Extending ERP

Investments will be made in extended ERP systems. Many companies will buy additional user-licences and modules, says Akhtar Pasha

ERP continues to account for the bulk of Enterprise Application Software (EAS) investments.

Penetration is highest in the manufacturing and pharmaceutical sectors. In manufacturing, 88 percent of respondents have an ERP system, and a similar percentage is noted in pharmaceuticals. FMCG/retail, telecom and oil follow. That said, many large businesses do not have basic transactional systems in place, or they depend on legacy, non-integrated systems. Raymond, Arvind Mills, Pantaloon Retail and Sandoz are examples of this phenomenon.

We believe that while investments in ERP will continue, many large businesses are buying additional user-licences and modules as they expand their operations and networks. Says Ravi Kathuria, Director, Marketing and Solutions, SSA Global India, “We find a good percentage (over 50 percent) of our business coming from repeat orders from these large enterprises in the form of additional user-licences and functionality modules including HR and payroll. This is because their transactions have grown along with capacities and sales.”

Rail Coach Factory, for example, uses a home-grown ERP system. It has added modules such as Supply Chain Scheduling to optimise scheduling on the shop floor. Ashok Leyland has also gone in for a supply chain module. Some more examples are NTPC, Alstom Power Services, Spice Telecom, Aramex, Sundaram Industries.

Says Nagaraj Bhargava, Director, Marketing, Alliances and Sales Operations, SAP India, “ERP penetration in large business is still low. Of the 2,000 large companies in India, only 35 percent have ERP systems in place while some continue to use their home-grown application. This tempts us to continue focussing on this segment.” SAP is tapping large businesses that were early adopters of ERP software and had deployed applications that are no longer supported. Bilcare and DCM Engineering are two examples of this trend.

Setting the tone

Comments Gowri Shankar, Executive Director, Take Solutions, “You don’t need to sell the benefits of automation.” Most of the companies contacted by us agreed that improving supply chain efficiencies, cutting time-to-market, and trimming inventories are focus areas, and that IT spend revolves around these. Sundhara Rajan, Worldwide Finance Manager, Reloadable Cameras, Kodak India Manufacturing, recalls that their material procurement, accounts payable and goods receipt notes were affecting their inventory levels. “We used to do manufacturing order planning once in three months, but this now takes place once a week. It’s a huge improvement as we are in Just-In-Time mode and carry minimal inventory.”

Affirms V K Singhal, Deputy General Manager, GTC Industries, “Our departments were using separate packages to manage their operations, and the data never tallied, which led to inventory pile-up. Our inventory-holding used to be in the range of Rs 3 crore. After implementing Baan ERP (from SSA Global), we have been able to reduce our inventory by Rs 1 crore—that’s a huge saving which directly adds to our bottom line.”

Garment manufacturers adopt RFID

Large businesses agree that 4 to 6 percent of sales are lost as products move from the assembly line through the supply chain to the end-customer. Half of the loss results from failure to restock popular items, and the rest is because of shrinkage (lost or stolen items). This is where RFID (Radio Frequency Identification) can dramatically improve production efficiencies, asset utilisation, forecasting and inventory accuracy, and ultimately customer satisfaction by pinpointing the location and status of products as they move through the supply chain. “These improvements can increase the quality and efficiency of the entire supply chain and lead to significant savings in areas such as inventory and labour,” says Chinar Deshpande, CIO, Pantaloon. RFIDs can update all inventories at one go in a few seconds. They also release people who would otherwise be involved in scanning merchandise.

According to Rajat Mathur, Vice-president, International Operations and Business Head, Solutions Division, Wipro Infotech, “RFID allows consumer-good manufacturers to capture accurate information about the location and status of physical objects, and track them as they move from the assembly line to the retail stores. This raises the efficiency of individual processes and asset utilisation, enhances forecasting, and improves the ability of companies to respond to changes in supply and demand with a high degree of certainty.”

Of the respondents, 28 percent plan to implement RFID while the rest are firm in saying ‘no’ to the technology. The telecom and BPO verticals show high interest in implementing RFID. Manufacturers are also keen on it. Some are implementing RFID while others are testing the waters through pilots or Proof-of-Concept centres. This is especially so in garment manufacturing, oil, power and pharmaceuticals. The Indian Railways is contemplating using this technology to track goods wagons across zones. Pantaloon has purchased 1,000 RFID tags. Madura Garments is conducting a pilot with 15,000 tags.

RFID will be the only technology that will be used in the supply chain and in retail N P Singh Vice-president Information Technology Madura Garments

Explains N P Singh, Madura’s Vice-president of Information Technology, “RFID will be the only technology that will be used in the supply chain and in retail.” RFID will improve labour efficiencies, increase production and eliminate downtime in stocktaking. “It takes us two days to execute the stocktaking process at the warehouse,” adds Singh. This downtime can be avoided using RFID.

Pranesh Deshpande, IT Manager at Raymond opines, “We are still understanding RFID and what value it can bring to our business. It will improve stocktaking and help track finished goods, but cost is the limiting factor.” Says GTC’s Singhal, “We did some ground work in setting up RFID, and found that it would cost us between Rs 15-20 lakh at both the factories in Baroda and Mumbai. RFID makes sense if businesses have high-value products.” Deshpande wonders why Lever and P&G are not adopting this technology if it is all that it is cracked up to be. Of the respondents who are not implementing RFID, more than half (55 percent) say that it does not suit their business due to high costs of deployment.

Cautions Mathur of Wipro, “The real productivity gains will come when RFID gets implemented at the warehouse and is extended to branch offices and retail outlets.” Wipro is doing several pilots, one of which (at Arvind Mills) is similar to what Pantaloon has done. BPCL is using RFID for access control at one of its petrol pumps in Bangalore where only authorised personnel with RFID cards can dispense fuel.

SRM comes of age

Supplier Relationship Management (SRM) will emerge as a discipline focussed on sourcing, engagement, procurement and settlement. In the next two years, mature SRM offerings will include features such as supplier selection, bid management, e-procurement and supplier performance analytics. Companies are looking at streamlining their supply chain cycle to increase productivity and capacity. Dabur, TVS Motors, Indo Rama, ICICI Prudential and BEML are some examples of large businesses that are e-sourcing their requirements. Affirms Ravi Kumaraswami, Group Director, Ariba India, “We have helped large businesses source Rs 22,000 crore of raw material and packaging material, and helped them save Rs 2,750 crore through e-sourcing.” Adds Jude Magima, Vice-president, Supply Chain, Dabur India, “Using e-sourcing and reverse auction tools, large businesses can save 3-5 percent on costs over and above the negotiated price.”

Rudimentary but functional

CRM (Customer Relationship Management) is quite popular with BFSI, telecom and BPO, as these verticals have a huge base of customers and products that can be cross- or up-sold. Going forward, these verticals will continue to drive CRM. That said, the use of CRM in India Inc. is limited to service and support. UTI Mutual Fund outsources one crore service records (of its customers) to four agents—UTI ISL, Cans, Datamatics Financial and Karvy, and each of these has its own legacy application for maintaining customer records. Notes Raghunatha Reddy, Assistant Vice-president, IT, UTI Mutual Fund, “As service records are handled by these four agents, there is no proper track of service records and we are not able to collate complaints.”

To explain the complexity he gives an example. A customer, X, has bought a children Career Plan which is handled by one agent. The same X has also bought UTI Bond Fund, which is handled by another agent. Now if this customer wants to communicate his change of address or wants to withdraw a policy, he has to write to two different agents. Similarly, if the customer wants to transact, he requires two different pins to do so. “Additionally, we cannot cross-sell or up-sell products to high net worth individuals because there is no 360-degree view of the customer available to us. Therefore to begin with, UTI Mutual Fund will invest in CRM for service support, and later move to integrate sales and marketing,” concludes Reddy.

Says Rajesh Ghosh, Vice-president and General Manager, Sage Accpac India, “You should know who the top 20 percent of your customers are, and you’ve got to make sure you retain them. You’ve got to find the reasons why they are with you, why they are paying premium prices, why they may have a lot of accounts and how you created value in that relationship to make switching either too expensive or undesirable.” Aramex, a large logistics player, uses Sage Accpac CRM and BI tools.

BI takes centre stage

BI and associated tools such as corporate performance management and balance scorecard are on the investment agenda of BFSI, telecom and pharmaceuticals. Businesses in BFSI and telecom want to analyse high net worth individuals so that they can focus on them and offer customised services or products. BI becomes a strategic tool for manufacturing to take business decisions.

Rajan of Kodak comments, “BI was customised to our requirements on to Softbrands Manufacturing’s ERP system. It helps conduct product-cost analysis. Using BI tools, we can find the unit manufacturing cost of each type of camera. We can keep a tab on variables such as labour, fixed costs, material, tooling and internal costs. Considering these variables, we can calculate the margins we need to keep for each type of camera, and also analyse how we can go about improving these margins.”

Explains Ghosh of Sage Accpac, “Today it’s a buyer’s market; therefore, you need to have checks and controls on operations to retain customers. Large businesses are focussing on secondary sales, and they want to know the patterns in customer-buying so that they can plan their capacities and production to reduce wastage. These factors are driving large businesses to look at Six Sigma and solutions such as Balanced Scorecard or Corporate Performance Management.” He adds that some large businesses are going a step further and using BI tools to analyse where they should be focussing on and what changes they have to make in their production and supply chain to boost their profits by another 10 percent.”

NMS rides high

Of the 2,000 large ompanies in India, only 35 percent have ERP systems in place while some continue to use their home-grown applications Nagaraj Bhargava Director, Marketing SAP India	We find over 50 percent of our business coming from repeat orders in the form of additional user-licences and functionality modules Ravi Kathuria Director, Marketing & Solutions SSA Global India

Network Management Software (NMS) such as Unicentre, HP OpenView, Tivoli and SAAZ are being used by organisations in the BFSI, oil, power and BPO sectors. According to IMRB, planned investments will continue to be high in these verticals. However, manufacturing has other plans. Large businesses are found to be using in-house NMS solutions in that segment, or they are using point solutions that come bundled with network equipment. According to Rajiv Rajda, Vice-president of Kodak India, “We have 31 links (leased lines) and 450 nodes, and we are using Solar Winds to manage our bandwidth consumption. It helps us route network traffic if a link is down.”

Affirms N Shekhar, CIO of Sandoz, “We are using a customised network management tool called NMR, which is developed by our regional headquarters in Singapore. NMR is predominantly used to manage our server resources (server utilisation rate and updates).”

Remarks Pravir Arora, Director, Marketing and Head- Channels, Computer Associates, “Large businesses will possibly have multiple offices across geographies and they are expanding. This calls for more robust IT infrastructure. Additionally, large businesses want to leverage existing IT infrastructure and boost network performance and capacities, which calls for investment in comprehensive NMS solutions and not point solutions that come bundled with networking equipment.” Further, some large businesses are using applications on rent, which lets them calculate the performance of applications using NMS. Customers have different SLAs with vendors, which are also driving NMS investments.

FMCG drives location-based services

FMCG and the dairy industry are driving GIS-based services as geographical information—demographics in particular—weighs heavily on their business. Telecom is the other vertical that is into GIS/GPS for offering location-based services to transporters who use these to manage their fleets. According to the survey, of all the respondents who have or are planning to invest in enterprise application, only a small percentage (15 percent) are planning to use GIS/GPS for tracking inventory movements. Telecom, oil and gas are key verticals that are driving GIS/GPS. These applications can be used where businesses depend on collecting data from a vast area. For example, Sumul Dairy uses a GIS system to get relevant information pertaining to cattle feed and income being generated from its many milk-collection centres. It also uses the software to define the most efficient route to be taken by its milk-collection trucks.

Kamesh Ramamoorthy, who is Executive Vice- president of Enterprise Solutions at Ramco Systems, believes that “Large businesses will continue to focus on supply chain and demand fulfilment, and going forward they will have virtual sales.” Large businesses will drive investment in extended ERP systems—be it ERP, SCM, CRM, BI or NMS. RFID will make sense in workplaces where the transaction volumes are huge and in organisations that have large distribution networks and data warehouses.

akhtar@expresscomputeronline.com