THE FEASIBILITY STUDY OF INFORMATION AND COMMUNICATION TECHNOLOGY ACQUISITION FOR LOGISTICS AND TRANSPORTATION BUSINESS: A CASE STUDY OF KIAT

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1 THE FEASIBILITY STUDY OF INFORMATION AND COMMUNICATION TECHNOLOGY ACQUISITION FOR LOGISTICS AND TRANSPORTATION BUSINESS: A CASE STUDY OF KIAT by Sumate Permwonguswa, Sakuna Anuvareepong, and Ravee Intaporn-udom Department of Business Information Systems Martin de Tours School of Management Assumption University, Bangkok, Thailand iam_matt@hotmail.com ABSTRACT While the logistics and transportation (LT) industry in Thailand is growing rapidly, many entrepreneurs expand their businesses to take advantage of the growing business opportunity. However, the quick expansion comes with the management and control problems. Some companies expand their businesses too fast that their internal infrastructure and personnel are not ready to respond for the quick changes. With the growing size of the businesses, the legacy systems may no longer be sufficient and may need to be re-evaluated for appropriate replacement and reinvestment, especially Information and Communication Technology (ICT). In addition, many applications are developed from abroad based on some specific characteristics of the industry from the country of origin. The systems from abroad needs to be customized to fit the characteristics of local businesses in Thailand. Hence, substantial amount of additional investment for customization and a transition period are required for ICT acquisition. Different technology implementations from various vendors, hardware required, and network infrastructures are also the main concerns in choosing from among available options. As a result, a feasibility study for ICT acquisition is needed as a significant issue that supports the decision of top management level in LT business, especially for restructuring from an offline process to an online system. The study will result in a model of a standard pattern of ICT acquisition for LT business in Thailand. KEYWORDS FS-ICTAL, ICTA, KIAT, Kiattana, ICT, ICT Acquisition, Logistics, Transportation INTRODUCTION This paper focuses on the logistics trading firms (LTF), not including the production area or manufacturing firm. It includes only the transportation of goods and commodities. Many small and medium-sized LTF may have started their businesses from paper-based procedures or managed and operated in a manual basis. Once the businesses have been running for some period of time and need to consider expanding their businesses, the manual systems and operations may not be enough when the businesses have grown up to some extent. Hence, it is the time to acquire the ICT and to prepare their personnel to be ready for the change. ICT can be adopted into various areas within the LT business such as Operation department, HR department, Accounting department, Finance department. Starting from the Operation department, Fleet Management system can be used to help planning the routes and managing the fleets. GPS technology can also be integrated into the system to instantly locate current geographic position of each vehicle. The system may be web-based so that the users can access the information online. For other supporting departments, HR may need a system for payroll management and for human resource management. Various accounting systems are also available for Accounting department and Finance department. Maintenance department may also need some systems for maintenance management which could be paperbased or electronic system (Jungtheerapanich et al., 2009). CCTV and biometric technology can also be used in controlling driver s performance along the routes (Anuvareepong et al., 2009). The above sections describe the possibility of adopting various systems to increase efficiency in each area of LT business. For small and medium-sized LTF, it could be useful and feasible to use the aforementioned systems in each area, but for large-sized companies, having variety of systems in different departments is a real chaos for the companies as a whole. Hence, ERP plays an important role in consolidating the data from many systems together (Laudon and Laudon, 2009).

2 From the above mentioned, it can be implied that ICT has significant role in each area of management and Feasibility Study can be used as a tool to select the most appropriate system for each area. LITERATURE REVIEW As described in the introduction, this paper focuses only on logistic trading firms (LTF). The implication of ICT for the whole logistics and transportation businesses also includes production area and manufacturing firms. In that case, there are so many factors affecting the performance of the software especially the Enterprise Resources Planning software (ERP). Many papers tried to evaluate the performance based on financial Key Performance Indicators (KPIs) using univariate tests and the results were inconsistent. Wieder referred to Dehning and Richardson s framework (2002) and used multivariate test to evaluate the performance of ERP and found out that there was no significant performance differences between ERP adopters and non-adopters, either at the business process level, or at the overall firm level. Only those ERP adopters that also adopted SCM system achieved significantly higher performance at the business process level (Wieder et al., 2006). However, this research study focuses only on logistic trading businesses, SCM context is not involved in this paper. As shown on Table 1, the ICT Acquisition (ICTA) for handling business processing systems (BPS) for LTF can be divided into 2 categories: Front-end and Back-end systems. The Front-end systems include Transportation Management System (TMS), Maintenance Management System (MMS), and Billing System (BS). Back-end systems include ERP, Accounting System (ACS), Financial System (FINS), Audit and Internal Control System (AudS), Human Resource/Payroll Management System (HR-PMS), Inventory Control System (ICS) and other systems. TABLE 1 BPS FOR LTF In order to implement the ICT systems into a firm, it must be ensured that the firm is ready for the new systems and the following factors must be ready: software, hardware, peopleware, and network infrastructure (Chesher and Skok, 2000). However, the readiness of the software refers to the compatibility of the software to the workflows of the firm. It must be ensured that the software features most fit the firm s procedures, processes, and workflows, otherwise the customization and implementation of software could be extremely complicated. Secondly, hardware must be examined and prepared as different software may have different hardware requirements. Thirdly, readiness of peopleware means that the users in the firm must be ready for the new systems. This implies that the users who involve in the new systems must be computer literate enough and may need some training in order to prepare them for the new systems. The firm must also survey the users acceptance and attitudes toward the new systems. Finally, the network infrastructures may need to be evaluated since the efficiency and the success of the new systems also depend on the capability of the firm s network infrastructures, especially the speed of the data transfer, the bandwidth of the network, and the availability of the network. As the consequences, before the acquisition and implementation of ICT at any area of the workflow, it is significant to ensure that the ICT being acquired from among various choices is the most appropriate to the firm in the following aspects: cost effectiveness, size and scope of the system, efficiency of the throughput, and users acceptance (Meredith and Mantel, 2009). For this matter, Feasibility Study (FS) can be an important tool in evaluating each criterion and aspect of the investment in order to determine the most feasible alternative. The business FS is the analysis of problems and opportunities for a business project in many aspects including the cost-benefit analysis to determine the viability of the project and to determine the best choice among all possible alternatives (Thompson, 2005). Additionally, the concept of FS is also a significant tool in the ICTAL (ICTA of LTF). FS for ICTA requires technical knowledge in setting up criteria or aspects to be evaluated. Therefore, this paper has been designed to be employed by any LTF. Moreover, this model has also been designed to be helpful in ICTA for any firms without technical experts.

3 This paper took the real case of FS for ICTA at Kiattana Transport PCL (KIAT), a local professional in logistic trading industry, as the case study. KIAT is the largest LTF in the field of petrochemical transportation having over 400 haulers, which is the largest fleet in Thailand. Questionnaires and FS had been used in combination as the tools for appropriate ICTA. This research study is designed to develop the theoretical model from case study. According to Eisenhardt (1989), case studies can be used to describe or test or generate theory. Eisenhardt had developed a roadmap for building theories from case study research which is one of the valuable guidelines for the case study approach. This approach can involve either single or multiple cases, can consist of either single or multiple levels of analysis within a single study, and can be used to analyze both qualitative and quantitative data. Table 2 is the abbreviated roadmap from Eisenhardt (1989). TABLE 2 PROCESS OF BUILDING THEORY FROM CASE STUDY RESEARCH (ABBREVIATED VERSION) RESEARCH METHODOLOGY This chapter presents research method, data collection methods, sampling procedures, research instruments and data processing and analysis. Research Method This paper is an exploratory research using qualitative analysis method. The purpose of this study is to propose model of FS-ICTAL, which is based on the case study approach. Data Collection Methods Primary data Interviews and questionnaires are used to collect data from the middle and top management of the selected case study. Secondary data Websites, documents, reports, journals, articles, and previous studies had been studied for secondary data from the Internet and libraries. Some context of author s previous research had also been used in this study. Documentation had been reviewed from front-end logistic sites and head quarter, and compiled into particular BPS for each different site.

4 Sampling Procedures Non-Probability Purposive Expert Sampling was used and KIAT was selected as a case study because of the large scale of business and the complexity of BPS, and the highest potential in ICT acquisition. Research Instruments Face-to-face (1) Using face-to-face for depth interviews to find out the user requirements for all BPS in order to derive at the criteria and checklist for vendor evaluation. (2) Getting detailed features of various software alternatives from vendors demonstration meeting. Survey Questionnaires (QN2) had been used to gather the management s opinion on the usefulness of each tool in the framework, which are the questionnaires for assessing ICTA awareness (QN1) and criteria checklist. 3.5 Data processing and analysis QN1 had been derived from the previous research studies (Chavasint et al., 2009; Anuvareepong et al., 2009). The criteria checklist had been derived from the meeting with the users and the vendor demonstrations. Another set of questionnaire QN2 had been designed to evaluate the usefulness of the questions in QN1 and the items in the criteria checklist. Data from questionnaires were coded and analyzed using Microsoft Excel 2010 as the analysis tool (National Research Center Inc., 2003). Data were calculated using functions and formula in Excel. All frequencies and cross-tabulations tables were generated using pivot tables. Column and line charts were generated using pivot charts. Research framework RESEARCH FRAMEWORK AND MODEL FIGURE 1 CONCEPTUAL FRAMEWORK Figure 1 illustrates the research framework for this study. The proposed model of FS-ICTAL is derived from QN1 and criteria checklist designed for Vendor Evaluation. The model starts from designing QN1, and conducting the interviews with top and middle management based on QN1. The result from QN1 determines the need to continue to the next stage, to develop the criteria checklist for vendor evaluation.

5 Research model FIGURE 2 THE PROPOSED MODEL FS-ICTAL In figure 2, the criteria checklist in figure 1 has been broken down into 3 categories: Front-end systems, Backend systems, and Network infrastructure. The complete criteria for vendor evaluation for each category are to be elaborated in this stage according to the BPS requirements of a particular firm and vendor demonstrations. DATA ANALYSIS FIGURE 3 AVERAGE SCORE FOR EACH QUESTION IN QN1 According to Figure 3, Q9 and Q10 had the highest average score from all respondents, which implies that all factors in Q9 represent the worthiness of the ICT investment in their organization. Question number 5 and 6 had the lowest average score from all respondents due to the fact that they are non-technical people. However, all questions had got the average score of at least 3.5 from all respondents, considered as acceptable level. This could be concluded that all 11 questions were useful for the assessment of ICTA.

6 FIGURE 4 OVERALL AVERAGE SCORE FROM EACH RESPONDENT Figure 4 shows that overall average scores from almost all respondents were at least 3 out of 5 (positive response) at the level of usefulness for the assessment of ICTA. TABLE 3 CROSS-TABULATIONS BETWEEN AVERAGE SCORE FROM ALL QUESTIONS AND JOB STATUS Column Labels qmean_1_ qmean_1_ 2 qmean_1 2 qmean_1 Total Total qmean_1_ qmean_1 2 qmean_1_ 2 Row Labels qmean_1 back % 0.00% 0.00% % front % % % % Top % 0.00% 0.00% % Grand Total % % % % Among all respondents, 53.85% responded at the scale of 4 out of 5 (Useful), 23.08% at 5 out of 5 (Very useful) and 23.08% at 3 out of 5 (Average). All of them are considered as positive answers (at least 3). TABLE 4 CROSS-TABULATIONS BETWEEN QUESTION 9 AND JOB STATUS Column Labels Total Total Count Count of Q9 of Q9_2 Coun Coun Row Count t of Count t of Count Labels Q9 of Q9_2 Q9 of Q9_2 Q9 of Q9_2 back 0.00% 0.00% % % front % % % % Grand Total % % % % For question 9, 100% of respondents who were back-end users and 75% of respondents who were front-end users responded as very useful. This implies the significance of having ICTA, especially for back-end users.

7 TABLE 5 AVERAGE SCORE OF QN2 PART 2 Average Average Average Front-end Back-end Network Software 4.3 Software 4.3 Warranty 3.7 Hardware 4.3 Hardware 4.1 Non-functional 3.5 Non-functional 4.1 Non-functional 4.5 User privileges 4.1 Table 5 shows that the average score for criteria checklist regarding hardware, software, and non-functional for front-end and back-end are similarly higher than 4 ( ) while the average score for network regarding warranty, non-functional, and user privileges are in the lower range ( ). CONCLUSION AND RECOMMENDATION From the analysis, there are the difference between the responses from front-end users and back-end users in Part 1 of QN2 but there is no difference in Part 2 of QN2 because the respondents focused mainly only on their responsible part. Nevertheless, the scores in Part 2 of QN2 from both front-end and back-end users indicate the significant level of usefulness of criteria checklist designed for vendor evaluation. The scores in the Network section were lower than those in other sections because it was not part of their responsibilities. The result from Part 1 indicates that back-end users concern more on the success of the ICTA and QN1 is significantly useful in assessing the ICTA awareness. Additionally, analyzed from the result in Part 2, back-end systems should be the first priority for the ICT implementation. However, findings of this FS-ICTAL can be useful for any LTF in Thailand for ICTA and further implementation within their firms. Moreover, this model can be useful in saving time and cost for the ICTA and help the top management to ensure the firm s objectives to match with the required specification of the ICT system. REFERENCES Anuvareepong S., Intaporn-udom R. & Permwonguswa S. (2009), The Proposed Driver s Performance Management and Control Information Technology Solutions for Logistics and Transportation Business, Proceedings of the 1 st International Conference on Logistics and Transport, Chiangmai, pp Chesher M. & Skok W. (2000), Roadmap for Successful Information Technology Transfer for Small Businesses, Proceedings of the 2000 ACM SIGCPR conference on Computer personnel research, Chicago, pp Eisenhardt K.M. (1989), Building Theories from Case Study Research, The Academy of Management Review, Vol. 14, No. 4, pp Jungtheerapanich C., Chavasint C. & Inta M. (2009), Information Technology Solutions for Strategic Logistics and Transportation Management, Proceedings of the 1 st International Conference on Logistics and Transport, Chiangmai, pp Laudon K.C. & Laudon J.P. (2009), Management Information Systems, 11 th Ed., New Jersey: Prentice Hall. Meredith J.R. & Mantel S.J. (2009), Project Management: A managerial approach, 7 th Ed, New York: John Wiley & Sons. National Research Center, Inc. (2003), Excel for Data Analysis, Boulder. Thompson A. (2005), Business Feasibility Study Outline, Entrepreneurship and Business Innovation: The art of successful business start-ups and business planning, pp Wieder B., Booth P., Matolcsy Z.P. & Ossimitz M. (2006), The impact of ERP systems on firm and business process performance, Journal of Enterprise Information Management, Vol. 19, No.1, pp