Computers Today, August, 1998 Master File, Pg 3

BLUE STAR LTD.
Cool Plans for a New Plant
Blue Star, the Rs 3-billion diversified engineeering group, has set up state-of-the-art airconditioners' manufacturing plant in Dadra. The new plant, which was set up with an investment of Rs 25 crore, is designed to produce over 1,00,000 unitary airconditioning products.

Says Suneel Advani, president and vice-chairman, the factory had a specific objective: to be different from others. This was possible only through computerisation and value-addition. So, it was decided to implement an integrated ERP package. Advani was aware of the problems in implementing an ERP application. Yet, since they were starting a new factory and had no old baggage to throw, it seemed an ideal place to learn. So an investment of Rs 50 lakh was not such a burden, as the package would help keep the headcount down.

Of the packages available, Baan IV was the ultimate choice, as Blue Star Ltd. found Baan Co.'s offering aggressive and the package user-friendly. Blue Star opted for an 8- to 16-user licence. The company has set up a core team to facilitate implementation, which is expected to be completed by October 1998. The spread of the ERP system is nearly 100 per cent. The company seems pleased with its decision of buying Baan. According to Sanjay Mallya, manager, Corporate Affairs, the company's International Software Division has become Baan's authorised international implementation partner to provide Baan support to companies globally.

ADDISON AND CO.
The Cutting Edge
Addison and Co. is a 150-year-old company with a turnover of $425 million annually. It manufactures cutting tools to various specifications (ISS, BSS, ANSI , DIN and JIS). The product range includes drills, cutters, reamers, endmills, and taps. It has manufacturing facilities in Chennai and eight branches country-wide. The company had an EDP set-up with FoxPro DBMS for information management, and many standalone units. To integrate the information within the organisation, Addison decided on ERP and after much search settled on Ramco System's Marshal on Windows NT.

The scope of implementation included supply chain, financial, and production management. Ramco's own implementation strategy was followed. Marshal went live one year later, in January 1998.

After implementing Marshal, Addison has a simplified and common sales process for dealers, OEMs and exports. The availability of online information on finished stock has helped liquidation. Sales and production functions have been integrated; and the purchase-order cycle cut by three weeks.

While ERP applications do promise greater productivity and lower costs, their implementation may not always be smooth.

Baan Info Systems India Pvt. Ltd., is claimed to be the fastest growing ERP solutions provider in India today. As per D. Bharath, CEO, its previous quarter success of 11 new accounts showcases Indian business' acceptance of this technology at the highest level.

Beyond accepting this technology, users must carefully consider its implementation. Godrej & Boyce Mfg. Co. Pvt. Ltd. implemented Baan IV last year across its divisions. The aim was to help "standardise the company's diverse businesses, stay abreast of the latest technology, using world-class best practices," says Pradeep Kapoor, general manager, information technology. By implementing Baan IV, the company expects the supply chain to be integrated with manufacturing functions, thus reducing time-to-market. The ultimate aim, Kapoor clarifies, "is not to increase turnover, but to increase profitability."

Coping with Culture Shock
ERP implementations may not always deliver. As Prof Sowmyanarayanan Sadagopan, Quantitative Methods & Information Systems, Indian Institute of Management, Bangalore, says, they can also fail to live up to expectations. The downside could well be scenarios where business processes do not work smoothly in the new environment. Or, users, unfamiliar with new workflows, throw processes out of gear.

When Cable Systems International, USA, an AT&T spin-off, and a copper cable manufacturer for AT&T and other long-distance telecoms companies, went live with SAP R/3, it faced some unexpected problems.

Having to use an application integrated across different departments, employees suddenly faced a different work environment. They had to deal with different business processes and workflows. For instance, accounting had to configure the general ledger in co-ordination with customer service, something they had not done earlier. Apart from the task of coordinating with various departments, when the information flow from one module to another was checked, they found many mistakes: the data didn't cross-check.

As this example illustrates, ERP implementations require not just setting up the application, but also orienting employees to the changed systems/relationships they will have to work with/share. And the new decisions they will have to make. According to Deloitte & Touche Consulting Group/ICS, as many as half the number of ERP implementations fail to achieve the hoped for benefits because managers underestimate significantly the efforts required for change management.

Targeting Success
What then are the critical success factors of a successful ERP implementation? According to Prof Sadagopan, first and foremost is top management commitment. The large investments needed to implement ERP ensures top management involvement. But top management involvement is not tantamount to top management commitment.

Consider a few examples. To be successful, the ERP team must consist of your "best" people, not those that "can be spared." Otherwise, ERP has little chance of success.

ERP is likely to turn the organisation "upside down", unleashing lots of energy from vested interests. Unless top management is involved directly, it is impossible for any line manager to face the opposition to such changes.

Yet another test of top management commitment is the resistance to overcustomisation, particularly in the Indian context. Sadagopan emphasises that it is better to follow the "standard" way.

Cadbury India Ltd., after having implemented three modules of SAP R/3 in 1996, was faced with the legacy of the DBMS used for payroll and production planning. According to Peter Calverly, vice-president, IT and finance, migrating this to the ERP environment would be tedious and time-consuming. As is seen in the case of Cadbury, implementations are rarely trouble-free. What are the mistakes organisations should avoid?

First, says Sadagopan, is tight control on time. A delayed project commands little respect, and less user acceptance. Second is creating an ERP culture. A modern ERP "logs everything": date, time, user, pre-updatevalue, post-update value, etc. Their routine use to "settle the score" could take away the very spirit of ERP culture. The third requirement is infrastructure support. Implementing ERP applicatoins is expensive but not having it "up and running" on a mission critical mode is far more expensive.

Last but not the least, ERP must be driven by business goals and not IT goals. At the start, a few measurable business benefits must be identified as benchmarks. It is true that "cost-benefit analysis" may not work to justify ERP implementation. It is equally true that it cannot be left to "faith" or implemented merely because it is the "in thing".

A well-prepared plunge into ERP with clear goals, top management commitment, adequate infrastructure and willingness to manage change, will usher in a vibrant organisation through a successful implementation.

How to Find the Right consultant

As classical ERP begins to mature, and new technologies emerge, there arises a greater role for a category of people who have so far preferred a background role: the consultant.

Some organisations who implemented ERP applications have however, formed the view that implementation is best done internally. Satish Jamdar, vice-president, Blue Star, Dadra factory, feels that consultants do not understand the process industry; he is wary the implications it might have on the final product. He feels it is best, therefore to train the process guys and make them IT-savvy, as ultimately, they would be the users.

Prasad of SHV Gas India Ltd. also expresses the same opinion of not involving consultants to implement the ERP solution, as it is cost without any value-addition.

Hence, looking for the right consultant is as important as deciding on the ERP application you want to implement/ or even deciding to implement one. What should you look for in a consulting firm? Gartner Group offers a few pointers.

A project manager (for the implementation) should have solid experience on at least one ERP project. Further, at least one-third of the project team should have real hands-on experience.
Ensure that the consultants are familiar with the limitations of the software, not just its strengths.
Be aware of how well the project team and the end-users work with each other.
Incorporate the name of the project manager into the contract. Also state that the manager can leave the project only with the concurrence of your company, which must also approve any replacement.
Do not judge vendors solely on price. Other consultant characteristics that must be taken into account include past relationships, industry expertise, application expertise, and project management capability. Followed by price.
Finally, remember that the final goal is not to implement the application, but to reap radical improvements in business processes using the technology.