Abstract 003-0254

A METHODOLOGY FOR THE ANALYSIS AND DESIGN OF AN

INFORMATION SYSTEM FOR INDUSTRIAL COMPANIES.

APPLICATION TO THE TEXTILE SECTOR

Sixteenth Annual Conference of POMS, Chicago, IL, April 29 - May 2, 2005.

Manuel Expósito, Josep Capó, José V. Tómás

Department of Business Organisation – Polytechnic University of Valencia

Plaza Ferrandiz y Carbonell; 03801 Alcoy (Alicante) Spain

Tel. + 34 96 652 84 66 / Fax: + 34 96 652 84 65

[maexlan, pepcapo, jvtomas]@omp.upv.es

ABSTRACT

This paper is aimed at proposing a methodology for the analysis and design of the

information system of industrial enterprises. The proposed methodology is based on three

main stages. The first stage covers the analysis of functional and informational areas of the

enterprise by means of IDEF and DFD techniques. The outcome of this stage is a set of

shortcomings and limitations of the current information system. The second stage comprises

of an analysis of ERP solutions from three points of view: generic ERPs, sectorial ERPs and

adhoc ERPs. The final stage unifies the results obtained, in order to provide a proposal for

ERP solution for the enterprise. The methodology has been applied to a textile company in

order to check its feasibility.

Key words: Information systems, ERP, Business management, Small and Medium-sized

Enterprises (SME).

1. Introduction

Programmes for business management have been in existence for two decades but it was only

around the middle of the nineties’ when they started to be known as ERP (Enterprise

Resource Planning). An ERP is an application designed to cover the demands stemming from

all the functional areas of a company. It starts from a comprehensive approach or a systems

approach and emphasizes the integration of information in real time. However, better than

integration of information, we should talk about “unique” information which circulates

through the processes of the company and is shared without the need for replicas or

duplicates.

The present study establishes and brings into practice a methodology for a small-sized

business, recommending one type of ERP solution over the existing ones in the current

market, which best meets its requirements.

2. Information systems

The control of a company’s information flow is an essential step that must be developed in

order to manage its knowledge. To observe how the information flows through, within and

around a company, let us obtain an overview of how it works and which information system

is in use (IS), (Andreu, Ricart and Valor, 1996). For that reason a company’s IS must serve its

business approach in such a way that the relevant information relating to all areas can be

accessed and converted into knowledge in order to improve the outcome of its functions and

activities.

Therefore, when thinking about new technologies for the company, and more precisely the

launch of an ERP, we must emphasize the importance of planning for the company and how

this contributes to the fulfilment of business objectives rather than simply focusing on the

technological approach or on the modernisation of work practices. Having clarified these

aspects and without intending to be too exhaustive, we now quote two definitions of IS based

on authors working in the field of IS:

The formal set of processes which, operating on a collection of data that is

structured according to the needs of a company, compiles, elaborates and

distributes (part of) the information needed for the operation of the company and

for the corresponding activities of management and control, supporting, at least

partially, the decision-making process necessary to carry out the functions and

processes of the company business according to its strategy. (Andreu, Ricart and

Valor, 1996, page 13).

An Information System can be defined technically as a set of interrelated

components that collect (or retrieve), process, store and distribute information to

support decision-making and control in an organization. In addition to supporting

decision-making, information systems help workers and managers to analyze

complex problems, to develop new products and to integrate the various modules

and departments. (Laudon, Laudon, 1996, page 7).

The IS assumes a more important or less important role according to the sector to which it is

applied. As such, whereas it has a strategic function for some, for others, it is merely useful.

However, in both cases the IS will have to be based on the workflow of the company and will

have to interact with all the activities of the company, both the primary and the support ones,

and additionally, at a non trivial level. (Andreu, Ricart and Valor, 1996).

In reference to the above, it is of interest to consider the concept of the Value Chain of an

organization as expounded by Porter (1995). The Value Chain classifies the activities of a

company into two types, on the one hand, the primary ones and on the other hand, the support

activities. The primary activities are those that create value for the company, whereas the

support activities help maintain the coordination, the company’s infrastructures, the

technological development... Such a flow of activity, whether of an administrative nature, or

the actual business activity itself, is known as the “Workflow” of a company. The common

objective of all types of company activity is the pursuit of profit (both tangible and intangible)

which ensures the continuity of the business activity.

Figure 1. The IS in the Value Chain framework

3. Work methodology

The main objective of this study is the ability to recommend the most appropriate ERP

solution based on the established criteria to meet the requirements and future possibilities of a

small textile company. The methodology stages undertaken are as follow:

• Prepare an IDEF0 analysis. This allows the analysis of the processes carried out by the

company.

• Devise a Data Flow Diagram (DFD) of the company’s current IS. This allows the

modelling of the functions and the data which flow between these at different levels of

abstraction.

• Study the technology support of the company.

Throughout these first stages an in- depth knowledge of the company will be acquired and, at

the same time, a starting point for identifying deficiencies and areas for possible improvement

will be attained. Once the current needs have undergone analysis, the subsequent stages will

follow the order outlined below:

• Establish a search for ERP applications. These will be classified into three groups:

o Generic ERPs

o Sectorial ERPs, specific to the textile sector

o Adhoc ERPs

• Prepare an initial table to adjust the solutions to the particular needs of the company.

A number of variables must be considered in a qualitative manner.

The outcome of the previous stage will permit a pre-selection of the most adequate solutions

to be conducted in such way that the subsequent stage will develop a more specific study of

these based on:

o Functional adequacy

o Technical adequacy

o Economic adequacy

• To conclude, we will re-examine the first table together with the previous analysis in

order to offer a valued assessment.

4. A Description of the Company

The company1 is a small-sized business belonging to the textile sector, located in the province

of Alicante (Spain). Its main business focus is the elaboration of jacquard fabrics for

upholstery and decoration. The company has a functional organizational structure which

covers the following departments: Marketing, Finance and Administration, Sales and

Production. The main areas regarding information among the various departments belonging

to the company organisation are outlined in detail below:

Figure 2. Existing relations among the different departments

Its production activity is carried out to order, and consists of a range of products including

chenille, polyester fabrics, double and triple fabrics, lycras… as well as the possibility of

accepting new proposals made by clients, providing these match the current capacity and

skills of the company. Given that its main activity is the production and marketing of different

kinds of fabrics, those activities which do not add a direct value to its core competence are

subcontracted. These include design, dyeing of raw fabric, transportation, knot warping and

accounts management.

1 The name of the company in which this methodology was applied is omitted for reasons of confidentiality.

The company has modestly reached a reasonably good position within the value system of the

textile sector. It has a loyal client portfolio, in an activity that is very competitive in price and

increasingly influenced by the effects of the global economy. Despite the company’s small

size, the product quality and excellent service offered to its clients have facilitated its recent

introduction into some of the European markets. This new situation has resulted in the need to

consider a change in its IS, given the inefficiencies found in the current system.

5. Study of the current information system

An analysis of the characterisation of the current existing IS will be the starting point for our

study. For this, the following tasks will be undertaken: an IDEF0 analysis, an analysis of the

company’s Data Flow Diagram and a study of the present technology support being used.

5.1. IDEF0 Analysis

This methodology facilitates the study of the activities and the relationships between these as

they are carried out within the company. IDEF0 is a modelling technique based on the

combination of tables and texts which, when presented in an organized and systematic

manner, allow a better understanding and a logical analysis of the potential changes. Just as

importantly, they help specify the requirements and supporting the systems both at the design

level and with regard to the actual integration of activities.

Subsequently, once we have completed the study, we will display the outcome of the IDEFO

diagram showing the greatest number of aggregations.

Figure 3. IDEF0 Diagram showing the greatest number of aggregations.

Each of the activities were analysed individually resulting in different diagrams for the

activities.

5.2. DFD of the IS

The DFD analysis, a technique defined by DeMarco (1979), enables us to establish how the

data flows within the system. The outcome is a net-diagram which represents the data flow

and the transformations applied to the data when moving this from the input stage to the

output stage of the system. Following this, we give the DFD for the top level of the company.

Figure 4. DFD Diagram for the top level

5.3 Current technology support

Once we have completed the study of how the company functions, we will establish and

analyse the technology support used to develop its processes. At present, the company’s

management uses a program which is compatible with MS-DOS, for single-users and

individual-tasks within the modules of accountancy, sales management and purchase

management. The use of these modules barely manages to produce marketing and

management documents and does not allow for other operations such as working with a

database of archived records in order to carry out forecasts or to analyse the evolution of the

company.

All in all, the most important problems that have been identified are: obsolescence,

inflexibility, and an incompatibility with the current technologies (e-commerce, intranet, etc.)

and a lack of functionality with regard to satisfying the present needs of the company.

Therefore, the company must embark on a radical change with regard to the system used, in

order to become more efficient within its competitive environment.

6. Analysis of proposals

The first assessment of applications will have to consider their inherent features, such as their

modular and parametric aspects, which can be integrated according to the growth of the

company, including security in the information process itself, which should be reliable and

useful, and which should provide a good after- sales service and the correct economic

conditions to suit the company.

Within the classification of companies offering ERP solutions we find three large groups:

generic ERPs (aimed at any sector), sectorial ERPs (specific to the textile sector) and adhoc

ERPs. However, the latter group will not be considered here, given that it is a very expensive

solution and that the company cannot afford a project of such magnitude at the present time. It

is worth pointing out that this solution is usually applied to those companies which, according

to their characterisation and specific requirements, do not match any of the existing

applications in the current market.

6.1. First approach

From the research carried out, we have selected the following solutions for a more in-depth

study:

• Generic ERPs: BAAN, JD Edwards, SAP and Navision Axapta

• Sectorial ERPs: Datatex, Gilsar, Arel Asia PAcific, ABAS, RITM, Cetex, Solomon,

Grupo Item, Inase, CCS, Actea, Kaivalia, Altimia and Intentia

The following stage involves the realization of a first approach concerning the suitability of

these solutions for the company.

For this purpose, we prepared a technical specifications sheet with a number of variables

which were assessed in a qualitative way through information offered on the websites

representing the different consultancy firms and following information acquired at the initial

point of contact with their representatives, which was sometimes only by telephone.

The result was a comparative table of the 18 consultancy firms among which the first 4

corresponded to the generic group and the remainder to the sectorial group. The table should

be interpreted in the following manner: the more intense the colour of the cell, the greater the

correlation between the company and the characteristic under study.

Table 1. First assessment of the consultancy firms

In view of this first approach, we observe that the generic solutions are very adequate with

regard to their outstanding features and the facility of integration. However, regarding the cost

factor, this does not appear to coincide with the present possibilities of the company. This

outcome led us to recommend a sectorial solution and hence we will subsequently study

Datatex, Grupo Item and Inase in more detail, all of which obtain a better result in the

assessment.

6.2. Second approach

After several meetings with the representatives of the three consultancy firms chosen and after

detailed presentations of the characteristics of their applications, we decided to set up a

second and more detailed analysis of adequacy (functional, economic and technical).

Thus, in the functional analysis the different modules taking part in each application, in

accordance with their role in the company, will each be assigned a greater or lesser weight

within the functionality table. Using this method, the adequacy of each application can be

assessed using a rating system between 0 and 100 according to the company’s needs. The

result obtained is as follows:

Table 2. Results of the functional analysis of the applications

On the other hand, the technical analysis has allowed the study of the actual architecture of

the application, the operating system, the database and the programming language. The results

obtained are shown in the following table:

Table 3. Results of the technical analysis of the applications

To conclude, the economic and financial analysis involved the study of the different estimates

in order to examine whether the final cost and the method of payment were acceptable given

the company’s financial status. Once again, for reasons of confidentiality, we cannot provide

the final prices, nor the negotiated method of payment. In summation, it is worth mentioning

that the best solution was that offered by Datatex; however, the final price exceeded the

expectations of the company directors.

7. Final recommendation

To complete the application of the methodology, we, once again, reviewed the variables in

Table 1, however, this time focusing only on the three selected firms, weighing up the

different variables and adding those studied in the second approach. The result can be seen in

the following table:

Table 4. Summary of the ratings given to each of the consultancy firms

As can be observed, the results obtained are very similar, although the solutions offered by

Inase and Grupo Item stand out, with hardly any significant difference between the two. Our

recommendation is to nominate the consultancy firm which obtained the highest rating but the

final decision will be taken by the company directors supported by the results of the study.

8. Conclusions

The correct management of information and its transformation into useful knowledge, which

will be strategically used by the company in order to improve its competitiveness, is,

nowadays, a key factor for survival. Through the adoption of an ERP solution the company

can achieve a significant improvement in the development of those tasks. However, the

decision to adopt a specific solution will involve many changes in the organization, which

will have an effect on its long term business practices

On many occasions, due to the lack of qualified human resources or due to the failure to apply

a systemic process capable of supporting decision making, the company adopts a solution

which, after some time, turns out to be inadequate for fulfilling its needs. This mistake has a

significant effect and, in most cases, irreversibly culminates in the loss of a large investment

not only from the economic point of view, but also with regard to the time and resources

which have been used. Therefore, the development of an exhaustive, methodological and

laborious process of analysis is necessary before carrying out the implementation phase.

The present study establishes and brings into practice a method for supporting this decision

making. It is important to emphasise that, throughout the process, the support of the company

directors and management team, as well as the support of all workers involved in it,

particularly those experts familiar with the previous system of the organization, was essential.

This process will help them to overcome any possible future resistance to change and to be

successful in the stages following the decision.

References

Andreu, R.; Ricart, J.E.; Valor, J. (1996). Estrategia y Sistemas de Información. McGraw

Hill.

DeMarco, T. (1979). Structured analysis and system specification. Yourdon Press.

Muñiz, L. (2004). ERP: Guía práctica para la selección e implantación. Ediciones Gestión

2000.

Laudon, K.; Laudon, J. (1996). Administración de los Sistemas de Información. Prentice Hall.

Piattini, M.; Calvo, J.A.; Cervera, J; Fernández, L. (1996). Análisis y Diseño detallado de

Aplicaciones Informáticas de Gestión. Ra-Ma.

Porter, M. (1985). Competitive advantage. The Free Press.

Websites visited for the research

http://www.abasiberica.com

http://www.aitex.es

http://www.actea.es

http://www.altimia.net

http://www.arel.com

http://www.baan.com/mycountry/spain/

http://www.ccs.biz

http://www.cetex.net/spanish.htm

http://www.datatex-tim.com/es/

http://www.ekamat.com

http://www.gilsar.com/gias/giasindex.html

http://www.grupoitem.com

http://www.inase.es

http://www.intentia.es

http://www.jdedwards.es/

http://www.kaivalia.com

http://www.mx.solomon.com

http://www.navision.com/es/

http://www.realsoftware.be

http://www.sap.com/spain/