13. effectiveness of erp systems

Analysing the factors responsiblefor effectiveness of

implementation and integration ofenterprise resource planning

systems in the printing industryShahneel Baray

Business School, University of Northampton, Northampton, UK

Shafqat HameedUniversity of Bradford, Bradford, UK, and

Atta BadiiIntelligent Media Systems & Services Laboratory,

Department of Computer Science, School of Systems Engineering,University of Reading, Reading, UK

Abstract

Purpose – This paper’s purpose is to examine the impact of ERP adoption in one of the mosttraditional sectors, namely the printing industry, within a case study of five typical large-scaleprinting organisations set in the developing economy context of Pakistan.

Design/methodology/approach – The research methodology and the analysis motivated aninterpretive approach. The inductive reasoning approach has been used, since the aim was to findsomething new for the printing industry and to try to discover the advantages that ERP could bringabout for the industry. In this research study, semi-structured interviews were conducted along with anumber of visits to the targeted printing firms selected as being prototypical of the sector in thisbusiness environment. The research questions focused on identifying and exploring the benefitsrelated to ERP for the printing industry, and why it was needed.

Findings – The research shows that all the functional categories identified in the literature for ERPcan be introduced in the printing industry. However, within each category, not all its modules can beadopted for this industry. The research has also shown that the benefits of some areas of ERP are stillto be understood by the stakeholders.

Practical implications – The enterprises under study now have an opportunity to look into ERPsolutions as the basis also for first-mover advantage within their sector.

Originality/value – There has been one previous attempt in Pakistan to restructure the largestprinting press by introducing SAP, which failed due to lack of technical expertise and trainingsupport. This paper draws on the successful approaches deployed in ERP implementations inother sectors and examines the extent to which they can be adapted for the printing industry,for example which modules should be prioritised for integration and how to optimise theirimpact.

Keywords Manufacturing resource planning, Management information systems, Printing industry,Pakistan

Paper type Research paper

The current issue and full text archive of this journal is available at

www.emeraldinsight.com/1741-0398.htm

Effectiveness ofERP systems

139

Journal of Enterprise InformationManagement

Vol. 21 No. 2, 2008pp. 139-161

q Emerald Group Publishing Limited1741-0398

DOI 10.1108/17410390810851390

1. IntroductionThe objective of this research was to assess the factors influencing the take-up andoptimisation of ERP implementations for the Pakistani printing industry. Anevaluation of the existing status of IT in the Pakistani printing firms was conducted. Alist of ERP modules to be prioritised was identified, followed by analysis of the benefitsthat could be derived from such an implementation. There are, of course, certain ethicalissues that have had to be handled carefully and no data or information has beeninserted in this research without prior consent from the personnel concerned.Throughout the paper, the words “ERP”, “enterprise resource planning systems” and“ERP systems” are used interchangeably.

1.2 Enterprise resource planning systemsThe concept of ERP can be analysed from different perspectives. Firstly, ERP is like aproduct in the form of software. Secondly, it can be viewed as a means of mappingmultiple processes and data of a company and generating a comprehensive integrativestructure (Klaus et al., 2000). There are several ERP definitions, which carry a lot ofsimilarity. Klaus et al. (2000) define ERP as:

A comprehensive package of software solutions which seek to integrate the complete range ofbusiness processes and functions in order to present a holistic view of the business from asingle information and IT architecture.

Yen et al. (2002) prefer to define ERP as::

Software that can be used to integrate information across all functions of an organisation toautomate corporate business processes [. . .] a business management system that integratesall facets of the business.

It can be noted that both these definitions have one thing in common – integration.This is what ERP does. It integrates all functions and processes of a business andgenerates a comprehensive view of the entire company. This is facilitated via a singledatabase approach through which data records are integrated and data redundancieseliminated (see Figure 1).

Figure 1.Departments and ERPsystems

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1.2 The purpose of ERPEnterprise resource planning is a method for effective planning and control of allresources needed to take, make, ship and account for customer orders in amanufacturing, distribution or service company (Sheikh, 2003). Large organisationstypically have many different kinds of information systems that support differentfunctions, organisation levels, and business processes (Pressman, 2003). However allthese systems are usually built around different functions, and managers end uphaving a hard time assembling the data that they need so as to obtain a comprehensiveoverall picture of the organisational operations. For instance, sales personnel may beunable to tell at the time that they place an order whether the items that were orderedwere in stock, customers may be unable to track their orders, and manufacturing maybe unable to communicate easily with finance to plan for new production.

Enterprise resource planning systems solve this problem by collecting data fromvarious key business processes and storing the data in a single comprehensive datarepository to be used by all parts of the business (Laudon and Laudon, 2002). Managersemerge with more precise and timely information for coordinating the daily operationsof the business and a firm-wide view of business processes and information flows.

ERP solutions use technology to address business issues, at the same time strivingto keep technology transparent for the users. Users do not need to learn more about bitsand bytes but they need to know how operational and long-term business issues couldbe effectively addressed with technology, with a user-friendly interface (Ushasri, 1999).Such systems can provide general managers with a firm-wide understanding of valuecreation and cost structure. ERP systems can help create a “customer-driven” or“demand” organisation, which better serves the customer’s value chain (Foss andStone, 2003).

Enterprise systems purport to replace legacy systems based on outdatedinformation technology (Chaterji, 1999). The organisation’s systems rarely includevendors and customers (Laudon and Laudon, 2002; see Figure 2).

Enterprise systems can integrate the key business processes of an entire firm into asingle software system that allows information to flow seamlessly throughout theorganisation (Burton, 1999). These systems may include transactions with customersand vendors (see Figure 3).

Figure 2.Traditional view of

systems


141

The prospect of successfully and rapidly transforming the corporate nervous system,retraining thousands of workers, while also redesigning the fundamental businessprocesses, all at once, with the business still having to carry on as usual, is daunting(Sadagopan, 1999). The costs of enterprise systems are large, up-front, highly visible,and politically charged, while their benefits are elusive to describe in concrete terms,particularly at the beginning of an enterprise project (Derek, 1998). The reason is thatthe benefits often accrue from employees using the system after it is completed andgaining the knowledge of business operations that would have not been readilyaccessible previously.

A software project lifecycle follows five steps (Pressman, 2003):

(1) analysis;

(2) design;

(3) implementation;

(4) testing and debugging; and

(5) documenting

The typical lifecycle of an ERP system development involves more steps than asoftware project lifecycle. The reason for this is that an ERP is a complete flexiblebusiness solution while a software solution is more of a limited and fixed solution to aspecific business need. The lifecycle of an ERP system is shown in Figure 4. As can beseen from Figure 4, implementing an ERP system is a ten-stage process, whichaccounts for the time it takes to complete.

1.3 The printing industryThe enormous export potential of the paper and printing industry remains anuntapped treasure in Pakistan (Bashar, 2002). Over the years, the industry hasdeveloped to a stage whereby it can meet the entire paper and printing needs of itsmarket sector, including those of multi-national companies. According to a recent

Figure 3.Enterprise resourceplanning systems

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survey, there are around 1,500 printing presses of various sizes all over the country(The Economist, 2004). It is, however, surprising that despite having a strong industrialand technical base, this industry has been neglected in the country and so far nodatabase is available regarding the performance of the industry. Machinery inPakistan is usually imported from foreign vendors such as Germany and Japan.Pakistan has not even a single research and development facility for the printingindustry (Pakistan Association of Printing and Graphic Arts Industry, 2003).

The decline of the industry does not imply that eventually there will be no printmedia. Printing can never be replaced completely. The type of printing or thetechnology behind it is what will evolve in this sector. Offset printing would probablybe replaced by digital print in the next ten years in the USA but since Pakistan isbackward in this respect, it would take at least 20 years for something like this tohappen.

The Pakistani printing industry is at a stage of bare survival whereby small firmswill not be able to compete against the giants because of their lack of potential to investlarge amounts and import expensive machinery (The Economist, 2003). This in turnimplies that there will be a significant reduction in small-scale printing firms aslarge-scale firms would be able to print the same product more cheaply and quickly,using state-of-the-art machinery, and delivering better quality. Keeping this in mind,information technology should be used as a tool to compete in the print market,whether it is for innovation of new methods of printing or managing day-to-dayoperations (Kipphan, 2001).

Figure 4.ERP project lifecycle


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The industry has taken some really commendable measures in importingtechnology in the last three years. PAPGAI has been holding yearly exhibitions inKarachi, the industrial capital of Pakistan, where printing firms from all over Pakistan,Japan and China have displayed their technologies and new innovative techniques(Print2Pak, 2005). This has provided a chance for organisations to discover theemergening technologies to support the printing world.

1.4 ERP for the printing industrySince it is unlikely, in the near term, to see much R&D investment in the sector, whatcan be done is to use IT as a tool to strengthen the managerial aspects of large- andmedium-scale printing firms. Streamlining manufacturing operations through ERPsystems is one solution to the problem, although it requires a lot of effort and technicalexpertise. The implementation of an enterprise resource planning (ERP) system canprovide a printing firm with a comprehensive internal architecture by lowering totalcosts in the complete supply chain and automating many of the basic processes of thecompany, from finance and accounts receivable operations to those on the shop floor(Leland, 2000).

Various printing giants have already jumped into the ERP era all around the world.ERP software like PECAS Vision II offers a low-risk option for anyone in search of aprinting or packaging management information system (John, 2003). As small firms tryto survive, their survival will be based on acquisitions and mergers. For them, futuregrowth is not going to be too difficult, based on the continuation of business strategieswhich are still proving to be successful as long as they are able to couple this withdeployment of the latest technology (Holohan, 2005).

Printing firms are in great need of centralisation and ERP is the ideal tool for this.“Our goal with XML – Print Buyer, specialised printing ERP software, is to leverage acorporation’s existing investment in an e-procurement or ERP system and tostreamline print workflow, cut costs, and, most importantly, centralise control andaccountability of the print buying process-something that is sorely missing today”,explained iPrint Enterprise Systems Group Vice President Tom Haley (Newton, 2001).ERP systems would henceforth help the printing industry by not only centralising alldata but also enabling MIS applications to run smoothly (see Figure 5).

The current range of online intermediate print-related services include solutions tomanage print ordering and service support, total service providers, auction sites andprint procurement sites. Many of these systems and categories fall into the category ofenterprise resource planning (ERP) or customer relationship management (CRM)solutions or products (Speirs, 2005).

As mentioned before, the reason why the first EPR attempt failed in the Pakistanprinting industry was a lack of training and skilled personnel to run the system. Therapid pace of technological change has had a major impact on the size of the workforceneeded in the printing industry, as well as on the occupational mix and the type ofskills required (Smallbone et al., 2000). This factor should be considered whendesigning and deploying ERP systems.

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2. Research approachThis research methodology and the analysis here basically motivated an interpretiveapproach. The theoretical aspects of enterprise resource planning were already knownto a large extent prior to the commencement of the research. The idea thus was toinvestigate the likely impact of the deployment of the theoretical ERP adoption modelson the printing industry of Pakistan and evaluate their possible impacts. The aim ofthis research was to assist the designers of ERP systems for the printing industry ofPakistan at Stage 1 – i.e. “solution inquiry”. Therefore, in order to do so, the inductivereasoning approach has been used since the aim was to find something new for theprinting industry and try to discover the advantages ERP could bring about for theindustry. As ERP adoption was something that could be replicated in any organisationwithin the same industry with some customisation, this research would be able togeneralise from its results, at this stage, by focusing on an exemplar printing businessin this environment to initially identify the basic printing processes.

A qualitative analysis base thus evolved whereby every attempt was made todiscover what benefits accrued from ERP for printing companies in Pakistan. Hence,this research strategy involved direct semi-structured interviews and the elicitation ofprimary qualitative data on ERP adoption and integration issues.

As has been mentioned, there were no previous research studies focused on thisarea. In this research study semi-structured interviews were conducted, along with anumber of visits to the targeted printing firms selected as prototypical of the sector in

Figure 5.Range of established

modules forming the maincore of a MIS, plus a

selection of add-on onlinee-commerce modules of

ERP and CRM


145

this business environment. The research questions focused on identifying andexploring the benefits related to ERP for the printing industry, and why it was needed.

The targeted population for research was basically the large- and medium-scaleprinting companies in Pakistan. Due to ambiguities that could arise in some companyregistration formalities, whilst in actual fact there are about 23 large-scale printingcompanies in Pakistan, officially the number of companies under this category wasactually recorded as five. Since in this context the population itself was small, nosampling was necessary as the whole population was taken as the target for thisresearch study. The five firms will be referred to as Printing Firm 1 (PF1), PrintingFirm 2 (PF2), etc.

Keeping this in mind, the objective of this research was to create awareness in thesefive organisations about ERP, and if ERP were to be successfully implementable inthese organisations, then the other companies could be targeted. Semi-structuredinterviews were conducted with various departmental managers within the fiveorganisations being studied for this research. Before the interviews were conducted,the interviewees were given some background information on ERP so that they couldprepare themselves for the interview. The interviews were aimed at identifying thefollowing:

. present status and dependency of IT within the organisation – the IS maturitystage;

. the potential for extension of the usage of IT as a strategic function of thebusiness;

. adaptation of in-house development and outsourcing;

. budget allocation for IT enhancements and business solutions;

. acceptability of IT-based solutions within the organisation;

. future plans for IT enhancements;

. ERP familiarity and current research status;

. existing sub-systems and their inter-dependency;

. drawbacks of existing sub-systems and possible future threats;

. previous ERP implementation attempts and results; and

. system analysis of existing manual and semi-automated business processes.

On the basis of the above, a second stream of interviews was carried out which wasbasically designed to obtain some feedback on the proposal of implementing an ERPsystem. For this purpose, ERP as a business tool, a strategic option and an operationalmechanism was presented to these five organisations and their response was noted. Aquestionnaire was also distributed along with the interviews and the responses wererecorded. The basic idea behind this second stream of interviews and theaccompanying questionnaires was to identify the organisational response to thefollowing:

. increasing the budget to implement an ERP system to support the business andhow this might be best be accomplished, for example whether it is done via local

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ERP vendors or through the purchase of customisable ERP solutions such asSAP, BAAN, Oracle, etc.;

. using ERP as a strategic tool to win more market share;

. comprehending the advantages that ERP systems designed for printingcompanies in Pakistan could bring to the organisation in terms of operationalbenefits, long-term financial benefits and effective resource management;

. exploiting the grey areas (segments within the business which are currently notbeing utilised) and demonstrating the reasons why they have been unsuccessfulfor the organisation in the past and how they could be beneficial in the futurethrough ERP implementations;

. enabling the organisation to envision the potential for future enhancements afteran ERP implementation is carried out (linking and devising plans for deployingsupply chain management and customer relationship management systems);

. describing ERP implementation in various foreign Printing firms across theglobe and what change and impact has been derived from them; and

. possible drawbacks and limitations associated with such an implementation andways to handle them.

The response received from those concerned helped in justifying the initial hypothesisof this research, as to whether introducing ERP in the printing industry of Pakistan canbe seen as productive and beneficial for the industry in the future and hence, whetherthese five large-scale firms that have been identified as potential ERP users should takethe step of investing in ERP packages. In order to achieve a high level of credibility forthe conclusions presented in this study, it was important to demonstrate that theresearch was designed and conducted in such a way so as to ensure that it revealed theERP adoption factors and likely benefits in the case study context (Ryan et al., 1992).To this end, research methodology guidelines were fully observed so as to minimisesources of error and bias and to ensure the highest validity and reliability of theresearch findings.

3. Results3.1 Questionnaire and interviews – Stream 1Since this research was primarily a qualitative research augmented by a quantitativequestionnaire in some cases to obtain actual operational data, the results obtained fromthe interviews and the questionnaire will be discussed together to allow an integrativeanalysis.

The response of the companies as a whole to the questionnaires sent to them wasrecorded. The questionnaires were targeted at general managers, finance managers,HR managers, directors, IT managers, distribution heads, procurement managers,operations managers and sales and marketing managers. The respondents were giventhe option to answer the questions related to their specific department. The primaryfocus in this phase was on the interviews; the questionnaire was used as asupplementary instrument as required. The questionnaire as handed out was designedto understand the business focus, market share and other quantitative measures in anorganisation.


147

The finance department is where the money comes from and goes to. The level ofimportance (rating) given by the general managers of the five organisations to thefinance department was high (i.e. 5), indicating that it would require more focus inimplementation of an ERP package. After the interviews, it was discovered that evenalthough the finance department was a very highly rated department, its budget wasvery low and it was usually under-staffed. The finance managers were asked toidentify the information sub-systems currently existing in the finance department oftheir respective organisations (see Table I).

As can be seen from the results, the payroll system was the one currently used byevery organisation. Hence, if ERP were to be implemented, it would be essential to seewhether the existing payroll system had the capability to seamlessly communicatewith the other modules within the same department, or whether there should be are-development of the payroll system on the basis of business process re-engineering.Apparently, two out of five organisations were using third-party software bought offthe shelf which handled their payroll (could not handle complex problems), while one ofthem was using the payroll module of Oracle Financial, which does provide anexcellent level of integration with various ERP systems. Eventually, the threeorganisations were asked to point out their level of satisfaction achieved from theirexisting payroll software and their response was noted (see Table II).

It was noted that two of the enterprises in the case study – namely PF1 and PF4 – hadmade some investment in automating their transactions through an offline transactionprocessing system by deploying the payroll module of Oracle Financial. However, theyhad not adopted the TPS module from the same suite. Both firms were asked to point outtheir level of satisfaction derived from this system and their response was noted. PF1quoted a figure of 50 per cent, while PF4 were 30 per cent satisfied with their TPS (overallsatisfaction average ¼ 40 per cent). The satisfaction rate in this case was once again lessthan 50 per cent for these two firms, which shows that they were looking to improveupon this, possibly through another system to be installed.

Organisation Satisfaction level (per cent)

PF1 60PF4 40PF3 35Overall satisfaction (average) 43.3

Table II.Level of satisfaction fromexisting payroll system

Sub-system name Number of organizations

Transaction processing system 2Budget allocation and financial planner 0Payroll management 3Forecasting system 0Consignment costing system 1

Table I.Sub-systems existing inthe finance department oforganisations

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A consignment costing system has been implemented at PF5, since most of the rawmaterials they use are imported. The system keeps track of which raw material (paper,ink, and card) will be arriving on which date and records the costs associated with thedelivery from the supplier to its premises (logistics, taxes, temporary storage, etc.). PF5has given an 80 per cent satisfaction level on their existing consignment costingsystem, which shows that the implementation has turned out to be a profitable move.However, the system however was designed as a desktop application. If the systemwere to be redeployed as a web-based application, it would be a more effective solutionbecause users at the shipment receiving point would simply be able to add newpurchase orders, which would get updated right away.

Besides these systems, no other financial system had been deployed by any of theorganisations in the case study. Financial budgeting and planning were central toevery printing firm’s business plan. Nearly all the planning was done usingspreadsheets. However, there was not a specific system designed or deployed in anyorganisation which catered for financial planning and budgeting. Forecasting, on theother hand, was an area which only happened to be an issue of importance for PF3. Asfor all other enterprises in the case study forecasting did not play a major role becauseof a tendency for little strategic and forward planning.

The operations department in a printing press has a close link to manufacturingresource planning and materials requirement planning. It basically involves theprocesses from the point where an order to supply some printing first arrives to thepoint where the delivery of the printed material is received by a client. The level ofimportance (rating) given by the general managers of the five organisations for theoperations department was 5. Since ERP is basically derived from manufacturingresource planning (MRP), the operations department would be a key target for theimplementation of ERP. The operations department of the large-scale printing firms inPakistan was the only department where technology was visible. The entire process isprimarily dependent on the level of quality control that the organisation can provide ona particular job at a low cost. The general managers of the five companies studied wereasked to point out which systems currently existed in their business set-ups (seeTable III).

Only two organisations currently have an inventory management system. However,when the managers of the other organisations were asked about this, their responsewas that an inventory management system would be the most crucial system that theirorganisation would invest in.

Their existing business system lacked a number of useful functionalities that ERPcan offer. One thing that the system did have, however, was connectivity with thequality control system. When a new batch of paper supply came in, a sample would be

Sub-system name Number of organisations

Inventory management 2Quality control system 2Sales order processing system 0Purchase order processing system 0Process control system 0

Table III.Sub-systems existing in

the finance department oforganisations


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taken out and passed through a set of QC processes for that kind of paper. If the samplewas approved, the batch was accepted.

The two organisations were thus asked to point out their level of satisfactionderived from the inventory management system that they had installed. PF1 quoted afigure of 40 per cent, while PF3 were not that satisfied with their inventorymanagement system and quoted a 10 per cent satisfaction rate. The overall satisfaction(average) is thus 25 per cent. There is a lot of work that can be done in this area.Inventory management is definitely a crucial element in business information systems.

All the firms have a quality assurance procedure; unfortunately only two firms havea quality assurance system. Quality control in printing comes at three stages (besidesthe quality checks that are performed during the printing lifecycle). This comprisesraw material quality control at the warehouse, printed material quality control in theoperations department, and binding quality control after the finished product is sentfor approval.

PF1 and PF2 have deployed quality control. The system performs quality checks attwo stages. At the first stage, the printing ink is tested by checking its density, waterand oil combination, colour matching, etc., at different temperatures. The results arerecorded in a similar way. At the second stage the system takes its input from adensitometer which checks the density of ink on paper to ensure that the correct colourhas been produced. PF1 claimed to be 55 per cent satisfied with their QC software,while PF2 quoted an 80 per cent satisfaction rate. The overall satisfaction (average)was thus 67.5 per cent. The installed base software supports only stage 1 of the aboveQC process and does not cater for stage 2.

None of the organisations have an effective sales order processing or purchase orderprocessing system. A more popular investment is the process control system, which isthe core of MRP II (manufacturing resource planning II). It is a system that managesthe daily operations in a manufacturing plant. In the printing industry of Pakistan,there are numerous independent systems that can be found in the operationsdepartment, each designed for and serving a particular process within the department.But none of these systems are inter-related with each other and there is no controllingmechanism that is keeping track of these systems.

When asked about the level of satisfaction attained from these sub-systems,responses shown in Figure 6 were noted. After further research, it was found that thissatisfaction level related to individual subsystems. Another query response was thusrequested to identify the organisation’s satisfaction level over the whole operationsdepartment. As can be seen from Figure 7, none of the companies showed a high levelof satisfaction with the performance of the whole operations department. One of the

Figure 6.Level of satisfaction withindividual process controlsubsystems

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main reasons for a low satisfaction level was the lack of a single system managingthese sub-systems and integrating them with each other. Secondly, all managerscomplained about the absence of a scheduling system whereby they could check whichjob could go on which machine and updated the status of the availability of a machine.Finally, some managers mentioned that every time there was a problem with a printingjob they were working on and they needed more paper, they needed a view of theinventory at run time so as to check the stock level.

Pre-press activities are all the activities that are performed before the printing jobenters the printing room. This includes composing, film-making, negative to positiveconversion, colour separation, machine scheduling, plate making, etc. Pre-pressbasically means converting a job into film and plates. It was extremely difficult toidentify whether organisations were satisfied with their respective pre-pressdepartments and their activities. Some organisations had CTP technology (computerto plate) whereby data from the computer is printed on the plate without any film.These organisations were thus questioned on the effectiveness of the system and theirlevel of satisfaction with it From Figure 8, it can be seen that none of the organisationsunder study are entirely happy with their pre-press activities. This may be becauseorganisations are well aware of the new technologies that are available and may bethinking in terms of innovation. The HR department is usually devoid of muchinvestment in most sectors of the developing economy of Pakistan, and this was foundto be the case in the printing enterprises under study. HR had the least number ofemployees (normally three to four). Table IV shows the level of importance, based onrelative resource deployment for the HR function as compared to other departments, ineach of the five organisations. It also shows the satisfaction derived from their existingemployee records systems.

Although the HR department is perceived as not so operationally significant, allorganisations have to maintain an employee records system. Each of the fiveorganisations had developed its own ad hoc approach to HR systems support. None ofthe HR systems had an employee image module, or an attendance module. Those

Figure 8.Level of satisfaction with

pre-press systems

Figure 7.Level of satisfaction with

the operations departmentas a whole


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organisations which did have a payroll module did not share the same database as thatof their employee records system.

HR as a strategic function of the business was not found to have much perceivedsignificance in the printing industry in Pakistan. The majority of the printing pressbusinesses did not even have a separate HR department, as all hiring and firing wascarried out by the manager of the particular department. Training was not supervisedby the HR departments in any of the organisations studied.

Similarly, there appears to be little or no significant presence for the marketingdepartment in the printing industry in Pakistan. For enterprises in this sector,increasing their client list was achieved mainly through word-of-mouth advertising.There were no hoardings on the streets, no advertisements in any media, whetherpaper or electronic, and no advertising campaigns. What they did have was a salesforce. In the printing industry, a sales executive is termed an “account executive”.Account executives are assigned targets every month, for example three new clients tobe introduced with their jobs this month. These targets are set by the sales manager.The logistics cost involved in landing a client is borne by the company through thesales manager who processes the petrol bills and other claims for the individualaccount executives on his sales force by passing the claims to the finance departmentfor payment.

The managers and directors have no system installed which performs jobscheduling, reporting, document managing or quotation handling. However, whenthese missing functionalities were pointed out to the managers, their responses interms of expressed levels of interest were as shown in Table V. As can be seen fromtheir responses, even although the management was not using any such informationsystems to manage their daily office activities, they all appreciated the need for suchsystems. The directors of these organisations were asked to comment on the currentallocation of budget for the IT department to assist the business. Table VI describes

Level of interest (per cent)Organisation Scheduling Reporting Document management Automated quotations

PF1 80 95 95 70PF5 90 95 70 70PF4 85 100 85 80PF3 100 100 90 90PF2 90 95 90 90Overall interest (average) 87 97 86 80

Table V.Levels of interest formanagement informationsub systems

Organisation name Level of importance Satisfaction level (per cent)

PF2 1 80PF1 2 30PF4 1 20PF3 2 70PF5 2 25Overall satisfaction 45

Table IV.Level of perceivedsignificance andsatisfaction with HRdepartment

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the current budget allocation for each organisation. As can be seen from Table VI,about 35 per cent of the IT budget was being set aside for research, which was quite alot. The reason behind this is the recent need for technological changes to take place inthe organisation. All organisations have realised their need to compete based ontechnological business support.

3.2 Analysis of resultsERP is an expensive solution and with the existing budget for new development inthese five organisations, a bottleneck situation was evident. This is because ERPrequires steady investment over the first ten years, during which integration tends tosettle down for the organisation and a maintenance cost is incurred from thereonwards. The organisations in focus were asked whether they were willing to increasetheir existing budget of new research and development to implement ERP. Nearly allorganisations expressed mixed views in this regard.

A lot of research on ERP was conducted after the interviews in order to plot downthe printing industry of Pakistan on an ERP mapping. Firstly, an essential componentof ERP is the marketing and sales tool, like employee reach, sales force automation, etc.Apparently, this area has been found to be ignored in the printing industry.

An ERP system was presented to the organisations, tailored to match the businessneeds on the basis of the first phase of research conducted. Figure 9 describes the scopeof the ERP used. On the basis of Figure 9, the scope shown in Figure 10 has beendefined for ERP in the Pakistan printing sector. As can be seen from Figure 10, thereare certain modules which are missing from the actual system. These modules havebeen removed because they were inconsistent with the business practice needs of theprinting industry in Pakistan.

The finance module is one of the two most important modules that can be deployedfor this industry. If an implementation of ERP is undertaken for any of the printingfirms discussed, the finance module should be the first one to be implemented. Theaccounts receivable and accounts payable will handle customers’ payments. They willoperate as a transaction processing system, and will have direct connectivity, ifpossible, to the systems deployed by suppliers.

Allocation of budget, 2005 (per cent)

Organisation

IT budget as apercentage of total

budget

Existing technologyenhancements

(percent)

Maintenance ofexisting systems

(percent)

New technologyand research

(percent)

PF1 10 20 50 30PF5 12 15 40 45PF4 8 30 50 20PF3 15 20 40 40PF2 12 15 45 40Overallbudget(average) 11.4 20 45 35

Table VI.Budget allocation withinthe printing enterprises

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The asset accounting module will handle the fixed assets of the organisation. Allmachinery, its key characteristics, electronic documentation, purchase dates, cost,depreciation methods, life span, etc., would be entered in this module. The module willautomatically calculate the depreciation at the end of the year according to theparameters set in it.

The cash management and forecasting module will keep track of all incomes andexpenses. It will basically be an automated version of the cash book. The forecastingmodule has been removed since the printing companies in Pakistan have a very smallforecast period due to the increasingly tactical level and rate of competition. The costelement and Cost centre accounting module has also been removed since all costs areaccumulated and included under a general expense account in printing.

Figure 10.Modified scope of an ERPsystem for the printingindustry in Pakistan

Figure 9.Scope of an ERP system

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The executive information system would look after the whole finance department.The system will manage all these other subsystems, and will allow the administrator toset up new users, provide administrative rights, etc. The system will aid the financemanager, who will be able to check the situation in each area of the finance department.It will also provide a set of reports to the finance manager based on various views andcriteria. The financial consolidation module has been removed, since it is alreadyincorporated inside the executive information system.

The general ledger module will act as the main accounting record for the businessand will use the existing manual double-entry bookkeeping. All transactions that occurin the company (for example purchase of raw materials, payment of expenses, etc.) willbe recorded in the general ledger, which will automatically update a standardisedprofit and loss account and the balance sheet. The product cost accounting module hasbeen removed since the product in this case is a piece of printed paper being producedin bulk quantity.

The profitability analysis module will be able to provide a good view of the amountof profit earned based on the investment per project. It can “slice and dice” theinformation in a variety of hierarchies, just like a Rubik cube. The main aim ofprofitability analysis in ERP is external market segment reporting.

The operations and logistics section is the second most important area to be workedupon in the implementation of an ERP system for the printing industry of Pakistan.The inventory management module will provide updates on the status of the inventory.This component deals with the following tasks:

. Managing material stock on quantity basis – All transactions that affect the stocklevel are entered live as well as the stock updates caused by this. The currentview of the stock level can be checked at any time, and this includes paper thatmay have been ordered from a supplier and has not yet been received (link withpurchase orders) or paper that is currently under quality inspection (link with theQC department).

. Planning, entry and documenting all goods movements – There may be internalor external movements of paper rolls and inks. For example, finished printedmaterial may be transferred from the warehouse to the client (external) or fromone warehouse to another (internal).

. Performing physical inventory – Various methods such as periodic inventory,continuous inventory, cycle counting, etc., can be incorporated for regularphysical inventory checks. In the printing industry, inventory checks on papermay be performed at different levels of production for example an inventorycheck can be done at the quality control stage and get recorded into the systemunder the QC inspection heading.

The material requirements planning module is like a computerised inventory controland production planning system. It will use the bill of material (BOM) as its basis. ABOM describes different components that together create a product. It includes allsub-assemblies, components, raw materials that go into a parent assembly, showingthe quantity of each constituent required to make that assembly. In the printingindustry, this may be paper, binding cloth, binding glue, ink, etc. Hence if a new paperis needed for a book, BOM would assist in raising an automated purchase order and a


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production order for that paper. BOM is directly linked to the inventory managementsystem. The materials management module in the printing industry will probably bethe most effective module for this industry, since paper means the world to a printer,and a printer wastes most of it. The module will ensure that they have the right paper,in the right place, at the optimum quantity and price.

The plant maintenance module will ensure that the printing machines are workingat optimum capacity and are being constantly monitored with regular maintenancechecks. The production planning module will have a series of activities associated withit from scheduling to resource allocation, etc. The module will be operated by theoperations manager who will be able to plan out which machine is to be used for whichjob. The project management module, on the other hand, will assist the operationsmanager to set up deadlines, allocate resources and update the status of a project. Thismodule will have a web-based view so that clients can check the current status of theirjobs online.

The purchasing module will work in the following way. When a job quotation getsapproved by the client, the specifications of the job will be entered into the system. Thesystem will automatically check to see whether the BOM has given any alerts for anyshortages of paper or ink. If there is an alert, a purchase order will be generated ande-mailed to the supplier with the highest rating. A copy of the purchase order will bekept in the system as well.

The quality management module will be linked to the vendor evaluation module.The QC module will have a list of test cases to be performed on inks and paper once abatch is received. It will also have the sampling specifications needed for every type ofpaper and ink. Once the tests are performed, the system will decide on the basis of theresults whether the batch should be approved or not. If the batch is approved, thevendor’s rating is increased. The shipping module will provide the user with an onlineinterface from where he can keep track of the exact location of his delivery. The modulewill have complete planning of logistics built into it, which would help the managerdecide which vehicle and driver should be used to send the shipment to the client.

The HR system may be designed after the above systems have been implemented,as it has a low priority. A human resource time accounting module can be implementedthat will identify which employee has been working fewer hours than can be allocated.Every employee will be given a swipe card to use when signing in and signing out. Thepayroll module will be connected to this module which will have an employee’scomplete information, previous trainings, salary, bonuses given, etc. One thing to notehere is the fact that in the printing industry of Pakistan, employees are not paid at anhourly rate but on the basis of a monthly salary. The system will thus only tell whetheran employee has been attending his workplace, and whether he has been punctual sothat bonuses can be allocated.

At this stage a personnel planning module will be quite irrelevant as well since therewill be only two or three employees working in the HR department and they will nothave enough time to maintain a personnel planning system. However, a travel expensesmodule for the sales force will be quite effective as it will allocate a budget fortravelling which could be claimed by the account executive.

As already observed, there is absolutely no utilisation or designation of a marketingdepartment, as such, in the printing industry of Pakistan. However, the sales

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department may have an order management system installed which can be linked tothe client’s ERP system if he has one. Clients could order online through a websitewhich would enable the costing module and provide updates on the job status. Apricing module can also be utilised in this way. The current market prices are placedinto the system for paper, electricity units, etc. This assists the sales manager in settingup the parameters for automated quotations. One more area which can be seen as aprospective advantage for the printing industry of Pakistan is the general managementmodule. This would provide a bird’s eye view for the managers and directors of theprinting press on the performances of the sales, marketing, finance and HRdepartments. A document management module may be installed at this point, whichhandles contracts with distributors and suppliers, etc.

3.3 Benefits to be derivedOn the basis of the overall company business information that could be made availablethrough implementation of the selected ERP modules recommended above, thedirectors and shareholders can perform strategic business planning for competitiveadvantage within their industry. This will also enhance the company vision, as it willbe better equipped to focus on achieving economies of scale in technology and size.

The following long-term benefits can be expected through implementing ERP in theprinting industry of Pakistan:

. External, not internal, focus – Printing companies will have the advantage oflooking at clients, competitors, suppliers and even other industries and thebusiness relationships and similarities with the outside world. Traditionally,their strategies have all been focused on internal processes and issues, but onceERP is implemented, they can communicate with the systems of otherorganisations and learn from them.

. Adding value, not cost reduction – The printing industry of Pakistan is at a stagewhere everyone is competing against each other on cost. The majority of themedium-scale organisations are trying to go forth and increase in size, but arenot able to because of the intensely low costs being offered by large-scaleorganisations. What the large-scale firms are losing is quality and value.Through ERP, better quality control can be established, which can assistorganisations in ensuring a quality standard.

. Sharing the benefits – Efficiency gains in the printing presses will be shareablein the organisation, with suppliers and customers. In the Pakistan printingindustry, the prevailing mindsets, sustained by old working regimes, haveprevented any system benefits being realised and shared even within theorganisation where departments have left each other in an unclear situation. Thisreduces mutual benefits and would not allow them to be sustained, but since ERPmakes everything transparent, the roots and scale of any benefits would then beclear and could be enjoyed by everyone in the firm.

. Understanding clients – An understanding of what clients can do with theprinted material that they have received, what value they can get from it, whatproblems they might encounter in gaining that value, etc., can be interpretedthrough ERP. This would make clients feel more comfortable in dealing with the


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printing firm and in return, the printing firm would end up with a higher clientretention rate.

. Incremental development – ERP systems are not built overnight. However, this isactually not a disadvantage, since the company does not have to allocate thecomplete budget for entire ERP packages all at once. ERP systems areimplemented module by module. To an extent this is like developing applicationsby experimentation but also appropriating them incrementally to the variousaspects of the business through evolutionary module-by-module customisation,evaluation and integration.

. Business-driven innovation from technology-driven innovation and processsupport – Probably the most important factor that will be achieved through ERPis that the company would realise its business potential after its technologicalinformation infrastructure has been suitably empowered with ERP-enabledmanagement information. The pressures of the marketplace will drivedevelopments within printing firms at this stage. This would tend to castdoubt on the idea of competitive advantage from IT, but, in practice, it meansthat new or existing ERP will be providing or enabling a business opportunity oridea to be converted into reality. Hence, technology-driven ideas will eventuallygive rise to business innovation.

. Future enhancements – ERP systems can be further expanded. Printing firmscan build better supply chain management systems and customer relationshipmanagement systems for business processes support. This would obviously takea long time to evolve because people running Pakistani printing firms aretime-poor, like to see quick results, and are extremely cost-benefit conscious.Managers will need to understand that the benefits to be achieved will take sometime to be realised, but that they would assuredly be forthcoming. Thetraditional “short-termist” mindsets will soon give way to a sense of cautiousacceptance of incremental integration of new MIS technologies such as ERPtowards longer-term sustained business advantage.

3.4 Questionnaire and interviews – Stream 2The primary focus in this phase was on the interviews, and the questionnaire was usedonly in a few areas. The organisations in focus were pre-informed about ERP and itsadvantages via various website references. Hence, the managers were well aware of thebusiness aspects that ERP can cater for. The analysis of the results received from thefirst stream of interviews was given to the directors, the advantages to be attainedfrom ERP were pointed out and the purpose of this stage was simply to check theirlevel of acceptability. Some foreign printing companies who had implemented ERP inneighbouring countries like India and China were also discussed with the managers.Their websites were shown, the various aspects of their ERP-enabled business supportwere identified, and potential benefits highlighted.

. Out of the five organisations that were targeted for this research, three haveagreed to increase their budget in order to opt for an ERP adoption plan. Thiswas the first instance, after this research had been running for some time, that acertain level of acceptance of the idea was noted. Table VII demonstrates this.

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. The marketing and sales departments and the HR departments were discussedwith the managers of the organisations. A success story was also discussed witheach of the managers of a company named Pragati in India. The managers hadtheir own view of the situation. According to them, Pakistan’s quality standardsare being compromised within the printing sector. Advertising is a means oftelling customers that the company has some really good quality standardswhich the clients should take into consideration. But it appears to be theexperience of the Pakistan printing sector that advertising makes little impact onmost of their client base and can in fact prove counter-productive, since mostclients do not value quality in the printed artefact beyond basic readability andbelieve that quality is sacrificed by lower prices and even more so by advertisingcosts involved in announcing lower prices. Accordingly the advertising processwas set aside at this stage in this study.

. When the HR department and its low level of IT investment was discussed, itwas found that the reason why HR was not appropriated much significance wasbecause HR was considered to be a support function of the business. Once againthe mindset of the departmental managers is that they believe that they canhandle the HR functions of an organisation, each for their own teams in adistributed fashion, and two to three employees in the HR department canaccomplish the remaining functions.

4. ConclusionsIn order to be able to answer the research question in focus – i.e. “What is theeffectiveness of introducing enterprise research planning systems in the printingindustry as applicable to our case study sector, namely the printing industry inPakistan?” – we have conducted an analysis of the Pakistan printing industry. Theexisting scope of IT has been identified, the potential advantages have been mappedbased on the findings, and feedback has been received. This was done in order todetermine whether or not ERP should be introduced in the printing industry inPakistan, and if so how it could best be deployed for maximum possible impact for allstakeholders.

The research showed that all the functional categories identified in the literature forERP can be introduced in the printing industry. However, within each category, not all

Allocation of budget (2005)

OrganisationIT budget as a percentage

of total budgetNew technology and

research (percent)Increase in the budget

(2006; percent)

PF1 10 30 30PF5 12 45 50PF4 8 20 –PF3 15 40 –PF2 12 40 35Overall budget(average) 11.4 35

Table VII.Allocation of budget

with ERP


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its modules can be adopted for this industry. This empirical study also showed that notall companies were eager to implement an ERP system in their organisation. However,based on the research conducted and the level of interest observed, it is clear that themajority of the enterprises in this case study have decided that they will be deployingERP.

The research has also shown that the benefits of some areas of ERP are still to befully understood by the stakeholders. This is primarily because of the dominance of thetraditional methods of doing business and resistance to change. A deeply rootedrisk-averse disposition in some of the companies has been noted through the findingsof this research, in that some are apprehensive about first-mover strategies so they arekeen on implementing ERP only after it has been successful in other organisationswithin the same business sector.

ERP is equipped with a lot of advantages. Modules for finance, operations andadministration should be the first to be implemented, depending on the internalpriorities of an organisation. ERP can then be expanded to other sectors of thebusiness. It was also discovered that an online web-based quotation system wouldattract lots of customers since no company in Pakistan is offering such a service, whichcan be offered at a very low implementation cost. The enterprises under study nowhave an opportunity to look into ERP solutions as the basis also of first-moveradvantage within their sector.

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Further reading

Ensyncsolutions (2004), “The ERP lifecycle”, available at: www.ensyncsolutions.com/erp_lifecycle.htm (accessed 11 December 2005).

Corresponding authorShafqat Hameed can be contacted at: [email protected]


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