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Home > CaseStudy > Full Story

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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