p 1275 Erp Project Report

8/2/2019 p 1275 Erp Project Report

http://slidepdf.com/reader/full/p-1275-erp-project-report 1/21

The critical success factors of ERP systems mainly include proper implementation and usage. Beside this there are several other factors thatdecide the regular functioning of ERP in organizations.

While many organizations have not incurred the necessary benefit in termsof money and other measures there are lots who have witnessed multiple

profits. Studying them will help in understanding the critical success factorsfor ERP implementation. They will help in deciding ERP success

What is ERP?

ERP or Enterprise Resource Planning is IT software that integrates businessactivities across an enterprise—from product planning, parts purchasing,inventory control, and product distribution, to order tracking. ERP may alsoinclude application modules for the finance, accounting and human

resources aspects of a business. SAP and Oracle are the two ERP leadingvendors.

From a business perspective, ERP today has expanded from simplycoordinating manufacturing processes to being the integrator of enterprise-wide backend processes. ERP has also evolved technologically from amonolithic legacy implementation into flexible, tiered, client-server architecture.

ERP Project Risks

In the late 1990s many ERP projects started, but more than a few failed.While ERP projects remain challenging even today, most can now besuccessful because the best practices have been identified and ERP

professionals are more knowledgeable and more experienced with makingthe projects successful.



ERP Business Benefits

ERP is an enabler of business benefits, and should not be viewed as astandalone initiative with the requirement to pay back its implementationcost. The most immediate ERP benefits include

(1) Improved visibility of procurement spend and savings from improvedsourcing policies,(2) Decrease of work-in progress and days-of-sale-outstanding,(3) Improved productivity through better sales order handling, better

procurement operations and more efficient planning.

However, the most important business benefits will often be delivered after

the ERP backbone is established, by other initiatives that use the ERP backbone:

• Integrated supply chain: from network planning through schedulingand Manufacturing Execution Systems (MES)

• Easier integration of business processes with business partners

• Shared services and outsourcing of support functions

• Increased information transparency to enable better decisions

• Agility in acquisitions and “carve-outs” or divestments

• Increased regulatory compliance• Robust and future-proofed backbone systems

There are cost savings on the IT side, often around 10-15%, especiallywhen different ERP implementations are being harmonized. These ITsavings include:

• Reduced ERP implementation costs due to a common template

• Reduced application maintenance costs

• Lower integration cost due to standard interfaces

• Lower infrastructure costs

With an awareness of the best practices and a good understanding of ERP project complexities, the risks in an ERP implementation are usuallyoutweighed by the benefits. The ERP discussion on investment return is oneof mindset more than one of standalone business cases.



TISCO PROFILE

This company founded and established in the year 1907 is known to be oneof the leading steel giants in the country offering multiple products and

successfully running many subsidiary corporations. Being a large entity doesnot stop things from being subject to scrutiny and internal audit. They areregularly implemented with the help of committees who report to theselected members from the senior management. The company is dedicated to

providing laudable services to the stakeholders improve on the quality and asthrive for innovations and improvements constantly.

BACKGROUND

TATA steel is India’s largest integrated private sector steel company that

started its corporate journey in the year 1907. Backed by captive iron oreand coalmines, Tata Steel runs state-of-the-art Cold Rolling Mill complex atJamshedpur, Eastern India. The enterprise has undergone a modernization

programme costing $2.3 billion, resulting in production of steel at the lowestcost in the world. Being a large entity does not stop things from beingsubject to scrutiny and internal audit. They are regularly implemented withthe help of committees who report to the selected members from the senior management. The company is dedicated to providing laudable services to thestakeholders improve on the quality and as thrive for innovations and

improvements constantly. Tata Steel is a relentless pursuer of excellence.ASPIRE, Tata Steel’s quality initiative drive combining TPM, Six Sigma,Total Operational Performance, Suggestion Management and QualityCircles has reaped rich dividends for the company.

Tata Steel's Jamshedpur plant has a capacity of 4 mn tons per year, and produces flat as well as long products. Currently, to meet growing demands,the plant is being expanded to accommodate another million. Tata Steel hasset up an ambitious target of 15 mn ton capacity per year by 2010. As part of its expansion plans the company recently made investments in NatSteel

Singapore, which will expand its footprint in six countries in the Asia Pacificregion and China.



Tata Steel's products include hot and cold rolled coils and sheets, galvanizedsheets, tubes, wire rods, construction re-bars, rings and bearings. Thecompany has introduced brands like Tata Steelium (the world's first brandedCold Rolled Steel), Tata Shaktee (Galvanized Corrugated Sheets), TataTiscon (re-bars), Tata Pipes, Tata Bearings, Tata Agrico (hand tools andimplements) and Tata Wiron (galvanized wire products). The ConstructionSolution Group explores new avenues for steel utilization by techniques thatare economical. Tata Steel has also developed 'galvannealed' cold rolledsteel with technical assistance from Nippon steel for high-end autoapplications.

ERP IMPLEMENTATION

TISCO deserves lot of credit for implementing ERP because of the fact thatmany organizations in the global level have given up the very idea of ERPdue to the fact that there are lots of failures associated with it even in theimplementation stage. ERP implementation did in wrong manner havecaused havoc to organizations more than bringing profits. This being thecase it is natural to expect a large company (in terms of Size and volume of operations) like TISCO to discourage the idea of Enterprise resource

planning. However TISCO proved to be different from the others bychoosing ERP in the right time and implementing it in a proper manner.They have also reported a whooping profit and reduction of costs in thewhole process. Another amazing fact is that they implemented it into thewhole systems in one single spree. The method of implementing it in onespree carries a lot of risks especially for a bigger company. Infact thesuccess rate of this method itself is low in general and very low as far as

bigger companies are concerned. Incase of the rare success organizationswill experience effective results in their enterprise operations. TISCO has

achieved that by way of meticulous handling and professionalism. The netresults of their ERP software have been described to be pathbreaking and atrendsetting one.



WHY ERP IN TISCO

TISCO faced two major problems from the systems that existed for a longtime. Firstly they were not customer friendly. The whole system was tuned

to the process and very little attention was paid to the customer demands.Secondly the systems were outdates and the modalities of operation were toocomplex and not error free. In order to rectify these issues which wouldotherwise prove to be major setbacks to the company the organizationresolved to take up ERP. This was instigated by the concerned departments.Leading consultants were hired and the business structure was studied andsuitable plans were drafted accordingly.

What Should They Do?

Let’s say you’re the CEO of a large multi-national steel company, andyou’re running a global operation with plants on four continents. You needto make good business decisions, and you rely on your IT systems to providethe data to make those good decisions.

But your IT systems are not well integrated. There are too many differentsystems, and too many gaps between them, a legacy of the company’shistory of mergers, acquisitions, and improvement initiatives. You need acommon information backbone. You’ve heard that ERP systems can do that,

but you’ve also heard about ERP project failures from years ago.

Can ERP handle the challenges of a steel company today? And will that leadto business benefits for the company? answer are yes, and yes.



Information Systems For A Quickly Changing Steel Industry

In a quickly changing industry like steel, one need information systemswhich quickly provide them the data they need. We believe that ERP,especially in its mature implementations today, is the crucial component for a company’s IT data backbone. ERP can play an essential role in:

• Driving accurate and fast decisions (product profitability, procurementspend) with consistently defined data

• Running broadly known and supported applications

• Harmonizing and optimizing back-office processes across theenterprise that comply with finance requirements such as SOX andIFRS

• Enabling best-practice demand planning for supply-chain processes

• Future-proofing global applications that support global enterprises

Six ERP Design Challenges for Steel Companies

A steel company presents six industry-specific design challenges for implementing ERP, as described below. A successful ERP project will start

by analyzing these challenges in detail across all of the company’s integrated

processes. This analysis will result in the basic decisions that will be thefoundation of the ERP project.

Challenge 1: More than one planning strategy

Steelmakers often use a combination of production planning strategies.Typically the flat or strip products are make-to-order, whereas the long

products are make to- stock. Depending on the existence of a “de-couple point”, finish-to-order could be a relevant planning strategy as well. Such acombination of planning strategies affects the design of most ERP processes,including supply chain processes as well as the financial/cost control

processes. Cost control in make-to-stock tends to go for standard priceapproaches, but in a make-to-order environment costing happens on anindividual order cost collection and forecast basis. ERP systems today canhandle this kind of complexity.



Challenge 2: Complex product variations

A steel product is made up of a large number of characteristics, making the product difficult to configure when entering it in the ERP system.Configuration in the make-to-order entries is typically done while enteringthe order, whereas for the make-to-stock entries, configuration is done in the

product definition, that is, on the “material master”.

This burdens the early discussions during the design phase of an ERPimplementation. Fundamental decisions need to be made very early in the

project about how many (finished product) materials should be defined: oneextreme is to define by material group which needs to be configuredcompletely in the order, or the other end of the spectrum is to define all

possible/feasible characteristic combinations which can possibly explodeinto an extremely large number of finished product definitions.

A steel product tend to explode towards the end of production processing; inother words, the bill of material “stands on its head” or is “v-shaped,” asshown in Figure 1. This means that the later in the process you define a

product, the higher the number of products to be defined becomes. ERPsolutions today can readily handle the complexities this of the V-shaped billof material. They allow “characteristics based product configuration” withautomatic deduction of characteristics, characteristic value inheritance fromsales order header to item level, entry of multiple order units such as pieces,tons, dimensions, and so on. Characteristics then drive production, shippingand purchasing processes across the supply chain



Challenge 3: Flexible planning

Planning for steelmaking often needs to happen on short notice, with

unstable production processes and unplanned outputs. This requirescontinuous re-assignment of products to processes and orders dependent onthe Characteristics described above. ERP systems today allow re-assigningflexibly to handle these situations.

Challenge 4: Specific Customer Service Requirements

To cope with high-demanding customer segments such as automotive andconstruction, tight integration with business partners on forecasts, electroniccustomer orders (EDI, internet etc.) are typically needed. ERP systems todaysupport electronic integration with partners.



Challenge 5: Complex production scheduling combining both

continuous and batch production

Figure 2 below illustrates the flow in a typical steel mill. While the blastfurnace and converter work in batches, the caster works continuously andthe finishing lines work in batches again.



The batches need to be selected based on characteristics during production, preparation and shipment planning. This means that the planning processneeds to be able to derive batches with characteristics inheritance and historytracing. Finally, the scheduling part of the planning system needs to be ableto work with multiple and dynamic bottlenecks – that is, bottlenecks whichcan change based on incidents such as production problems in certain

process steps. ERP systems today can handle all of these situations.

Challenge 6: Detailed margin analysis

In today’s steel industry when prices are high and capacity short, marginanalysis becomes the essential method to tell what money is being made onwhich customer/product segments. On top of segment analysis, it is alsoessential to differentiate between “strategic materials” (cokes and ore, Ni

and Cr for stainless) and the other cost elements that may be easier tocontrol. ERP systems provide the tools to support these decisions.

The ERP system will also need to work closely with the company’s BusinessInformation Systems (BIS) to optimize the business benefits. Workingtogether, the ERP and BIS systems can, for example, improve inventoryallocation to late orders.



Integrated IT Model for Steel

An integrated IT model as in Figure 3 is important because it lets you see thesystems involved in planning and production. A typical flow would be:

• The Supply Chain Management (SCM) application provides therough-cut planning in “Demand Planning.” The result is planning

blocks of similar products which are then handed over to production planning.

• When orders are being entered, availability checks assign the order toa block (unless inventory already exists that meets the order) andfeeds back a promise date (at the end of the block to allow for the

flexibility of possibly moving to an earlier date).

• The mill optimizer then typically would re-shuffle orders in betweenthe blocks, and feed results back into the SCM application in order tooptimize the load balancing.

• Right before production starts, planned orders from the SCMapplication are converted into production orders and, via the ERPsystem, are transferred into the MES layer. It is at that time when

quantities are being translated into pieces (slabs, coils etc.).

• Detailed scheduling then takes place, sequencing and combining pieces from various orders throughout the mill into lots for optimization.

• Production completion then posts an updated status of the orders intothe ERP system, including stock receipts of finished products, and soforth.



Figure 3 is also important because it lets you identify gaps among acompany’s different IT systems. A typical gap occurs between the ERP andMES (process control and machine control) systems, where the “system” isactually combination of custom-built applications and manual spreadsheets.“Bridging this gap” properly is essential forrealizing the business benefits of the IT investments.

If the applications in Figure 3 are to provide true value, they need to berobust, integrated and cost efficient. A recent IBM survey indicates that steelclients process control and MES systems are custom-built applications 66%of the time, and that these custom-built applications usually differ from millto mill. Clearly, this risks creating sub-optimal processes and leaves thecompany open to all the problems of maintaining custom-built, legacyapplications.

Implementation Approaches for ERP

The key element for ERP success is to know how to implement an ERP project. Past experiences recommends best practices such as:

• Rapid/realistic project timelines due to external pressures (acquisitionsynergies, legal reorganization)

• Command-and-control approaches from a central project management

office• A global business process owner who has the authority and credibility

to approve process designs and business model/ organization changes

However, there’s much more to it than these few general principles.Implementing ERP is complex and takes a team of knowledgeable andexperienced ERP professionals to successfully implement an ERP project.



Implementation Process At Tata Steel

The company knew well that they had a tough time especially to implementthe software in one stroke. They had to choose top ERP software in order toensure that it meets the demands of a big firm like TISCO. They went ahead

with associating and implanting TISCO to all the stakeholders so that they become compatible. These ideas also contributed to the success. They werealso shrewd enough in adopting the modern and most recent technologyavailable in the market. The period set for implementation seemed to beanother major challenge. The time granted for the process was 8 months.

The business process was divided into two main segments. The corefunctions were denoted to be major ones. Similarly the supporting functionswere named minor ones. A plan of action on the proposed ERP's impact wasdrafted depicting their relation to one another and to the business process.

All of them were made to bear in mind the fact that ERP's implementationwas imperative and that the deadlines were not very comfortable. Thecompany took all efforts to ensure that the change did not produce any sortof resentment in the organization. This was done by educating everyone onthe need and desirability of change. In addition all apprehensions relating tochange were discussed and clarifications made to the fullest satisfaction.

It sounds almost Utopian doesn't it? But that's exactly the result of TISCO'sERP implementation completed within eight months. TISCO is Asia's first

and India's largest integrated private sector steel company. It has a state-of-the-art 3.5 million tonne steel plant and is capable of meeting the mostrigorous demands of its customers worldwide.

The company adopted ERP technology to take a lead in the competitive steelindustry and through constant learning, innovation and refinement of its

business operations, has transited seamlessly from a production-drivencompany to a customer-driven one. The existing technology was a simplereplication of the manual system. Not only did it operate as individualislands of information but the technology had outlived its lifetime and was

completely obsolete. The employees and management at TISCO faced acumbersome task exchanging and retrieving information from the system.

Further, the reliability of information obtained was questionable because of inconsistency and duplication of data from different departments. Also therewas no built-in integrity check for various data sources. Besides, severaltimes the information against certain items was found missing.



An Early Response

Responding to changing customer needs started as early as 1991, with astudy on cost competitiveness and a formal business plan, followed by ISO9002 certification and benchmarking initiatives. Realizing the need tofurther support the re-engineered core processes and quickly align the

business processes to radical changes in the market place, Tata steel decidedto go for a new robust solution.

Design

In 1998-99 a small cross-functional in-house team along with consultantsfrom Arthur D. Little (Strategy Consultants) and IBM Global Services (BPR Consultants) redesigned the two core business processes: Order Generation

& Fulfillment and the Marketing Development processes. This was done toimprove customer focus, facilitating better credit control, and reduction of stocks. In keeping with this commitment it adopted the latest production and

business practices to offer innovative processes that meet the changingdemands of its global and local customers.

Choosing The Platform And Technology

The management at Tata Steel wanted the software to seamlessly integratewith its existing information system and further provide compatibility with

its future implementations. After an in-depth study of functionality, cost,time, compatibility, esteem, operability, support and future organizationalrequirements was done, SAP topped the list of contenders.

The implementation of SAP software was associated with certain strategicgoals in mind. With this implementation, TISCO wanted to bring forth aculture of continuous learning and change. This would enable TISCO toachieve a world-class status for its products and services and strengthen itsleadership position in the industry. Besides this, TISCO also wanted thesoftware to result in quick decision-making, transparency and credibility of

data and improve responsiveness to customers across all areas.



The Real Challenge

B Muthuraman, MD (Designate), said, "Implementing any ERP system is achallenge for an organization because of the declining success rate of ERPimplementations world-wide.” The challenge is compounded if the ERP

provider is a world leader - SAP. At Tata Steel however the real challengefor us did not lie in successfully implementing SAP or in rolling it out to our 46-odd geographic locations across the country under a big bang approach in

just eight months. The real challenge lay ahead in building a conduciveenvironment where SAP will be embedded in the hearts and minds of the

people and the customers of Tata steel. They all looked forward toknowledge-based, successful organization. It is inspiring to know that our TEAM ASSET with support from Pricewaterhouse Coopers and SAPsuccessfully lived up to our axiom and truly demonstrated leadership skills

by going live across 46 locations within a record time frame of eight months.

Mapping Technology To Business Processes

The path was set to achieve success through SAP. All the branches, whichhad huge numbers of transactions and complexity, were identified as a HUBwhile the smaller branches along with the consignment agents were definedas SPOKES which were attached to these branches. In January 99 the teamfrom TISCO was decided and christened 'TEAM ASSET' an acronym for Achieve Success through SAP Enabled Transformation. The TEAM ASSET

had two simple axioms:

• Go-Live date - 1st November 1999• There are only 24 hours a day

Preparatory task forces activities were conducted and core business processes were mapped to SAP modules. Also another parallel activitycalled 'Change Management' was initiated within the company. The primeobjective of 'Change Management' was to reach out to people involved non-directly in the project to apprise them of the developments taking place. "Wewanted that Tata Steel be the number one in the steel industry…we wantedto be the first to have the latest systems…" said Mr. Sandipan Chakravortty,GM (Sales), TISCO.



Tata Steel planned a big-bang approach of going live with all the modules atthe same time, in just a span of eight months. Driven against the speed of time, the pace of implementation was fast with all activities backed by a lotof thought process and meticulous planning. On 1st November 1999 TataSteel pulled off a big bang implementation of all SAP modules at one goacross 46 countrywide locations, as per the set deadline.

Achieving Business Agility Through SAP

Marching ahead, Web enabling of SAP R/3 is on the cards. On the surface, itmeans it would allow anyone to access our SAP R/3 over the Internet. But

beneath it, the implications are tremendous, as it would result in sharing of information with enterprise accounts and key customers. The success inMarketing and Sales has prompted a re-visit of the existing system in the

works and a detailed rollout is expected as below.

• Phase I - To Extend SAP in Works with FI, CO, MM, PP & QM• Phase II - To implement SAP modules such as Asset Management &

Budget management sub-modules of FICO, Plant maintenance,Human Resources, Production Optimizer (such as SAP APO)

• Phase III - SEM (Strategic Enterprise Management)

The company also plans to adopt the my SAP Customer RelationshipManagement solution to enhance its customer relationships in the near term

and eventually realize its dream of a becoming the most efficient andcompetitive company in the world in its vertical.



ARCHITECTURE AT TATA STEEL



Major IT initiatives and implementations at Tata Steel

SAP R/3 in Sales, Procurement, Finance and Accounting, Production

Planning Systems for Steel plants using the APO module of SAP

Baan at Tisco growth shop and in spares manufacturing unitWorkflow, Document Management, Collaboration using Lotus Notes

Data Warehousing and Data Mining for manufacturing processes

E-procurement, e-auction, and other e-enablement initiatives

Knowledge Management and Intranet

Videoconferencing, live video streaming for improved communication

across geographies

VoIP, Wi-Fi, integration with cell phones and PDAs to support mobile

computing



In a Nutshell

• The Company

TISCO is Asia's first and India's largest integrated private

sector steel company. It is present in 46 nationwidelocations.

• The Need

The company wanted to keep its lead in the competitive steel

industry through constant learning, innovation, and

refinement of its business operations. It had to transit from a

production-driven company to a customer-driven one. The

legacy systems had outlived its life and was quite obsolete.

• The Solution

An ERP SAP R/3 was deployed in a 'big bang' approach across all

its locations nationwide.

• The Benefits

The company now has efficient business processes, enhanced

customer service, reduced costs, improved productivity,

accelerated transaction time, workflow management and

reduction in the number of credit management errors.

There have also been significant savings in manpower,

inventory levels, and resources



THE OUTCOME

SAP ERP solutions produced a remarkable result to the company in terms of financial technical and managerial parameters. The effective handling andspeed delivery resulted in greater sales .Similarly there was a drastic fall inthe amount owned to creditors. The systems were made more user friendlywithout any complexities and procedural lacunas. This improved the quality

of work and lessened the time taken for work and thereby increased the productivity. This was followed by a massive change in terms of accountability administration and control.

"Post the introduction of the ERP solution, the results have been terrific.Tisco has spent close to Rs 40 crore on its implementation and has saved Rs33 crore within a few months," said Ramesh C. Nadrajog, Vice President,Finance. "The manpower cost has reduced from over $200 per ton two yearsago, to about $140 per ton in 2000. The overdue outstanding has been

brought down from Rs 5,170 million in 1999 to Rs 4,033 million by June2000. The inventory carrying cost has drastically deflated from Rs 190 per ton to Rs 155 per ton. To add to this, there have been significant costssavings through management of resources with the implementation of SAP.With SAP's solution Tata Steel can now update their customers on a daily

basis and provide seamless services across the country improving customer management. The availability of online information has facilitated quicker



and reliable trend analysis for efficient decision-making. Besides thestreamlined business process reduces the levels of legacy system and also

provides consistent business practices across locations and excellent audittrail of all transactions.

Future Moves

This exercise undertaken by TISCO has been a motivating factor for both

companies and ERP vendors. TISCO is not determined to stop ERP or attain

a saturation point now. They are working on to improve and increase the

scopes of enterprise resource planning software in the organization so that it

benefits the stakeholders in all possible manners. Organizations can take this

as a model guide and combine it with the critical success factors for ERP

systems and critical success factors for ERP implementation in order to

enjoy ERP success.

Conclusion

ERP is a key backbone application for companies in a fast changing industrylike steel. Given an awareness of the best practices and a good understandingof the project complexities, the risks in an ERP implementation are usuallyoutweighed by the benefits. The ERP discussion is often one of mindset

more than one of standalone business cases. While implementing ERP can be challenging and demands sustained commitment from top executivelevels, it is fundamental to enhancing the competitive position of a companyin the dynamic environment of the steel industry today.

p 1275 Erp Project Report

Documents

Transcript of p 1275 Erp Project Report