Enterprise applications

A single integrated enterprise

MBs continued to put their transactional systems in place. Being hungry for growth, they are investing in ERP as a strategic differentiator says Akhtar Pasha

The survey reported that 76% of 194 respondents have already invested in enterprise applications and that manufacturing had the second highest penetration of enterprise applications after IT/ITES. ERP continues drive the bulk of enterprise application deployments with a penetration of 43% followed by databases with 28%, enterprise messaging, CRM, middleware and SCM slowly kicking in with 22%, 21%, 15% and 10% respectively. ERP penetration was highest in the manufacturing sector.

68% of the respondents in manufacturing have invested in enterprise applications, 64% of those in BFSI, 46% in Professional/ Other services and 45% in IT/ITES.

35% of 189 respondents are planning to invest in enterprise applications in 2008-09. Vertical-wise manufacturing will continue to lead from the front as 49% of these companies are planning to spend on ERP. Databases (37%), CRM (19%), SFA and BI with (13%) each are the other focus areas for this sector.

Most MBs continue to use in-house legacy applications for their business operations and that’s because many of them are still small and their nature of business does not warrant investment in standardized off-the-shelf ERP.

Legacy applications still popular for transactional systems

Green Park hotel has been using a legacy application, Fortune Enterprise (a product of IDS Software Pvt Ltd) a hospitality ERP systems for the last 16 years to manage its front office, reservation, check in/out, lobby desk, operations, point of sale billing, sales & marketing, material management and the like. N Pawan Kumar, Manager-IT, Green Park said, “We have gone in for an integrated suite because it gives us a complete overview of our business operations at the click of the mouse. In one stroke we get how much revenues are coming from rooms, billings, taxes collected from guest, taxes collected from liquor and like across our operations in Hyderabad, Chennai and Visakhapatnam. All this is just not possible from disintegrated manual systems, which are error prone and double the workload.”

He added, “We also do a bit of data mining looking into the history of our high-net worth guests and their preferences. ERP has enabled us to serve our guests better.” For Financial Accounting, Green Park continues to use Tally.

Similarly India Motor Parts & Accessories Ltd (IMPAL), a TVS Group Company is using a Trading application software that was developed in-house for billing, materials, procurement, stocks and inventory. V Sridhar, Assistant General Manager-Systems & Materials, IMPAL said, “Our business operations are such that it does not call for a sophisticated tool such as ERP. Our Trading software can run our business operations (52 dealers serving 40,000 customers in India) with ease. It [Trading software] is a strategic tool for our business, as we cannot do billing if we do not get receivables of materials. We can also do credit checks for dealers and if they have any credit already we can stop issuing credit notes.”

John Jacob, Systems Administrator, Style Spa Furniture Ltd a furniture retailer and manufacturer said, “We continue to depend on Tally for FI and budgeting, inventory and stocks. All the reports and budgeting across our 16 office locations are mailed through the Internet and are downloaded centrally on Tally to generate MIS reports. We are satisfied with the Tally system.”

That said, there are also MBs that have invested in standard ERP solutions and done away with legacy applications, which did not scale as per their business growth.

Lack of visibility impedes operational efficiency

The top management at Adhunik Group felt the need for an ERP solution to help them to optimize production cost and generate more revenue, improve quality and enhance customer satisfaction, while increasing competitiveness as well as meet market demand and sustain organic growth. The company realized that its fragmented IT systems spread across multiple locations could curb its growth plans. Rajat Subhra Dutta, General Manager IT, Adhunik Group of Industries informed, “It was a cumbersome process for the top management to access data as and when necessary. It was also quite difficult to get the exact picture of our plants located at Rourkela, Jamshedpur and Durgapur. We needed to drastically reduce the complexity of processes and the operating costs of the multiple systems accumulated over the years.” There were instances when the top management was unable to access the procurement stocks, used and unused materials, product mix and pricing, which resulted in unnecessary expenses and reduced profit margins.

Ketan Constructions Ltd (KCL) with a record of accomplishment that included several infrastructure projects had disparate systems that led to work duplication and delays in report generation. As accurate information was not available on time, the company could monitor the progress of projects and the movement of equipment between projects. In addition, KCL was finding it difficult to figure out monthly purchases against the consumption of materials. Owing to this inefficient procurement planning process, there was a considerable increase in cost and the company was unable to plan the allocation of resources for various projects. Preeti Barad, Director, KCL said, “In the pre-SAP implementation period, the distribution of equipment and materials was not uniform. There was shortage of equipment and raw materials in one project while there would be a surplus elsewhere and it affected our business.”

D B Power Electronics Pvt Ltd., a manufacturer of UPS systems and power conditioning solutions is another case in point. They had disintegrated legacy ERP Systems developed. Material requirement planning, procurement and some basic logistics were also functioning as separate modules. Bharat Keskar, Manager, SAP Operations, D B Power Electronics Pvt Ltd explained, “The financial module was on a FoxPro-based system and was disparate from the sales systems, which did not have an ERP system at all. Spreadsheets were used to make reports. The result was that correct information was not flowing smoothly across projects and through to the management.

With all the stats and examples in place, let us examine why there is a big momentum in enterprise applications. Most MBs are already invested in creating basic IT infrastructure including desktops, printers and software and the next focus areas for them are networking, servers, storage, security and along with enterprise applications.

The percentage figures represent planned technology penetration /usage within MBs. These numbers may add up to more than 100% since a particular respondent may plan to invest on multiple technologies. Base = 189

Managing growth with ERP

As per the survey, over two-thirds of MBs contacted said that they are keen to open new branches to increase geographical coverage and cater to a newer and larger customer base. Manufacturing with BFSI and IT/ ITES verticals show much higher growth plans compared to the average. However, manufacturing’s lot is better and more interesting. The average number of branches manufacturing vertical has is 9.3 with 94% of these companies having operations in multiple locations. 75% of manufacturing concerns in the MB segment plan to add locations and an average of 2.9 branches are supposed to be opened in 2008-09. Dutta said, “We have expanded our manufacturing in three locations in the past and had aggressive growth. Our legacy systems could not have met the current requirement. Additionally it was hurting our business, as we could not speed up production. Maintaining legacy applications was pinching our pockets.”

Crystal Phosphates manufactures a wide spectrum of agriculturally important agro-chemicals and it had spread its operations into 27 branches across India including regional offices, company owned branches and carrying-and-forwarding agencies. It has three manufacturing plants in Delhi, Jammu and Sonipat, Haryana. Lalit Thakur, manager-IT, Crystal Phosphates said, “When you are growing at that rate its difficult to sustain growth with legacy applications. We were using a legacy system that had been developed in house. It was a basic offline model progressively developed over a period of time. In order to simulate the facilities of an online enterprise, data was created periodically all day long and then e-mailed to the head office. It would then be added to the database of the branches to consolidate data and a report was prepared. This was a tedious and error-prone procedure.”

The percentage figures represent planned technology penetration /usage within MBs. These numbers may add up to more than 100% since a particular respondent may plan to invest on multiple technologies. Base = 189

Total visibility into its operations

The Adhunik Group of Industries has implemented SAP ERP to automate and streamline key business processes such as sales and customer service, logistics, finance, stores, procurement and reporting. Dutta said, “Now, everything is visible. We have ready availability of data such as production figures, the total value of the materials, the vendors etc. We are slowly getting a clear picture.” For instance, if a customer makes a complaint, the sales staff has access to relevant real-time data on the production parameters, the quality parameters, whether the complaint is truly genuine etc. We are in a position to give the correct feedback to our customers and keep them happy. The sales team can react faster to market changes and plan more effectively for sales activities, leading to an increase in productivity and efficiency throughout the sales process. Adhunik can now focus on customer value-adding activities. It is this visibility MBs are looking for—which is strategic and yet scalable to support their future growth.

Barad added, “After implementing SAP ERP, we are able to monitor the materials stock accurately and initiate procurement action only as and when the stock level goes below the threshold. We want visibility into our systems.”

According to Keskar real time information and reporting is important. Data such as the different products that are available for sale, their price and order status, production status, stock levels, etc is available 24X7. Continuous connectivity has therefore become a matter of paramount importance. “Since the data is now online and available to everyone, communication costs have come down a great deal. The sales agents just have to look up the needed information online rather than make expensive, time-consuming long distance telephone calls. Cost estimation for project-based orders has become easier and quicker. In such orders, the customer gives his own variants for a standard product, so deciding the cost of such a project was difficult earlier. Now since the raw material costs, stock levels, etc are online, a quick calculation of the estimated project cost and the quotation cost can be generate for the customer,” he said.

With the SAP ERP Portal running, DB experienced the benefits of consolidated data and streamlined business processes. The main business flows namely—the order-to-sales, material planning-to-customer and material management-to-logistics has been integrated. However, the biggest advantage of using SAP has been the large reduction in inventory carrying costs. The latest review taken across their three manufacturing plants points to a clear 20% reduction in costs and increased accuracy.

Bhausaheb Patil, Director-Technology, Sakaal Group a leading regional publishing house said, “ERP has played a seminal role in transforming Sakaal from a reputed but old generation media group into a new age digitally savvy media company. This IT initiative has opened up numerous business opportunities for the company and the results are there for all to see.”

Thakur added that critical functionalities like costing, profitability and resource management were handled offline. It was an insecure system, which had scope for the customer and the supply chain agents to skip necessary credit checks and override permissible limits. The top management could not have access to complete and correct information regarding sales, finance and profits. Since production planning and forecasting were not included in the legacy systems at all, the company could not keep up with the sudden surges or drop in demand for various products. It was getting increasingly difficult to remain customer-oriented. It was then that the company decided to go in for robust IT systems and implemented ERP. He added, “We are a technology-savvy company and we wanted the latest technology in the market to support us. This is the key factor which makes our company grow faster and better than our peers,” said Thakur. With an integrated enterprise system, Crystal Phosphates is now getting complete clarity and transparency of all its business operations.

CRM, BI, SCM takes a back seat

There have been instances where we came across of MBs using a part of CRM and BI tools. However, those instances were extensions of the ERP itself and not standalone implementations. This clearly underscores that fact they are not prepared for CRM/BI/SCM yet as they are still focusing on putting their transactional systems in place. MBs are thinking about these technologies. Keskar said, “Within the next couple of years, we may opt for SAP Business Warehouse.” says Keskar. They are also considering SAP Strategic Enterprise Management i.e. scorecard type of management etc. for better Management Information Systems (MIS) Reports. Green Park is using part of SFA built into their hospitality ERP for sales & marketing.

MBs, particularly in the manufacturing sectors, will drive the ERP market in 2008-09.

akhtar.pasha@expressindia.com