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Issue of August 2003 
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Case Study: Escorts AMG’s ERP upgrade

New tools at Escorts AMG

Escorts Limited's, Agri Machinery Group had deployed Avalon's ERP systems and faced challenges like inability to upgrade, lack of vendor support, and buggy software. It used tools from the Oracle 11i suite and now performs its critical operations with better productivity levels. by Shipra Arora

Escorts Limited's Agri Machinery Group (EL-AMG) manufactures agricultural machinery, and has four manufacturing plants in Faridabad. It manufactures three lines of tractors, imports and sells various other farm equipment, and consequently accounts for around almost two-third of Escort's revenues (Rs. 900 crore in FY 2002-2003). The use of an ERP thus plays a significant role in the business operations of this busy manufacturing company.

EL-AMG had already deployed ERP systems from Avalon, but was plagued with a number of challenges. The company was unable to draw a future roadmap and upgrade its technology. And to make matters worse, the ERP vendor Avalon had shut shop in India. This prompted EL-AMG to look for an alternative enterprise applications solution for its business. As a solution, it deployed a number of modules of the Oracle 11i suite of products and can now make better and more informed decisions, and enjoy a bug-free software performance.

In a nutshell

The company
Escorts Limited's Agri Machinery Group (EL-AMG) manufactures agricultural machinery, and has four manufacturing plants and an R&D center in Faridabad.

The need
The company used an ERP from Avalon which did not allow the company to upgrade technology. And the vendor shut down its office in India, cuttingoff support.

The solution
The company deployed a range of tools from the Oracle 11i suite like Oracle Financials, Oracle Discrete Manufacturing, Oracle Purchasing, Oracle Order Management, Oracle Workflow and Alerts, and Financial Analyzer (OFA).

The benefits
The company was able to perform better workflow processes, easier generation of MIS reports, bug-free performance of systems, and timely closing of accounting cycles.

Escorts Agri Machinery Group

Click on image for larger view

Business challenges

Despite using an ERP, the toughest challenge was the inability to draw a future roadmap by leveraging the latest technologies. This was impeding the scope for future growth. The company could not leverage the benefits of the Internet by offering e-commerce and other Web initiatives. Since the Avalon ERP could not be Web-enabled. To make matters worse, Avalon had shut shop in India, shutting down chances of upgrades and making use of the latest technology developments.

"The Avalon ERP system had outlived itself and had become a dead product," said Vinay Mehta, IT Head, EL-AMG. The product had inadequate documentation, which made maintenance very difficult. It was a headache to incorporate frequent changes in the application.

EL-AMG also had to deal with the problems of software bugs, which could not be resolved due to lack of proper documentation. The company feels that the bugs appeared due to over-customization of the product. The central systems department, which took charge of applications maintenance, spent most of its time tackling these bugs.

The system was not very user-friendly. The users were not able to run queries on their own. The responsibility of running the large amounts of queries and reports was delegated to the central systems department. This created a huge backlog of work.

EL-AMG also had a certain amount of legacy, which included i2 SCM, demand planner, factory planner, warehouse management software for the spare parts division, HR and payroll applications, after-sales and warranty systems, and Auto-Matrix Exchange for collaboration with vendors. The group wanted an end-user-driven system that would empower the users and allow them to run their own queries, reducing the burden on the systems department. This made the company decide to implement a new ERP system, which could take care of the future growth strategies of the company and provide the needed functionalities.

Choosing the ERP system

In early 2001, EL-AMG began to look for a new ERP system to replace the existing one. The company chose Oracle among other vendors keeping in mind the organization's functional and technical requirements. Since the ERP project was very significant for company, it was named, 'Pragati'.

A lot of time was spent in planning and deciding upon the right software. And the entire proceedings were conducted in an elaborate and phased manner to ensure efficiency.

The company laid down three ground rules for vendors willing to participate.

They were:

  • The vendor had to conduct a three-month Business Process Re-engineering (BPR) exercise at EI-AMG.
  • The ERP vendor would be the technology implementation partner and handle the sole responsibility of the project.
  • The ERP systems had to integrate seamlessly with the company's legacy software systems.

An important highlight in the selection process was the involvement of end users. A team of around 70 members was created during evaluation. Almost 80 percent of the members belonged to functional areas. The rest were from the IT department.

"This was a key learning from the earlier ERP implementation, which was largely IT-driven. If the selection process is not end-user-driven, you'll have a hard time convincing users about the benefits. In our new ERP implementation, we made sure that it was the choice of the end users, so that they accepted the decision easily," explained Mehta. The Gartner group was also involved in providing consultancy at each stage.

Each member of the team gave ratings to the vendor. The evaluation was finally done on the following criteria:

  • Functionality
  • The ability to integrate third party software
  • Type of feedback from existing user base (through visits to other company's ERP sites)
  • Presence in India
  • Localization of modules
  • Cost
  • Time taken to implement.

In March 2002, Oracle was chosen for the applications, an Accenture was chosen to conduct the BPR exercise.

Implementing 'Pragati'

The rollout of Oracle's products began in March 2002. EL-AMG is present in five locations, which comprised four manufacturing plants and an R&D setup, all within distances of three Km in Faridabad.

The company decided upon the 'big bang' approach to implementation in the five locations. It went live on Oracle 11i in March 2003. The modules implemented were Oracle Financials, Oracle Discrete Manufacturing, Oracle Purchasing, Oracle Order Management, Oracle Workflow and Alerts, Financial Analyzer (OFA), Purchasing and Manufacturing Intelligence, Teleservice, iReceivables, and Oracle Treasury.

An important set of exercises during implementation was on data cleansing and migration. Earlier, different finance divisions used various items, parts, and vendor codes. With the unification of the different divisions, standard codes were created for simplification and more efficiency. The data was taken from legacy system and the coding scheme was revamped.

Reporting and MIS systems had different formats and had to be revamped. The Bill of Materials (BOM) systems also had to be re-done during implementation.

The company network

The heart of the network is at the second plant (Plant 2) in Faridabad. Around 40 servers, some of which are PCs configured as servers, act as a centralized system. The servers range from NT, Windows 98, Windows 2000 to Linux and Solaris.

A set of four HP severs (HP-Ux 11i) run the core Oracle application modules. These are connected to a SAN box. The other three plants and the R&D locations connect to these servers through 2 Mbps leased lines. The area offices are able to connect to the servers located in Plant 2 through a VPN provided by HCL Infinet using a PSTN dial-up.

BPR

"If one goes for an ERP without BPR, there is a chance the company will miss out on a lot of benefits of BPR," said Mehta. The BPR exercise was closely aligned with the ERP implementation, ensuring that 'best practices' were incorporated. Accenture was involved in defining the re-engineered processes and convincing the end users of the future benefits. Oracle's role was to map the processes into their products.

The processes involved in re-engineering included finance, procurement, materials, plant maintenance, and quality assurance.

How the new tools helped

A significant benefit of the new Oracle-based systems was the resolution of the problems with present in the earlier Avalon ERP. Due to the bugs, the company could not use its database (Oracle) for generating any meaningful MIS. So, the MIS for the top management was generated through Excel sheets instead of being generated directly through the system.

With 11i, the MIS is generated through the system and standard reports are created. Currently, there are around 250 reports generated for the middle management and operational people.

The company has also deployed Business Intelligence (BI) tools from Oracle for the top management. While earlier the focus was on the middle management and operational personnel, the present focus is on the top management so that they can perform informed planning and better decision making activities.

With the help of the new tools, the company was able to shorten the time taken to close the annual accounts. It was able to close the year end accounts of FY 2002-2003 within two months, an improvement from four months time taken earlier. By next year, the company hopes to bring the time taken down to one week. It is also able to close the accounts each month by the first week of the next month.

At any time the company is aware of its inventory status. According to R.K. Jain, Dy. General Manager, AMG (Information Systems), there has been elimination of a lot of non-value added activities as well, translating into benefits for the group.

ROI

The company feels that it's a little early to calculate ROI, and the results are already visible in the lowered inventory value. According to Mehta, the system has already brought down the value of inventory by around 30 percent. There has been substantial savings in terms of inventory and manpower resources.

The future roadmap

Within the next three months, the company will extend its ERP system to its area offices, which number 25. It will roll out the ERP to 15 nationwide depots. And will implement product data management systems. It will also integrate its R&D systems, designing, and product development systems in the plants in the next few months.

Shipra Arora can be reached at shiparora@yahoo.com

 
     
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