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: 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.