Chapter I

INTRODUCTION

Today, information technology plays a vital role in every aspect of

human’s lives. It leads to high level of corporate competition and growth seems

equal to innovation. It is the brain of modern economy and the brain of corporate

organization, information technology is all about storing, manipulating,

distributing and processing information using computer-based tools. Business

sector is one of the beneficiaries of modern technology, it allows organizations to

work efficiently and maximize productivity, thus make computer and information

systems very essential in running business operations.

Technology now became a necessity for every business establishment

and corporate world is leaning more and more toward it, making it almost

impossible to separate the two from each other. Innovation breed business, and

since technology paves the way for it, it can be gathered here that business

needs technology to be sustained. The role of technology in business caused

tremendous growth in trade and commerce. It provides a faster, more

convenient, and more efficient way of preforming business transactions.

One of the high end contributions of the advance technology is the birth of

Enterprise Resource Planning or ERP. And since businesses faced new

challenges in increasing competition, market expansion and meeting and

exceeding consumer expectation the ERP systems have been developed to

provide a total business solution. It is business software solution that seeks to

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streamline and integrate operations, processes and information that flows within

the enterprise. ERP is software suited for business application such as,

accounting, supply chain management, human resources (HR), and sales and so

on. Once an ERP system is implemented, each department or business unit in a

company will use the same database, share the same data that immediately

improve the communication among different department or business units that

will enhance the business operations, operate the enterprise in effective and

efficient manner. ERP system improves productivity, which is the main reason

why many large scale enterprises are keen to study and adopt this kind of

system in running and managing their business operations. Likewise, it became

an organizational tool for various enterprises since it has enabled the business to

integrate varied organizational systems and provide a flawless operation and

production.

ERP system is the evolution of Manufacturing Requirements Planning

(MRP) II. From business perspective, ERP has expanded from coordination of

manufacturing processes to the integration of enterprise-wide backend

processes. From technological aspect, it has evolved from legacy implementation

to more flexible tiered client-server architecture. Below is the evolution of this

system from 1960s to 1990s (Rashid. et.al, 2003)

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Figure 1

Evolution of Enterprise Resource Planning (ERP) System

In Philippines, the use of Enterprise Resource Planning (ERP) system was

governed by Republic Act No. 8792 or also known as “Electronic Commerce Act

of 2000”. In Section 2, Declaration of the Policy, vividly states:

“The State recognizes the vital role of information and communications

technology (ICT) in nation-building; the need to create an information-friendly

environment which supports and ensures the availability, diversity and

affordability of ICT products and services; the primary responsibility of the private

sector in contributing investments and services in telecommunications and

information technology; the need to develop, with appropriate training

programs and institutional policy changes, human resources for the information

technology age, a labor force skilled in the use of ICT and a population capable

of operating and utilizing electronic appliances and computers…”

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There are over 150 vendors of Enterprise Resource Planning (ERP)

system, and one of the well-known providers is the Systems, Applications and

Products or best known as SAP. As of 2010, SAP has more than 140,000

installations worldwide, over 25 industry-specific business solutions and more

than 75,000 customers in 120 countries. Thus in current market of ERP system,

the SAP make as one the best known and most widely used ERP solution. SAP

system comprises of a number of fully integrated modules, which covers virtually

every aspect of the business management. All these separate parts of ERP

systems must work together to accomplish companies business operation.

Systems, Applications and Products (SAP), started in 1972 by five

former IBM employees in Mannheim, Germany. They are Dietmar Hopp, Klaus

Tschira, Hans-Werner Hector, Hasso Plattner, and Claus Wellenreuther. The

original name for SAP was German: Systeme, Anwendungen, Produkte,

meaning "Systems Applications and Products." The original idea was to provide

customers with the ability to interact with a common corporate database for a

comprehensive range of applications. Gradually, the applications have been

assembled and today many corporations, including IBM and Microsoft, are using

SAP products to run their own businesses. This applications is currently built

around their latest R/3 system, provide the capability to manage financial, asset,

and cost accounting, production operations and materials, personnel, plants, and

archived document.

In recent data, there are more than twenty (20) modules in SAP system,

but this study will focus on Financial Accounting and the Controlling Modules

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(FICO). The Finance (FI) Module is designed to record financial transactions in a

manner consistent with external reporting. Controlling (CO) module in SAP

system is to provide organizations with a method of slicing and dicing data to

view costs from an internal management perspective and provide a view of

profitability beyond that of basic financial reporting.

Background of the Study

Implementation of an ERP is an extensive, lengthy, and costly process,

typically measured in millions of dollars. The investment is both in the software

itself and in related services such as consulting, implementing, training, and

system integration. Generically, the issue in implementing ERP is the fact that it

will cost the organization a million of expenditures such as software licenses and

implementing partners for training and support, it is not an overnight project, and

it is complex software that requires wide-ranging knowledge in ERP

implementation. Various critical issues occur during and after ERP

implementation, and the root of this issue is the lack of the knowledge in software

integration, this is the major problem in an ERP implementation (Pan et.al, 2003).

For KEPCO Group, wherein the company is currently on GoLive Phase,

lot of problems has been encountered during the system integration and

implementation. Problem includes the generated reports wherein the same

shows limited information that makes such reports incomprehensible and hard to

understand. Likewise, printing issues become one of the difficulties during

migration since hardware compatibility is likewise needed to consider. Further,

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the system was designed generically, the company has not able to adopt

immediately the system requirements, failure of conducting business process to

study the needs of the organization so to customize and configure the system

itself.

This problem, challenges and critical issues on ERP implementation have

a direct and indirect effect on the progress and to the ability if the company to

earn profit in a minimal cost. There are various cases of failed ERP

implementation within the business like what happened to Hershey Company

failed to deliver candies for its customers, Nike lost shoes order and Foxmeyer’s

failure to process orders (Wailgum, 2009). This mere fact is evidence that ERP

implementation is not just technical based software, but has an impact on the

productivity and profitability of the organization.

This is the very reason why the researcher desires to assess the degree

of performance of the SAP integration before and after system migration,

particularly, the Financial and Control Process of KEPCO Group as a key in

developing a program that will sustain the dynamic needs of accounting system.

Further, the level of effectiveness will be assessed in order to determine how

effective the system for the whole organization in terms of financial and

controlling processes. Lastly, being formerly part of the organization, it is a

privilege of the researcher to provide a useful material that will serves as a basis

for enhancement of the SAP system of the organization.

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Scope and Limitation of the Study

The study will aim to assess the degree of performance of the SAP

integration before and after system migration with respect to accuracy,

timeliness, efficiency, economy and productivity of KEPCO Finance Group.

Also, the study will determine the level of effectiveness of the SAP to the

financial accounting and controlling processes of KEPCO Philippines Finance

Group. Thus, the study will focus on one of the modules of SAP implemented by

KEPCO Philippines, the Financial Accounting (FI) and Controlling (CO) module.

The subject of the study will be the Philippine team of KEPCO Group

composed by three business units, the KEPCO Ilijan, KEPCO SPC and KEPCO

Holdings. In order to complete the methodology and data gathering of this study,

the researcher will need at least four (4) months to finish such phase, and it will

start from January to May 2014.

There are total of twenty seven (27) SAP users of FICO modules two (2)

from KEPCO Holdings, thirteen (13) from KEPCO Ilijan and twelve (12) from

KEPCO SPC. The researcher will use the one hundred percent (100%) of SAP

users as respondents for this study.

In evaluation of the degree of performance of SAP before and after

system migration, respondent will assess the system in terms of accuracy,

timeliness, efficiency, economy and productivity.

The researcher will use the descriptive method of research and will utilize

a questionnaire checklist to gather necessary information. On the other hand,

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effectiveness will be measured through respondents’ personal point of view and

experiences in using the system whether it is effective or ineffective in terms of

various personal profiles.

The questionnaire has been design by the researcher and the instrument

will be content validated by experts in fields of SAP FICO, accounting and

controlling. The study will use the frequency, percentage distribution, weighted

mean, and two-way ANOVA.

Due to high technicality of the study, it is limited to Financial Accounting

and Controlling Module. The other available modules of the system will not be

discussed. Likewise, the platform and system architectural design will not be

tackle. Further, costs of the system implementation cannot be disclosed due to

confidentiality and all payments made to the implementing partner has been

done by the Head Office in South Korea for overseas SAP implementation is part

of the organization’s contract with the implementing partner.

Statement of the Problem

This study will aim to determine the level of effectiveness of Systems,

Applications and Products (SAP) as a medium in recording, processing, and

translating financial data into reports of KEPCO Philippines Finance Group.

Specifically, this will seek to answer the following questions:

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1. What is the degree of performance of Systems, Applications and Products

(SAP) before and after the system migration of Financial and Control

Processes of KEPCO Group as assessed by respondents with respect to:

1.1 Accuracy;

1.2 Timeliness

1.3 Efficiency;

1.4 Economy; and

1.5 Productivity?

2. Is there any significance difference in the performance of KEPCO

Finance Department before and after system migration?

3. What is the level of effectiveness of Systems, Applications, and Products

(SAP) with respect to various aspects in terms of personal profile?

Hypothesis

Hypothesis is a wise guess prepared and temporarily adopted to explain

the observed factors covered by the study.  It helps the researcher in designing

the study such as the methods, research instruments, and sampling design to be

used as well as the data to be gathered. It also use as bases for determining

assumptions and for the explanation about the data gathered.

The study will test the null hypotheses as follows:

1. There is no significant difference in the degree of performance KEPCO

Finance Department before and after system migration.

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2. There is no significant difference in the perception of the respondents on

the level of effectiveness of Systems, Applications, and Products (SAP)

with respect to various aspects in terms of personal profile.

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Chapter 2

EVALUATION DESIGN AND FRAMEWORK

This chapter discusses the expected output and justification, theoretical

framework, conceptual framework, and the variables and their definitions and

importance to the study.

Discussion of Expected Output and Justification

The expected output of the study is an action plan that will be able to give

the company a certain program that will enhance the SAP implementation and

avoid future problems in working with the system that might hamper the daily

operation of the business specifically in the financial side. The objective of the

action plan is to point out various system troubles that sometimes impede the

processing of the financial transactions, and what will be the key action or

company’s move in order to solve such problems. The SAP of KEPCO group has

been running for just one year, and it can be concluded that it is still in the initial

stage of using the system, thus, troubles in using and in generating reports are

likewise not perfect. Still there are problems arises that users and even key users

are unable to solve. The researcher’s goal is to achieve a certain program that

the company can use as a guide in dealings with unnecessary system dilemma

that might encumber the purpose of the system which is to make the company

effective and efficient in running its daily financial operations.

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The objective will be attain through the use of survey questions that will

determine the level of effectiveness of the system compared the old system and

process of Finance Department in processing the financial data into reports.

Theoretical Framework

In today's competitive world many major companies have decided to use a

popular tool that has evolved over the past few decades. ERP, the descendant of

MRPII offers the "answer" to the economic and productivity troubles of

manufacturing and service enterprises. Thus, the ERP system has become very

popular as an enterprise management software tool. Implementation of ERP

system in the organization is the most complex and crucial part of the whole

integration and many researchers have proposed stage models of ERP

implementation so to provide successful implementation.

Collins and Hussey (2009) stated that theoretical framework is a collection

of theories and models from the literature. It is logically developed, described,

and elaborated network of associations between the variables deemed relevant

to the problem situation, and which have been identified through such process.

This is study is based on the ideas of by Robert D. Carisen and James E.

Lewis on system analysis, they view system analysis as a study of operation to

evaluate the system in terms of accuracy, timeliness, efficiency, economy and

productivity (Lizo, 2004). System analysis is a set of interacting entities, including

computer system analysis; this field is closely related to requirements analysis or

operation research. Likewise, it is an explicit formal inquiry carried out to help a

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decision maker to identify a better course of action and make better decision than

he might otherwise have made. Thus, based on this idea, the researcher used

the perception of the respondents with regards to their age, sex, job position and

Nature of Work as independent variables, while the test of effectiveness of using

SAP as a medium in processing financial information into reports and making

sound decisions in terms of accuracy, timeliness, efficiency, economy and

productivity as dependent variables.

Further, this study is based on the theory on competitive advantage by

Michael Porter, this theory is about taking offensive or defensive action to create

a defendable position in the industry, in order to cope successfully with

competitive forces and generate a superior return on investment.

To maintain competitive advantage and to augment performance,

companies need a solid resource management capability and dynamic

capabilities that is, the companies should be able to effectively control, integrate,

and utilize the internal and external resources, and adaptive to environmental

changes and competition. ERP system by nature is one resource management

system, since ERP system itself is invented for material resource planning

(MRP). This system is one model to manage, integrate, and control enterprise

resources. This model links with company's management culture, management

processes and management objectives, and each enterprise application of ERP

systems can be seen as the unique ability to manage resources. Therefore, it is

to believe that its implementation can enhance the company's resource

management capabilities and help the company gain a competitive advantage.

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Moreover, the use of the ERP system, is based on Business Process

Reengineering method defined by Hammer and Champy as the fundamental

reconsideration and radical redesign of organizational process, in order to

achieve drastic improvement of current performance in cost, service and speed.

BPR expound the possibility of substantial increase in efficiency and productivity

in a relatively short of amount of time. According to Hammer, re-engineering is

the mechanism for creating strengths and operating processes which can then

be exploited in many ways, re-engineering can be used to provide cost

advantages or improve customer service, thereby defending an existing market;

it can enable entry into entirely new businesses either by turning internal

processes into revenue generating services or by identifying new applications for

the same skills.

Value creation is the leading factor in BPR and information technology

plays a vital enabling role. Since ERP system is a technology driven tool for an

organization that will enabled the companies to maintain or reach an optimum

spot in their own industry, likewise it is considered by some as a major support

for new forms of working and collaborating within an organization and across

organizational borders.

Conceptual Framework

The purpose of this section is to explain and rationalize the conceptual

framework proposed by the researcher. A model was used to show the

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perception of the researcher regarding the study for a better and vivid

understanding.

The paradigm is based on IPO model that convey system fundamentals

which are the input, process and output. Based on the researches made, through

theories and concepts, the researched came up with a paradigm which consists

of three (3) boxes. The first box pertains to the independent variables which are

profile of respondents in terms of age, sex, job position, and Nature of Work.

Further, the second box relates to dependent variable which is the level of

effectiveness in relations to accuracy, timeliness, efficiency, economy and

productivity. The third box or the output of the study, this is the main product of

the study which the business process flowchart of the company so that for any

future system upgrade there is a guide on how to the configuration of the system

and likewise an intranet based manual for FICO users for an easy access and

guide.

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Input Process Output

FEEDBACK

Figure 2

Conceptual Model Showing the Effectiveness of Systems, Applications, and Products (SAP)

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Criteria of measuring System Effectiveness Accuracy Timeliness Efficiency Economy Productivity

Documentary Analysis

Development and

Administration of

the Questionnaire

Checklist

Analysis and

Interpretation of

Data

Effectiveness of Systems,

Applications, and Products (SAP)

ProposedAction Plan

The Variables, their Definitions and Importance to the Study

This chapter gives the meaning to the users or readers of this research

study the variables used, as well as its definition and importance in the study.

Below are the variables that defined operationally and conceptually.

Accuracy

In the fields of science, engineering, industry, and statistics, the accuracy

of a measurement system is the degree of closeness of measurements of

a quantity to that quantity's actual (true) value. The precision[1] of a measurement

system, also called reproducibility or repeatability, is the degree to which

repeated measurements under unchanged conditions show the same results.

Although the two words precision and accuracy can

be synonymous in colloquial use, they are deliberately contrasted in the context

of the scientific method.

According to ISO 5725-1 the terms trueness and precision are used to

describe the accuracy of a measurement. Trueness refers to the closeness of the

mean of the measurement results to the actual (true) value and precision refers

to the closeness of agreement within individual results. Therefore, according to

the ISO standard, the term "accuracy" refers to both trueness and precision.

ISO 5725-1 also avoids the use of the term bias, because it has different

connotations outside the fields of science and engineering, as in medicine and

law (JCGM, 2008).

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Accuracy in the field of accounting, is the precision of financial data, it is

said to be a financial statements is accurate if it is free from biased, it is recorded

in its true value and data should be existing. In this study, accuracy will be

basically to be measured against manual data and manual lapsing schedules to

test that systems are runs accurately against raw data.

In information systems, the concepts of accuracy and precision have also

been studied in the context of data bases, information systems and their

sociotechnical context. The necessary extension of these two concepts on the

basis of theory of science suggests that they (as well as data

quality and information quality) should be centered on accuracy defined as the

closeness to the true value seen as the degree of agreement of readings or of

calculated values of one same conceived entity, measured or calculated by

different methods, in the context of maximum possible disagreement. In using

SAP as ERP solution, accurate data is the key to building relationships with local

and international customers, suppliers, and partners. Accuracy is one of the four

goals of ERP installation, accuracy relates to both the system and the people.

Make sure the people know where and how to create, read, update and delete

data. The system should inform them when their actions are not correct. Once

the data is in the system, processes and additional entry should protect the data

to produce accurate outputs. An example includes the chain of events in

distribution that range from purchasing to fulfillment (Boecking, 2013).

Timeliness

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The concept of timeliness is studied in many different fields, including

cognitive sciences, logic, and library and information science. Most

fundamentally, however, it is studied in epistemology (the theory of knowledge).

Different theories of knowledge have different implications for what is considered

relevant and these fundamental views have implications for all other fields as

well.

In the world of Finance and Accounting, timeliness means it will make

difference to a decision maker. It is the relationship or the relatedness of financial

data and reports itself in making a certain financial decision. In timeliness, great

timing is needed and in accounting accuracy is sometimes sacrificed. For this

study, timeliness is to be tested in the easiness of generating reports and

schedules that might needed for a certain decision that needs immediate action.

Timeliness is a potential property not only of utterances and other

observable phenomena, but of thoughts, memories and conclusions of

inferences. In timeliness-theoretic terms, any external stimulus or internal

representation which provides an input to cognitive processes may be relevant to

an individual at some time. According to timeliness theory by Sperber and

Wilson, utterances raise expectations of timeliness not because speakers are

expected to obey a Co-operative Principle and maxims or some other specifically

communicative convention, but because the search for timeliness is a basic

feature of human cognition, which communicators may exploit. In this section, we

will introduce the basic cognitive notion of timeliness and the Cognitive Principle

of Timeliness, which lay the foundation for the timeliness-theoretic approach to

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pragmatics. In this theory, an input is RELEVANT to an individual when, and only

when, its processing yields such positive cognitive effects.

In the modern business scenario ERP is verisimilitude to the oxygen. As

oxygen is the essence of life similarly ERP is the lifeblood of the business. A

business irrespective of type and size cannot run smoothly in absence of

properly drafted and formulated ERP software (Gupta, 2005).

Efficiency

In general, describes the extent to which time, effort or cost is well used

for the intended task or purpose. It is often used with the specific purpose of

relaying the capability of a specific application of effort to produce a specific

outcome effectively with a minimum amount or quantity of waste, expense, or

unnecessary effort. "Efficiency" has widely varying meanings in different

disciplines. Efficiency is can be computed through what they called Efficiency

Ratio, a ratio that typically applies to banks, in simple terms is defined as

expenses as a percentage of revenue (expenses / revenue), with a few

variations. A lower percentage is better since that means expenses are low and

earnings are high. It relates to operating leverage, which measures the ratio

between fixed costs and variable costs.

Efficiency in accounting generally refers to the use of certain ratios and

measurements designed to assess the effectiveness of a specific company or

firm and used to assess the financial condition of a company based on the way it

manages its assets. This paper intends to measure efficiency of the accounting

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application through resources management and likewise the impact of the

system with regards to overall efficiency in the organization and consequently

their profitability and sustainability.

The potential benefits of ERP are significant: a more smoothly running

operation with efficiencies in virtually every area of administration, from

automated payroll to course registration to scheduling and just about every facet

in between. The stakes are high. Depending on the size of the college, an ERP

implementation often translates into a multimillion-dollar investment. It can also

take a long time to complete and require significant IT resources. Still, for many

institutions ERP has become a "must-have" technology. The business case for

adopting the technology is strong, even if there might not be an immediate

financial payback (Violino, 2008). ERP systems provide the opportunity to

integrate high levels of business processes integration, improve communications

at different levels, and combine internal and external communication for faster

and easier data accessibility, but maximum efficiency is only accomplished when

there is strong alignment between the ERP system and the company's business

processes. The success or lack of a successful implementation can be partially

measured by examining the four key antecedents of ERP system integration

(Interconnectivity, Interoperability, Semantic consistency, and Convergent

integration) and ERP performance (Yousefi, 2011)

Economy

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Economy consists of the production, distribution or trade,

and consumption of limited goods and services by different agents in a given

geographical location. The economic agents can be individuals, businesses,

organizations, or governments. Transactions occur when two parties agree to the

value or price of the transacted good or service, commonly expressed in a

certain currency. A given economy is the result of a set of processes that

involves its culture, values, education, technological evolution, history, social

organization, political structure and legal systems, as well as its geography,

natural resource endowment, and ecology, as main factors. These factors give

context, content, and set the conditions and parameters in which an economy

functions. Some cultures create more productive economies and function better

than others, creating higher value

Further, SAP implementation requires large budget amount, it is a capital

expenditures that cost a million dollar of investment. Aside from lack of time and

budget, as well as lack of apparent value, one of the visible reasons why many

companies are not open for switching their accounting system to complete ERP

software is mainly because of the deteriorating economic and existing business

condition. Economic factor is the first and foremost aspect that needs a heavy

consideration for the success of the implementation is basically based on the

capacity of a certain company to support all the monetary needs in running the

projects (Wailgum 2009).

However, given this large amount of money, a proper implementation of

the system means huge cost savings, not just in terms of IT supplies and office

22

supplies, but likewise with the time save in processing various transactions. In

this era, most organizations are asked to “do more for less.” Accounting system

can certainly help in that goal, however, focus tends to rest on the “for less” part

of this request. In reality, organizations focusing solely on saving money will have

to make sacrifices in terms of quality, service, and operations that will impact

internal and external customers and ultimately the business (Franklin, 2009).

Economic cost is defined as the sacrifice involved in performing activity or

following a decision or course of action. It may express as the total opportunity

cost and the explicit cost. This paper will identify some points whether the

benefits of using and implementing Systems, Applications and Products (SAP) is

much higher than the cost if the implementation. Likewise, to test the ability of the

system in implementing a paperless transaction that could be a savings for the

company in terms of supplies.

Productivity

"Productivity isn’t everything, but in the long run it is almost everything. A

country’s ability to improve its standard of living over time depends almost

entirely on its ability to raise its output per worker. Productivity is considered a

key source of economic growth and competitiveness and, as such, is basic

statistical information for many international comparisons and country

performance assessments. There are different measures of productivity and the

choice between them depends either on the purpose of the productivity

measurement and/or data availability (OECD 2008).

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Productivity is measure efficiency in producing goods or services. It is a

degree to which a real income is being measured. Increasing national

productivity can raise living standards because more real income improves

people's ability to purchase goods and services, enjoy leisure, improve housing

and education and contribute to social and environmental programs. Productivity

growth also helps businesses to be more profitable. Thus, in processing and

communicating financial information, a certain group is to be said productive

when the resources are being fully utilized, that the system does not require too

much time in running and processing data that might caused some delays and

became a hindrance in immediate translation of numerical data that is needed in

preparation of financial reports of the enterprise.

Measuring the impact of applications on ERP end-user productivity is a

complex undertaking because of the wide range of business functions, vertical

industry requirements, and user types who interact with such systems. In recent

study of Keystone Strategy Inc handled by Professors Marco Iansiti and David

Sarnoff wherein they developed a business productivity framework to measure

how end users feel SAP applications impact their personal productivity (Iansiti,

2007).

Given the scale of ERP implementation projects as well as the possibility

for both large successes and failures, it is reasonable to expect that ERP

deployment have a significant and measurable effect on firm performance. While

both costs and potential benefits are high, it is not clear whether the net effect

results in higher productivity for the firm. In addition, because implementation is a

24

difficult and uncertain process, firms that are successful in implementing the

system may gain competitive advantage over other firms that are unwilling or

unable to make similar changes.

Definitions of Terms

The following terminologies are operationally defined for a better

understanding of the study:

Business Process Reengineering. This is a business management

strategy, originally pioneered in the early 1990s, focusing on the analysis and

design of workflows and processes within an organization. BPR aimed to

help organizations fundamentally rethink how they do their work in order to

dramatically improve customer service, cut operational costs, and become world-

class competitors.

Competitive Advantage. It is an advantage that firms has over its

competitors, allowing it to generate greater sales or margins and/or retain more

customers than its competition. There can be many types of competitive

advantages including the firm's cost structure, product offerings, distribution

network and customer support.

Enterprise Resource Planning. Principally this is an integration of business

management practices and modern technology. Information Technology (IT)

integrates with a corporate house’s core business processes to streamline and

accomplish specific business objectives. Consequently, ERP is an amalgamation

25

of three most important components: Business Management Practices,

Information Technology, and Specific Business Objectives.

Financial Accounting/ Controlling Module. FICO module is a tool used in

Systems, Applications and Products in Data Processing, or SAP. FICO modules

are used for information technology through SAP, which is a package mainly

employed for financial accounting.

Systems, Applications, and Products Software. It is a business solution

that will help enterprises to manage its operation. SAP provides software tailored

to fit different aspects of business.

Technology.The branch of knowledge that deals with the creation and use 

of technical means and theirinterrelation with life, society, and the environment, d

rawing upon such subjects as industrial arts,engineering, applied science, and pu

re science.

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Chapter 3

RESEARCH METHODOLOGY

This chapter presents the discussion on the research design, setting and

the subject of the study, sources of data, procedure of the study and the

statistical treatment.

Research Design

This study will use the descriptive qualitative research design utilizing a

questionnaires checklist as a medium in gathering information that is needed in

the conducting this study. Descriptive Research studies are those studies which

are concerned with the describing the characteristics of a particular individual, or

if a group (Kothari, 2004). The principal aims of descriptive method are to

describe the nature of the situation as it exists at the time if research and explore

the cause of the particular even. Data gathering is the primary means of

collecting information to conclude and answer the questions concerning the

current status of the study.

The study aims to determine the extent of extent of SAP system in

processing financial data by Finance Department of KEPCO Philippines Group.

This will be measures through the use of input data such as Business Process

Reengineering, configuration of the system, trainings of the end users, testing of

the system, going-live of the integration and the post-implementation. Likewise,

27

the level of effectiveness will be asses in this study. Effectiveness shall be

measured suing the test of system accuracy, timeliness of the system with the

decision of the management, efficiency and economic value of the system and as

well as the productivity of the SAP users in processing financial information.

Setting of the Study

KEPCO Philippines was established when Korea Electric Power

Corporation won a bid for Operate, Maintain, Service Contract (OMSC) with the

Philippine Government, National Power Corporation (NAPOCOR) specifically, in

response to the call of the government to develop and utilize the country’s

indigenous resources and augment its power supply. Currently, KEPCO group

has a three power plant. Last September 12, 1997 a natural gas power plant was

built in Ilijan, Batangas under Build-Operate-Transfer (BOT) contract, it is the

largest natural gas facility in the country comprising 1200MW combined-cycle,

dual-fuel electricity generation facilities with a design life of 25 years. Another two

power plants are located in Naga, Cebu with Built-Operate-Own scheme. The

two units of coal-fired that cater the Visayan Grids composed of two units

185.8MW and one 100MW Thermal Power Plant. This project is conceptualized

under the scheme of a merchant power plant, characterized by executions of

power sale contracts (PSCs) with distribution utilities and electric cooperatives,

instead of power purchase agreements with the government. The Manila head

Office is located at the heart of Makati City, the existing plant site of KEPCO

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group are located in Ilijan, Batangas and Naga, Cebu City for LNG Power Plant

and Coal-operated Power plant respectively.

KEPCO Head Office has been using SAP as their medium in operating the

business and for a stress-free consolidating the reports of all their subsidiaries

and overseas projects, the Management ordered all KEPCO Group to use same

system with server at Korea and user ID provided by the Head Office. Prior to the

implementation, all employees had undergone a rigid and tremendous Systems,

Applications, and Products (SAP) trainings for a couple of months, training

include theoretical classroom style introduction and a complete hands-on training

using client test server. However, there are some encountered transactions that

has never been considered, some complex and complicated that failed to

ruminate that’s why it makes hard for the team to complete the processing of the

transaction and became a back log that to be raised to the Head Office and

consultant.

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Figure 3

Map of Makati

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Figure 4

Map of Salcedo Village, Makati City.

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Subject of the Study

The respondents of this study will be the personnel of KEPCO Group

Finance Department having a key ID as users of SAP. They chose as

respondents are the one who underwent trainings and the one with SAP access.

The researcher will employ the 100 per cent (100%) of the population or total of

27 respondents, two (2) from KEPCO Holdings, thirteen (13) from KEILCO and

twelve (12) from KSPC. Below is the table that shows the total number of the

respondents for this study.

Table 1.0

Subject of the Study

Business Group No. of Repondents

KEPCO Philippines Holdings, Inc 2

KEPCO Ilijan Corporation 13

KEPCO SPC 12

Total 27

They are chosen purposively to determine the level of effectiveness in

accordance to their own perspective about the system being implemented. They

are described according to age, sex, educational attainment, position, Nature of

Work and user classification. The group consists of two (2) users from KEPCO

Holdings, thirteen (13) users from KEILCO group and twelve (12) users from

KSPC.

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Procedure of the Study

The researcher prepared and presented three (3) proposed theses to the

research professor for selection and approval. The title of the study at hand has

been chosen and approved by the four (4) members of the panel during the title

defense. The researcher used different medium in gathering necessary

information to construct and have ideas for the chosen topic. Those medium are

the different thesis writing available in libraries, leaflets and journal, IT

practitioners’ point of views and knowledge, browse the internet and the SAP

portal for various ideas and techniques in the world of ERP.

After completing the three (3) chapters, it is need to present and defend

during proposal defense so to continue with the remaining chapters and improve

the write-up as well. Once approved, the researcher needs to develop the

questionnaire checklist which is subject to test for reliability and validity with the

assistance of the adviser and with the expertise of the statistician. As soon as the

reliability and validity was determined the researcher can proceed with the

dissemination of the questionnaire checklist among respondents. Moreover, the

researcher needs to secure a permit to conduct study from the University to

conduct study and interviews to the respondents and institution that could feed

information and body of knowledge to the researcher.

Finally, after the distribution of the research instruments, the researcher

has to collate all the data. The information must be encoded and with the aid of

the statistician, the data gathered was tallied, tabulated, analyzed and

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incorporated. This procedure was the key that answered the hypothesis of the

study.

Statistical Treatment

In this study following statistical tools will be used:

1. To determine the profile of the respondents, the frequency, percentage,

and rank distribution will be employed.

2. To determine the level of effectiveness of integrating SAP of KEPCO

Philippines in their Financial and Control Process as assessed by

respondents, weighted mean will be applied. The Likert scale will be

used:

Scale Scale Interval Degree of Importance

1 1.0 – 1.79 Ineffective (IE)

2 1.8 – 2.59 Less effective (LE)

3 2.60 – 3.39 Effective (E)

4 3.40 – 4.19 Much effective (ME)

5 4.20 – 5.0 Very much effective (VE)

3. To find out the significant difference of the effectiveness of SAP

integration of KEPCO Philippines in terms of accuracy, timeliness,

efficiency, economy and productivity the one-way ANOVA will be utilized.

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