Erp Project Up

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Chapter 1

Introduction

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The business environment has been very challenging over the past few

decades. Companies have been looking for various opportunities for enhancing their

competitive edge over their competitors. The advent of Information Technology (IT)

in the last two decades has made the companies to look at IT for creating the

competitive edge required to prevail over its competitors. The IT industry has also

come out with innovative solutions to help companies of other industries in their

respective businesses. Through various solutions provided, IT has become part and

parcel of each and every company irrespective of the industry it is in. The solutions

provided by the IT companies in the form of software applications have largely been

successful. One of the successful software packages is the Enterprise Resource

Planning (ERP) software package and SAP has been the pioneer in providing the ideal

ERP package known as the SAP R/3 package. TVS group was one of the first

companies to implement the SAP R/3 package for its business operations.

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Enterprise Resource Planning

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ABOUT ENTERPRISE RESOURCE PLANNING(ERP)

Enterprise resource planning (ERP) is an integrated computer-based systemused to manage internal and external resources including tangible assets, financial

resources, materials, and human resources. It is a software architecture whose purpose

is to facilitate the flow of information between all business functions inside the

boundaries of the organization and manage the connections to outside stakeholders.

Built on a centralized database and normally utilizing a common computing platform,

ERP systems consolidate all business operations into a uniform and enterprise wide

system environment. An ERP system can either reside on a centralized server or be

distributed across modular hardware and software units that provide "services" and

communicate on a local area network. The distributed design allows a business to

assemble modules from different vendors without the need for the placement of

multiple copies of complex, expensive computer systems in areas which will not use

their full capacity.

The ERP was first employed by research and analysis firm Gartner Group in

1990 as an extension of MRP (Material Requirements Planning; latermanufacturing

resource planning) and CIM (Computer Integrated Manufacturing), and while not

supplanting these terms, it has come to represent a larger whole. It came into use as

makers of MRP software started to develop software applications beyond the

manufacturing arena. ERP systems now attempt to cover all core functions of an

enterprise, regardless of the organization's business or charter. These systems can now

be found in non-manufacturing businesses, non-profit organizations and governments.

To be considered an ERP system, a software package should have the following traits:

Should be integrated and operate in real-time with no periodic batch updates.

All applications should access one database to prevent redundant data and

multiple data definitions.

All modules should have the same look and feel.

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Need for an ERP solution:

An ERP solution can deliver dramatic benefits to businesses of all types and

sizes increased productivity, reduced operating expenses, improved information flow,

and enhanced performance management. Why does a company need an ERP solution?

ERP solutions have been around for quite some time, and until now, many

companies have succeeded without one. Yet, as ERP solution vendors begin to focus

their efforts on small and mid-market businesses, more and more companies continue

to jump on the ERP bandwagon and reap significant benefits from doing so.

Countless different processes, activities, and systems are used to run a

business. Numerous workflows and procedures some manual, some automated

that may or may not be formally documented. And a variety of departmental

applications and legacy databases that are likely disjointed and not well-integrated.

While this approach may have served its purpose in the past, in todays dynamic andhighly competitive marketplace, it can seriously hinder productivity, profitability, and

growth.

The primary reason an ERP solution is so vital to a companys success is

efficiency. Cumbersome, error-prone, labor-intensive manual processes can drain

both time and money. Businesses must operate as lean as possible in order to keep the

bottom line in check, and failing to automate critical, yet routine business activities

makes it nearly impossible to do that. ERP solutions allow companies to achieve true

business process automation streamlining many of the important day-to-day tasks

across a business, and freeing up staff to focus their efforts on more complex

initiatives that require more personalized attention. This can not only boost

productivity and worker output, it can dramatically reduce operating and overhead

expenses.

An ERP solution also bucks the notion that efficiency needs to be consideredone department at a time. Business processes and activities have become increasingly

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complex no matter how big or small a company is, or what industry it is in

requiring multiple teams and divisions to operate as a single, cohesive unit. Without

an ERP solution in place, creating that kind of cross-departmental coordination and

workflow execution can be quite challenging.

Another reason ERP solutions are so critical is their ability to increase

information consistency and accuracy. Many companies still suffer from multiple

versions of the truth incorrect and inconsistent information across the business. For

example, if the accounting department and purchase department access two different

databases which arent integrated, a supplier with a payment question will likely get

an inaccurate answer if they conduct the purchase person for assistance. These

problems, although they may appear small on the surface, can add up, leading to

bigger customer satisfaction and retention issues that can negatively impact revenues

and market share.

But most importantly, an ERP solution makes it easier for employees at all

levels from front line staff members and team supervisors to senior managers and

executives to assess company performance and understand their impact on it. ERP

solutions enable effective objective setting, and allow everyone to monitor progress

towards that goal. This makes companies far more agile by helping them quickly

identify problems in the business, and take immediate corrective action. An ERP

solution can also empower companies to be more responsive to shifts in the

marketplace, quickly changing strategies to address new customer needs as they

emerge.

Modules of an ERP package:

A standard ERP package consists of a set of modules. The components of the

ERP package can be classified as below.

Transactional Backbone

o Financials

o Distribution

o Human Resources

o Product lifecycle management

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can also employ independent program management, business analysis, change

management, and UAT specialists to ensure their business requirements remain a

priority during implementation.

Data migration is one of the most important activities in determining the success

of an ERP implementation. Since many decisions must be made before migration, a

significant amount of planning must occur. Unfortunately, data migration is the last

activity before the production phase of an ERP implementation, and therefore receives

minimal attention due to time constraints. The following are steps of a data migration

strategy that can help with the success of an ERP implementation:

1. Identifying the data to be migrated2. Determining the timing of data migration

3. Generating the data templates

4. Freezing the tools for data migration

5. Deciding on migration related setups

6. Deciding on data archiving

In general implementation of ERP is itself a process of Business Process Re-

engineering. Companies consider the following two options for implementing the

ERP package.

1. Re-engineer the business process before implementing the ERP.

2. Directly implement ERP and avoid re-engineering.

In the first option, the employees will develop a good sense of process orientation

and ownership. This would be a customized solution considering the organizations

structure, culture, existing IT resources, employee needs and promises relatively less

disruption to routine work.

Second option offers world class efficient and effective process with built in

measures and controls and is likely to be quickly installed. But if the employees are

not aware of the processes or the processes are not documented, then the employees

may not be able to perceive the ERP implementation that is done. Thus for successful

implementation of ERP solution employees play a vital role. Only if the employees

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are aware of the business processes of the organization the ERP implementation can

be done perfectly and it will be easy for the employees to work on the new system.

Critical Success factors for ERP Implementation:

The world of technology and business consulting is tainted by horror stories of

ERP projects gone wrong. Companies have had widely publicized lawsuits against

ERP software vendors because of their failed implementations. In some extreme

cases, these companies sue because they couldn't ship product or their entire business

shut down because the software did not work correctly. Many assume success or

failure is the fault of the software you purchase, but in reality, 95% of a project's

success or failure is in the hands of the company implementing the software, not the

software vendor. Here are just a few ERP implementation critical success factors that

we have seen:

1. Focus on business processes and requirements first: Too often, companies get

tied up in the technical capabilities or platforms that a particular software supports.

None of this really matters. What really matters is how you want your business

operations to run and what your key business requirements are. Once you have this

defined, you can engage in a more effective ERP software selection process.

2. Focus on achieving a healthy ERP ROI (Return on Investment), including

post-implementation performance measurement: This requires doing more than

just developing a high-level business case to get approval from upper management or

your board of directors. It also entails establishing keyperformance measures, setting

baselines and targets for those measures, and tracking performance after go-live. This

is the only way to maximize the business benefits of ERP.

3. Strong project management and resource commitment: At the end of the day,

your company owns the success or failure of a large ERP project, so you should

manage it accordingly. This includes ensuring that you have a strong project manager

and your "A-players" from the business to support and participate in the project.

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4. Commitment from company executives: Any project without support from its

top-management will fail. Support from a CIO or IT Director is fine, but it's not

enough. No matter how well-run a project is, problems arise (such as conflicting

business needs), so the CEO and your entire C-level staff needs to be on board to

drive some of these

5. Take time to plan up front: An ERP vendor's motive is to close a deal as soon as

possible. Its the companys responsibility to make sure it gets done right. Too often,

companies jump right in to a project without validating the software vendor's

understanding of business requirements or their project plan. The more time you

spend ensuring these things are done right at the beginning of the project, the less time

you'll spend fixing problems later on.

6. Ensure adequate training and change management: ERP systems involve big

change for people, and the system will not do you any good if people do not

understand how to use it effectively. Therefore, spending time and money on training,

change management, job design, etc. is crucial to any ERP project.

7. Make sure you understand why you're implementing ERP: It's easy to see that

many big companies are running SAP or Oracle but it's harder to consider that maybe

you don't need an ERP system at all. Perhaps process improvement, organizational

redesign, or targeted best-of-breed technology will meet your business objectives at a

lower cost. By clearly understanding your business objectives and what you're trying

to accomplish with an ERP system, you will be able to make a more appropriate

decision on which route to take, which may or may not involve ERP.

.

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Chapter 3

Implementation of SAP R/3 at VIRINCHI

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Virinchi was one the first companies to implement an ERP system for its

business operations. The implementation of ERP has helped VIRINCHI to improve

its business process significantly. Earlier VIRINCHI used a legacy system which was

a stand-alone system with individual databases for every department.

Issues faced with Legacy System:

There were two major issues faced while using the Legacy system.

Transparency:

The data entered/prepared by one department is not available for other

departments. The departments which require the necessary data have to contact other

departments for the data that is required. For example if the purchase department has

to prepare the purchase order, it has to contact the production and the warehouse

department for getting the data regarding the materials required. This is time

consuming and hampered the efficiency of the company.

Duplication of data:

The other major issue faced was the duplication of data. Redundancy of data was

found as the same data was entered in the same database by different departments.

This was mainly because the databases were stand alone and not integrated. This led

to unnecessary cost to the company. For example for preparing the purchase order,

when the purchase department browses the database for ordering the materials

required, it was not getting the exact amount of materials required as the databases of

purchase, production and warehouse departments were not interconnected. This led to

incorrect purchase order and extra cost incurred for the company.

Because of the above two issues VIRINCHI decided to implement an ERP

system and opted for BaaN as its ERP solution in the year 1998. The implementation

of BaaN has helped VIRINCHI to improve its overall business process.

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Apart from the above two issues there are certain limitations faced by VIRINCHI

with Baan system as below.

The communication to the suppliers was done manually and this led to

high response time. The chances of wrong supplies from the suppliers

to VIRINCHI were also high.

Quality Management is very critical in Virinchi. The support for the

Quality Management was minimal with the BaaN system.

Since Virinchi was the leader in die casting the demand is very high.

This high demand lead to non possibility of preventive maintenance.

Hence there were frequent breakdowns of machines. And this also

paved the way for longer lead times for repairing of machines.

Lean system and Kanban are the two prominent systems that is existent

in Virinchi. With the Baan system these systems existed but there was

no system support.

At the beginning Virinchi was enjoying a monopoly in die casting. But

the recent increased competition has made Virinchi to look for new

ways to tackle the competition and also change its style of business

that is done.

Necessity for advanced ERP system at VIRINCHI:

Apart from the issues faced with the legacy system, there are certain factors

which made Virinchi to look for an advanced ERP system. The major factors are as

below.

Linking all VIRINCHI units with a single system and standardizing of

business processes across all VIRINCHI units.

Integration of various business processes within a VIRINCHI unit.

Aiming for faster response time and reduced transaction cost.

Building a robust integrated information engine and linking all the

manufacturing and stocking points.

Providing IT support for all processes and leveraging IT for all initiatives of

the company.

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Installing a scalable enterprise system to support business growth.

Reasons for deciding on SAP R/3:

After coming to a conclusion that the business needs an advanced ERP

system, Virinchi analyzed other ERP systems such as SAP, ORACLE,

PEOPLESOFT, JD EDWARD etc which would suit their business and also provide

solutions for its issues and limitations. After doing a detailed analysis Virinchi

decided on SAP R/3 system to standardize the ERP solution across the group. The

various reasons for selecting SAP R/3 system are as below.

Availability and support for all major business modules that are implemented. Wide range of functionality availability within the modules that are

implemented.

The possibility of continuous up gradation and developments for the system.

Also the SAP R/3 system has advanced solutions like SEM, SCM and PLM.

SAP R/3 is one of the best and cost effective ERP systems available in the

market.

Key Objectives considered before Implementation:

Virinchi is the leading manufactures in die casting manufacturing for heavy

and light commercial vehicles. Hence customer satisfaction is very critical for the

company. The following metrics are considered before the implementation of SAP

R/3 system.

Improve delivery service level.

Reduce premium freight.

Improve inventory turnover ratio.

Improve overall line efficiency.

Improve supplier delivery performance.

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Business Requirements at Virinchi:

Apart from the key objectives that are considered for the implementation of

SAP R/3 system, Virinchi Ltd also had certain Business Requirements that are to be

satisfied by the ERP system. They are

Improved Customer Satisfaction with greater responsiveness.

Operational Productivity.

E-enabling of customers and vendors by integrating them with the ERP

system.

Cost control with more efficient tracking.

What is SAP R/3?

SAP the company was founded in Germany in 1972 by five ex-IBM

engineers. SAP stands for Systems, Applications, and Products in Data Processing.

SAP AG is now the third largest independent software maker in the world. SAP

employs over 50,000 people worldwide today, and had revenues of $16.9 billion and

Net Income of $2.7 billion in FY08. There are now more than 121,000 installations of

SAP, in 120 countries, with more than 12 million users. Back in 1979 SAP released

SAP R/2 (which runs on mainframes) into the German market. SAP R/2 was the first

integrated, enterprise wide package and was an immediate success. For years SAP

stayed within the German borders until it had penetrated practically every large

German company. Looking for more growth, SAP expanded into the remainder of

Europe during the 80's. Towards the end of the 80's, client-server architecture became

popular and SAP responded with the release of SAP R/3 (in 1992). This turned out to

be a killer app for SAP, especially in the North American region into which SAP

expanded in 1988. SAP today is available in 46 country-specific versions,

incorporating 28 languages including Kanji and other double-byte character

languages. SAP also comes in 21 industry-specific versions.

SAP R/3 is delivered to a customer with selected standard process turned on,

and many other optional processes and features turned off. SAP functionality included

is truly enterprise wide including: Financial Accounting, Management Accounting,

Sales, Distribution, Manufacturing, Production Planning, Purchasing, Human

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Resources and Payroll etc. There are many reasons a company selects and implements

SAP. They replace an out-dated and inefficient IT Architecture, enabling business

process change, and to gain competitive advantage. Implementing SAP is expensive.

No doubt about it. But the potential rewards can dwarf the costs. SAP sells its R/3

product on a price per user basis. The actual price is negotiated between SAP and

the customer and therefore depends on numerous factors which include number of

users and modules.

SAP R/3 Architecture:

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PresentationLayer

SAP GUI

ApplicationLayer

ApplicationServer

Database LayerDBMS

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SAP Implementation Scope:

SAP R/3

Implementation:

SAP R/3 is one of the leading ERP solutions available in the market. SAP R/3

system is implemented by various implementation partners. Virinchi has analyzed

various experienced implementation partners and decided on one of the most

experienced partner Caritor Inc, at present known as Keane Solutions which also

provided the option of least cost for the implementation of SAP. The project was

titled as SIMPLE (SAP Implementation for Excellence). The total number of

consultants employed by Caritor was 15 who worked along with 30 core users of

Virinchi. The 30 core users were the task force that was formed within VIRINCHI by

selecting people from various departments. The task force was responsible for

learning the technology and provide sufficient training for the end users. The

processes of the company were studied in detail and the modules were customized

accordingly. Hence the conversion of As-Is process to To-Be process was smooth and

successful. After implementation, two types of testing were done, 1) Unit Testing and

2) Integration Testing. In Unit testing each and every module was tested separately

and for separate users. By this process, it is made sure that the module is working fine

for the individual users first. Once the Unit testing was successful, Integration testing

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Suppliers

Brakes

HSSL

HaritaRubber

Die Casting

SundaramPlastics

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was done. In Integration testing, all the individual modules were linked or integrated

across all departments and verified whether it is working fine. By this process it is

made sure that all the integration errors were eliminated. The SAP R/3

implementation can be divided as two phases.

1) Pre Implementation phase.

2) Post Implementation phase.

Pre Implementation phase:

The pre implementation phase of the SAP R/3 system implementation is the

most decisive phase of the implementation. A clear understanding of the business is

done in this phase. This phase consists of the following steps.

As Is process mapping:

The first step of any SAP R/3 implementation process is the As- Is process

mapping. In this step, the existing business processes of the company are analyzed

and a framework is created. Based on this the implementation strategy is framed. The

As Is process mapping helps in getting a clear idea of the processes and practicesexisting in the company and helps in customizing the modules accordingly.

Pain Points capture:

Once the As Is process is done, Pain Points capture is done. Pain Points are

the issues faced by the users with the existing system and processes. The Pain Points

capture step helps in understanding the problem areas and also helps in determining

the improvements required from the new system. This also helps in framing the To

Be process.

Toll Gate Audit by Internal Auditors:

During the implementation of SAP R/3 system regular audit needs to be done.

This audit is called as Toll Gate Audit and this is done be internal auditors of the

implementation team. The Toll Gate audit is done to check whether the

implementation is headed in the right direction. This is generally done after

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implementation of every module. The auditors are the members of the implementation

team who will be the involved in implementation and audit the implementation

process.

Discussion with and approval of Statutory Auditors:

The implementation of the SAP R/3 system needs to be regularly audited and

the developments that happens during the implementation has to be regularly

informed to the Statutory Auditors. If any new development is done, the approval of

the Statutory Auditors has to be obtained. The Statutory Auditor will not be directly

involved with the implementation process and will be an official from the Top

Management.

Continuous Training to / involvement of power users:

Power users are those users who will be working with the SAP R/3 system.

The core implementation team contained 30 power users and they were sufficient

training on the ERP system. These users who are part of the implementation trained

the remaining users who were not part of the implementation. By involving the power

users in the implementation enabled the users to know what was exactly done with the

system and the way the system works.

Failure Mode and Effect Analysis (FMEA):

Failure modes are any errors or defects in a process, design, or item, especially

those that affect the customer, and can be potential or actual. Effects analysis refers to

studying the consequences of those failures. FMEA analysis is done to identify the

potential flaws in the system and suitable corrective actions can be done based on

that.

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Standard, Work Around, Exits, Not addressed (SWEN) analysis:

SWEN analysis is done for each and every process of the implementation.

This is done to frame the business blue print and also to finalize the blue print. The

SWEN analysis provides a clear snapshot of the processes of the company.

Post Implementation phase:

In the post implementation phase a series of reviews is done. A multi tier

review system is followed and based on these reviews the success of the SAP R/3

implementation is determined. The various types of reviews are as below.

Daily review.

Weekly review.

Quarterly review.

Periodical review.

The reviews are done right from the power users to the top management officials.

Based on the reports of the reviews further modifications are done to the system.

Modules implemented at Virinchi:

The SAP R/3 solution has various modules which can be customized based on

the business process. Virinchi after analyzing the business process at Virinchi

decided to implement the following modules.

Sales and Distribution:

The SAP Sales and Distribution (SD) is part of the logistics module that

supports customers, starting from quotations, sales order and all the way towards

billing the customer. It is tightly integrated with the MM and Production Planning

functional modules. It allows companies to input their customer sales price, check for

open orders and forecast etc.

The most important basic functional features in the SD module are:- Pricing - Availability Check

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- Credit Management - Material Determination

- Output Determination - Text Processing

- Tax Determination - Account Determination

SD module is used to manage customer-focused activities, from selling to delivery,

including RFQ, Sales orders, Pricing, Picking (and other warehouse processes),

Packing and Shipping

Some of the main SAP SD transactions are:

VA01 - Create Customer Order

VL01N - Create a Delivery

VA03 - Display a Order

VL02N - Change Customer Delivery (F20 is to post a good issue)

VA05 - List Orders

VF01 - Create a Invoice

Materials Management:

The Materials Management (MM) module is fully integrated with the othermodules of the SAP System. It supports all the phases of materials management:

materials planning and control, purchasing, goods receiving, inventory management,

and invoice verification. The main objectives of the MM module are as below.

To ensure that we have the right product, in the right place, at the right

quantity and price.

To reduce working capital by monitoring raw and packaging stocks on a

continuous basis.

SAP MM helps in managing end to end procurement and logistics business

processes, from requisitioning to payment, including Requisitions, Purchase orders,

Goods receipts, Accounts payable, Inventory management, BOM, Master raw

materials, finished goods etc. Some of the main SAP MM transactions are:

ME51N - Create Requisition.

ME21N - Create Purchase Order.

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Planning

Execution

Inspections

Certificates

Financial Accounting:

SAP FI - which stands for Financial Accounting, is the Module where

regulatory or statutory data is tracked and managed. The SAP FI Module has the

capability of meeting all the accounting and financial needs of an organization. It is

within this SAP FI Module that Financial Managers as well as other Managers within

your business can review the financial position of the company in real time as

compared to legacy systems which often times require overnight updates before

financial statements can be generated and run for management review. The FI

(Financial Accounting) Module integrates with other SAP Modules such as MM

(Materials Management), PP (Production Planning), SD (Sales and Distribution), and

PM (Plant Maintenance). The FI Module comprises several sub-modules as follows:

Accounts Receivables

Accounts Payable

Asset Accounting

Special Purpose Ledger

Travel Management

Bank Accounting

Consolidation

Funds Management

General Ledger

Controlling:

SAP CO - which stands for Controlling - is the Module which allows you to

perform your management accounting. The SAP CO (Controlling) Module provides

supporting information to Management for the purpose of planning, reporting, as well

as monitoring the operations of their business. Management decision-making can be

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achieved with the level of information provided by this module. Some of the

components of the CO (Controlling) Module are as follows:

Cost Element Accounting

Cost Center Accounting

Internal Orders

Activity-Based Costing ( ABC)

Product Cost Controlling

Profitability Analysis

Profit Center Accounting

Plant Maintenance:

SAP PM Module is where you maintain your equipment including Labour,

Material and Down time and outages. The SAP Plant Maintenance comprises of the

following activities such as inspection, to measures and establish the actual condition

of a technical system, preventive maintenance to measures and maintain the ideal

condition of a technical system, repair to measures and restore the ideal condition of a

technical system and other measures that need to be taken using the maintenance

organization.

SAP PM is closely integrated with other modules and the data is always kept

current and processes that are necessary for Plant Maintenance and Customer Service

are automatically triggered in other areas for example, a purchase requisition for non-

stock material in the Materials Management/Purchasing area.

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I reported to the company on 24th May 2010, and met Ms. Padmavathy from

the Personnel Department. After completing the formalities, I was introduced to Mr.

T.G. Dhandapani, Corporate CIO. Mr. Dhandapani briefed me about the project I

would be expected to do in the six week period. Then I was introduced to Mr. Ashok,

General Manager, Information Systems Department. Mr. Ashok explained to me how

the flow of the project would be and the trainings I would be required to undertake. I

was then introduced to Mr. Venkatakrishnan, Senior Manager, Information Systems

Department who guided me with the trainings and the project.

During the first week of my project period, I was briefed about the production

process and given training on the important terminologies that are used in the

Manufacturing Sector. The training was aimed at making me to be at ease with the

terminologies during the course of the project. Also I had the opportunity to witness

some live negotiations done in the company for establishing a communication channel

for various plants of Virinchi and Corporate Office. By being part of the meeting, I

gained valuable experience on how to make the deal a favourable one.

During the second and third week, I was given training on the SAP modules

that are implemented in the company. By this I was made aware of the working of the

modules and its applications. I was made to go through the training materials and had

hands on experience on the system directly under Test environment.

The implementation of SAP R/3 has been done in the year 2004 in Virinchi.

Since there were no live implementations, I missed the opportunity of having a liveexperience of the implementation. I was briefed about the various issues faced before

implementing ERP system in the company by Mr. Venkatakrishnan. And also I had

interaction with some employees of Information Systems department and other

departments regarding the difficulties faced with the legacy system and also the

earlier ERP system BaaN. This gave me an idea about the various issues and the need

for an SAP R/3 system in Virinchi.

Apart from the above, I got exclusive access to documents on SAP R/3

implementation and also the report submitted for the SAP Excellence Awards 2008.

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The documents gave clear idea about the happenings during the implementation and

the initiatives taken. Thus the six week period in Virinchi gave me a good exposure

about the manufacturing sector and also helped me to witness live managerial

decisions taken. The success of the SAP R/3 implementation is purely because of the

employees dedication and the values of the TVS group.

CHAPTER 5

Findings

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Module wise Results:

The SAP R/3 implementation in Virinchi Ltd has produced excellent results

and helped in improving its business. The benefits obtained from each module

implementation are stated as below.

Module Particulars Benefits

Material

Management

Inventory Transparency across

the supply chain

Base of extreme excess of

decision making for production,

supplier schedules, dispatch etc.

Bar coding of GRN Productivity improvement at

brought out stores.

Release strategy for purchase

orders/ scheduling agreements

Two stop authorization. Hence

better internal control.E portals for suppliers Immediate communication to

supplier. Key data of supplier

available in portal facilitates

faster reconciliation.

E Kanban and 2 bin systems JIT procurement and reduction

of inventory.

Dual status Bought out or sub

contracted and in house

production

Effective usage of capacity.

More accurate inventories.

Service orders for labour

contracts

Work description, service master

maintenance for comparison.

Sales and

Distribution

Pull system Improved service levels and

customer satisfaction. Lower

inventory.

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E portal for dealers and

distributors

Instantaneous order booking,

claim registration. Key

information aiding faster

reconciliation and resolution of

issues.

Long term planning and sales &

operating plan

Aids in planning with the help of

scenario analysis.

Robust pricing module Accurate billing to customers

and also able to cater to statutory

requirements.

Production

planning

Pull based production system Production is done based on

customer requirements. Hence

reduction in inventory and

drastic reduction in fire fighting.

Capacity and man power

planning

Reduced line stoppers and

production based on customer

requirements.

Production resource tool

planning

Helps reduce production

bottlenecks due to resource non

availability.

Die life monitoring Die replacement / die

procurement made robust.

Quality

management

Incoming inspection plan, online

and offline inspections in shop

floor, final inspection plans,

recording of character and test

results

Rejection analysis is enabled

which is base for corrective

action and quality rating for

suppliers

Financial

Accounting

Evaluated receipts settlement for

logistics invoice verification

Improvement of productivity

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Form tracking, payment details,

supplier and dealer transactions,

sub contractor transactions,

rejection details in E portals.

Faster reconciliation.

Funds management Effective cost control across the

supply chain.

Controlling

Product costing. Break up of raw

materials, sub contract, factory

costing.

Cost control aid, accurate

inventory valuations as per

standards.

Product wise and customer wise

profitability.

Cost control aid.

Business benefits:

The digitization of Kanban started to yield results immediately on

introduction. The company could improve the inventory turn by 15% within a short

span of time. The buyers could concentrate on vendor development rather than

spending time on chasing for material. Line stopper on account of shortage of material

has been reduced and thus it improved the overall efficiency by 13%. The E portal

that was developed for suppliers and dealers is extensively used and their visit to thecompany for administrative reasons and payment follow ups have dropped

substantially. This has significantly helped in minimizing errors, eliminating

duplication of documents, reducing process lead time and transmitting time and

thereby avoiding costly delays. Processes having less than 20% process ratio (value

added time over non value added time in a process) were taken for corrective action.

There were 15 processes having less than 20% process ratio before SAP R/3

implementation and it was brought down to 10 within six months after

implementation.

Major improvements / innovations:

The implementation of SAP R/3 systems has introduced three major

innovations into the business process of Virinchi Ltd. These innovations has helped

the company to improve its productivity and efficiency. The major innovations are as

below.

E Supported Lean manufacturing system.

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E Portals for suppliers and dealers.

TPM through SAP Plant Maintenance module.

A Pull system with electronic Kanban is illustrated below.

Initiatives along with SAP R/3 implementation:

Apart from the SAP R/3 implementation, Virinchi has taken some major

initiatives in its business process. They are as below.

31

Downloadcustomer dailyrequirement

Update SOor Demandon SAP

Dispatch customerrequirement fromWarehouse

RunMRP

Trigger forproduction.

KanbancardProduction

Productionconfirmation.

Kanban

Parts

Consumption

Material pullfrom stores

Issue ofmaterial toshop

Material issuetriggerreplenishmentrequest. Kanban

Supplierreplenishesmaterial.


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Automation of transaction capturing by bar coding etc.

Direct capture of data from the source electronically.

Trigger of alerts quality, machine breakdown, and equipment failures etc.

E Portals for vendors and customers information exchange.

E Support for working Kanban and Lean system.

Business Process Re-engineering due to SAP and customer expectation.

Apart from the above initiatives, Virinchi also handled certain challenges.

Transforming the suppliers to respond to digital request was the major challenge faced

by the company. The suppliers were used to hard copy and telephonic follow ups for

ages. To train the suppliers, VIRINCHI formed a small team of five suppliers and

explained them the benefits of the SAP R/3 system. The requirements of the suppliers

were also reckoned at the design stage and report formats and download facilities

were modified to keep the suppliers at full comfort in using the system. This process

has helped the solution architects to look at the process from suppliers point of view.

Conclusion:

The overall implementation of SAP R/3 system at Virinchi has beensuccessful with limited errors. The issues faced are more of technical and does not

affect the business of the company. The SAP R/3 system has been used from the year

2004 and in the past six years the solution is working fine and there is significant

improvement in the overall business of the organization. The success of the

implementation can be attributed to the clear understanding of the business processes

that were in practice in the company and the modules were customized accordingly.

The implementation was done individually for each department and the integration of

the departments was also done successfully. The employees at the company were

totally aware of the process that existed and the changes that was made in the new

system. Sufficient training was given to the employees on the new system in such a

way the errors are sorted by the employees itself. Data maintenance is done internally

by the company instead of outsourcing to an IT company. Hence the cost of

outsourcing has been saved. VIRINCHIs biggest payoff came in the form of a Pull

System of manufacturing. After the implementation of SAP, the overall line

efficiency went up from 80 to 87 percent and the inventory turns increased to 26

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percent, up from 23 percent. The inventory has been integrated with the finance

module. The forecasting and calculation of depreciation values as well as the

capitalization process have improved. A major benefit that VIRINCHI now enjoys is

that the plant maintenance has been vastly improved ever since the process has been

digitized through SAP. Thus the SAP R/3 solution has been cost effective and has

improved the overall business of Virinchi Ltd significantly.

References:

http://www.sundaram-clayton.com/

http://www.sap.com/india/index.epx

http://www.business-software.com/

http://info.shine.com/company/Sundaram-Clayton-Limited/810.aspx

http://www.sap-basis-abap.com/

http://www.thespot4sap.com

http://www.erpgenie.com/sapfunc/pp.htm

http://www.indiastudychannel.com/
http://www.sundaram-clayton.com/http://www.sap.com/india/index.epxhttp://www.sap-basis-abap.com/http://www.sundaram-clayton.com/http://www.sap.com/india/index.epxhttp://www.sap-basis-abap.com/

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