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L&TS
SEAMLESS B2B INTEGRATION
By
Shubha Murthy
Read
on to find how the Electronics Business Group of L&T improved
and transformed its key business processes to strengthen
customer service operations, streamline supply chains and
reach existing and new customers with ease by deploying
SAP
Mumbai
based Larsen and Toubro Ltd., one of India's largest multi-dimensional
industrial organizations, implemented SAP last year, and
has made a precarious transition from the conventional brick
and mortar business model to one that integrates the virtual
processes, with elan.
Founded
more than 55 years ago, the business portfolio of Larsen
and Toubro Ltd. (L&T) enfolds such diverse processes
as engineering, manufacturing, earthmoving, construction
and IT among others.
The
Electrical and Electronics Business Group (EBG) of L&T,
also headquartered in Mumbai, was set up in 1960. This group
manufactures:
-
Low voltage switchgear and controlgear, petrol
metering and dispensing pumps at Mumbai, Ahmednagar
and Faridabad.
-
Solutions for control, regulation and monitoring of
various plants and equipment such as cement plants,
rolling mills, electricity generation plants, fertilizer,
petrochemicals complexes, etc.
-
Medical equipment for patient monitoring, ultrasound
equipment, equipment for ICCU, energy meters etc. at
Mumbai and Navi Mumbai.
For
the fiscal 1999-2000, L&T posted a turnover of Rs. 7,599
crores, while EBG posted a turnover of about Rs. 7,000 million.
Basic
Network Infrastructure
The
basic IT network at EBG comprises a 10/100 mbps UTP Ethernet
LAN, with 800 plus nodes, driven by a backbone of Level
III Intelligent Switch at Powai in Mumbai. Other locations
also have similar equipment to suit their needs. Various
establishments of this group are connected to each other
by a private WAN called LNTNET, which is maintained by Larsen
and Toubro Information Technology Limited (LTITL),
formerly
called Information Systems Division (ISD), a wholly owned
IT subsidiary of L&T that was setup in April 1997.
The
Need for Change
Way
back in 1999 EBG foresaw the need for strategic change,
initiated by a need to remodel its existing information
technology infrastructure to keep pace with the flux in
the market. This restructuring was designed to help the
business group focus on specific customer segments and address
their needs.
"Following
enterprise-wide restructuring, we realised the necessity
for an infrastructure that could effect a turnaround in
the corporate culture in terms of communication, and change
the way EBG, as an organisation, responded to its customers,
suppliers and distributors. Without this, co-ordination
among the various departments of the organisation such as
production, sales and other processes would have been a
herculean task," points out Vivek Shiroor, general
manager, SAP, L&T Information Technology Ltd.
What
emerged was a decision to streamline procedures and improve
communications for faster decision-making in a flatter organisation.
For a company of this size, one of the primary concerns
was the need for an effective communications mechanism to
create greater efficiency in response time to both internal
and external customers.
Pre-SAP
Scenario
In
the pre-SAP days, the now SAP-enabled functions were carried
out on island IBM ES 9000 systems using the CICS-COBOL-DB2
environment that were almost a decade old. Maintenance turned
out to be a big problem as with availability of low manpower
in the mainframe/ midrange computing segments. Also, these
systems were more than 15 years old and hence were lacking
in features and flexibility.
"Besides,
in the Mumbai works at Powai and Madh, the production and
materials functions were carried out on the mainframe, with
the inventory function on-line. The other departments had
independent systems, from which data had to be periodically
transferred to the main frame for consolidation," explains
Shiroor.
EBG
was unable to cope with the fast changing business scenario,
new and complex requirements of users. Besides, there were
islands of information with suppliers and distributors on
heterogeneous platforms, leading to data inconsistency and
duplication.
More
importantly, almost all Business Process Reengineering (BPR)
initiatives required enhancements in the information systems
area. There was neither real-time bi-directional integration
between two or more legacy systems across the intranet having
different versions, nor any supplier information regarding
products, prices and availability. In addition, there were
no links between fulfillment and order tracking applications
and shippers' internal systems.
These
factors influenced EBG to work with SAP India Pvt. Ltd.,
to establish a robust brick-and-mortar infrastructure on
core SAP R/3 and further powered it with SAP's new Internet
environment, mySAP.com (implemented in 29 days) to future-proof
its business by transforming into a click-and-mortar company.
The
SAP environment
|
In a nutshell |
|
Company: Larsen and Toubro |
|
Department: Electronics Business Group |
|
Core Business: Electrical & Electronics
Equipment manufacturers |
|
|
|
SAP Products Deployed |
|
Sales & Distribution |
|
Production Planning |
|
Materials Management |
|
Financial Accounting and Controlling |
|
Quality Management |
|
Service Management |
|
Variant Configuration |
|
|
|
mySAP.com products |
|
Online Store |
|
B2B Procurement |
|
Business Connector |
|
|
|
Hardware |
|
Compaq servers |
|
IDES server |
|
LAB server |
|
MS cluster server |
|
PAMA VSATs |
|
TDM/TDMA VSATs |
|
Frame Relay OSS |
|
|
|
Operating System |
|
MS Win NT 4.0 Enterprise Edition |
|
|
|
Database |
|
Informix 7.30 |
|
|
|
No.of users |
|
300 |
EBG
was looking for a long-term solution offering a more robust
and integrated environment involving proven state of the
art technology. Shiroor informs, "We decided to deploy
an Enterprise Resource Planning (ERP) software to reap the
benefits of an integrated system that would help avoid batch
data transfers and make available real-time information
for better decision making."
SAP
was selected by a cross-functional task force after carefully
evaluating several other ERP packages available in the market
such as Oracle Applications, Baan, JD-Edwards, Ramco Marshall,
Avalon, MFG/PRO and so on. Delineating the factors that
favored SAP, Shiroor says, "The functionality of SAP
suited our day-to-day operations such as manufacturing,
procurement, sales, distribution of FG, costing, financial
accounting etc. better than any other ERP software. Besides,
SAP also had a better vision in terms of R&D, market
share, local presence and localization modules, organizational
stability, and focus."
The
SAP system, which is centrally located at Mumbai, is running
on Windows NT with Informix as the database engine, using
Microsoft Cluster Server solution. The database and the
central instance are in a cluster. The SAP installation
is connected to the head office via a leased line, to the
four factories and to the four regional offices through
PAMA VSATs of Hughes Escorts Communications Ltd. (HECL)
and to the 21 branch offices and 10 godowns by TDM/TDMA
VSATs. The service provider is COMSAT MAX.
EBG
is also in the process of installing a disaster recovery
server that will be in the same Powai complex but about
a kilometer away. This will also take up some routine query
load from the main server during peak time.
The
implementation partner SAP India Pvt. Ltd trained the implementation
core team of EBG, comprising about 25 people. The training
was then cascaded to cover the organization.
The
greatest benefit of SAP is its customizability and scalability.
Localization (sales tax, excise, etc.) and variant configuration
were the focus of EBG's customization efforts. These were
done after consulting SAP and gaining their consent on the
path to be adopted. Most of the efforts were towards easy
manageability after implementation.
Since
software life cycles are short, EBG has been constantly
upgrading from the original implementation of SAP version
3.1H. Six months after the initial implementation, EBG upgraded
to version 4.0B and plans to go for another upgrade to version
4.6C in August this year.
Explaining
the need for upgrades, Shiroor avers, "New features,
specially related to local taxation were introduced which
are useful to us. These new features in SAP localization
add-ons, work only with the new SAP product versions, and
simultaneously support for old versions are withdrawn, typically
three years after the new version is introduced."
|
mySAP.com functionality |
|
For Suppliers |
|
Purchase order list and download/purchase order status
and details/purchase order history. |
|
Goods receipt with progress details and quality status. |
|
Invoice parking. |
|
Supplier accounts details. |
|
For Distributors |
|
Product catalog management and shopping cart functionality.
|
|
Faster order entry, data validation, order simulation
& editing facility. |
|
Availability and credit check. |
|
Order processing and status including delivery and
billing details. |
|
Customer account with payment details. |
Constant
upgrades however, cause a complete shutdown of the entire
process. "If the basic SAP source code is not modified
and additional development is minimal, then it is quite
simple and easy to upgrade. However, during the actual upgrade
the system is shut for a certain period. Since, we are fully
dependent on SAP, it is very difficult to schedule such
shutdowns," says Shiroor.
Security,
which is a major issue, is managed through such means as
authorization management, robust firewall, intruder detection
software, SAP router, data encryption and so on.
mySAP.com
EBG
implemented mySAP.com modules in March 2000 and became the
first organization to do so in India. This included an online
store (Internet sales submodule of SAP-CRM) for capturing
sales orders over the Internet and enabling the monitoring
of despatches, FG stocks, account balance, outstandings,
etc. through the Internet. This also included B2B procurement
on the supplier side. L&T's EBG happens to be the first
customer to deploy these features of mySAP.com and put into
operation in India.
Benefits
accrued
EBG
has benefited in a number of ways due to its SAP implementation.
Sales order processing that earlier took four days is now
online and in real-time. It has drastically reduced order-processing
time and improved online processing and tracking. Furthermore,
it has improved the response time of services by standardizing,
monitoring and prioritizing them.
It
offers partner participation and facilitates the process
of purchasing. Approved purchase orders are then sent to
suppliers online. Labor and paper intensive operations have
been converted into self-service operations, with the help
of release strategy based workflow. In addition, invoice-parking
occurrence in payment computation has also been eliminated.
"The
result of all this is manifested in the reduced communication
costs, evolution of document standards, improved customer
service, reduced time-to-market, reach to global markets
and increased revenues," points out Shiroor.
LNTEBG.com
L&T
has just launched LNTEBG.com, a B2B portal for its EBG.
The LNTEBG.com solution will enable the company's stockists
across the country to track orders online from creation
to billing, including an availability check. Similarly,
the entire gamut of supplier-management activities from
purchase order downloads to accounts payable, including
online tracking of supplies have been enabled for L&T
vendors.
The
most difficult part of the entire restructuring process
according to Shiroor was changing well-entrenched 25-year-old
practices, especially in product related area. "Difficulties
were primarily regarding WAN setup and management, mixed
communication load (SAP and non-SAP), response time, handling
user training due to geographically dispersed locations,
managing high user expectations," he adds.
Future
Direction
L&T
has chalked out concrete plans for enhancing its network
infrastructure. The next step of LTITL will be to work with
SAP in developing engineering and construction portals.
L&T is gearing up to go for the SAP Customer Competence
Centre (CCC), remote access, VPNs, SANs, disaster recovery
center, Extensive Workflow applications, Document Management
System and Product Data Management to further future proof
and automate its businesses processes.
Shubha
Murthy can be reached at shubha_m24@hotmail.com
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