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Tata
Iron and Steel Company Limited (TISCO) made a steely
resolution to remodel itself from a product-driven to
a customer-driven enterprise of the Internet economy.
It deployed an ERP, SAP R/3 to help its resolution bear
fruit, and now enjoys exciting operational and cost
benefits. by Bhavish Sood
"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 Rs 33 crore within
a few months," said Ramesh C. Nadrajog, Vice President,
Finance. "The manpower cost has reduced from over
$200 per ton two years ago, 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 June 2000. 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 costs savings through management
of resources with the implementation of SAP."
Sounds almost Utopian doesn't it? But that's exactly
the result of TISCO's ERP 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 most rigorous demands of its customers worldwide.
| In
a Nutshell |
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The Company
TISCO is Asia's first and India's largest integrated
private sector steel company. It is present
in 46 nationwide locations.
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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.
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The Solution
An ERP SAP R/3 was deployed in a 'big bang'
approach across all its locations nationwide.
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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.
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The
company adopted ERP technology to take a lead in the
competitive steel industry and through constant learning,
innovation and refinement of its business operations,
has transited seamlessly from a production-driven company
to a customer-driven one. The existing technology was
a simple replication of the manual system. Not only
did it operate as individual islands of information
but the technology had outlived its lifetime and was
completely obsolete. The employees and management at
TISCO faced a cumbersome 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 there was no
built-in integrity check for various data sources. Besides,
several times the information against certain items
was found missing.
An
early response
Responding to changing customer needs started as early
as 1991, with a study on cost competitiveness and a
formal business plan, followed by ISO 9002 certification
and benchmarking initiatives. Realizing the need to
further support the re-engineered core processes and
quickly align the business processes to radical changes
in the market place, TISCO decided to go for a new robust
solution.
Design
In 1998-99 a small cross-functional in-house team along
with consultants from 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 to improve customer focus, facilitating
better credit control, and reduction of stocks.
Choosing the platform and technology
The management at TISCO wanted the software to seamlessly
integrate with 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
organizational requirements SAP fared on the top of
the list of contenders.
The implementation of SAP was associated with certain
strategic goals in mind. With this implementation, TISCO
wanted to bring forth a culture of continuous learning
and change. This would enable TISCO to achieve a world-class
status for its products and services and strengthen
its leadership position in the industry. Besides this,
TISCO also wanted the software to result in quick decision-making,
transparency, credibility of data, and improve responsiveness
to customers across all areas.
The real challenge
B Muthuraman, MD (Designate), said, "Implementing
any ERP system is a challenge for an organization because
of the declining success rate of ERP implementations
world-wide. At Tata Steel however the real challenge
for 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 conducive environment where SAP will be embedded in
the hearts and minds of the people and the customers
of TISCO."
Mapping technology to business processes
A road map was created to achieve the desired levels
of success with ERP. All branches which had huge numbers
of transactions and complexity, were identified as 'hubs.'
And the smaller branches along with the consignment
agents were defined as 'spokes,' which were attached
to these branches. In January 1999 TISCO created a team
called 'TEAM ASSET', an acronym for Achieve Success
through SAP Enabled Transformation.
The TEAM ASSET had two simple axioms:
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Go-Live date - 1st November 1999
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There are only 24 hours a day
Preparatory task forces activities were conducted and
core business processes were mapped to SAP modules.
A parallel activity called 'Change Management' was initiated
within the company. The prime objective of 'Change Management'
was to reach out to people involved non-directly in
the project to apprise them of the developments taking
place.
Tata Steel planned a 'big-bang' approach of going live
with all the modules at the same time. Within eight
months, on November 01, 1999, Tata Steel pulled off
a big bang implementation of all SAP modules at one
go across 46 countrywide locations. The deadline was
successfully met.
The Result
The introduction of SAP solutions within Tata Steel
has led to 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 resource management.
TISCO can now update its customers daily 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, the streamlined
business process reduces the levels of legacy system
and also provides consistent business practices across
locations and excellent audit trail of all transactions.
"Now I shudder to think how we were functioning
so many years without a world-renowned ERP system. Along
with the hard times we had, came the rewards of the
success of implementation," remarked Mr. K. V.
Srinivasan, Member, Team ASSET at TISCO.
Bhavish
Sood can be reached at bhavishsood@netscape.net
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