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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

Corresponding author, Tel: (662) 501-3505-20 Ext 2105,

Fax: (662) 501-3507 Ext 2101 Email: pisit@siit.tu.ac.th

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.