Case Study: ERP helps shorten production cycles
A well-tiled path to productivity
H&R Johnson, the largest tile manufacturer in the country,
phased out its older systems and deployed an ERP. This led to reduced production
planning times, quicker response to market changes, and increased levels of
efficiency. by Soutiman Das Gupta
In order to meet the demands of a booming construction
market, tile-maker H&R Johnson (India) Limited (HRJIL) had to shorten production
cycles and increase variety in product size and design.
After careful consideration it deployed an ERP solution
from SAP and now enjoys a number of benefits like reduced production planning
times, quicker response to market changes, and increased levels of efficiency.
|"We clearly wanted a single package that could take
care of all sections of our organization like production, accounts, materials,
sales & distribution, and pricing, enable scaling up as required, and yet
stay focussed on moving the organization up the value chain." — Gopinath
Krishnan, General Manager - IT, HRJIL
The demand boom
In 1999-2000, India witnessed a boom in the construction
market and the demand for tiles grew with a jump. The market trend was towards
greater variety in terms of sizes, colors, and designs, all with very short
lead times for delivery.
The company needed to add more print cycles and shorten
its production runs to cope with these demands. For instance, in order to create
multi-colored tiles of four colors, each tile had to go through a printing block
Coupled with the need to shorten production cycles,
the company faced other complicated tasks. There were also needs like more innovative
pricing strategies, cutting costs, and providing value-added products and services.
Foxpro saves the day
The company used to run Tally from 1994 and wanted
to run it uniformly across all locations. The company has factories in four
locations Devas (Indore), Kunigal (Near Bangalore), Pen (near Mumbai), and Karaikal
(Pondicherry). It also has 22 nationwide branch offices.
But Tally couldn't address the issue of pricing, which
turned out to be important at that time. And the absence of a comprehensive
production planning system still existed.
So in 1996 the company implemented a Foxpro-based solution
and had the in-house team develop modules for pricing, and sales and distribution.
This configuration stabilized and was deployed across all factory locations.
All the branches ran Foxpro. Although the factories and branches were not connected,
this configuration ran smoothly till 1998.
Surviving a depression
1997-1999 saw a depression in the construction market.
To survive the times, the company used IT to manage its market position, introduce
value-added products like Marbonite and bathroom fittings, and develop pricing
"The techniques worked and the company weathered
We started growing by a CAGR of around 20 percent,"
said Gopinath Krishnan, General Manager - IT, HRJIL.
Now for an ERP
In the face of a high rate of growth, several variations
in the production line, the need for shorter production cycles, and the need
for aggressive pricing strategies, the company began to debate the need for
an ERP package. The company however didn't look for a short-term solution by
cutting down fixed cost components like labor.
Krishnan explained, "We clearly wanted a single
package that could take care of all sections of our organization like production,
accounts, materials, sales & distribution, and pricing, enable scaling up
as required, and yet stay focussed on moving the organization up the value chain."
Moving up the value chain is something that can happen
independent of IT in an organization. "But IT has to enable it very strongly.
The backend should be able to support the value-addition process and consequent
business changes," said Krishnan.
|H & R Johnson - WAN Diagram
Deploying the solution
"We considered using SAP R/3 based on the strength
of its manufacturing solution, the vendor's support infrastructure and future
scalability of the solution," said Krishnan.
A core team was formed in early 2000 comprising the
best people in the organization from relevant fields like production, finance,
sales & distribution, accounts, and controlling to evaluate options on products
& technology. Covansys was chosen as the consulting and implementation partner.
In late 2000, the four manufacturing locations were
connected to the Head Office (HO) at Santa Cruz, Mumbai with VSAT. The bandwidth
between each location was 300 Kbps, and it offered 1.5 Kbps to each user.
Deployment of the ERP began in February 2001 and the
solution went live on January 01, 2002.
"The first 45 days were troublesome because the
old systems were completely halted and the new ones had to be used in its place.
We had to resolve teething problems related to data, servers, connectivity,
new operations workflow, and new business processes. The existing process had
to die, and the new processes had to take over," recollected Krishnan.
"We were still growing at 20 percent CAGR and
growth threw on us new business requirements like the need to train new personnel,
and to stabilize the system before the yearly accounts closure in March. After
the initial 45-day period the sales & distribution cycle began to run smoothly
and we could concentrate on consolidation."
In the fist phase of deployment, which was complete
in August 2002, the company deployed the modules of sales and distribution,
finance and controlling, materials management, production planning, quality
management, and the Country India version.
In the second phase, which started in August 2002,
the company planned to deploy the modules of HR, plant maintenance, CRM, Advanced
Planning and Optimization (APO), and Business Information Warehouse (BIW). The
India Payroll of the HR module has been implemented at the HO and is in the
process of being rolled out to the other locations.
HRJIL is slated to go live with APO and CRM by October
2003. As a part of this deployment process the company provided training to
its dealers and urged them to procure hardware and connectivity.
- The production planning cycle is more flexible and
the transparency induced by the ERP system has enabled the marketing and production
teams to coordinate effectively to reduce the planning cycles.
- Pricing strategies are easier to implement and a
lot more flexible.
- The company has been able to reduce the proportion
of the products slipping into the 'Stale' category, which improves its price
realizations. The company has been able to tune its internal business processes
like material management and production to facilitate faster response to the
production of fast moving items.
- Time taken for collection of receivables was brought
down from 28 days to 21 days. During the legacy period invoices raised from
plants were sent from the manufacturing plant to the nearest branch. The branch
would then arrange to collect the same from the customer. Now the receivables
get updated at relevant locations instantly, thereby accelerating the collection
"And as the organization grows, these benefits
pay back much faster," explained Krishnan.
A big challenge was to manage change. The personnel
had to be convinced that they would receive a lot of value by using the ERP
systems. Sizing of IT systems and servers was also critical to ensure a smoother
"You need to know the volume and frequency of
transactions you will make in order to size your servers correctly and several
transactions may be specific to the ERP. This makes the advance evaluation difficult,"
said Krishnan. "There are questionnaire-based server sizing tools, but
they are very broad and at times inadequate."
The company uses L-class servers from HP, using HP-UX.
It uses Oracle as the database. Comsat Max which provides the VSAT connectivity
also hosts a DR facility for the company.
HRJIL plans to roll the APO module across all manufacturing
locations nationwide. It will also connect its CRM systems to a limited number
of dealers in the beginning as a pilot run and later extend it to other dealers
Soutiman Das Gupta can be reached at firstname.lastname@example.org
- The company
H&R Johnson (India) Limited (HRJIL) is a large tile-manufacturer
with 4 manufacturing units and 22 nationwide branch offices.
- The need
In an increasingly competitive world, the company needed to shorten
production cycles and increase variety in product size and design.
- The solution
The company deployed SAP R/3 in phases across its locations.
- The benefits
The company has reduced production planning times, responds quicker
to market changes, creates aggressive pricing strategies, and performs
at increased levels of efficiency.