Airconditioning major Daikin Shriram is the latest company to reap the benefits of SAP’s ERP suite, says Gaurav Patra

The shift from manual to SAP R/3 was a daunting task for Daikin Shriram’s IS team, says anand sengupta

Daikin Shriram (DS) Airconditioning is the Indian subsidiary of the Japan-based Daikin Industries. The Japanese company has operations across the globe with seven to eight manufacturing units, and has good brand value in Asia Pacific countries.

Daikin Industries entered the Indian market in April 2000 with a joint venture with the Siel Group (Shriram Group). This is an 80:20 joint venture, where 80 percent of the stake is held by Daikin and 20 percent by Shriram. Though DS started full-scale operations only in August 2000, the company is already targeting a turnover of Rs 120 crore this year.

Says Anand Sengupta, senior manager-IT at DS, who has been with the company since the commencement of its operations in India, “I was entrusted with the task of giving a winning edge to the company with the help of IT. When we started operations, ERP was the basic criterion of the whole system.” Sengupta had to set up the hardware and software infrastructure, and then implement the ERP package.

Before going in for a package, Sengupta met with some of the customers of major ERP vendors. He visited SAP’s site at Videocon, for MFG Pro he went to Gestetner, and for Scala he met up with the Hilti MIS Team. Although SAP was the costliest of the lot, the management and department heads at Daikin decided to go in for it. But before the implementation could be carried out, two things were required to be done—proper infrastructure at the branches needed to be set up, and end-users had to be trained.

Why ERP?
Going in for ERP was necessary at DS—streamlining of the entire business process and seamless integration between functional areas were the two major objectives that forced the company to go in for ERP. “Faster RoI and faster decision-making was a necessity, and we realised that only ERP could help us achieve this,” Sengupta states.

Besides, ERP implementation would help in the reduction of the sales order cycle, and also in inventory control and accounting.

The company had two options: either develop the ERP software package in-house or opt for a standard ERP software from an established player. The proposal to develop ERP software in-house was rejected because of various factors. “We felt that in-house development is a never-ending process and also involves high maintenance costs. Apart from this, the level of user-satisfaction is very low as far as in-house software is concerned. That’s why we decided to go in for a standard ERP software from an established brand,” explains Sengupta.

Before finalising on the ERP package, the company decided to evaluate some of the ERP packages available at that point of time. The packages evaluated were Scala, MFG Pro and SAP R/3. The parameters on which they assessed the software were standard best business practices, global acceptance of the package, embedded modern management tools, Indian tax laws, after sales support, and cost of ownership. After stringent evaluation they zeroed in on SAP R/3 which met all the selection criteria. “We also realised that SAP R/3 has a huge existing installation base in India, and they also provide very good support,” says Sengupta. Another factor that influenced the company’s decision was that Daikin Europe NV, Daikin’s chemical division in Japan, and Daikin Germany were already on SAP, while Daikin Philippines and Daikin Italy were in the planning stages. So worldwide, Daikin was working towards a policy of SAP R/3 as the standard ERP software. “Thus going in for SAP R/3 was always a logical move for us,” says Sengupta.

The ERP implementation project at DS was divided into two phases. In the first phase they set up the basic infrastructure—PCs, printers, servers, LAN and VPN. SAP R/3 implementation was initiated in March 2001 at the corporate office and at its two manufacturing plants at Silvassa and Faridabad. After the successful completion of the first phase, it went live at four locations on April 1, 2002. The next phase was completed on June 1, 2002. In this phase, eight out of the company’s 10 branches—Mumbai, Chennai, Ahmedabad, Okhla, Pune, Lucknow, Chandigarh and Secunderabad—were connected to the ERP system.

“When we started the implementation there was no infrastructure. We had to start from scratch. There was also no legacy system and no established business practice. So in that respect it was a great experience.” He says that the shift from manual to SAP R/3 was definitely a big task for the IS team at the company. For the implementation, Siemens Information Systems was the partner.

Sengupta attributes the success of the SAP R/3 implementation to several factors. According to him, sticking to the standard SAP R/3 helped DS achieve this success. “Since SAP addresses all the necessary key issues, in case of SAP implementation customised development should be minimum and should be done only where strongly required.

SAP is a very flexible package to certain extent. But after that if you want to modify it then you face problems. This realisation helped us,” he feels. “SAP offers an exhaustive collection of standard reports for every module which should always be considered before having a customised report.” Another factor that helped to implement a flawless ERP set-up is that DS had master data which was almost free of inconsistencies and errors. The company has implemented SAP modules such as sales and distribution, metals management, finance, service management and business workflow.

Post-SAP benefits
Sengupta feels the implementation has benefitted the organisation immensely; SAP helped the company integrate its network across the country. This in turn helped to consolidate heterogeneous islands of information at one location. Apart from this, seamless integration and smoother flow of information across functional areas was possible. Also because of this consolidation, today there is less fire-fighting activity among employees that results in greater productivity and more effective utilisation of manpower.

Infrastructure
For wide area connectivity, DS has a leased line ISDN connection across all locations, apart from Silvassa, which is a remote location; Silvassa is connected through a VSAT. Both these services are hired from Comsat Max.

As far as hardware infrastructure is concerned, DS has two Compaq Servers and a mix-and-match of IBM and Compaq PCs. Among other applications, DS is using Windows NT platform, Oracle Database and Microsoft Exchange solution. As far as data back-up is concerned, it is in the process of implementing ArcServ from Computer Associates, though it is presently using NT as a back-up tool. In days to come it will also be going in for SCM and Firewall solutions. To connect different machines on the LAN, DS is using Cat 5 structured cabling solution from AMP.

Future IS strategy
Daikin Shriram is planning to connect all dealers to the company’s intranet set-up. This is under the company’s programme called technology -enabled relationship management, whereby it will use technology to build a strong relationship with its dealer partners. These dealer partners will not have to link to the SAP set-up. “To expose our SAP set-up to the Internet we should have all the necessary security features in place. That is part of our future expansion plans,” Sengupta concludes.