Odd as it may seem, not many IT distributors use the IT products they deal in. Srikanth R P comes across one that does—with very positive results

Atul Mehta says the ERP system has helped Compuage to address issues such as online sales tracking, inventory management and receivables management to enable real-time decision-making

As distributors of IT products, the Indian IT channel industry deals with IT products on a daily basis. But in spite of this day-to-day interaction, one does not find many distributors who have deployed IT within their own organisations to boost productivity and improve efficiencies. Among the very few IT distributors that have deployed ERP to improve operations is Compuage, the Mumbai-based IT distributor.

The need
The Rs 160 crore company is a national and regional distributor and has 18 billing locations across India. Since the IT distribution business is a highly competitive industry, with margins squeezed at each level, it was important for a distribution company like Compuage to keep track of inventory levels.

But as Compuage had disparate systems at each branch for sales, inventory and financials, the firm used to face problems like inaccurate or out-of-date sales information, coupled with lack of real-time data for effective decision making. For instance, it used to take a week for Compuage to get a real picture of sales, inventory and receivables for each month. Another challenge was in managing the stock levels of critical items and components in the face of huge fluctuations in customer demand every month. In view of the problems faced, the company decided to go in for an integrated enterprise application which would present managers with a unified view of the company’s operations.

Accordingly, in 2000 Compuage decided to go in for a full-fledged ERP system. It selected QAD’s MFG/PRO because the product had a high rate of success in the electronics and distribution industry. In addition, MFG/PRO was a proven product at many sites in India, especially in the distribution segment, with clients having geographically-distributed locations.

Atos Origin India was chosen as the implementation partner for the project as the company had an excellent track record of implementing full lifecycle ERP projects. HCL Infinet was chosen as the communications partner for providing VPN services and connecting all branches of Compuage to the head office. The hardware for connectivity was obtained from Ramco. The ERP software was installed on a central database server from Acer at the corporate office in Mumbai, and hardware redundancies are backed up with disaster management software from Veritas.

Roadmap
Implementing the ERP system was not a cakewalk as there were considerable issues to be addressed. Being in the distribution business, the company’s offices were geographically distributed across the length and breadth of the country. Hence, remote support, connectivity and process change management for implementing re-engineered business processes were major concerns initially.

To enable smooth implementation, Compuage set up a steering committee comprising members of its senior management. Such was the focus that the company managed to complete the ERP implementation in a record five months. This achievement was noted, and the company received QAD’s ‘Rapid Achiever Award’ for successful and fast implementation. Today, after implementing ERP, the benefits are flowing in for Compuage.

Says Atul Mehta, chief executive officer of Compuage, “In the IT distribution industry, information availability at the tap of your finger is no more a luxury but a necessity in today’s scenario of stiff competition, doubled with sinking margins. Now, with the ERP system, we are able to address all the challenging issues we had earlier (such as online sales tracking, inventory management and receivables management) to enable real-time decision-making.”

Benefits
With the successful implementation of ERP, Compuage today has a consolidated picture of sales, inventory and receivables every month as data entered in a particular transaction updates all areas of business at one go. This enables the management to take a top-down view of the operations and take decisions based on real-time data.

A major benefit accruing to Compuage has been the optimisation of stocks of critical items. Thanks to this, the company can view transactional history at an item level and analyse consumption and procurement patterns.

Since the whole system is centralised, Compuage has been able to track inventory levels on a daily basis, including inventory in transit and future consignments to be received. This visibility has enabled the company to control its working capital requirements to a great degree. The success of the ERP solution can be seen from the fact that it has helped the company to achieve an impressive 24 percent reduction in working capital requirements in a short span of four months. Additionally, Compuage has achieved a 26 percent reduction in inventory levels at all its branch locations.

With MFG/PRO in place, a lot of manual processes have been automated, and have helped to reduce human error and improve accuracy. More importantly, the company has been able to re-allocate personnel to other value-added activities. Manpower requirements in the operations and logistics department have been reduced from 25 to 10 people, which translates to a significant 60 percent reduction.

One more critical factor which the ERP system has helped in monitoring is a debtor’s position, very relevant in today’s scenario where payment defaults are astronomically high. Says Mehta, “Since we are into distribution of IT-related products, we need to be extra careful on stock positions and debtors’ positions. With the MFG/PRO system we are able to get instant reports on debtors’ positions across all our locations in India. We can also manage a debtor’s credit position more efficiently, with the ability to identify defaulting parties quickly. This facility has resulted in better returns on working capital, and has contributed to approximately 15 percent net savings.”
Pleased with the performance of its ERP system, the company is now looking at implementing a B2B site for its channel partners, which would enable online payments.

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