What does organizational change mean? Speculation on a taken for granted category, Management Accounting Research 12,403—435.

Reck, L. (2000). Information systems outsourcing announcements: Investigating the impact on the market value of contract granting firms. Journal of Information Systems 14(2), 22-35.

Recklies, D. (2001). Small Business: Size as a change or Handicap. Retrieved 20 May 2004. Available at http://www.themanager.org.

Ross, J. and Vitale, M.R. (2000). The ERP revolution: surviving vs thriving. Information Systems Frontiers 2(2), 233-240.

Ryan, B., Scapens, R.W., and Theobald, M. (1992), Research method and methodology in finance and accounting, Academic, London.

129


http://www.themanager.org

Scapens, R.W. and Jazayeri, M. (2003). ERP systems and management accounting change: opportunities or impacts?—a research note. European Accounting Review 122(1), 201-233.

Scott, J. E. (1999). The FoxMeyer Drugs' Bankruptcy: Was it a Failure of ERP? AMCIS99 223-225.

Spathis, C. and Constatinides, S. (2002). ERP systems and management accounting practice. Paper presented at 3rd conference on new directions in management accounting: innovations in practice and research. Brussels: December 12-14.

Sprott, D. (April 2000). Componentizing the Enterprise Application Packages. Communications of the ACM 43(4), 63-69.

Stefanou, C.J. (1999). Supply Chain Management (SCM) and Organizational Key Factors for Successful Implementation of Enterprise Resource Planning (ERP) Systems. In Proceedings of the Fifth Americas Conference on Information Systems, W. D. Haseman and D. L. Nazareth (eds.), Milwaukee 800-802.

Sumner, M. (1999). Critical Success Factors in enterprise wide information management systems projects. AMCIS99 232 — 234.

Turban, M., MacLean, J. and Wetherbe, P. (1999). Information Technology for Management. J. Wiley.

Uraikul, V. (1999). An Architecture Framework for Develop of an Expert System for Optimizing Natural Gas Pipeline Operations. University of Regina.

Wagle, D. (1998). Making the Case for an ERP System. Corporate Finance. December 6-8.

Wagle, D. (1998). Case for ERP Systems. The McKinsey Quarterly (2), 130-135.

Wah, L. (2000). Give BRP a chance. Management Review (Mar) 20-24.

Weill, P., Broadbent, M., and St. Clair, D. (1996) I/T Value and the Role of IT Infrastructure Investments. Strategic Alignment. Oxford University Press.

White, J. (2002). Process. Integration. Usability. Making ERP work the way your business works: A New Approach Improves ERP Simplicity, Productivity and ROI. An ERP White Paper for Fuego.

Wu, Tie. (2003). Implementing CRM in SMEs: An Exploratory Study on the Viability of Using the ASP Model. Swedish School of Economics and Business Administration

130


Scapens, R.W. and Jazayeri, M. (2003). ERP systems and management accounting change: opportunities or impacts?—a research note. European Accounting Review 122(1), 201-233.

Scott, J. E. (1999). The FoxMeyer Drugs’ Bankruptcy: Was it a Failure of ERP? AMCIS99 223-225.

Spathis, C. and Constatinides, S. (2002). ERP systems and management accounting practice. Paper presented at 3rd conference on new directions in management accounting: innovations in practice and research. Brussels: December 12-14.

Sprott, D. (April 2000). Componentizing the Enterprise Application Packages. Communications of the ACM 43(4), 63-69.

Stefanou, C.J. (1999). Supply Chain Management (SCM) and Organizational Key Factors for Successful Implementation of Enterprise Resource Planning (ERP) Systems. In Proceedings of the Fifth Americas Conference on Information Systems, W. D. Haseman and D. L. Nazareth (eds.), Milwaukee 800-802.

Sumner, M. (1999). Critical Success Factors in enterprise wide information management systems projects. AMCIS99 232 - 234.

Turban, M., MacLean, J. and Wetherbe, P. (1999). Information Technology for Management. J. Wiley.

Uraikul, V. (1999). An Architecture Framework for Develop of an Expert System for Optimizing Natural Gas Pipeline Operations. University of Regina.

Wagle, D. (1998). Making the Case for an ERP System. Corporate Finance. December 6- 8 .

Wagle, D. (1998). Case for ERP Systems. The McKinsey Quarterly (2), 130-135.

Wah, L. (2000). Give BRP a chance. Management Review (Mar) 20-24.

Weill, P., Broadbent, M., and St. Clair, D. (1996) I/T Value and the Role of IT Infrastructure Investments. Strategic Alignment. Oxford University Press.

White, J. (2002). Process. Integration. Usability. Making ERP work the way your business works: A New Approach Improves ERP Simplicity, Productivity and ROI. An ERP White Paper for Fuego.

Wu, Tie. (2003). Implementing CRM in SMEs: An Exploratory Study on the Viability of Using the ASP Model. Swedish School of Economics and Business Administration

130


Xu, H., Nord, J. H., Brown, N., and Nord, G. D. (2002). Data Quality Issues in Implementing an ERP. Industrial Management & Data Systems,102(1), 47-58.

Yi, Hyong. (2002). ERPs: The Promise and the Peril. The Public Manager 31(4), 55-62.

Yin, R. (1994). Case study research: Design and methods (2nd ed.). Thousand Oaks, CA: Sage Publishing.

Zhang, Z. et al. (2004). A framework of ERP systems implementation success in China: An empirical study. International Journal of Production Economics 98(1), 56-80.

131


Xu, H., Nord, J. H., Brown, N., and Nord, G. D. (2002). Data Quality Issues in Implementing an ERP. Industrial Management & Data Systems, 102(1), 47-58.

Yi, Hyong. (2002). ERPs: The Promise and the Peril. The Public Manager 31(4), 55-62.

Yin, R. (1994). Case study research: Design and methods (2nd ed.). Thousand Oaks, CA: Sage Publishing.

Zhang, Z. et al. (2004). A framework of ERP systems implementation success in China: An empirical study. International Journal of Production Economics 98(1), 56-80.

131


Appendix A

Questionnaires

Questionnaire#

Questionnaire for the study of experience in Enterprise

Resource Planning System involvement and knowledge.

If you have experience with an ERP system please skip to question #7; otherwise, please answer questions #1-6.

1. What are the types of software currently employed in your company? 2. Are they integrated as a whole or individually? 3. What are their main features and functions? 4. What are the license fees for the software? 5. What is the implementation cost of the software? 6. How would you rate the ease of use of your software? 7. What Enterprise Resource Planning (ERP) System do you employ? 8. When did you decide to invest in an ERP? 9. What were the motives behind the ERP investment? 10. Who was involved in making this decision, and which organizational levels were

involved? 11. Did you consider alternative solutions? 12. Does your ERP system suit what your company needs? 13. Have company processes been changed in order to fit the ERP system? 14. Has the market position of the company been affected by the ERP

implementation? 15. Why did your company adopt an ERP system (or anything related)?

a. Process Integration b. Resolve order processing issues c. Hardware and software obsolescence d. Resolve data duplication and inconsistencies e. Reduce stock/inventory excess

16. Why has your firm not invested in an ERP system? a. High costs b. Unsecured transactions c. Uncomfortable to use and learn d. Friction with the supply chain network

132


Appendix A

Questionnaire#,

Questionnaires

Questionnaire for the study of experience in Enterprise

Resource Planning System involvement and knowledge.

If you have experience with an ERP system please skip to question #7; otherwise, please answer questions #1-6.

1. What are the types of software currently employed in your company?2. Are they integrated as a whole or individually?3. What are their main features and functions?4. What are the license fees for the software?5. What is the implementation cost of the software?6. How would you rate the ease of use of your software?7. What Enterprise Resource Planning (ERP) System do you employ?8. When did you decide to invest in an ERP?9. What were the motives behind the ERP investment?10. Who was involved in making this decision, and which organizational levels were

involved?11. Did you consider alternative solutions?12. Does your ERP system suit what your company needs?13. Have company processes been changed in order to fit the ERP system?14. Has the market position of the company been affected by the ERP

implementation?15. Why did your company adopt an ERP system (or anything related)?

a. Process Integrationb. Resolve order processing issuesc. Hardware and software obsolescenced. Resolve data duplication and inconsistenciese. Reduce stock/inventory excess

16. Why has your firm not invested in an ERP system?a. High costsb. Unsecured transactionsc. Uncomfortable to use and learnd. Friction with the supply chain network

132


e. Lack of internal resources f. There are other projects in progress g. Inadequacy of firm process/products h. Functions/features not suitable i. Lack of integration with existing software

17. What is your ERP's Operating System? a. Packaged OS (Windows) b. Free OS (Linux)

18. What are your ERP's Programming Languages? a. Packaged languages (C++, ASP) b. Free languages (JAVA, PHP)

19. What is your ERP's Database Management System? a. Packaged DBMS (MS SQL Server) b. Free DBMS (MySQL)

20. What is your ERP's Platform? a. Thick Platform (Server/Client) b. Thin Platform (Web based) c. Slim Platform (Hybrid)

21. What is the license fee for your ERP system? 22. What is the implementation cost of your ERP system? 23. What are the additional costs per module of your ERP system?

Suggestions:

133


e. Lack of internal resourcesf. There are other projects in progressg. Inadequacy of firm process/productsh. Functions/features not suitablei. Lack of integration with existing software

17. What is your ERP’s Operating System?a. Packaged OS (Windows)b. Free OS (Linux)

18. What are your ERP’s Programming Languages?a. Packaged languages (C++, ASP)b. Free languages (JAVA, PHP)

19. What is your ERP’s Database Management System?a. Packaged DBMS (MS SQL Server)b. Free DBMS (MySQL)

20. What is your ERP’s Platform?a. Thick Platform (Server/Client)b. Thin Platform (Web based)c. Slim Platform (Hybrid)

21. What is the license fee for your ERP system?22. What is the implementation cost of your ERP system?23. What are the additional costs per module of your ERP system?

Suggestions:

133


Survey #

Survey for research in

Framework Design for the development of an ERP system

for Small-to Medium-Sized Enterprises in Southeast Asia

The following questions will be used to determine the important factors in developing an integrated manufacturing computer system for small enterprises in the Southeast Asia Region. Please circle the score that you think is most appropriate for the specific questions, where the levels of satisfaction are: 5 =much above average, 4 = above average, 3 = fair/average, 2 = below average, 1 = much below average

Part 1 Satisfaction with the overall specification of the system for both the existing

system and the Novell ERP system for SMEs in Southeast Asia.

System Overall Specification Factors Current System NERP System 1. Adaptability 5 4 3 2 1 5 4 3 2 1 2. Flexibility 5 4 3 2 1 5 4 3 2 1 3. Overall Cost 5 4 3 2 1 5 4 3 2 1 4. Efficiency of Internal business processes 5 4 3 2 1 5 4 3 2 1 5. Ease of use 5 4 3 2 1 5 4 3 2 1

Part 2 Software and module expectations of the system for both the existing system and

the Novell ERP system for SMEs in Southeast Asia. Please score how necessary

the following modules are to the system.

Softu are and Modules Expe4...tation Factors Current System NEM' System 1. Accounting 5 4 3 2 1 5 4 3 2 1 2. Customer and Supplier relations 5 4 3 2 1 5 4 3 2 1 3. Information Management 5 4 3 2 1 5 4 3 2 1 4. Intuitive System 5 4 3 2 1 5 4 3 2 1 5. Inventory Management 5 4 3 2 1 5 4 3 2 1 6. Manufacturing and Logistics 5 4 3 2 1 5 4 3 2 1 7. Personal Productivity 5 4 3 2 1 5 4 3 2 1 8. Openness 5 4 3 2 1 5 4 3 2 1 9. Sales 5 4 3 2 1 5 4 3 2 1 10. Time 5 4 3 2 1 5 4 3 2 1

134


Survey #.

Survey for research in

Framework Design for the development of an ERP system

for Small-to Medium-Sized Enterprises in Southeast Asia

The following questions will be used to determine the important factors in developing an integrated manufacturing computer system for small enterprises in the Southeast Asia Region. Please circle the score that you think is most appropriate for the specific questions, where the levels of satisfaction are: 5 =much above average, 4 = above average, 3 = fair/average, 2 = below average, 1 = much below average

Part 1 Satisfaction with the overall specification of the system for both the existing

system and the Novell ERP system for SMEs in Southeast Asia.

System Overall Specification Factors Current System NERP System1. Adaptability2. Flexibility3. Overall Cost4. Efficiency of Internal business processes5. Ease of use

5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1

5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1

Part 2 Software and module expectations of the system for both the existing system and

the Novell ERP system for SMEs in Southeast Asia. Please score how necessary

the following modules are to the system.

Software and Modules Expectation Factors Current System NERP System1. Accounting 5 4 3 2 1 5 4 3 2 12. Customer and Supplier relations 5 4 3 2 1 5 4 3 2 13. Information Management 5 4 3 2 1 5 4 3 2 14. Intuitive System 5 4 3 2 1 5 4 3 2 15. Inventory Management 5 4 3 2 1 5 4 3 2 16. Manufacturing and Logistics 5 4 3 2 1 5 4 3 2 17. Personal Productivity 5 4 3 2 1 5 4 3 2 18. Openness 5 4 3 2 1 5 4 3 2 19. Sales 5 4 3 2 1 5 4 3 2 110. Time 5 4 3 2 1 5 4 3 2 1

134


Part 3 Platform choices importance for the ERP system. Please score how necessary the

following platforms are to the system:

Platform Specification Factors Importance 1. LAN 5 4 3 2 1 2. Web-based 5 4 3 2 1 3. Mobile Device 5 4 3 2 1

Part 4 Organization and Culture of the system for both the existing system and the Novel

ERP system for SMEs in Southeast Asia. Please score how necessary the

following modules are to the system:

Organizational and Cultural Factors Current System NERP System 1. Centralization 5 4 3 2 1 5 4 3 2 1 2. Responsibility 5 4 3 2 1 5 4 3 2 1 3. Work Routines 5 4 3 2 1 5 4 3 2 1 4. Level of production automation 5 4 3 2 1 5 4 3 2 1 5. Top Management Support 5 4 3 2 1 5 4 3 2 1 6. Reengineering 5 4 3 2 1 5 4 3 2 1 7. Role-Base 5 4 3 2 1 5 4 3 2 1

Part 5 Satisfaction with and usefulness of the Novel ERP system for SMEs in Southeast

Asia:

Factors Satisfaction 1. Satisfaction of NERP 5 4 3 2 1 2. Usefulness of NERP for future development 5 4 3 2 1

Part 6 Level of satisfaction with the NERP system in detailed modules.

Modules NERP System 1. Sales Module 5 4 3 2 1 2. Purchasing Module 5 4 3 2 1 3. Inventory Module 5 4 3 2 1 4. Production Module 5 4 3 2 1 5. Transaction Reminding Module 5 4 3 2 1 6. Q* and ROP Calculation 5 4 3 2 1 7. Initial and Profit Cost Analysis 5 4 3 2 1 8.Production Scheduling and Estimation 5 4 3 2 1

135


Part 3 Platform choices importance for the ERP system. Please score how necessary the

following platforms are to the system:

Platform Specification factors Importance1. LAN 5 4 3 2 12. Web-based 5 4 3 2 13. Mobile Device 5 4 3 2 1

Part 4 Organization and Culture of the system for both the existing system and the Novel

ERP system for SMEs in Southeast Asia. Please score how necessary the

following modules are to the system:

Orj’iivii/iitioniil anil C ultural Factors Current System NERP Svstcm1. Centralization2. Responsibility3. Work Routines4. Level of production automation5. Top Management Support6. Reengineering7. Role-Base

5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1

5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1 5 4 3 2 1

Part 5 Satisfaction with and usefulness of the Novel ERP system for SMEs in Southeast

Asia:

Factors Satisfaction1. Satisfaction of NERP2. Usefulness of NERP for future development

^ 4 3 2 1 5 4 3 2 1

Part 6 Level of satisfaction with the NERP system in detailed modules.

Modules NERP System1. Sales Module 5 4 3 2 12. Purchasing Module 5 4 3 2 13. Inventory Module 5 4 3 2 14. Production Module 5 4 3 2 15. Transaction Reminding Module 5 4 3 2 16. Q* and ROP Calculation 5 4 3 2 17. Initial and Profit Cost Analysis 5 4 3 2 18.Production Scheduling and Estimation 5 4 3 2 1

135


Part 7 General Information 1. What is your gender?

a. Male b. Female 2. What is the number of the company's employees?

a. 1-10 c. 51-250 b. 11-50

3. What is the company's turnover? (Approximately) a. $0.1-0.5 M c. $1.0-2.0 M b. $0.5-1.0 M d. Over $2.0 M

4. How wide is the market area of your company? a. Local c. National b. Regional d. International

5. What is the company configuration? a. Independent company b. Member of a group

6. Is the company planning any organizational change? a. Local automation of existing procedures b. Internal integration of existing business processes c. Business process reengineering d. Business network redesign, through integration with external partners e. Redefinition of company boundaries through the creation of inter-

organizational relationship.

136


Part 7 General Information1. What is your gender?

a. Male b. Female2. What is the number of the company’s employees?

a. 1-10 c. 51-250b. 11-50

3. What is the company’s turnover? (Approximately)a. $0.1-0.5 Mb. $0.5-1.0 M

c. $1.0-2.0 Md. Over $2.0 M

4. How wide is the market area of your company?a. Localb. Regional

c. Nationald. International

5. What is the company configuration?a. Independent companyb. Member of a group

6. Is the company planning any organizational change?a. Local automation of existing proceduresb. Internal integration of existing business processesc. Business process reengineeringd. Business network redesign, through integration with external partnerse. Redefinition of company boundaries through the creation of inter-

organizational relationship.

136


Appendix B

Statistical Calculations

This section is written to give an illustration of the uncertainty calculation showed in Chapter 4 of this thesis. All the numbers and data presenting in this appendix are the actual data used in calculation for one of the representative companies. Two types of uncertainty have a direct impact upon inventory policy: demand uncertainty and performance cycle uncertainty (Bowersox at el., 2003).

Demand uncertainty Sales forecasting estimates the units demand during the inventory replenishment

cycle. Even with good forecasting, demand during replenishment cycle often exceeds or falls short of what is anticipated. To protect against a stockout when demand exceeds forecast, a safety stock is added to the base inventory. Under conditions of demand uncertainty, the average inventory represents one-half of the order quantity plus the safety stock. Assume for purposes of illustration that the inventory performance cycle is 10 days. Historical evidence indicates that daily sales range from 5 to 15 units with average daily sales being 10 units.

From the history records in Table B-1, it is observed that stockouts occurred on 2 of 30 days. The sales history over the 30-day period has been arranged in Table B-2 in terms of a frequency distribution. The main purpose of a frequency distribution is to observe the variations of the average daily demand.

Forecast Cycle 1 Forecast Cycle 2 Forecast Cycle 3 Day Demand Accumulated Day Demand Accumulated Day Demand Accumulated

1 14 14 11 5 5 21 10 10 2 7 21 12 11 16 22 10 20 3 6 27 13 10 26 23 9 29 4 8 35 14 12 38 24 8 37 5 12 47 15 15 53 25 9 46 6 10 57 16 12 65 26 6 52 7 9 66 17 11 76 27 7 59 8 13 79 18 14 90 28 13 72 9 11 90 19 10 100 29 8 80

10 10 100 20 5 Stockout 30 9 89 Table B-1 Typical demand experience during three rep enishment cycles

137


Appendix B

Statistical Calculations

This section is written to give an illustration of the uncertainty calculation showed in Chapter 4 of this thesis. All the numbers and data presenting in this appendix are the actual data used in calculation for one of the representative companies. Two types of uncertainty have a direct impact upon inventory policy: demand uncertainty and performance cycle uncertainty (Bowersox at el., 2003).

Demand uncertaintySales forecasting estimates the units demand during the inventory replenishment

cycle. Even with good forecasting, demand during replenishment cycle often exceeds or falls short of what is anticipated. To protect against a stockout when demand exceeds forecast, a safety stock is added to the base inventory. Under conditions of demand uncertainty, the average inventory represents one-half of the order quantity plus the safety stock. Assume for purposes of illustration that the inventory performance cycle is 10 days. Historical evidence indicates that daily sales range from 5 to 15 units with average daily sales being 10 units.

From the history records in Table B-l, it is observed that stockouts occurred on 2 of 30 days. The sales history over the 30-day period has been arranged in Table B-2 in terms of a frequency distribution. The main purpose of a frequency distribution is to observe the variations of the average daily demand.

Forecast Cycle 1 Forecast Cycle 2 Forecast Cycle 3Day Demand Accumulated Day Demand Accumulated Day Demand Accumulated

1 14 14 11 5 5 21 10 102 7 21 12 11 16 22 10 203 6 27 13 10 26 23 9 294 8 35 14 12 38 24 8 375 12 47 15 15 53 25 9 466 10 57 16 12 65 26 6 527 9 66 17 11 76 27 7 598 13 79 18 14 90 28 13 729 11 90 19 10 100 29 8 8010 10 100 20 5 Stockout 30 9 89

Table B-l Typical demand experience during three replenishment cycles

137


Daily Demand (in Units) Frequency (Days) Stockout 1

5 1 6 2 7 2 8 3 9 4 10 6 11 3 12 3 13 2 14 2 15 1

Table B-2 Frequency of demand

The probability of occurrences assumes a pattern around a measure of central tendency, which is the average value of all occurrences. While a number of frequency distributions can be used in inventory control, the most basic is the normal distribution. The basis for predicting demand during a performance cycle using a normal distribution is the standard deviation of observations around the measures of central tendency. A normal distribution is characterized by a symmetrical bell-shaped curve, illustrated in Figure B-1. The essential characteristic of a normal distribution is that the three measures of central tendency have equal value. For the inventory management application, the event is unit sales per day and the dispersion is the variation in daily sale levels. Within ± 1 standard deviation, 68.27 percent of all events occur. This means that 68.27 percent of the days during a performance cycle will experience daily sales within ± 1 standard deviation of the average daily sales. The same goes for ± 2 with 95.45 percent and ± 3 with 99.73 percent.

Mean Median Mode

Figure B-1 Normal distribution

138


Daily Demand (in Units) Frequency (Days)Stockout 1

5 16 27 28 39 410 611 312 313 214 215 1

Table B-2 Frequency of demand

The probability of occurrences assumes a pattern around a measure of central tendency, which is the average value of all occurrences. While a number of frequency distributions can be used in inventory control, the most basic is the normal distribution. The basis for predicting demand during a performance cycle using a normal distribution is the standard deviation of observations around the measures of central tendency. A normal distribution is characterized by a symmetrical bell-shaped curve, illustrated in Figure B-l. The essential characteristic of a normal distribution is that the three measures of central tendency have equal value. For the inventory management application, the event is unit sales per day and the dispersion is the variation in daily sale levels. Within ± 1 standard deviation, 68.27 percent of all events occur. This means that 68.27 percent of the days during a performance cycle will experience daily sales within ± 1 standard deviation of the average daily sales. The same goes for ± 2 with 95.45 percent and ± 3 with 99.73 percent.

68.27-

95.46

99.73-

MeanMedianMode

Figure B-l Normal distribution

138


Performance Cycle Uncertainty Performance cycle uncertainty means that the inventory policy cannot assume

consistent delivery. If performance cycle uncertainty is not evaluated statistically, the most common practice is to base safety stock requirements on the planned replenishment time. However, if there is a substantial variation in the performance cycle, a formal evaluation is desirable. Table B-3 presents a given frequency distribution of performance cycles of one of the specific products from a representative company. Although 10 days is the most frequent, replenishment experience ranges from 6 to 14 days.

Performance Cycle (days) 6 7 8 9 10 11 12 13 14 Frequency (F1) 1 3 5 9 10 8 7 5 2

Table B-3 Frequency of performance cycle (days)

Determining Safety Stock with Uncertainty Treating both the demand and performance cycle uncertainty requires combining

two independent variables. The duration of the cycle is, at least in the short run, independent of the daily demand. However, in setting safety stocks, the joint impact of the probability of both the demand and the performance cycle variation must be determined. Table B-4 presents a summary of sales and replenishment cycle performance.

Demand Distribution Replenishment Cycle Distribution Daily Sales Frequency Days Frequency

5 1 6 1 6 2 7 3 7 2 8 5 8 3 9 9 9 4 10 10 10 6 11 8 11 3 12 7 12 3 13 5 13 2 14 2 14 2 15 1

n=29 D=10

Ss=2.49

n=50 T=10

St=1.92

Table B-4 Frequency distribution demand and replenishment uncertainty

The exact compounding of two independent variables involves multinomial expansion. This type of procedure requires extensive calculation. A direct method is to determine the standard deviations of demand and performance cycle uncertainty and then to approximate the combined standard deviation using the convolution formula:

= l bs s2 + D2 6,-,t2 = V10(2.49) 2 + 0. 0) 2 0.92) 2 = 20.75

139


Performance Cycle UncertaintyPerformance cycle uncertainty means that the inventory policy cannot assume

consistent delivery. If performance cycle uncertainty is not evaluated statistically, the most common practice is to base safety stock requirements on the planned replenishment time. However, if there is a substantial variation in the performance cycle, a formal evaluation is desirable. Table B-3 presents a given frequency distribution of performance cycles of one of the specific products from a representative company. Although 10 days is the most frequent, replenishment experience ranges from 6 to 14 days.

Performance Cycle (days) 6 7 8 9 10 11 12 13 14Frequency (Fi) 1 3 5 9 10 8 7 5 2

Table B-3 Frequency of performance cycle (days)

Determining Safety Stock with UncertaintyTreating both the demand and performance cycle uncertainty requires combining

two independent variables. The duration of the cycle is, at least in the short run, independent of the daily demand. However, in setting safety stocks, the joint impact of the probability of both the demand and the performance cycle variation must be determined. Table B-4 presents a summary of sales and replenishment cycle performance.

Demand Distribution Replenishment Cycle DistributionDaily Sales Frequency Days Frequency

5 1 6 16 2 7 37 2 8 58 3 9 99 4 10 1010 6 11 811 3 12 712 3 13 513 2 14 214 215 1

n=29 n=50D=10 T=10

Ss=2.49 St=1.92

Table B-4 Frequency distribution demand and replenishment uncertainty

The exact compounding of two independent variables involves multinomial expansion. This type of procedure requires extensive calculation. A direct method is to determine the standard deviations of demand and performance cycle uncertainty and then to approximate the combined standard deviation using the convolution formula:

arc = -JtS* +D2Sf = ^/l0(2.49)2 +(l0)2(l.92)2 = 20.75

139


The standard formulation for EOQ which has the annual demand volume of 1,720 units at $39 per unit with $17 per order and 15% inventory carrying cost per year, is as follows:

Q* = 112Ds 112*1720*17 = 99.98

IC 39*0.15 The fill rate represents the magnitude of a stockout rather than the probability.

The case fill rate is the percentage of units that can be filled when requested from the available inventory. Assume that a company desired 99 percent product availability to the case fill rate;

SL =1 f (k)src Q

0.99 =1 f (k)20.75

100 f (k) = 0.0482

k f(k) k f(k) 0 0.3989 1.6 0.0232

0.1 0.3509 1.7 0.0182 0.2 0.3068 1.8 0.0143 0.3 0.2667 1.9 0.0111 0.4 0.2304 2 0.0085 0.5 0.1977 2.1 0.0065 0.6 0.1686 2.2 0.0049 0.7 0.1428 2.3 0.0037 0.8 0.1202 2.4 0.0028 0.9 0.1004 2.5 0.002 1 0.0833 2.6 0.0015

1.1 0.0686 2.7 0.0011 1.2 0.0561 2.8 0.0008 1.3 0.0455 2.9 0.0005 1.4 0.0366 3 0.0004 1.5 0.0293 3.1 0.0003

Table B-5 Table of loss integral for standardized normal distribution

Source: Edward Silver, David Pyke, and Rein Peterson, Inventory Management and Production Planning and Scheduling. 3rd ed. (New York: John Wiley & Sons, 1998), pp. 724-34.

The calculated value off(k) is then compared against the values in Table B-5 to find the one the most closely approximates the calculated value. For this example, the value of k that fits the condition is 1.175. The required safety stock level is:

SS = k* = 1.175* 20.75 = 24.38 units

The safety stock required to provide a 99 percent product fill rate when the order quantity is 100 units is approximately 25 units. An increased order size can be used to compensate for decreasing the safety stock levels, or vice versa. The existence of such a

140


The standard formulation for EOQ which has the annual demand volume of 1,720 units at $39 per unit with $17 per order and 15% inventory carrying cost per year, is as follows:

W S l2'172D'17.m99MV 1C V 39*0.15

The fill rate represents the magnitude of a stockout rather than the probability. The case fill rate is the percentage of units that can be filled when requested from the available inventory. Assume that a company desired 99 percent product availability to the case fill rate;

SL = 1 -

0.99 = 1 -

Qf {k) 20.75

100f ( k ) = 0.0482

k m k m0 0.3989 1.6 0.0232

0.1 0.3509 1.7 0.01820.2 0.3068 1.8 0.01430.3 0.2667 1.9 0.01110.4 0.2304 2 0.00850.5 0.1977 2.1 0.00650.6 0.1686 2.2 0.00490.7 0.1428 2.3 0.00370.8 0.1202 2.4 0.00280.9 0.1004 2.5 0.0021 0.0833 2.6 0.0015

1.1 0.0686 2.7 0.00111.2 0.0561 2.8 0.00081.3 0.0455 2.9 0.00051.4 0.0366 3 0.00041.5 0.0293 3.1 0.0003

Table B-5 Table of loss integral for standardized normal distribution

Source: Edward Silver, David Pyke, and Rein Peterson, Inventory Management and Production Planning and Scheduling. 3rd ed. (New York: John Wiley & Sons, 1998), pp. 724-34.

The calculated value off(k) is then compared against the values in Table B-5 to find the one the most closely approximates the calculated value. For this example, the value of A: that fits the condition is 1.175. The required safety stock level is:

SS = k * a c =1.175*20.75 = 24.38 unitsThe safety stock required to provide a 99 percent product fill rate when the order

quantity is 100 units is approximately 25 units. An increased order size can be used to compensate for decreasing the safety stock levels, or vice versa. The existence of such a

140


trade-off implies that there is a combination of replenishment order quantities that will result in desired customer service at the minimum cost.

141


trade-off implies that there is a combination of replenishment order quantities that will result in desired customer service at the minimum cost.

141


Appendix C

Management decision aid in the NERP System

There are several features in the NERP system that will provide very useful

information to the decision maker in order to make the appropriate decision. These

features are "Transaction pending reminder," "Cost Information," "scheduling

adjustment, "Dynamic Reorder Point and Replenishment order quantity," and "Expected

completion date and Expected delivery date." This appendix represents the actual figures

captured from the company that installed the NERP system, focusing only on the

management decision aid modules. A brief explanation on the module and the data

presented in it is provided.

Cost Information

The cost management module in the NERP system provides the user with the

necessary information of different types of costs. As can be seen from Figure C-1, the top

portion of the figure shows the products related cost; for example the "Lamp" costs $300

per unit, and the customer was given a 3.5% discount on an order quantity of 27 units.

The total cost before tax for this order is $9418.40 and $10736.98 including 14% tax. The

second portion (the bottom portion) shows the production and profit related cost

including the safety factor added by the system. The order quantity of the Lamp is only

27 units; however the system has added a safety factor of 1.35 units to the production,

therefore the company will be required to produce 28 units of the Lamp instead of 27

units to prevent a product shortage due to production operations. In order to carry out the

production of 28 units, the raw material cost of $2,535.91, the labor cost of $765.45, and

the setup cost of $35 for the total of $3,336.36 is required as the initial production cost.

The Lamps are sold at $300 per unit, and with an order of 27 units and a total of $8,100

in revenue, the company will earn $4,763.64 as a profit.

This cost management module can be very useful for users, who can check the

detailed cost of the product before sending the order to the production department. A cost

142


Appendix C

Management decision aid in the NERP System

There are several features in the NERP system that will provide very useful

information to the decision maker in order to make the appropriate decision. These

features are “Transaction pending reminder,” “Cost Information,” “scheduling

adjustment, “Dynamic Reorder Point and Replenishment order quantity,” and “Expected

completion date and Expected delivery date.” This appendix represents the actual figures

captured from the company that installed the NERP system, focusing only on the

management decision aid modules. A brief explanation on the module and the data

presented in it is provided.

Cost Information

The cost management module in the NERP system provides the user with the

necessary information of different types of costs. As can be seen from Figure C-l, the top

portion of the figure shows the products related cost; for example the “Lamp” costs $300

per unit, and the customer was given a 3.5% discount on an order quantity of 27 units.

The total cost before tax for this order is $9418.40 and $10736.98 including 14% tax. The

second portion (the bottom portion) shows the production and profit related cost

including the safety factor added by the system. The order quantity of the Lamp is only

27 units; however the system has added a safety factor of 1.35 units to the production,

therefore the company will be required to produce 28 units of the Lamp instead of 27

units to prevent a product shortage due to production operations. In order to carry out the

production of 28 units, the raw material cost of $2,535.91, the labor cost of $765.45, and

the setup cost of $35 for the total of $3,336.36 is required as the initial production cost.

The Lamps are sold at $300 per unit, and with an order of 27 units and a total of $8,100

in revenue, the company will earn $4,763.64 as a profit.

This cost management module can be very useful for users, who can check the

detailed cost of the product before sending the order to the production department. A cost

142


management module that supported by NERP system can provide the comprehensive

visibility of the cost necessary for the Southeast Asian SMEs.

.-'.11Sales Order

Us erlaadmin

Order ID SaQ-Og007

Refer F1'.°R) !Sale Order

Date 1

1QuotatIon ID

09/07105

Customer Kerne Josh

salesllathe !Valentino

Discount I 3.5 %

':TAX''" GST ) 14P4 (G5T + PST )

Address1 131,1:14utt'1 Cost 4001 Peofit I l‘lote I

Product ID Il7r1)01WCP.

UnitPrici3

Customer Order;Date

Save_

Estimate Completion Date 109/13/05

'Expected Dehrery Date:109/14105

!Lamp

QoantitY Note

27 013.5% Discount

Update

Delete

'.:ProdUttiD ProduCt ame 'Unit UnitPriCe($), Quantj4 QT' Note PrD-00001 TANK, 16(54', QH, Si... Box 100.00 7 0 PrD-00002 Filling Cabinets Box 80.00 12 0 2% Discount PrD-00003 Lamy Box 300.00 27 0 3.5% Disco...

Total Net "$ 1 9418.40 Total $' 1 10736.98

Address Product Cost and Profit Note

!Initial•Cost

Product IDJ Product Name j Qty/SF ! RM Cost Labor Cost! OT Cost 1 Setup 1 Total PrD-00001 TANK. 10X54, OH, . . . 1 7.35 183.75 106.58 0.00 20.00 310.32 PrD-00002 FillingCabinets I 12.601. 314.62 113.40 0.00 15.00- 443.02 PrD-00003 Lamp i 28.351 2,535.91 765.45 0.00 35.00 3,336.36

Profit-

Product ID

..,... , . •

Product. Name Qty/SF .-1

Initial Cost 1 Sale Cost Profit li PHD-00001 TANK, 10X54, QH, Single 7.35 310.32

443.02 700.00 389.68 960.00 516.98 PrD-00002 Filling Cabinets 12.60

PrD-00003 Lamp 28.35 3,336.36i 8,100.001 4,763.64

Figure C-1 Cost management module.

143


management module that supported by NERP system can provide the comprehensive

visibility of the cost necessary for the Southeast Asian SMEs.

0 9 /0 7 /0 5

ZJz J

~3

C ustom er O rd e r D a te |P

Save

E stim ate Com pletion D a te |0 9 /1 3 /0 5

E x p ected Delivery D a te ; J09/14/OS

Iga S a le s O r t lu r

U s e ; ID admin

O rder ID f SaO -0Q 007 Da.te j“R efer From [sale Order 3 19uotationID f~

C ustom er N am e ]Mr. Josh

S alesN aitie { v a ie n t in o

D iscount I 3 .5 %

TAX r 7 % ( GST ) p 11% (-G5T + PST j

Address Product | Cost and Profit | Note j

Product ID jp rO -00003

Unitp . ---------------

UnitPrice»)

(Lamp

Q u an tity OT"3

N ote

Add

Update

3 0 0 ,0 0 27 Q (3 .5 % Discount Delete

Product ID Product Name Unit UnitPrice($) Quantity, O T ' j Note'PrD-00001 TANK, 10X54, QH, Si... Box 100.00r 7 0PrD-00002 Filling Cabinets Box 80.00 12 0 2% DiscountPrD-00003 Lamp Box 300.00 27 0!3.5% Disco...

Total N e t % ■9416.10 Total * r 10736.98

Address] Product Cost and Profit j Notej

1 Initial Cost

Product ID Product Name Qty/SF RM Cost Labor CostPrD-00001 TANK, 10X54, Q H ,... 7 35 183.75 106.58PrD-00002 Fillin^Cabinets 12.60 314.62 113 40PrD-00003 Lamp >6.35 2,535.91 765 45

m p u s n i ffltlllil iSilliliirm m

OT Cost Setup Total j 310.320.00 20 .00 !

443:020.00 15.0035.00I 3,336.360.00

Product ID Product Name Qty/SF I Initial Cost I Sale Cost 1 Profit |PrD-OOOOi TANK, 10X54, QH, Single 7.35! 310.32 700.00i 389.68!PrD-00002 Filling Cabinets 12.60] 443.02! 960.001 516.98PrD-00003 Lamp 28.35! 3,336.361 8,100.001 4,763.64!

Figure C -l Cost management module.

143


Expected Completion Date and Expected Delivery Date

The NERP system can provide the user with expected completion date and

expected delivery date of the order, as shown in figure C-2. Both of the expected dates

are calculated automatically by the NERP system based on the current production, the

pending production, availability of workforce, and availability of the raw materials. In

figure C-2, the order has been placed on September 7th, 2005 and the NERP system has

estimated the completion date of the order to be on September 13th, and expects to deliver

to the customer on September 14th.

This feature provides the user and customer with the approximate date that the

products will be finished and delivered. The user then can easily add the extra workforce,

or overtime hours to the production if the order is needed.

EMSdles Order

User lbadmin

Order ID 5aff:130007

Refer From Sale Omer.

.Date

Quotation ID

119107105

Customer Name JMr. Josh

Sales Name iValentino

'Discount 3.

TAX 7% ( CST) P" 14% ( G5T + PST )

Customer Order Date

Esdiiiate CoMpletion Date.: 0.3/13/05

Exeetted,peliyerie.Dat

Figure C-2 Expected completion and delivery date


Figure C-3 shows the Production Scheduling module and Scheduling Adjustment

module in the NERP system. The Production Scheduling module represents the status of

the transaction order created on the NERP system. It provides the users with an order

identification number, order type (sale order, sale quotation, or internal order), promised

delivery date, customer's name and the status of the production. There are three types of

status that can be shown on the module: "Finish," "Requesting Raw Material," and

"Waiting." The Requesting Raw Material status tells the user that the production

department is waiting for the raw material to arrive from the warehouse. The Waiting

status shows that the order is ready (with all required raw material), and waiting to be put

in the production order. Last, the Finish status tells the user that the production of the

144


Expected Completion Date and Expected Delivery Date

The NERP system can provide the user with expected completion date and

expected delivery date of the order, as shown in figure C-2. Both of the expected dates

are calculated automatically by the NERP system based on the current production, the

pending production, availability of workforce, and availability of the raw materials. IntVifigure C-2, the order has been placed on September 7 , 2005 and the NERP system has

estimated the completion date of the order to be on September 13th, and expects to deliver

to the customer on September 14th.

This feature provides the user and customer with the approximate date that the

products will be finished and delivered. The user then can easily add the extra workforce,

or overtime hours to the production if the order is needed.

jSs| S a les O rd e r

User IDs

O rd er ID

R efer From

C ustom er Nam e

Discount f

S a v e |

f S a 0 -0 0 0 0 7 1 D a te f '0 9 /0 7 /0 5

[Sale Order V j Q u o ta tio n id

jfvlr. Josh . r JCustom er O rd e r D a te j

fValentino zl E stim ate Com pletion D a te [0 9 / 13/05

j 3 .5 %. E x p ec ted Delivery D a te [0 9 / 14/05

TAX r 7 % ( GST ) W 14% ( GST + PST )

Figure C-2 Expected completion and delivery date


Figure C-3 shows the Production Scheduling module and Scheduling Adjustment

module in the NERP system. The Production Scheduling module represents the status of

the transaction order created on the NERP system. It provides the users with an order

identification number, order type (sale order, sale quotation, or internal order), promised

delivery date, customer’s name and the status of the production. There are three types of

status that can be shown on the module: “Finish,” “Requesting Raw Material,” and

“Waiting.” The Requesting Raw Material status tells the user that the production

department is waiting for the raw material to arrive from the warehouse. The Waiting

status shows that the order is ready (with all required raw material), and waiting to be put

in the production order. Last, the Finish status tells the user that the production of the

144


specific order is completed and ready to move to the warehouse or be shipped to the

customer.

The scheduling adjustment module shows only the orders under the status of

"Waiting." Because these orders are not yet in the production line, they are still

adjustable. The users can use their experience in order to change and schedule the

production order. The current version of NERP system cannot optimize the scheduling

order.

Pf 0 d tIC t itl 11SC 11 e d 11 I g

•."RaC1,00003 Sa0-00004 SSO-00005 Sa0-000106 Sa0-00008Sa0-00009 Sa0-00010

Production Detail -

FrodU41D.: PrdattO Name Order Qty J Finish Qty Unit : loitial'COst Sale Cost Profit PrD-00001 1TANK.10)(54, QH; ... •

Order Type leOriler

SaleOrder SaleOrder

SaleOrcier SaleOrder $alsOrder

Customer $latus .0911 Lulu ' 09/10/05 09/09/06 09/12/05 09/09/05 09109/05 09109/06

• Mr. .Li.ilu• Mr. Lulu Mr. Lulu Mr. Lulu Mr. Lulu Mr. Lulu

Waiting Requesting Rawmat... Requesting Rawmat...

Finigh Finish

Waiting.

PrD-00002 PrD-00003

Filling Cabinets . Lamp

Sc hedutingAdjustment

Down

OrderlD Sa0-00004 Sa0-00010

3.001 3.00 : 5.00 5.00 15110 •15:00

Box Box Box

OrderType SaleOrder SaleOrder

144.42 193.34

1,869.09

300.00 400.00

4,500.00

ClOe

Status Waiting Waiting

Figure C-3 Production Scheduling and Scheduling Adjustment

155 58 206.66

2,630.91

Pending Reminder

As stated in the section 4.6.3, the NERP system can alert users when the system

detects that there is (are) transaction(s) waiting to proceed. On the main screen, the

system will remind the user of the transactions pending processing, and once the user


screen. The transactions that the system can remind the users of are: (1) Sales Quotation

pending Sales Order, (2) Supplier Quotation pending Purchase Order, (3) Purchase Order

145


specific order is completed and ready to move to the warehouse or be shipped to the

customer.

The scheduling adjustment module shows only the orders under the status of

“Waiting.” Because these orders are not yet in the production line, they are still

adjustable. The users can use their experience in order to change and schedule the

production order. The current version of NERP system cannot optimize the scheduling

order.

Iff Production St lu'iluliii:'. Hi*!• ^roaucuon rian - -

Order .ID Order Type Date Delivery Customer Status [

Sa0-00004 SaleOrder 09/10/05 : Mr. Lulu Waiting iSa0-D0005 SaleOrder 09/09/05 Mr. Lulu Requesting Rawmat... .

SaleOrder 09/12/05 Mr. Lulu Requesting Rawmat...1 Sa0-00008 SaleOrder 09/09/05 : Mr. Lulu Finish I

Sa0-00009 SaleOrder 09/09/05 Mr. Lulu Finish 1I Sa0-00010 SaleOrder 09/09/05 Mr. Lulu Waiting

Production Detail -

Product ID Product Name Order Gty Finish Qty Unit Initial'Cost Sale Cost Profit

PrD-00001 TANK, 10X54, Q H ,... 3.00 3.00 Box 144.42 : 300.00 155.58PrD-00002 Filling Cabinets 5.00 5.0C Box 193.34 400.00 206.66PrD-00003 Lamp 15.00 15.00 Box 1,869.09 4,500.00 2,630.91 i

t i i H ' . h m ' j i i i f F i t

o o l Down Close Save

OrderlD. O.rderType Status

Sa0-00004 SaleOrder Waiting

-__SaO-_00010 __ SaleOrder Waiting

--------------

Figure C-3 Production Scheduling and Scheduling Adjustment

Pending Reminder

As stated in the section 4.6.3, the NERP system can alert users when the system

detects that there is (are) transaction(s) waiting to proceed. On the main screen, the

system will remind the user of the transactions pending processing, and once the user


screen. The transactions that the system can remind the users of are: (1) Sales Quotation

pending Sales Order, (2) Supplier Quotation pending Purchase Order, (3) Purchase Order

145


pending the arrival of the raw materials, (4) Raw Material Requisition pending the

issuing of the raw material to the production department. Figure C-4 shows four types of

pending reminders on the NERP system.

ERP for SME

File Common Sales Purchase Inventory Oroduction

Alert Detail Sales Quotation pending"afe SaQ-00004 Supplier Quotation pending are : PuS-00001 Purchase Order pending are : Pu0-00001 Raw Material Requisitign pencil-0 are,: 00Q-00005 OpQ-00006

Figure C-4 Pending reminder

Dynamic O. ROP and Inventory

1,4 NtA CUI1011, IIIVOIlt01 7 PI Ei

Raw Material

ID Name Unit Cost Qty on Order City on Hand ROP RaM-000131 Polyethylene Resin LB 1.013 0.00 354.00 18.00 4.03 RaM-00002 Fastener EA 0.25 12.00 270.00 12.00 3.00 RaM-00003 Fiberglass Roving KG 1.19 0.00 263.40 64.00 16.00 RaM-00004 Plastic Tube EA 4.75 0.00 295.00 26.00 8.00 RaM-00005 Tank, Base EA 0.43 0.00 285.00 66.00 16.00 RaM-00006 Pyrofill Fiber Carbon LB 0.85 0.00 299.85 49.00 12.00 RaM-00007 Hanging File Folder Pkg 1.75 0.00 370.00 149.00 35.00 RaM-00008 Plastic Drawer Labels EA 0.38 0.00 208.00 . 202.00 50.00 RaM-00009 Flanging Folder Bars EA 0.48 0.00 208.00 179.00 41.00

i RaM-0131310 File Folder Labels Box 0.39 0.00 185.00 223.00 54.00 RaM-00011 File Folders Box 0.16 0.00 105.00 348.00 82130 RaM-00012 Controlling Lock EA 1.33 0.00 277.00 54.00 13.00 1 RaM-00013 Lamp LA EA 29.05 0.00 268.00 45.00 10.00 RaM-00014 Base Assembly EA 16.35 0.00 268.00 61.00 15.00 RaM-00015 Finished Shaft EA 1.30 0.00 268.00 21.00 5 CO RaM-00016 3/8 Steel Tubing Inc 0.05 140.00 74.00 559.00 140.00 RaM-00017 6D Steel Plate EA 9.25 0.00 268.00 81.00 20.00 .„ I

.„-,..,,..u „ go,,,,,,,, -, .....nu move

tOlall 4 aillui ...,,, f '*• , ID 'Me cis Oty on Order Qty,ori Hand Oty on De... ?ROP 11

PrD-00001 TANK, 10X54, OH, S... Box 39.50 14.00 103.00 0.00 45.00 14.00 PrD-00002 Filling Cabinets Box 33.97 50.00 149.00 0.00 62.00 17.03 PrD-00C103 Lamp Box 116.45 48.00 41.00 0.00 24.00 7.00

II 111000000,1r 00001" pi 0„„ ull II

r„,,,,, _ 101.1011 1,0111„10140010 0 0 0 - 00,000001„0100000,00,004ir

----

_ .6.000,04 d 1 --- - tii T. 1

tx . Close

Figure C-5 Inventory status, ROP and Q*

Figure C-5 shows the information related to raw materials and products, including

the identification number, name, unit, initial cost, quantity on order, quantity on hand,

146


pending the arrival of the raw materials, (4) Raw Material Requisition pending the

issuing of the raw material to the production department. Figure C-4 shows four types of

pending reminders on the NERP system.

ERP fo r SME

File Common Sales Purchase Inventory Production

Alert Detail jsiies Quotation ponding are : SaQ-00004 Supplier Quotation pending are : PuS-00001 Purchase Order pending ate : PuO-OOOOl

Material Requisition pending are : GpQ-00005 OpQ-OOOOd

Figure C-4 Pending reminder

Dynamic 0*. ROP and Inventory| .... . . ̂| ̂ - 1 [ | | |

- Raw Material

ID Name Unit Cost Qty on Order Qty on Hand Q* ROPI B ,

: RaM-00001 Polyethylene Resin LB 1.00 0.00 354.00 18.00 4.001 i -i RaM-00002 Fastener EA 0.25 12.00 270.00 12.00 3.00I RaM-00003 Fiberglass Roving KG 1.19 0.00 263.40 64:00 16.00! RaM-00004 Plastic Tube EA 4.75 0.00 295.00 26.00 8.00: RaM-00005 Tank, Base EA 0.43 0.00 285.00 66.00 16.00i RaM-00006 Pyrofill Fiber Carbon LB 0.85 0.00 299.85 49:00 12.00i RaM-00007 Hanqinq File Folder Pkg 1.7:5 : 0.00 370.00 149:00 35.00i RaM-00008 Plastic Drawer Labels EA : 0.38 0.00 208.00 202:00 50.00! RaM-00009 Hanging Folder Bars EA 0.48 0.00 208.00 179.00 41.00

RaM-Q001Q File Folder: Labels Box 0.39 0.00 185.00 223:00 54.00; RaM-00011 File Folders Box 0.16 0.00 185.00 348.00 82.00' RaM-00012 Controlling Lock EA 1.33 0.00 277.00 54,00 13.00s RaM-00013 Lamp LA EA 29.05 0'.00 268.00 45.00 10.00 *1 RaM-00014 B ase Assembly EA 16.35 0.00 268.00 61:00 15.00; RaM-00015 Finished Shaft EA 1.30 0.00 268.00 21.00 5.00I RaM-G0016 3/8 Steel Tubing Inc 0.05 140.00 74.00 559.00 140.00< RaM-00017 6D Steel Plate EA

..,,9.25 :: 0.00 268.00

.. ..........81.00 20.00

s ' " I

ID Name Unit Cost Qty on Order Qty on Hand Qty on De... Q* ROPi PrD-00001 TANK, 10X54, QH. S ... BOX: 39.50 14:00 103.00 0.00 45.00 14.00! PrD-00002 Filling Cabinets Box 33.97 50.00 149.00 ........... ;...0.00 62.00 17.00: PrD-00003 Lamp Box 116.45 48.00 41,00 0.00 24.00 7.00

Close |

Figure C-5 Inventory status, ROP and Q*

Figure C-5 shows the information related to raw materials and products, including

the identification number, name, unit, initial cost, quantity on order, quantity on hand,

146


replenishment quantity (Q*), and reorder quantity point (ROP). The Q* and ROP have no

specific value, and the calculation is performed with the activities of the transactions. For

example, every time the raw materials are used for production, the Q* and ROP for those

raw materials will be recalculated. Then, an order of size Q* is placed when the available

inventory reaches the point ROP.

147


replenishment quantity (Q*), and reorder quantity point (ROP). The Q* and ROP have no

specific value, and the calculation is performed with the activities of the transactions. For

example, every time the raw materials are used for production, the Q* and ROP for those

raw materials will be recalculated. Then, an order of size Q* is placed when the available

inventory reaches the point ROP.

147
