Clariant's penchant for doing things differently seems to be paying off huge dividends. Around seven years back, when most of its peers were still evaluating the benefits of ERP, the company went ahead and implemented its ERP system. And now it is extending this system in a unique offline mode to its distributors and suppliers too, says Srikanth R P

In the current economic downturn, investing in IT solutions is undoubtedly the key to making many a company’s operations more efficient. But today’s technology can fast become obsolete tomorrow. It’s therefore a tough call for a CIO or CTO to make a choice between completely overhauling a legacy system or going in for tremendous adjustments to integrate a new technology with existing processes. Traditionally, most organisations have taken the popular approach where old legacy systems have been ripped off and millions have been poured into new systems. This is where the approach of the Rs 300 crore Clariant (India) makes it radically different from the IT initiatives of other organisations.

Widening the net
Clariant (India) is in the business of manufacturing, developing and marketing speciality chemicals and dyestuffs for textiles, leather and paper processing industries. The company also manufactures dyes and additives for the plastics industry. As with any big company, Clariant too realised the needs of an ERP system and had it operational nearly seven years ago. The ERP solution ‘BPCS’ from System Software Associates was then chosen keeping in mind the functions and solutions pertinent to the chemical industry. Today, the ERP system covers the entire gamut of the company’s operations, namely financials, sales administration, material management, production, planning and costing. (See Box Below: Business planning and control systems at Clariant) Right from the moment a particular raw material enters the company, to the various stages of production—everything is tracked on a real-time basis. With the basic internal system in place, the company thought about extending the benefits of its ERP system to its suppliers. But with around 85 distributors spread across the length and breadth of the country, the company had a challenging task on hand.

Technology options
In terms of technology, the company had many choices for connecting its distribution network. In addition to using the Internet as a medium for providing online connectivity to distributors, Clariant also had an option of connecting distributors through VSATs. But if the option of connecting all the distributors through VSATs were exercised, then it would have meant investing huge amounts in just the infrastructure. Further, though Internet connectivity was available in almost all the places where Clariant’s distributors operated—the poor quality of connections in remote places ruled out the possibility of distributors being connected all the time. Further, the security policy of the company made it very clear that none of the company’s confidential data was to be hosted on the Internet in a public domain. In addition to these hurdles, the management wanted a solution that would enable it to link its distributors in a cost-effective way.

In the old system, distributors filled in details on a plain sheet of paper whenever they wanted a particular dye or a chemical, and faxed it to the main office. While this mode was costly for the distributors, it was also time-consuming for Clariant. As the orders started increasing, the company was looking at a situation where the handling of data was becoming unwieldy. Orders were building up and there was a huge backlog of data. There were also cases of dispute when due to the non-clarity of faxes received, either a wrong product was shipped or no product could be shipped. Due to all these reasons, the time taken to process an order used to be a minimum of 5-10 days. While these problems were reason enough for the company to connect its distributors online, it wanted to evaluate different options before selecting a particular technology or product.

CILFlashNet
Before implementing the system, a task force was set up and a basic requirement analysis was done. Both the offline and online options were examined and an offline model without direct connection to the ERP solution was found to be most appropriate. Next, the requirements of the various business units were studied, and draft specifications were prepared. After evaluating a host of options, the company adopted a totally different approach and selected a solution from a company called Abacus Software Services. The solution christened ‘CILFlashNet’ follows a distributed database management system using the POP3 and SMTP protocols for automated peer-to-peer networking in an offline mode. What makes this solution different is the fact that except the software, no additional investment had to be made by the company or its various distributors, thereby making it a win-win situation for both the company and its distributors.

This is how it works. Every distributor of Clariant is given a CD, which contains all the relevant data pertaining to the distributor. The CD contains a list of over 6,000 products manufactured by Clariant. Whenever any distributor needs to make an indent or request, all he has to do is fill up an indent form in an offline mode. That done, the distributor has to connect to the Internet and hit the submit button to post the details of his order to the main office in Clariant. Today, a distributor armed with only a PC and an Internet connection enjoys B2B connectivity for all his order requirements. Also, the software is intelligent enough to update only the incremental data. For instance, if a new product is introduced, then as soon as a distributor connects, the details about the product are updated in the master database.

Not surprisingly, when the whole speciality chemicals manufacturing industry was going through a downturn, Clariant (India) managed to buck the trend.

The role of IT in the success of the company is undoubtedly significant. Says Prakash Rastogi, managing director of Clariant (India), “Due to our e-connectivity initiatives, we have connected as many as 85 distributors online. Hence, order processing which took 15 days earlier now gets done in one day.” Further proof of the success of the solution comes from the fact that till date, all the distributors combined have processed over 3,200 orders using this system. Over 94 percent of all orders are received through CILFlashNet.

Taking on challenges
Implementing the solution was no easy task and the company had its share of challenges. Many of Clariant’s distributors had their own ERP systems in place to manage inventory. Therefore, there was a major challenge in integrating disparate IT systems of distributors with the ERP system of Clariant on AS/400. To address this issue, a module was developed which could interface with any database or RDBMS independent of operating systems and hardware platforms.

The development cycle for the distributor module took six weeks and the entire solution was rolled out in eight weeks—connecting all the distributors across the country.

Benefits
Besides cutting down order processing time, the solution also ensures direct access to the product catalogue, the latest stock position and invoice status. Since the information is readily available and transmitted electronically through the Internet, a distributor pays only local call charges as opposed to the STD charges that he used to pay earlier. As each distributor is automatically given an acknowledgement, he does not have to worry about the receipt of his order. Additionally, regular updates are provided to distributors, indicating clear records and latest status of each item of various indents under process. Each and every order can be tracked right from the moment the company receives an order to the moment it is despatched.

Since data is entered and viewed offline, CILFlashNet is different from a portal. And this is where there are tremendous cost benefits. Explains S Viswanathan, deputy general manager at Clariant (India), “There are strategic reasons for selecting the offline mode compared to an online mode. The number of items available for sale is quite high, and hence the access time would be very high if the portal route was taken. What makes this software unique is also the fact that the software can be installed remotely. From Clariant’s point of view, all orders from various distributors can be seen at a single console and orders can be segregated according to different fields such as date, type and availability. Additionally, top distributors can be identified as sales and region-wise trends can be pointed out.

Benefits to suppliers
After achieving success in extending the ERP system to its distributors, Clariant thought of extending the same benefits to its suppliers. As it sources raw materials from many suppliers, there was a need for a solution that could streamline operations. In the earlier system, whenever a supplier supplied raw material to Clariant depending on the specifications given, he was given a qualitative report along with the payment details. With the current system, suppliers are sent purchase orders electronically and payment details can be tracked online. Along with each order, details of the payment like the date when the cheque was sent, amount and the quality parameters on which the payment is made are entered. From Clariant’s viewpoint, it gives the company the ability to see how much stock each supplier holds for the company.

As a result of these initiatives, 100 percent connectivity is today possible with Clariant’s distributors, branches, marketing executives and suppliers. Besides facilitating order processing, CILFlashNet ensures direct access to product catalogues, quality reports, schedules and despatch details between suppliers and the company. And while new technologies will continue to emerge on the IT landscape, the case of Clariant (India) proves that adopting a radically different approach can set new benchmarks.

Business planning and control systems at Clariant
Area of Application	MODULES	Main Features
FINANCIALS	Account Receivable	Online payment updates by customer Customer credit control & credit rating Online enquiry on credit status
	Account Payable	Integrated with purchases and inventory Automatic bill passing
SALES ADMINISTRATION	Customer Order Processing	Order booking and enquiry integrated with inventory Customer pending order inquiry and customer stock allocation features
	Billing & Sales Analysis	Updates stocks and customer billings, Caters to India-specific taxes & discounts Sales reporting as per group (V8)
MATERIAL MANAGEMENT	Purchasing	Purchase orders as per production plan requirements Vendor performance rating features
	Inventory	Online inventory by item integrated with purchase, order processing & production Modified for accounting material receipts QA approvals and bar Coding
PRODUCTION	Shop Floor Control	Online updates of production batches Online requestition for production
PLANNING	MRP (Material requirement plan)	Powerful MRP II features for accurate material planning
	MPS (Master production scheduling)	Online manufacturing plan based on sales Forecast & considering inventory, back orders and expected deliveries
	Capacity Planning	Considers defined plant capacity and plans for optimum plant usage
	API (Advanced process industries)	Features of tracing products and batches. Advantageous in audit tracing
Source: Clariant (India)