Computers Today, August, 1998 Master File

How can ERP help you streamline your organisation? A look at the vendors offerings, and an advisory on how to get the most from your investment.

Last month, ITC Ltd, the Indian tobacco giant, announced it is considering implementing an Enterprise Resource Planning (ERP) application at its tobacco division. ITC proposes to invest Rs 3.5 crore to chart out a pilot plan for the implementation. This application could later be extended to its other divisions: hotels, paper and packaging. Microsoft Corp. estimates that installing SAP AG's ERP application to produce a common procurement system worldwide should result in it saving $12 million annually in early payment discounts. Safariland, USA, a $50-million manufacturer of body armour for the police, found that using an MRP system, it could not access the data needed to make key business decisions. It has now implemented an ERP system that integrates manufacturing, distribution and finance functions. Later on, the company's 1,000 dealers will be able to enter orders into its Web site, which will be linked directly to the ERP system.

Enterprises in the Wonderland
Enterprise resource planning, as implemented by a growing number of companies worldwide, provides them with an application that integrates business processes, and thereby a means to increase productivity and cut costs. That ERP applications can deliver what they promise is evidenced by a global market that was nearly $15 billion in 1997, according to International Data Corp.

The $17.9-million Indian market (1997-98) owed its revenues in part to as many as many as 350 companies that opted to install an ERP solution. International Data Corp. estimates that the ERP applications market in India will grow by 90 percent next year.

According to Gopal Madnani, director, operations, Baan India, there have been three drivers for the Indian market . Firstly, Indian companies are gradually moving away from appointing large IT departments for in-house development. As this has resulted in their moving away from their area of core competence, they prefer to use packaged software.

Secondly, the necessity to tackle the Year 2000 problem has accelerated the decision to buy these packages. And lastly, the need for integration of various businesses is being felt more now than it was two years ago.

Developing from applications that targeted the manufacturing functions (Manufacturing Resource Planning, MRP), ERP applications now address the information requirements of the entire organisation. Extending beyond their initial mandate, ERP applications now integrate not only business processes within an organisation, but also supply-chain management and customer chain management functions outside the enterprise.

Market leader SAP AG now claims 15,000 sites worldwide (as of 1997), with over 2.2 million users. SAP AG, Oracle Corp., PeopleSoft Inc., Baan Co., QAD Inc. and other players, between themselves, offer solutions that cuts across industry segments--manufacturing, and vertical industries including discrete, process and paper-oriented industries. These include banking and insurance, healthcare, telecommunications, and utilities industries.

Becoming Light
As the vendor reach indicates, some myths surrounding ERP usage are slowly being dispelled. Apart from manufacturing or process industries, they are now being implemented in banking and insurance, telecommunications, and healthcare sectors, to name a few. Escotel

Mobile Communications Ltd., a leading telecommunications player in India, recently decided to implement Ramco Marshal, an ERP package developed by Ramco Systems, India.

Traditionally, ERP applications have been used by large organisations. That's because implementing the ERP application is often very expensive. According to some industry professionals, the cost of the ratio of implementation to the package cost, for SAP, Baan or Oracle applications, is 10:1. Only recently are they being implemented by small and medium-scale enterprises (SMEs). This because lighter, cheaper ERP applications (like PeopleSoft 6) are becoming available. According to Price Waterhouse Associates, SMEs currently account for 35 percent of the Indian ERP market, worth Rs 225 crore in 1997-98.

Another factor could be the support for the Windows NT platform that some ERP applications now provide. Since the Windows NT version of SAP R/3 was released in 1994, as of 1997, 28 percent of SAP R/3 sites are on NT; 42 percent of new installations are on the NT platform. Traditionally, ERP applications have targeted Unix-based client/server environments. Users find a significant cost advantage in using Windows NT-based hardware and system tools, over Unix-based ERP implementations.

The world's largest implementation of an ERP application is claimed to be at the Boeing Commercial Airplane Group (BCAG). Boeing, the world's largest manufacturer of commercial airplanes, began a move to reduce costs, cut down cycle times and defects. One way was to streamline all internal processes for handling airplane configuration data, as well as engineering and assembly processes driven by this data. Boeing manufactures 29 different models of airplanes, as well as a complete line of freighters. At its various part fabrication plants, Boeing used over 30 different shopfloor controls and 14 bills of material systems.

Baan Co.'s ERP solution, Baan IV, has now been implemented at 19 parts fabrication plants. The exercise, begun in February 1996, was complete by December 1997. Now that these plants use a common information system, part manufacture can be scheduled more efficiently. Employees now have fewer information tools to learn and use. Also, the data available is now more visible, giving end-users more control over operations. Finally, workflow has become much more flexible, meaning that managers can plan through bottlenecks and minimise delays.

A Shorter, Faster Run
While the implementation of an ERP package can typically run into months (or even longer time frames--Boeing is scheduled to complete implementing ERP across engineering and sales teams by June 1999), shorter implementation times are also possible.

SAP now offers AcceleratedSAP, designed to implement SAP R/3 within a few months. Rapid implementation of SAP R/3 and other complex ERP applications is even more significant now, with the end of century date-changeover drawing closer. SAP R/3, by the way, is Year 2000-compliant. Besides the Year 2000 problem, the other problem organisations worldwide will face is accounting for Euro, the common currency that members of the European Union will adopt on January 1, 1999.

This capability is now available in applications such as SAP R/3, Oracle Applications and PeopleSoft 7.5.

What ERP Offers You
The benefits that an ERP application can offer your organisation are definite, and tangible. Reduced manufacturing cycle times, lower costs, higher productivity, as overall benefits, are available for the organisation. For the end-users, it may mean freer or a different access to data. As data becomes more visible, decision-making is easier. Work processes then can be more flexible.

With a clear picture of the workflow available, managers at Boeing found they could plan around bottlenecks, and thus minimise production delays. As Boeing discovered, there is now more flexibility in the workprocess. As processes have been standardised across plants, the employees can be relocated to any of the plants without needing to be trained to work in a different environment.

These and other benefits can be obtained, but to achieve them, organisations need to be sure they know why they want to implement an ERP solution. What are the returns they expect from its implementation? What problems do they face currently which they believe an ERP application can help solve or mitigate?

With a clear focus, the selection of the most suitable vendor, and a carefully planned implementation, they can expect good returns on their investments. After all, that's the bottomline of any business decision.

Training Blues

Complete Business Solutions India, Hyderabad, a wholly-owned subsidiary of Complete Business Solutions Inc.. USA, will, according to a marketing tie-up with PeopleSoft Inc., USA, provide training for PeopleSoft 6, in India. CBSI joins a list of as many as 80 institutes that provide training on an ERP application, in Hyderabad. This emerging trend is fuelled by the growing demand for ERP professionals abroad. In India too. with SMEs implementing ERP solutions, the demand for ERP professionals is growing.

This demand is being mainly met by the vendors themselves. SAP offers training through an alliance with Price Waterhouse Associates (PWA), while Baan Info Systems Ltd. offers training at Baan Technology Park, Hyderabad. Oracle offers training through PWA, Calcutta, and Blue Star, New Delhi.

Predictably, training does not come cheap, needing high-cost infrastructure, and experienced faculty. The fee for training on SAP R/3 may well reach Rs 2 lakh.

While considering ERP implementation/consultancy as a career option, students must weigh the merits of the institutes offering training--infrastructure available, legality of the software, course structure, time frame, training methods, fee structure and, lastly, placement opportunities provided.