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SYSTEMS APPLICATION AND PRODUCTS (SAP) INTEGRATION ONFINANCIAL AND CONTROL (FICO) PROCESS OF KEPCO PHILIPPINES

A Thesis Study

Presented to

The Faculty of Graduate School

University of Rizal System

Binangonan, Rizal

In Partial Fulfillment

Of the Requirements for the Degree

Master in Business Administration

Jhoanna Mary E. Pescasio

October 2013


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Chapter I

INTRODUCTION

Today, information technology plays a vital role in every aspect of humans

lives. It leads to high level of corporate competition and growth seems equal to

innovation. It is the brain of modern economy and the brain of corporate

organization, information technology is all about storing, manipulating, distributing

and processing information using computer-based tools. Business sector is one of

the beneficiaries of modern technology, it allows organizations to work efficiently and

maximize productivity, thus make computer and information systems very essential

in running business operations.

Technology now became a necessity for every business establishment and

corporate world is leaning more and more toward it, making it almost impossible to

separate the two from each other. Innovation breed business, and since technology

paves the way for it, it can be gathered here that business needs technology to be

sustained. The role of technology in business caused tremendous growth in trade

and commerce. Business concepts and models were revolutionized as a result of the

technology. This is because technology gave a new and better approach on how to

go about with business. It was provided a faster, more convenient, and more efficient

way of preforming business transactions.

One of the high end contributions of the advance technology is the birth of

Enterprise Resource Planning or ERP. And since businesses faced new challenges

in increasing competition, market expansion and meeting and exceeding consumer

expectation the ERP systems have been developed to provide a total business

solution. It is business software solution that seeks to streamline and integrate

operations, processes and information that flows within the enterprise. ERP is


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software suited for business application such as, accounting, supply chain

management, human resources (HR), and sales and so on. The key characteristics

of the this system the integration, once an ERP system is implemented, each

department or business unit in a company will use the same database, share the

same data that immediately improve the communication among different department

or business units that will enhance the business operations, operate the enterprise in

effective and efficient manner. ERP system improves productivity, which is the main

reason why many large-sized scale enterprises are keen to study and adopt this kind

of system in running and managing their business operations. Likewise, it became

an organizational tool for various enterprises since it has enabled the business to

integrate varied organizational systems and provide a flawless operation and

production. However, it is radically different from conventional system development.

The same can run on variety of computer hardware and network configurations,

typically employing a database as a warehouse for information.

ERP system is the evolution of Manufacturing Requirements Planning (MRP)

II. From business perspective, ERP has expanded from coordination of

manufacturing processes to the integration of enterprise-wide backend processes.

From technological aspect, it has evolved from legacy implementation to more

flexible tiered client-server architecture. Below is the evolution of this system from

1960s to 1990s (Rashid. et.al, 2003)


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Figure 1

Evolution of Enterprise Resource Planning (ERP) System

In Philippines, the used of Enterprise Resource Planning (ERP) system was

governed by Republic Act No. 8792 or also known as Electronic Commerce Act of

2000. In Section 2, Declaration of the Policy, vividly states:

The State recognizes the vital role of information and communications technology

(ICT) in nation-building; the need to create an information-friendly environment

which supports and ensures the availability, diversity and affordability of ICT

products and services; the primary responsibility of the private sector in contributing

investments and services in telecommunications and information technology; the

need to develop, with appropriate training programs and institutional policy changes,

human resources for the information technology age, a labor force skilled in the use

of ICT and a population capable of operating and utilizing electronic appliances and

computers

There are over 150 vendors of Enterprise Resource Planning (ERP) system,

and one of the well-known providers is the Systems, Applications and Products or

best known as SAP. As of 2010, SAP has more than 140,000 installations


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worldwide, over 25 industry-specific business solutions and more than 75,000

customers in 120 countries. Thus in current market of ERP system, the latter make

as one the best known and most widely used ERP solution. SAP system comprises

of a number of fully integrated modules, which covers virtually every aspect of the

business management. All these separate parts of ERP systems must work together

to accomplish companies business operation.

Systems, Applications and Products (SAP), started in 1972 by five

formerIBM employees in Mannheim, Germany, they are Dietmar Hopp, Klaus

Tschira, Hans-Werner Hector, Hasso Plattner, and Claus Wellenreuther, the original

name for SAP was German: Systeme, Anwendungen, Produkte, meaning "Systems

Applications and Products." The original idea was to provide customers with the

ability to interact with a common corporate database for a comprehensive range of

applications. Gradually, the applications have been assembled and today many

corporations, including IBM and Microsoft, are using SAP products to run their own

businesses. This applications is currently built around their latest R/3 system,

provide the capability to manage financial, asset, and cost accounting, production

operations and materials, personnel, plants, and archived document.

In recent data, there are more than twenty (20) modules in SAP system, but

this study will focus on Financial Accounting and the Controlling Modules (FICO).

The Finance (FI) Module is designed to record financial transactions in a manner

consistent with external reporting. Controlling (CO) module in SAP system is to

provides organizations with a method of slicing and dicing data to view costs from an

internal management perspective and provide a view of profitability beyond that of

basic financial reporting.
http://searchsystemschannel.techtarget.com/definition/IBMhttp://en.wikipedia.org/wiki/Dietmar_Hopphttp://en.wikipedia.org/wiki/Klaus_Tschirahttp://en.wikipedia.org/wiki/Klaus_Tschirahttp://en.wikipedia.org/wiki/Hasso_Plattnerhttp://en.wikipedia.org/wiki/Claus_Wellenreutherhttp://searchwinit.techtarget.com/definition/Microsofthttp://searchsap.techtarget.com/definition/R-3http://searchsystemschannel.techtarget.com/definition/IBMhttp://en.wikipedia.org/wiki/Dietmar_Hopphttp://en.wikipedia.org/wiki/Klaus_Tschirahttp://en.wikipedia.org/wiki/Klaus_Tschirahttp://en.wikipedia.org/wiki/Hasso_Plattnerhttp://en.wikipedia.org/wiki/Claus_Wellenreutherhttp://searchwinit.techtarget.com/definition/Microsofthttp://searchsap.techtarget.com/definition/R-3


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Background of the Study

Implementation of an ERP is an extensive, lengthy, and costly process,

typically measured in millions of dollars. The investment is both in the software itself

and in related services such as consulting, implementing, training, and system

integration. The hope of increasing productivity and efficiency, particularly the

management of a global operation, as a means of raising organizational

competitiveness underlies the rationality behind firms motivation for adopting ERP.

Generically, the issue in implementing ERP is the fact that it will cost the

organization a million of expenditure, it is not an overnight project, and it is complex

software that requires wide-ranging knowledge in ERP implementation. Various

critical issues occur during and after ERP implementation, and the root of this issue

is the lack of t knowledge in software integration, this is the major problem in an ERP

implementation (Pan et.al, 2003).

According to analysts, the most important problem in ERP implementation is

the failure of organizations to understand what ERP is all about and what exactly is

required for implementing the project effectively. The companies fail to take into

account the costs associated with implementing the project as the vendors do not

reveal them initially. This results in increased costs for these companies.

Organizations fail to plan the project implementation details and this leads to

confusion and delays in implementation. Further, even if minor problems appear in

one area of the ERP system, they affect the operations in other areas of the

company. The need for knowledge integration continues even after implementation,

if the system is to be fully appropriated. Moreover, knowledge integration does nothappen automatically as the implementation of ERP is not merely a technological


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task influenced by users perceived usefulness, but a cross-functional knowledge

integration process structurally enabled by the establishment and maintenance of

knowledge-based social relationships intra- and inter-organizationally. This is a big

challenge for both, organization and ERP vendors, their major task is to know fully

the principles beyond ERP integration so the implementation will go flawlessly, and it

could be done through commitment form top management, proper business

reengineering process, selection of ERP vendors and consultant, integration of the

system across various business units or departments, implementation time and cost

as well, and appropriate post-implementation or the system maintenance.

This problem, challenges and critical issues on ERP implementation has a

direct and indirect effect on the progress and to the ability if the company to earn

profit in a minimal cost. There are various cases of failed ERP implementation within

the business like what happened to Hershey Company failed to deliver candies for

its customers, Nike lost shoes order and Foxmeyers failure to process orders

(Cotteleer, 2003). This mere fact is evidence that ERP implementation is not just

technical based software, but has an impact on the productivity and profitability of

the organization.

This is the very reason why the researcher desires to assess the

effectiveness of the SAP integration, particularly, the Financial and Control Process

of KEPCO Group as a key in developing a guide or model on how to implement an

ERP system. Also, being part of the organization, it is a privilege of the researcher to

provide a useful material that will serves as a basis for enhancement of the SAP

system of the organization.


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Scope and Limitation of the Study

The study aims to assess extent of the SAP implementation of KEPCO

Philippines on its financial and control process and the level effectiveness of the

system. Thus, the study will focus on one of the module of SAP implemented by

KEPCO Philippines, the Financial Accounting (FI) and Controlling (CO) module. It

will determine the effectiveness of a real-time updates as effective means of

recording relevant data into a sound financial decision making.

The subject of the study is the Philippine team of KEPCO Group composed by

three business units, the KEPCO Ilijan, KEPCO SPC and KEPCO Holdings. In

order to complete the methodology and data gathering of this study, the researcher

needs at least four (4) months to finish such phase, and it will start from June to

October 2013.

There are total of forty-six (46) SAP users of FICO modules four (4) from

KEPCO Holdings, twenty-seven (27) from KEPCO Ilijan and fifteen (15) from

KEPCO SPC. The researcher will use the one hundred percent (100%) of SAP

users as respondents for this study.

The subject of the study is the one hundred percent (100%) of the Finance

team or a total of 46 people and likewise all the SAP) users from various

departments aside from Finance Group who do the parking of the accounting

documents.

The variables present in the study are the profile of SAP users in terms of

age, sex, job position, nature of works and SAP function, in evaluation of the degree

of effectiveness, respondent will assess the system in terms of accuracy, relevance,

efficiency, economy and productivity. While with the assessment of respondents for

the extent of the system implementation, business process reengineering,


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configuration of the system, team and users trainings, system testing, going live and

post implantation are the variables to considers.

The researcher used the descriptive method of research and utilized a

questionnaire checklist to gather necessary information. Descriptive research is

concerned with the description of data and characteristics about a population. The

goal is the acquisition of factual, accurate and systematic data that can be used in

averages, frequencies and similar statistical calculations. The instrument will be

validated through content validation using the frequency percentage, rank

distribution, weighted mean, t-test and one-way ANOVA as a statistical treatment in

analysis of data.

Due to highly technicality of the study, it is limited to Financial Accounting and

Controlling Module and other available modules of the system will not be discussed

and likewise the version of the platform of the system.

Statement of the Problem

This study aims to determine the impact of integrating whole financial process

with Systems, Applications and Products (SAP) as a medium in recording,

processing, and translating financial data into reports.

Specifically, this will seek to answer the following questions:

1. What is the profile of the respondents in terms of:

1.1 Age;

1.2 Sex;

1.3 Job Position;

1.4 Nature of work; and

1.5 SAP Function (s)?


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2. What is the extent of the implementation of SAP system of KEPCO

Philippines in terms of:

2.1 Business process reengineering;

2.2 Configuration of the system;

2.3 Team and users trainings;

2.4 Testing;

2.5 Going-live; and

2.6 Post-implementation.

3. What is the level of effectiveness of integrating Systems, Applications and

Products (SAP) of KEPCO Philippines in their Financial and Control Process

as perceived by respondents with respect to:

3.1 Accuracy;

3.2 Relevance

3.3 Efficiency;

3.4 Economy; and

3.5 Productivity?

4. Is there significant difference in the assessment of the respondents on the

integration of SAP of KEPCO Philippines when grouped according to their

profile?

5. How does the extent of SAP implementation of KEPCO Philippines with the

effectiveness of the system.

Hypothesis

The studies test the following null hypothesis:


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1. There is no significant difference in the extent of SAP implementation and

level of effectiveness of the system of KEPCO Philippines in accordance to

perspective of the respondents.

2. There is no significant relationship between the implementation of the SAP

system and the level of effectiveness of the SAP system of KEPCO

Philippines.


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Chapter 2

EVALUATION DESIGN AND FRAMEWORK

This chapter discusses the expected output and justification, theoretical

framework, conceptual framework, and the variables and their definitions and

importance to the study.

Discussion of Expected Output and Justification

The expected output of the study is to be able to produced a standard model

based on the perception of the respondents that can be used as a guide of the

company in implementing SAP system based on the information conducted of the

research. This model is to be used in further enhancing of the system and as well as

the process of the business operation that will eventually make the company

effective and efficient.

Furthermore, in assessing the relationship of the extent of SAP

implementation and level of effectiveness of the same will offer a complete guide for

the company for trouble shooting for any unnecessary situation that will serve as a

hindrance in the business operation.

The objective will be attain through the use of survey questions that will

determine the extent of the system implementation and the effectiveness of the

system compared the old system and process of Finance Department in processing

the financial data into reports.

Theoretical Framework

In today's competitive world many major companies have decided to use a

popular tool that has evolved over the past few decades. ERP, the descendant of

MRPII offers the "answer" to the economic and productivity troubles of


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manufacturing and service enterprises. Thus, the ERP system has become very

popular as an enterprise management software tool. Implementation of ERP system

in the organization is the most complex and crucial part of the whole integration and

many researchers have proposed stage models of ERP implementation so to

provide successful implementation.

Collins and Hussey (2006) stated that theoretical framework is a collection of

theories and models from the literature. It is logically developed, described, and

elaborated network of associations between the variables deemed relevant to the

problem situation, and which have been identified through such process.

This study is based on the theory on competitive advantage by Michael

Porter, this theory is about taking offensive or defensive action to create a

defendable position in the industry, in order to cope successfully with competitive

forces and generate a superior return on investment.

To maintain competitive advantage and to augment performance, companies

need a solid resource management capability and dynamic capabilities that is, the

companies should be able to effectively control, integrate, and utilize the internal and

external resources, and adaptive to environmental changes and competition. ERP

system by nature is one resource management system, since ERP system itself is

invented for material resource planning (MRP). This system is one model to manage,

integrate, and control enterprise resources. This model links with company's

management culture, management processes and management objectives, and

each enterprise application of ERP systems can be seen as the unique ability to

manage resources. Therefore, it is to believe that its implementation can enhance

the company's resource management capabilities and help the company gain a

competitive advantage.


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Furthermore, the used of the ERP system, is based on Business Process

Reengineering method defined by Hammer and Champy as the fundamental

reconsideration and radical redesign of organizational process, in order to achieve

drastic improvement of current performance in cost, service and speed. BPR

expound the possibility of substantial increase in efficiency and productivity in a

relatively short of amount of time. According to Hammer, re-engineering is the

mechanism for creating strengths and operating processes which can then be

exploited in many ways, re-engineering can be used to provide cost advantages or

improve customer service, thereby defending an existing market; it can enable entry

into entirely new businesses either by turning internal processes into revenue

generating services or by identifying new applications for the same skills.

Value creation is the leading factor in BPR and information technology plays a

vital enabling role. Since ERP system is a technology driven tool for an organization

that will enabled the companies to maintain or reach an optimum spot in their own

industry, likewise it is considered by some as a major support for new forms of

working and collaborating within an organization and across organizational borders.

Conceptual Framework

The purpose of this section is to explain and rationalize the conceptual

framework proposed by the researcher. A model was used to show the perception of

the researcher regarding the study for a better and vivid understanding.

The study focused on the extent of SAP integration of KEPCO Philippines in

its level of effectiveness in processing financial information as input in developing a

conceptual framework. Based on the researches made, through theories and

concepts, the researched came up with a paradigm which consists of three (3)


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boxes. The first box pertains to the independent variables which are profile of

respondents in terms of age, sex, job position, nature of work and SAP function(s)

and the extent of SAP implementation with regards to business process

reengineering, configuration of the system, team users and trainings, testing, going-

live and post-implementation. Further, the second box relates to dependent variable

which is the level of effectiveness in relations to accuracy, relevance, efficiency,

economy and productivity. The third box or the output of the study, this is the main

product of the study which the business process flowchart of the company so that for

any future system upgrade there is a guide on how to the configuration of the system

and likewise an intranet based manual for FICO users for an easy access and guide.

Input Process Output

Figure 2

A Conceptual Framework showing the Development Model of Business Process Flowchart

and Intranet based Manual of KEPCO Philippines

2. Profile of therespondents

1.1Age

1.2Sex1.3Job position1.4Nature of work1.5SAP Function(s)

3. Extent of SAPimplementation

2.1Business processreengineering;

2.2Configuration of

the system;2.3 Team and users

trainings;2.4Testing;2.5 Going-live; and2.6Post-

implementation.

1. Level ofEffectiveness

1.1Accuracy1.2Relevance1.3Efficiency1.4Economy1.5Productivity

1. Business

Process

Flowchart

2. Business

Productivity

Measure

3. Intranet

Based Manual

for FICO

Users


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The Variables, their Definitions and Importance to the Study

Research papers will mention a variety of different variables, and, at first,

these technical terms might seem difficult and confusing. But with a little practice,

identifying these variables becomes second nature. In research, the most heard

kinds of variables are the independent and the dependent variables. If the variables

is said to be manipulated by the researchers it is the independent variables it is

presumed as the cause. While, dependent variables is the response that is being

measured and it presumed as the effect.In this study, the independent variables are the integration of Systems,

Applications and Products (SAP) of KEPCO Philippines replacing the old computer-

aided system in processing financial information, while the response of the

respondents that is grouped according to their profile is the dependent variables.

Likewise, to measure the level of effectiveness, which the dependent variables in this

study, the independent variables are the following:

Accuracy

In the fields ofscience, engineering, industry, and statistics, the accuracy of

a measurement system is the degree of closeness of measurements of a quantity to

that quantity's actual (true) value. The precision[1] of a measurement system, also

called reproducibility orrepeatability, is the degree to which repeated measurements

under unchanged conditions show the same results. Although the two words

precision and accuracy can be synonymous in colloquial use, they are deliberately

contrasted in the context of the scientific method.

According to ISO 5725-1 he terms trueness and precision are used to

describe the accuracy of a measurement. Trueness refers to the closeness of the

mean of the measurement results to the actual (true) value and precision refers to
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the closeness of agreement within individual results. Therefore, according to the ISO

standard, the term "accuracy" refers to both trueness and precision.

ISO 5725-1 also avoids the use of the term bias, because it has different

connotations outside the fields of science and engineering, as in medicine and law

(JCGM, 2008).

Accuracy in the field of accounting, is the precision of financial data, it is said

to be a financial statements is accurate if it is free from biased, it is recorded in its

true value and data should be existing. In this study, accuracy will be basically to be

measured against manual data and manual lapsing schedules to test that systems

are runs accurately against raw data.

In information systems, the concepts of accuracy and precision have also

been studied in the context of data bases, information systems and their

sociotechnical context. The necessary extension of these two concepts on the basis

of theory of science suggests that they (as well as data quality and information

quality) should be centered on accuracy defined as the closeness to the true value

seen as the degree of agreement of readings or of calculated values of one same

conceived entity, measured or calculated by different methods, in the context of

maximum possible disagreement. In using SAP as ERP solution, accurate data is

the key to building relationships with local and international customers, suppliers,

and partners. Accuracy is one of the four goals of ERP installation, accuracy relates

to both the system and the people. Make sure the people know where and how to

create, read, update and delete data. The system should inform them when their

actions are not correct. Once the data is in the system, processes and additional

entry should protect the data to produce accurate outputs. An example includes the
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chain of events in distribution that range from purchasing to fulfillment (Boecking,

2013).

Relevance

The concept of relevance is studied in many different fields, including

cognitive sciences, logic, and library and information science. Most fundamentally,

however, it is studied in epistemology (the theory of knowledge). Different theories of

knowledge have different implications for what is considered relevant and these

fundamental views have implications for all other fields as well.

In the world of Finance and Accounting, relevance means it will make

difference to a decision maker. It is the relationship or the relatedness of financial

data and reports itself in making a certain financial decision. In relevance, great

timing is needed and in accounting accuracy is sometimes sacrificed. For this study,

relevance is to be tested in the easiness of generating reports and schedules that

might needed for a certain decision that needs immediate action.

Relevance is a potential property not only of utterances and other observable

phenomena, but of thoughts, memories and conclusions of inferences. In relevance-

theoretic terms, any external stimulus or internal representation which provides an

input to cognitive processes may be relevant to an individual at some time.

According to relevance theory by Sperber and Wilson, utterances raise expectations

of relevance not because speakers are expected to obey a Co-operative Principle

and maxims or some other specifically communicative convention, but because the

search for relevance is a basic feature of human cognition, which communicators

may exploit. In this section, we will introduce the basic cognitive notion of relevance

and the Cognitive Principle of Relevance, which lay the foundation for the relevance-
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theoretic approach to pragmatics. In this theory, an input is RELEVANT to an

individual when, and only when, its processing yields such positive cognitive effects.

In the modern business scenario ERP is verisimilitude to the oxygen. As

oxygen is the essence of life similarly ERP is the lifeblood of the business. A

business irrespective of type and size cannot run smoothly in absence of properly

drafted and formulated ERP software (Gupta, 2005).

Efficiency

In general,describes the extent to which time, effort or cost is well used for

the intended task or purpose. It is often used with the specific purpose of relaying the

capability of a specific application of effort to produce a specific outcome effectively

with a minimum amount or quantity of waste, expense, or unnecessary effort.

"Efficiency" has widely varying meanings in different disciplines. Efficiency is can be

computed through what they called Efficiency Ratio, a ratio that typically applies to

banks, in simple terms is defined as expenses as a percentage of revenue

(expenses / revenue), with a few variations. A lower percentage is better since that

means expenses are low and earnings are high. It relates to operating leverage,

which measures the ratio between fixed costs and variable costs.

Efficiency in accounting generally refers to the use of certain ratios and

measurements designed to assess the effectiveness of a specific company or firm.

Efficiency ratios are used to assess the financial condition of a company based on

the way it manages its assets. This paper intends to measure efficiency of the

accounting application through resources management and likewise the impact of

the system with regards to overall efficiency in the organization and consequently

their profitability and sustainability.
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The potential benefits of ERP are significant: a more smoothly running

operation with efficiencies in virtually every area of administration, from automated

payroll to course registration to scheduling and just about every facet in between.

The stakes are high. Depending on the size of the college, an ERP implementation

often translates into a multimillion-dollar investment. It can also take a long time to

complete and require significant IT resources. Still, for many institutions ERP has

become a "must-have" technology. The business case for adopting the technology is

strong, even if there might not be an immediate financial payback (Violino, 2008).

ERP systems provide the opportunity to integrate high levels of business processes

integration, improve communications at different levels, and combine internal and

external communication for faster and easier data accessibility, but maximum

efficiency is only accomplished when there is strong alignment between the ERP

system and the company's business processes. The success or lack of a successful

implementation can be partially measured by examining the four key antecedents of

ERP system integration (Interconnectivity, Interoperability, Semantic consistency,

and Convergent integration) and ERP performance (Yousefi, 2011)

Economy

Economy consists of the production, distribution ortrade, and consumption of

limited goods and services by different agents in a given geographical location. The

economic agents can be individuals, businesses, organizations, or governments.

Transactions occur when two parties agree to the value or price of the transacted

good or service, commonly expressed in a certain currency. A given economy is the

result of a set of processes that involves its culture, values, education, technological

evolution, history, social organization, political structure and legal systems, as well
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as its geography, natural resource endowment, and ecology, as main factors. These

factors give context, content, and set the conditions and parameters in which an

economy functions. Some cultures create more productive economies and function

better than others, creating higher value

Further, SAP implementation requires large budget amount, it is a capital

expenditures that cost a million dollar of investment. Aside from lack of time and

budget, as well as lack of apparent value, one of the visible reasons why many

companies are not open for switching their accounting system to complete ERP

software is mainly because of the deteriorating economic and existing business

condition. Economic factor is the first and foremost aspect that needs a heavy

consideration for the success of the implementation is basically based on the

capacity of a certain company to support all the monetary needs in running the

project s (Wailgum 2009).

However, given this large amount of money, a proper implementation of the

system means huge cost savings, not just in terms of IT supplies and office supplies,

but likewise with the time save in processing various transactions. In this era, most

organizations are asked to do more for less. Accounting system can certainly help

in that goal, however, focus tends to rest on the for less part of this request. In

reality, organizations focusing solely on saving money will have to make sacrifices in

terms of quality, service, and operations that will impact internal and external

customers and ultimately the business (Franklin, 2009).

Economic cost is defined as the sacrifice involved in performing activity or

following a decision or course of action. It may express as the total opportunity cost

and the explicit cost. This paper will identify some points whether the benefits of

using and implementing Systems, Applications and Products (SAP) is much higher


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than the cost if the implementation. Likewise, to test the ability of the system in

implementing a paperless transaction that could be a savings for the company in

terms of supplies.

Productivity

"Productivity isnt everything, but in the long run it is almost everything. A

countrys ability to improve its standard of living over time depends almost entirely on

its ability to raise its output per worker. Productivity is considered a key source of

economic growth and competitiveness and, as such, is basic statistical information

for many international comparisons and country performance assessments. There

are different measures of productivity and the choice between them depends either

on the purpose of the productivity measurement and/or data availability (OECD

2008).

Productivity is measure efficiency in producing goods or services. It is a

degree to which a real income is being measured. Increasing national productivity

can raise living standards because more real income improves people's ability to

purchase goods and services, enjoy leisure, improve housing and education and

contribute to social and environmental programs. Productivity growth also helps

businesses to be more profitable. Thus, in processing and communicating financial

information, a certain group is to be said productive when the resources are being

fully utilized, that the system does not require too much time in running and

processing data that might caused some delays and became a hindrance in

immediate translation of numerical data that is needed in preparation of financial

reports of the enterprise.

Measuring the impact of applications on ERP end-user productivity is a

complex undertaking because of the wide range of business functions, vertical
http://en.wikipedia.org/wiki/Real_incomehttp://en.wikipedia.org/wiki/Real_income


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industry requirements, and user types who interact with such systems. In this study,

the researcher developed a business productivity framework to measure how end

users feel SAP applications impact their personal productivity (Keystone, 2007).

Given the scale of ERP implementation projects as well as the possibility for

both large successes and failures, it is reasonable to expect that ERP deployment

have a significant and measurable effect on firm performance. While both costs and

potential benefits are high, it is not clear whether the net effect results in higher

productivity for the firm. In addition, because implementation is a difficult and

uncertain process, firms that are successful in implementing the system may gain

competitive advantage over other firms that are unwilling or unable to make similar

changes.

Definitions of Terms

The following terminologies are operationally defined for a better

understanding of the study:

Business Process Reengineering. Business management strategy, originally

pioneered in the early 1990s, focusing on the analysis and design of workflows and

processes within an organization. BPR aimed to help organizations fundamentally

rethink how they do their work in order to dramatically improve customer service,

cut operational costs, and become world-class competitors.

Competitive Advantage. An advantage that firms has over its competitors,

allowing it to generate greater sales or margins and/or retain more customers than
http://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Customer_servicehttp://en.wikipedia.org/wiki/Operational_costshttp://en.wikipedia.org/wiki/Competitorhttp://en.wikipedia.org/wiki/Strategic_managementhttp://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Customer_servicehttp://en.wikipedia.org/wiki/Operational_costshttp://en.wikipedia.org/wiki/Competitor


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its competition. There can be many types of competitive advantages including the

firm's cost structure, product offerings, distribution network and customer support.

Enterprise Resource Planning. Principally an integration of business

management practices and modern technology. Information Technology (IT)

integrates with a corporate houses core business processes to streamline and

accomplish specific business objectives. Consequently, ERP is an amalgamation of

three most important components: Business Management Practices, Information

Technology, and Specific Business Objectives.

Financial Accounting/ Controlling Module. FICO module is a tool used in

Systems, Applications and Products in Data Processing, or SAP. FICO modules are

used for information technology through SAP, which is a package mainly employed

for financial accounting.

Systems, Applications, and Products Software. A business solution that will

help enterprises to manage its operation. SAP provides software tailored to fit

different aspects of business.

Technology.The branch of knowledge that deals with the creation and use of t

echnical means and theirinterrelation with life, society, and the environment, drawing

upon such subjects as industrial arts,engineering, applied science, and pure science.

CHAPTER 3
http://dictionary.reference.com/browse/environmenthttp://dictionary.reference.com/browse/environment


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RESEARCH METHODOLOGY

This chapter presents the discussion on the research design, setting and the

subject of the study, sources of data, procedure of the study and the statistical

treatment.

Research Design

This study use the descriptive qualitative research design utilizing a

questionnaires checklist as a medium in gathering information that is needed in the

conducting this study. Descriptive Research studies are those studies which are

concerned with the describing the characteristics of a particular individual, or if a

group (Kothari, 2004). The principal aims of descriptive method are to describe the

nature of the situation as it exists at the time if research and explore the cause of the

particular even. Data gathering is the primary means of collecting information to

conclude and answer the questions concerning the current status of the study.

The study aims to determine the extent of extent of SAP system in processing

financial data by Finance Department of KEPCO Philippines Group. This will be

measures through the use of input data such as Business Process Reengineering,

configuration of the system, trainings of the end users, testing of the system, going-

live of the integration and the post-implementation. Likewise, the level of

effectiveness will be asses in this study. Effectiveness shall be measured suing the

test of system accuracy, relevance of the system with the decision of the

management, efficiency and economic value of the system and as well as the

productivity of the SAP users in processing financial information.

Setting of the Study


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KEPCO Philippines was established when Korea Electric Power Corporation

won a bid for Operate, Maintain, Service Contract (OMSC) with the Philippine

Government, National Power Corporation (NAPOCOR) specifically, in response to

the call of the government to develop and utilize the countrys indigenous resources

and augment its power supply. Currently, KEPCO group has a three power plant.

Last September 12, 1997 a natural gas power plant was built in Ilijan, Batangas

under Build-Operate-Transfer (BOT) contract, it is the largest natural gas facility in

the country comprising 1200MW combined-cycle, dual-fuel electricity generation

facilities with a design life of 25 years. Another two power plants are located in Naga,

Cebu with Built-Operate-Own scheme. The two units of coal-fired that cater the

Visayan Grids composed of two units 185.8MW and one 100MW Thermal Power

Plant. This project is conceptualized under the scheme of a merchant power plant,

characterized by executions of power sale contracts (PSCs) with distribution utilities

and electric cooperatives, instead of power purchase agreements with the

government. The Manila head Office is located at the heart of Makati City, the

existing plant site of KEPCO group are located in Ilijan, Batangas and Naga, Cebu

City for LNG Power Plant and Coal-operated Power plant respectively.

KEPCO Head Office has been using SAP as their medium in operating the

business and for a stress-free consolidating the reports of all their subsidiaries and

overseas projects, the Management ordered all KEPCO Group to use same system

with server at Korea and user ID provided by the Head Office. Prior to the

implementation, all employees had undergone a rigid and tremendous Systems,

Applications, and Products (SAP) trainings for a couple of months, training include

theoretical classroom style introduction and a complete hands-on training using

client test server. However, there are some encountered transactions that has never


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been considered, some complex and complicated that failed to ruminate thats why it

makes hard for the team to complete the processing of the transaction and became

a back log that to be raised to the Head Office and consultant.

Figure 2

Map of Makati


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Figure 3

Map of Salcedo Village, Makati City.

Subject of the Study

The respondents of this study are the personnel of KEPCO Group Finance

Department having a key ID as users of SAP. They chose as respondents are the

one who underwent trainings and the one with SAP access. The researched decided

to make the 100 per cent (100%) population of the subject to be the respondents or

total of 46 respondents, four (4) from KEPCO Holdings, twenty seven (27) from

KEILCO and fifteen (15) from KSPC. Below is the table that shows the total number

of the respondents for this study.


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Table 1.0

Subject of the Study

They are chosen purposively to determine the level of effectiveness in

accordance to their own perspective about the system being implemented. They are

described according to age, sex, educational attainment, position, nature of work and

user classification. The group consists of four (4) users from KEPCO Holdings,

twenty seven (27) users from KEILCO group and fourteen (14) users from KSPC.

The researcher used the selective methods of sampling techniques,

specifically the purposive sampling technique. This method is to be used when

studying a certain or particular groups.

Procedure of the Study

The researcher prepared and presented three (3) proposed theses to the

research professor for selection and approval. The title of the study at hand has

been chosen and approved by the four (4) members of the panel during the title

defense. The researcher used different medium in gathering necessary information

to construct and have ideas for the chosen topic. Those medium are the different


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thesis writing available in libraries, leaflets and journal, IT practitioners point of views

and knowledge, browse the internet and the SAP portal for various ideas and

techniques in the world of ERP.

After completing the three (3) chapters, it is need to present and defend

during proposal defense so to continue with the remaining chapters and improve the

write-up as well. Once approved, the researcher needs to develop the questionnaire

checklist which is subject to test for reliability and validity with the assistance of the

adviser and with the expertise of the statistician. As soon as the reliability and validity

was determined the researcher can proceed with the dissemination of the

questionnaire checklist among respondents. Moreover, the researcher needs to

secured a permit to conduct study from the University to conduct study and

interviews to the respondents and institution that could feed information and body of

knowledge to the researcher.

Finally, after the distribution of the research instruments, the researcher has

to collate all the data. The information must be encoded and with the aid of the

statistician, the data gathered was tallied, tabulated, analyzed and incorporated. This

procedure was the key that answered the hypothesis of the study.

Statistical Treatment

In this study following statistical tools are used:

1. To determine the profile of the respondents, the frequency, percentage, and

rank distribution is used.

2. To determine the extent of implementing the system which is SAP integration

of KEPCO Philippines, in terms of business process reengineering,


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configuration of the system, trainings, testing, going-live, post-

implementation , the weighted mean is applied using the Likert Scale:

Scale Scale Interval Degree of Importance

1 1.0 1.79 Strongly disagree (SD)

2 1.8 2.59 Disagree (D)

3 2.60 3.39 Neutral (N)

4 3.40 4.19 Agree (A)

5 4.20 5.0 Strongly Agree (SA)

3. To determine the level of effectiveness of integrating SAP of KEPCO

Philippines in their Financial and Control Process as perceived by

respondents using Likert scale:

Scale Scale Interval Degree of Importance

1 1.0 1.79 Strongly disagree (SD)

2 1.8 2.59 Disagree (D)

3 2.60 3.39 Neutral (N)

4 3.40 4.19 Agree (A)

5 4.20 5.0 Strongly Agree (SA)

4. To find out the significant difference of the extent of SAP integration of

KEPCO Philippines in terms of business process reengineering, configuration


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of the system, trainings, testing, going-live, post-implementation, the one-way

ANOVA is employed.

5. To find out the significant difference of the effectiveness of SAP integration of

KEPCO Philippines in terms of accuracy, relevance, efficiency, economy and

productivity the one-way ANOVA is likewise utilize.

systems application and products.doc

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