SYSTEMS APPLICATION AND PRODUCTS (SAP) INTEGRATION ON FINANCIAL AND CONTROL (FICO) PROCESS OF KEPCO PHILIPPINES

A Thesis Study Presented to The Faculty of Graduate School University of Rizal System Binangonan, Rizal

In Partial Fulfillment Of the Requirements for the Degree Master in Business Administration

Jhoanna Mary E. Pescasio October 2013

Chapter I INTRODUCTION Today, information technology plays a vital role in every aspect of humans 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. Business concepts and models were revolutionized as a result of the technology. This is because technology gave a new and better approach on how to go about with business. It was provided 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 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. The key characteristics of the this system the integration, 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-sized 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. However, it is radically different from conventional system development. The same can run on variety of computer hardware and network configurations, typically employing a database as a warehouse for information. 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)

Figure 1 Evolution of Enterprise Resource Planning (ERP) System In Philippines, the used 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 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 latter 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 (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 provides 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. The hope of increasing productivity and efficiency, particularly the management of a global operation, as a means of raising organizational competitiveness underlies the rationality behind firms motivation for adopting ERP. Generically, the issue in implementing ERP is the fact that it will cost the organization a million of expenditure, 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 t knowledge in software integration, this is the major problem in an ERP implementation (Pan et.al, 2003). According to analysts, the most important problem in ERP implementation is the failure of organizations to understand what ERP is all about and what exactly is required for implementing the project effectively. The companies fail to take into account the costs associated with implementing the project as the vendors do not reveal them initially. This results in increased costs for these companies. Organizations fail to plan the project implementation details and this leads to confusion and delays in implementation. Further, even if minor problems appear in one area of the ERP system, they affect the operations in other areas of the company. The need for knowledge integration continues even after implementation, if the system is to be fully appropriated. Moreover, knowledge integration does not happen automatically as the implementation of ERP is not merely a technological

task influenced by users perceived usefulness, but a cross-functional knowledge integration process structurally enabled by the establishment and maintenance of knowledge-based social relationships intra- and inter-organizationally. This is a big challenge for both, organization and ERP vendors, their major task is to know fully the principles beyond ERP integration so the implementation will go flawlessly, and it could be done through commitment form top management, proper business reengineering process, selection of ERP vendors and consultant, integration of the system across various business units or departments, implementation time and cost as well, and appropriate post-implementation or the system maintenance. This problem, challenges and critical issues on ERP implementation has 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 Foxmeyers failure to process orders (Cotteleer, 2003). 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 effectiveness of the SAP integration, particularly, the Financial and Control Process of KEPCO Group as a key in developing a guide or model on how to implement an ERP system. Also, being 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.

Scope and Limitation of the Study The study aims to assess extent of the SAP implementation of KEPCO Philippines on its financial and control process and the level effectiveness of the system. Thus, the study will focus on one of the module of SAP implemented by KEPCO Philippines, the Financial Accounting (FI) and Controlling (CO) module. It will determine the effectiveness of a real-time updates as effective means of recording relevant data into a sound financial decision making. The subject of the study is 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 needs at least four (4) months to finish such phase, and it will start from June to October 2013. There are total of forty-six (46) SAP users of FICO modules four (4) from KEPCO Holdings, twenty-seven (27) from KEPCO Ilijan and fifteen (15) from KEPCO SPC. The researcher will use the one hundred percent (100%) of SAP users as respondents for this study. The subject of the study is the one hundred percent (100%) of the Finance team or a total of 46 people and likewise all the SAP) users from various departments aside from Finance Group who do the parking of the accounting documents. The variables present in the study are the profile of SAP users in terms of age, sex, job position, nature of works and SAP function, in evaluation of the degree of effectiveness, respondent will assess the system in terms of accuracy, relevance, efficiency, economy and productivity. While with the assessment of respondents for the extent of the system implementation, business process reengineering,

configuration of the system, team and users trainings, system testing, going live and post implantation are the variables to considers. The researcher used the descriptive method of research and utilized a questionnaire checklist to gather necessary information. Descriptive research is concerned with the description of data and characteristics about a population. The goal is the acquisition of factual, accurate and systematic data that can be used in averages, frequencies and similar statistical calculations. The instrument will be validated through content validation using the frequency percentage, rank distribution, weighted mean, t-test and one-way ANOVA as a statistical treatment in analysis of data. Due to highly technicality of the study, it is limited to Financial Accounting and Controlling Module and other available modules of the system will not be discussed and likewise the version of the platform of the system.

Statement of the Problem This study aims to determine the impact of integrating whole financial process with Systems, Applications and Products (SAP) as a medium in recording, processing, and translating financial data into reports. Specifically, this will seek to answer the following questions: 1. What is the profile of the respondents in terms of: 1.1 Age; 1.2 Sex; 1.3 Job Position; 1.4 Nature of work; and 1.5 SAP Function (s)?

2. What is the extent of the implementation of SAP system of KEPCO Philippines in terms of: 2.1 Business process reengineering; 2.2 Configuration of the system; 2.3 Team and users trainings; 2.4 Testing; 2.5 Going-live; and 2.6 Post-implementation. 3. What is the level of effectiveness of integrating Systems, Applications and Products (SAP) of KEPCO Philippines in their Financial and Control Process as perceived by respondents with respect to: 3.1 Accuracy; 3.2 Relevance 3.3 Efficiency; 3.4 Economy; and 3.5 Productivity? 4. Is there significant difference in the assessment of the respondents on the integration of SAP of KEPCO Philippines when grouped according to their profile? 5. How does the extent of SAP implementation of KEPCO Philippines with the effectiveness of the system.

Hypothesis The studies test the following null hypothesis:

1. There is no significant difference in the extent of SAP implementation and level of effectiveness of the system of KEPCO Philippines in accordance to perspective of the respondents. 2. There is no significant relationship between the implementation of the SAP system and the level of effectiveness of the SAP system of KEPCO Philippines.

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 to be able to produced a standard model based on the perception of the respondents that can be used as a guide of the company in implementing SAP system based on the information conducted of the research. This model is to be used in further enhancing of the system and as well as the process of the business operation that will eventually make the company effective and efficient. Furthermore, in assessing the relationship of the extent of SAP

implementation and level of effectiveness of the same will offer a complete guide for the company for trouble shooting for any unnecessary situation that will serve as a hindrance in the business operation. The objective will be attain through the use of survey questions that will determine the extent of the system implementation and the 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 (2006) 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 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.

Furthermore, the used 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 perception of the researcher regarding the study for a better and vivid understanding. The study focused on the extent of SAP integration of KEPCO Philippines in its level of effectiveness in processing financial information as input in developing a conceptual framework. 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, nature of work and SAP function(s) and the extent of SAP implementation with regards to business process reengineering, configuration of the system, team users and trainings, testing, goinglive and post-implementation. Further, the second box relates to dependent variable which is the level of effectiveness in relations to accuracy, relevance, 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. Input 2. Profile of the respondents 1.1 Age 1.2 Sex 1.3 Job position 1.4 Nature of work 1.5 SAP Function(s) 3. Extent of SAP implementation 2.1 Business process reengineering; 2.2 Configuration of the system; 2.3 Team and users trainings; 2.4 Testing; 2.5 Going-live; and 2.6 Postimplementation. Process Output

1. Business Process Flowchart 1. Level of Effectiveness 1.1 Accuracy 1.2 Relevance 1.3 Efficiency 1.4 Economy 1.5 Productivity 2. Business Productivity Measure 3. Intranet Based Manual for FICO Users

Figure 2 A Conceptual Framework showing the Development Model of Business Process Flowchart and Intranet based Manual of KEPCO Philippines

The Variables, their Definitions and Importance to the Study Research papers will mention a variety of different variables, and, at first, these technical terms might seem difficult and confusing. But with a little practice, identifying these variables becomes second nature. In research, the most heard kinds of variables are the independent and the dependent variables. If the variables is said to be manipulated by the researchers it is the independent variables it is presumed as the cause. While, dependent variables is the response that is being measured and it presumed as the effect. In this study, the independent variables are the integration of Systems, Applications and Products (SAP) of KEPCO Philippines replacing the old computeraided system in processing financial information, while the response of the respondents that is grouped according to their profile is the dependent variables. Likewise, to measure the level of effectiveness, which the dependent variables in this study, the independent variables are the following: 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 he 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). 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). Relevance The concept of relevance 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, relevance 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 relevance, great timing is needed and in accounting accuracy is sometimes sacrificed. For this study, relevance is to be tested in the easiness of generating reports and schedules that might needed for a certain decision that needs immediate action. Relevance is a potential property not only of utterances and other observable phenomena, but of thoughts, memories and conclusions of inferences. In relevancetheoretic 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 relevance theory by Sperber and Wilson, utterances raise expectations of relevance not because speakers are expected to obey a Co-operative Principle and maxims or some other specifically communicative convention, but because the search for relevance is a basic feature of human cognition, which communicators may exploit. In this section, we will introduce the basic cognitive notion of relevance and the Cognitive Principle of Relevance, which lay the foundation for the relevance-

theoretic approach to 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. Efficiency ratios are 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 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 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 project s (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 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 isnt everything, but in the long run it is almost everything. A countrys 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). 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 this study, the researcher developed a business productivity framework to measure how end users feel SAP applications impact their personal productivity (Keystone, 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 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. 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. 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 an integration of business management practices and modern technology. Information Technology (IT) integrates with a corporate houses core business processes to streamline and accomplish specific business objectives. Consequently, ERP is an amalgamation 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. 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 t echnical means and theirinterrelation with life, society, and the environment, drawing upon such subjects as industrial arts,engineering, applied science, and pure science.

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 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, goinglive of the integration and the post-implementation. Likewise, the level of effectiveness will be asses in this study. Effectiveness shall be measured suing the test of system accuracy, relevance 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 countrys 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 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 thats 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.

Figure 2 Map of Makati

Figure 3 Map of Salcedo Village, Makati City.

Subject of the Study The respondents of this study are 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 researched decided to make the 100 per cent (100%) population of the subject to be the respondents or total of 46 respondents, four (4) from KEPCO Holdings, twenty seven (27) from KEILCO and fifteen (15) from KSPC. Below is the table that shows the total number of the respondents for this study.

Table 1.0 Subject of the Study

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 four (4) users from KEPCO Holdings, twenty seven (27) users from KEILCO group and fourteen (14) users from KSPC. The researcher used the selective methods of sampling techniques, specifically the purposive sampling technique. This method is to be used when studying a certain or particular groups.

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

Statistical Treatment In this study following statistical tools are used: 1. To determine the profile of the respondents, the frequency, percentage, and rank distribution is used. 2. To determine the extent of implementing the system which is SAP integration of KEPCO Philippines, in terms of business process reengineering,

configuration

of

the

system,

trainings,

testing,

going-live,

post-

implementation , the weighted mean is applied using the Likert Scale:

Scale

Scale Interval

Degree of Importance

1 2 3 4 5

1.0 1.79 1.8 2.59 2.60 3.39 3.40 4.19 4.20 5.0

Strongly disagree (SD) Disagree (D) Neutral (N) Agree (A) Strongly Agree (SA)

3. To determine the level of effectiveness of integrating SAP of KEPCO Philippines in their Financial and Control Process as perceived by respondents using Likert scale:

Scale

Scale Interval

Degree of Importance

1 2 3 4 5

1.0 1.79 1.8 2.59 2.60 3.39 3.40 4.19 4.20 5.0

Strongly disagree (SD) Disagree (D) Neutral (N) Agree (A) Strongly Agree (SA)

4. To find out the significant difference of the extent of SAP integration of KEPCO Philippines in terms of business process reengineering, configuration

of the system, trainings, testing, going-live, post-implementation, the one-way ANOVA is employed. 5. To find out the significant difference of the effectiveness of SAP integration of KEPCO Philippines in terms of accuracy, relevance, efficiency, economy and productivity the one-way ANOVA is likewise utilize.