The Effect of Industrial Differences on ERP Implementation

Transcription

1 The Effect of Industral Dfferences on ERP Implementaton Wen-Hsen Tsa Department of Busness Admnstraton Natonal Central Unversty, Tawan Abstract Ths research examnes the structural effects of busness process gap, vendor assstance and tranng across dfferent ndustres n the performance mprovement of ERP system n Tawan s companes. Evdence s found that the gap between exstng busness process and ERP system process wll reduce the mplementaton performance of ERP system from ndustral perspectve. Educaton/tranng effect n hgher gap ndustry s more obvous. When the busness process gap attans certan hgh level, vendor assstance effect replaces educaton/tranng effect, offsets busness process gap effect and rases the ndustral performance of ERP system. In concluson, the fndngs suggest that renforcng educaton and tranng s stll crtcal for ERP mplementaton success, especally for the ndustres under ntrnsc busness process gap weakness and nsuffcent vendor assstance. In our sample, electroncs ndustry s of ths knd. 1. Introducton Enterprse Resource Plannng (ERP) system, whch becomes a popular tool n current busness admnstraton, s an nformaton System (IS) that ntegrates all aspects of a busness ncludng producton plannng, purchasng, manufacturng, sales, dstrbuton, fnance and customer servce [19]. However, ERP systems are dfferent from general software, ther unqueness and ntegraton feature account for many reported mplementaton falures. These falures of ERP mplementaton even led to organzatonal bankruptcy [7,14]. Crtcal success factors for ERP mplementaton are wdely dscussed by many antecedent researches [e.g. 11, 16, 15]. Major ERP package vendors also have employed the concept of Best Practce (BP), whch transfers the past successful experence to the new ERP projects, to make the mplementaton effectve and effcent [11]. Snce standard ERP mplementaton process s gradually establshed, more sophstcated ssues about mplementaton practce are needed to be taken nto consderaton. These ssues nvolve the customzaton of standardzed ERP system n varous cultures, countres and ndustres. A group of researches pay attenton to strategc and cultural ssues nvolvng the algnment of ERP mplementaton wth products and processes [7, 9, 14, ]. Sheu et al. [1] puts emphass on natonal dfferences. They argue that natonal dfferences affect multnatonal ERP mplementaton wth regard to the Shh-Jeh Hung Department of Busness Admnstraton Natonal Central Unversty, Tawan & Department of Fnance Yu Da College of Busness, Tawan pascope@ms64.hnet.net type and amount of ERP adaptaton, centralzaton of mplementaton decsons, nformaton sharng, project duraton, project approach and tranng program. Furthermore, the categores of natonal dfference that affect mplementaton practces are language, culture, poltcs, regulatons, and management style. Realzng the potental effects of natonal dfferences on multnatonal ERP mplementaton practces s necessary to enable managers to be more proactve n plannng and mplementaton. Although ndustral dfference s also a salent factor that makes busnesses dfferent, few studes clarfy the profles of ERP mplementaton under dfferent ndustres so far. By the questonnare survey conducted n Tawan s representatve companes n 003, ths study examnes the structural effects of busness process gap, tranng and vendor assstance n the context of ndustral dfferences on the performance mprovement of ERP system n Tawan s companes. We extend the above lne of research by focusng on ndustral dfferences. Ths study dffers from the exstng researches on ths topc n two mportant aspects. Frst, among varous ndustral dfferences, we select busness process gap as an ndustral dfference factor. In ths way, we can descrbe the structural relatonshp of ERP mplementaton under dfferent ndustres more precsely. Second, after classfyng ndustres by the degree of busness process gap, we examne the effects of educaton/tranng and vendor assstance. To put t shortly, ths paper attempts to explan how and why factors of ndustral dfferences affect mult-ndustral ERP mplementaton practces by the structural effects of busness process gap, tranng and vendor assstance. For a sample of companes n Tawan, the emprcal results show that the gap between exstng busness process and ERP system process wll reduce the mplementaton performance of ERP system from ndustral perspectve. Educaton/tranng effect n hgher gap ndustry s more obvous. Whle the busness process gap attans certan hgh level, vendor assstance effect replaces educaton/tranng effect, offsets busness process gap effect and rases the ndustral performance of ERP system. In concluson, the fndngs suggest that renforcng educaton and tranng s stll crtcal for ERP mplementaton success, especally for the ndustres under ntrnsc busness process gap weakness and nsuffcent vendor assstance. In our sample, electroncs ndustry s of ths knd. The remander of ths paper s organzed as follows. The hypotheses of ths study are frst set up. The data and

2 methodology are detaled n the next secton followed by a dscusson of the emprcal results and the overall conclusons.. Hypotheses Industral dfferences can be observed by a varety of dmensons. In Tawan, electroncs ndustry s very export-orented, but constructon ndustry s not. Average ages of employees are younger n emergng ndustres. In terms of R&D, hgh-tech ndustres such as electroncs and botechnology are more R&D ntensve than tradtonal ndustres such as paper products. Moreover, other dmensons for ndustral dfferences nclude: busness process, value chan, ndustry concentraton, advertsng ntensty, captal ntensty, growth rate and so on [6]. Castanas and Helfat [5] dscuss ndustry-specfc-skls as those skls that have value n partcular ndustres but that are not easly transferable across ndustres. Industry characterstcs naturally attract ther ft workers and thus shape ndustry culture. Organzatonal learnng has ncreasngly attracted the nterest of practtoners and scholars for ther compettve advantage n the rapdly changng busness envronment. Argyrs and Schon [1] defned organzatonal learnng as "the detecton and correcton of error". Huber [1] regards organzatonal learnng as changes n an organzaton's behavour through ts process of nformaton. Argyrs and Schon [1] pose three levels of organzatonal learnng that are brefly dscussed below. Sngle-loop learnng (SLL) happens when errors, problems and mstakes are detected and eventually corrected. In ths frst stage, Argyrs and Schon [1] state that prevalng goals, polces, processes and routnes remaned unchallenged and unquestoned. An organzaton contnues to mantan the status quo of the fundamental actvtes. Double-loop learnng (DLL) s needed when, n addton to sngle-loop learnng, fundamental ssues are questoned, challenged, and revewed. Routnes and norms are examned for underlyng causes of the problems and factors that are related to the error detecton and rectfcaton. Assumptons are reevaluated for changes, addng to knowledge-base competences. It s a generatve learnng, whch enhances organzatonal capabltes and organzatonal strategc understandng n order to adapt the organzaton to the envronment t faces, and leadng organzaton to hgher-level of learnng. In ths level of learnng, organzatons seem flexble, devatng from ther old routnes to nnovatve ways n order to sustan such capabltes. Deutero-learnng (DL): Hghest among all, ths type of learnng s a reflectve cognton of the organzatons [1]. In the frst two stages, frms are aware of the necessty of learnng, eventually reflectng on why or why not learnng s takng place. Organzatons at the DL stage are conscous of the dsadvantages of gnorance that eventually motvates them to learnng. Organzatons that have acheved ths level are open to postve feedback, proactve coordnaton and communcaton n order to avod falure n the learnng process. Although ERP mplementaton success may be related to some ndvdual parts (or non-systematc varance) such as leader ntellgence, opportunty, accdent and so on, t stl may also be caused by some common parts (or systematc varance). The nvestgaton of these common parts s useful to those busnesses tryng to mplementng ERP system. Snce ERP mplementaton can be vewed as an organzatonal learnng behavor [16], mplementaton outcomes may be affected by ndustry culture, process and other ndustry characterstcs. Accordng to the learnng theory of schema, learners have to construct meanng based on ther own prevous experences and knowledge structures. These prevous knowledge structures are caled schema. If new learnng materal s closer to a learner s schema, he/she wll learn t faster [3, 18]. Applng schema concept to our ERP mplementaton problem, when an ndustry s schema s closer to the ERP system, ths ndustry wll mplement t more smoothly. To put t shortly, the schema gap may affect the probablty of mplementaton success. In order to descrbe the structural relatonshp of ERP mplementaton more precsely, we use the gap between exstng busnes proces and ERP system proces (.e. busness process gap) to represent the schema gap. Busness process gap s wdely regarded as a sgnfcant negatve factor for ERP mplementaton success [e.g. 11, 5]. Tsa et al. [5] even ponts out that busness process gap s one of the most sgnfcant factors n ths problem (the other sgnfcant factors are educaton/tranng and vendor assstance). They fnd that busness process gap, educaton/tranng problem and nsuffcent vendor assstance have negatve mpact on ERP mplementaton performance. If we vew ERP mplementaton as an organzatonal learnng behavor, busnes proces gap represents the nherent atrbute, educaton/tranng represents the acqured atrbute and vendor asstance represents the envronmental atrbute. It seems reasonable that ERP mplementaton success conssts n these three aspects. As for the educaton/tranng factor, n order to help users understand how the ERP system wll mprove ther jobs, formal educaton and tranng n the ERP mplementaton s recommended by many scholars [e.g. 4, 10, 17]. Tranng, re-skllng, and professonal development are also crtcal [3], especally n ERP software desgn and mplementaton methodology. Many researches menton that educaton and tranng s a crtcal success factor for ERP mplementaton [e.g. 11, 16, 15, 4, 10, 3, 13], but few studes put educaton/tranng n the framework of ndustral dfferences. Based on above dscusson, we want to test the followng hypothess: Hypotheses: When the ndustral gap between exstng busness process and ERP system process s hgher, the ndustral performance of ERP system wll be lower and vendor assstance wll be hgher. Educaton/tranng effect n hgher gap ndustry s more obvous. 3. Data and Methodology

3 The ntal sample s formed based on the questonnare survey regardng ERP mplementaton n Tawan durng 003. In ths survey, 3597 questonnares were sent to manufacturers and servce companes on the 001 lst of Top 5000 Largest Corporatons n Tawan. Of the 3597 questonnares maled, 657(18.7% of 3597) usable responses were returned. Only the ERP package adopted companes can enter our sample, so the sample sze s 1. Lkert Scale s used as a measurement method. Sample data were obtaned wth a certan level of relablty and valdty. DeLone and McLean [8] developed sx dmensons of nformaton system(is) success measures, whch ncluded system qualty, nformaton qualty, system use, user satsfacton, ndvdual mpact and organzatonal mpact. Followng DeLone and McLean [8], we measure the performance mprovement of ERP system by the followng expressons: P ( P W jk / W jk ), 1 to N, and j 1 to 6 (1) j P k 1 6 j1 N jk W jk ( W ) / N 1 ( P j jk k 1 W k 1 jk / 6 j 1 k 1 W jk ), 1 to N where P j s the performance mprovement level of the j th dmenson for the th respondent s company. P s composte performance mprovement level for the th respondent s company. W jk s the average mportance level score of the k th measure of the j th dmenson as perceved by N respondents, P jk s the performance mprovement level score of the k th measure of the j th dmenson for the th respondent s company, and s the number of chosen measure of the j th dmenson. W jk s the mportance level score of the of the k th measure of the j th dmenson as perceved by the th respondent. As for busness process gap, the questonnare asked our sample companes f they feel a hgh gap between exstng busness process and ERP system process. Varable equals to 1 f they have the busness process gap problem and 0 otherwse. It s smlar for vendor assstance. Varable equals to 1 f they have suffcent vendor assstance and 0 otherwse. As modeled by Tsa et al.[4], we use Inadequate well-educated IT members, Lack of IT knowledge for organzaton members, Employee resstance, Organzaton members nadequately prepared to use the ERP system as tools for asstng ther work, and Not enough understandng of the ERP functons by organzaton members to measure the degree of the problem of educaton and tranng. The means of ndustral performance and busness process gap are lsted n table 1. Table shows the classfcaton of ndustres by the degree of busness process gap. Table 3 shows the descrptve statstcs (means and standard devaton) of ndustral performance, busness process gap, educaton/tranng problem and vendor assstance. In order to make sure the relatonshp between mplementaton performance and busness process gap, we regress the composte performance mprovement () (3) level of ERP system on busness process gap, P 1 GAPBP u (4) where P s defned as above. GAPBP s a dummy varable equal to 1 f they have the busness process gap problem, and 0 otherwse. When the mprovement s hgher, P wll be hgher; and u s the random error term. Fnally, the classfed regresson analyss of the composte performance mprovement level of ERP system and the degree of the problem of educaton and tranng s employed. P 1 DPEDUT e (5) where P s defned as above. DPEDUT s the degree of the problem of educaton and tranng. When the mprovement s hgher, P wll be hgher, and so s DPEDUT ; e s the random error term. 4. Emprcal Results Table 1 shows the means of ndustral performance and busness process gap. As seen n ths table, Electrc Machnery s the ndustry that has the hghest busness process gap (0.750), and Bankng /Insurance s the ndustry that has the lowest busness process gap (or no gap). Because some ndustres sample szes are too smal, we classfy the ndustres nto four classes: Lower Gap (N=4), Mddle Gap (N=65), Hgher Gap (N=55), and Hghest Gap (N=50). Table shows the classfcaton of ndustres by the degree of busness process gap. In general, servce ndustres have lower busness process gap, and tradtonal manufacture ndustres have hgher gap. Ths result s rather consstent wth our expectaton. The descrptve statstcs of ndustral performance, busness process gap, educaton/tranng problem and vendor assstance are lsted n Table 3. As seen n ths table, when busness process gap ncreases, the mplementaton performance of ERP declnes n the former three classes. However, the hghest gap s an excepton. When we turn to the vendor assstance varable, the hghest gap also has relatve hgh vendor assstance. Ths fact suggests that although the hghest gap class s weaker n process gap, but vendor assstance compensate for ths dsadvantage. The estmaton results of equaton (4) are showed n Table 4. When the sample comprses the hghest gap class, the effect of busness process gap s nsgnfcant statstcally. However, when the sample excludes the hghest gap class, the effect of busness process gap becomes nsgnfcant statstcally. Ths result s consstent wth the observaton n Table 3. The estmaton results of equaton (5) are showed n Table 5. In consderaton of between-group effect, we dvde equaton (5) nto four parts accordng to our busness process gap classfcaton. The results ndcate that educaton/tranng effect s not sgnfcant statstcally n the two extreme classes, the lower gap and the hghest gap. When neglectng the hghest gap class,

4 the results show that when busness process gap ncreases, educaton/tranng effect also ncreases, rangng from 0 to -0.60, For the hghest gap class, educaton/tranng effect s not so obvous because vendor assstance s suffcent to compensate for ts dsadvantage n process gap. These results llustrate the structural relatonshp of ERP mplementaton. The relatonshp of busness process gap and ERP mplementaton performance seems to be nonlnear. One mportant factor s vendor assstance. When ndustral busness process gap attans certan hgh level, vendor assstance wll be hgher to compensate for ths dsadvantage. For Lower Gap class, educaton/tranng effect s not obvous n nature. On the other hand, for Hghest Gap class, the problem s so great that ther effort n educaton and tranng has no obvous attanment. Educaton/tranng effect s the most nfluental n those ndustres that have not-too-hgh level of busness process gap and whose vendor assstance s not very large (the shaded area). In our sample, ths knd of ndustry belongs to Hgher Gap class, whch s Electroncs/Applance ndustres. When ndustral nherent attrbute (busness process gap), and envronmental attrbute (vendor assstance) are not suffcent for a company, ts best strategy s to renforce educaton/tranng effect, an acqured attrbute n our model. Implementaton Total Due to Vendors Due to Gap Gap Fgure 1 Implementaton performance structural relatonshp Table 1 Means of ndustral mplementaton performance and busness process gap Industry Number of Process Gap Companes mance Gap Busness Number of Perfor- Busness Process Industry Companes Food Steel/Iron Textles Vehcles/Parts clothes Transportaton Plastcs/ Department Rubber Stores Chemcal Internatonal Electroncs/ Applance Electrc Machnery Informaton Product Trades Bankng /Insurance Constructon other Servces Table Classfcaton of ndustres by the degree of busness process gap Level of Gap Lower Gap (N=4) Mddle Gap (N=65) Hgher Gap (N=55) Hghest Gap (N=50) Industry Groupng Plastcs/ Rubber, Steel/Iron, Transportaton, Department Stores, Bankng /Insurance Informaton Products, Constructon, Other Servces Electroncs/ Applance Food, Textles, Clothes, Chemcals, Electrc Machnery, Vehcles/Parts, Internatonal Tradng

5 Table 3 Descrptve statstcs of ndustral mplementaton performance, busness process gap, educaton/tranng problem and vendor assstance Level of Gap Busness Process Gap Educaton/Tranng Problem Vendor Assstance Lower Gap (N=4) (0.749) (0.354) (1.65) (0.468) Mddle Gap (N=65) (1.03) (0.451) (1.368) (0.45) Hgher Gap (N=55) (0.991) (0.490) (1.067) (0.474) Hghest Gap (N=50) (0.980) (0.498) (1.170) (0.439) Note: Total sample sze s 1. The numbers n parentheses are the standard devatons of correspondng means. Table 4 Regressons of mplementaton performance on busness process gap P 1 GAPBP u Equaton Intercept GAPBP Adj. R F-Value D.W. A * (5.03***) (-1.653*) A (30.409***) (-0.71) Note: Equaton (A1) uses the sample excludng the Hghest Busness Process Gap class, and Equaton (A) uses the whole sample. t-statstcs are reported n parentheses below each parameter estmate. *, **, ***ndcate sgnfcant at the 10%, 5%, and 1% levels, respectvely. Table 5 Regressons of mplementaton performance on the degree of the problem of educaton and tranng P 1 DPEDUT e Equaton Intercept DPEDUT Adj. R F-Value D.W. Lower Gap (30.617***) (0.1) Mddle Gap *** (33.935***) (-.943***) Hgher Gap ***.17 (8.808***) (-.854***) Hghest Gap (.948***) (-0.69) t-statstcs are reported n parentheses below each parameter estmate. *, **, ***ndcate sgnfcant at the 10%, 5%, and 1% levels, respectvely.

6 5. Concluson The mplementaton of an ERP system s a radcal logstcal nnovaton for a company and needs exploratve learnng [16]. Many researches devote to the nvestgaton of the crtcal success factors of ERP mplementaton, whle few studes pay attenton to ndustral dfferences n ths problem. We begn our study from the perspectve that ERP mplementaton can be vewed as an organzatonal learnng behavor. In ths way, ths research examnes the structural effects of busness process gap, vendor assstance and tranng across dfferent ndustres n the performance mprovement of ERP system n Tawan s companes. Evdence s found that the gap between exstng busness process and ERP system process wll reduce the mplementaton performance of ERP system from ndustral perspectve. Educaton/tranng effect n hgher gap ndustry s more obvous. Whle the busness process gap attans certan hgh level, vendor assstance effect replaces educaton/tranng effect, offsets busness process gap effect and rases the ndustral performance of ERP system. In concluson, the fndngs suggest that renforcng educaton and tranng s stll crtcal for ERP mplementaton success, especally for the ndustres under ntrnsc busness process gap weakness and nsuffcent vendor assstance. In our sample, electroncs ndustry s of ths knd. Acknowledgement Ths study s supported by the MOE Program for Promotng Academc Excellence of Unverstes: Electronc Commerce Envronment, Technology Development, and Applcaton (Project Number: 91-H-FA08-1-4). References [1] Argys, C. and D.A. Schon, Organzatonal Learnng: A Theory of Acton Perspectve. Readng, MA: Addson-Wesley,1978,. [] Bancroft, N. H., Sep, H., and Sprengel, A.. Implementng SAP R/3 How to Introduce a Large System nto a Large Organzaton, Greenwch: Mannng Publcatons,1998. [3] Bartlett, F. C.. 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