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ERP IMPLEMENTATION IN THAI TEXTILE INDUSTRY: A CASE STUDY
by
Pisit Chanvarasuth
*1A
Ekkprawatt Phong-arjarn
*A
,
Chawalit Jeenanunta
*A
,
*A
School of Management Technology,
Sirindhorn International Institute of Technology,
Thammasat University, Thailand
and
Kornthip Watcharapanyawong
*B
,
*B
Department of Textile Science, Kasetsart University, Thailand
1
Corresponding author, Tel: (662) 501-3505-20 Ext 2105,
Fax: (662) 501-3507 Ext 2101 Email: [email protected]
ABSTRACT
Enterprise Resource Planning (ERP) systems are important for all kinds of firms including firms in Textile
industry. The implementation of such systems is very difficult and many projects do not meet their
expectations. While firms in other industries have technology and human resources to engage in such a
project, the situation for textile industry is different. They have only limited technology and human
resources. This paper presents the case study used evidence from several Thai textile companies which
are pilot firms to implement ERP systems. After ERP implementation, the results were mixed. Some
companies have achieved significant reductions in inventory and operation cycle time, improvements in
reliability and flexibility due to improved information flows across all units. On the other hand, some
companies have not. The findings are beneficial to all enterprises in terms of deploying enterprise
systems across their value chain. They need not only to re-engineer business processes, but also to
generate new business policies while deploying enterprise systems in order to create value out of IT
investment.
KEYWORDS
Case Study, Textile Industry, ERP, Implementation, BPR, Firm Performance
INTRODUCTION
Enterprise resource planning (ERP) systems have become common in companies operating in changing
environments. The main goal is to provide the means to integrate business units and functions across an
organization. By automating many of tasks involved in business processes and standardizing the
processes themselves, the ERP system can provide substantial payback to a company if the system is
implemented properly. The history of ERP implementation contains both successes and failures. Yusuf
et al. (2006) reported some difficulties in the implementation process and also provide solutions to
implementation ERP successfully. Buckhout et al. (1999) examined several ERP implementation projects
worth more than $500 million in revenues. They found that the average cost overrun was 179 percent,
and the average schedule overrun was 230 percent. Despite these overruns, the desired functionally
was 59 percent below expectations, on average. Some of the failures can be attributed to factors
common to other IS projects, such as the system’s large size and complexity. However, ERP systems
differ in a significant way from other systems. Since ERP systems are designed to integrate and
streamline numerous business units, they have significant implications for the way the company is
organized and operates (Laudon and Laudon, 2009). This paper describes an implementation success
and failure of ERP software, in conjunction with re-engineering efforts, at textile plants in Thailand. The
reported case in this paper represents a complementary study to a major research
project on the new technology implementation to improve business and operation performance. The
objective of this case study is to explore the ERP implementation process in Textile manufacturer and
illustrate the longitudinal outcome of new ERP software created by Thailand Textile Institute (THTI).
RESEARCH METHODOLOGY
In general, a qualitative case study technique was used for data collection to gain insights into the topic
being investigated. Interviews, observations, and documents related to changes were the main sources
used for data collection. Following the contact with key informants in the company, interview schedules
were agreed on. More than one appointment was needed to finish interviewing all subjects. Follow-up
phone calls were also made to seek clarification or further information. All data taken from the main
sources were consolidated and linked together to create a full picture of the entire process and outcome
of changes. In an attempt to analyze the data further and facilitate explanations and comparisons,
several secondary case studies of leading organizations were chosen from the literature and analyzed
for the success elements of their ERP implementation efforts.
A CASE STUDY
1. Thai Garment Industry Overview
Textile-Apparel (T/A) is one of the major manufacturing sectors in Thailand. It contributes approximately
4% of Thailand’s total GDP. The export value of this industry is approximately US$6,000 million per year.
There are more than 4,000 T/A establishments that employ over a million Thai workers (THTI, 2007;
THTI, 2009). Since garment industry is labor-intensive, it is currently facing an intensify competition
from other developing countries with lower labor cost, such as China, Bangladesh, and Vietnam. As a
result, Thai garment industry really need an improvement in both product development and business
management. Thailand Textile Institute (THTI) suggested that
implementation of IT technology, especially ERP system, is important for increasing the efficiency of the
garment companies and supply chain management (SCM) (Sirisoponsilp et al., 2007).
1 IT-Infrastructure before the ERP implementation and goal of the ERP implementation project
These garment companies expected that the ERP system would help them in the following issues;
1. A quality improvement in order to provide cost-effective, flexible, reliable, and timely products and
services to clients.
2. Cost reduction through the elimination of overlapping activities, inefficiencies, and handoffs.
3. An improvement of outdated IT infrastructure in order to improve their communication and decision
making processes.
4. Gaining more competitive advantages
ERP Implementation Obstacles
The major obstacle in ERP implementation was the resistance to change from employees due to the lack
of clear understanding of advantages obtained from using new systems. In addition, during the ERP
implementation stage, the new systems were running parallel with the existing systems. As a result,
employee’s work loads were double. Another major problem was a difficulty in software development
process. Development teams had very limited experiences on ERP software development. Since the ERP
software was very complicated in nature, sometimes it did not align well with business processes.
The training courses were set to clarify ERP understanding and decrease user resistance. The ERP
developing team frequently met users to solve ERP utilizing problems. An ERP at company E was set to
align with organizational KPIs and being used for employee’s personal assessment.
A SUMMARY OF KEY FINDINGS OF COMPANIES’ SHORTCOMING
BEFORE THTI’S ERP IMPLEMENTATION
Main Areas Problems
Organization - Limited IT skills of employees
IT Policy - Lack of IT policy
Network and IT Platforms - Several platforms of servers, PCs, and operating systems
Application and data - Lack of flexibility in current applications
Lack of support to some required business functionalities
Limited integration of application and systems
FACTORS INFLUENCING ERP IMPLEMENTATION
Antecedence
Vision & attitude
Risks & benefits
Working standard
Budget human resource
Implementing
Commitment
Suitable erp system
Ability to implementing team
Implementing process
Training
Maintenance & development
Top management support
Hrm development
Technology
Success of the implemented system
Discussion
There are many factors influencing the ERP implementation. Before ERP implementation, the companies
should examine thoroughly the benefits and risks of ERP implementation, the readiness of
implementation, such as expenses and budgets, human resources, organizational structure and culture,
company’s infrastructure and IT resources, and business processes. ERP system is very difficult to
implement when there are complexity, uncertainty, and variances involving with the working system.
Attitude and commitment of the Top management are factors highly affect organizational development;
therefore, ERP implementation can not succeed without the sufficient support from the Top
management. According to our findings, we show factors impacting ERP implementation as follows:
CONCLUSION
The benefits of ERP system have been well documented, and so were the theories on performance
improving by utilizing ERP. In this study we selected five Thai garment companies as the case study of
ERP implementation, four of them joined the THTI’s ERP development project and the other was the
best practice. After two years of ERP development and implementation, only two companies succeeded.
Our research findings suggested that ERP implementation was influenced by factors, such as vision and
attitude of
top management, organizational readiness, ERP selection, implementing team and process, and
organizational commitment. The major obstacles are the misunderstanding and resistance from the
users and the complexity of the working system. The findings are beneficial to all enterprises in terms of
deploying enterprise systems across their value chain. For further study, more empirical study of ERP
implementation and selection in Thai T/A industry should be made. They need not only to re-engineer
business processes, but also to generate new business policies while deploying enterprise systems in
order to create value out of IT investment.
REFERENCES
Buckhout, S., Frey, E., and Nemec, Jr., J. (1999), “Making ERP Succeed: Turning Fear into Promise”,
Journal of Strategy and Business, Vol.15, pp. 60-72.
Laudon, K.C. and Laudon, J.P. (2009), Management Information Systems: Managing the Digital Firms,
11th Edition, Prentice Hall.
Sirisoponsilp, S., Kritchanchai, D., Wasusri, T. and Watcharapanyawong, K. (2007), Basic Concept of
Supply Chain Management in Textile Industry, 1st Ed., Thailand Textile Institute (THTI).
THTI, T. T. I. (2007), Thai Textile Statistics 2006/2007, 1st Ed., Bangkok, Thailand Textile Institute.
THTI, T. T. I. (2009), "Thai Textile & Clothing Statistics (January - December 2008)", Thailand Textile
Institute, [Online] Available: http://www.thaitextile.org, Accessed: Sep. 2009.
Yusuf, Y., Gunasekaran, A., and Wu, C. (2006), “Implementation of Enterprise Resource Planning in
china”, Technovation, Vol.26, pp. 1324-1336.