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 four times.

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 strategies.

"The techniques worked and the company weathered the storm.

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.

Teething

"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."

Phases

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.

ERP paybacks

• 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 process.

"And as the organization grows, these benefits pay back much faster," explained Krishnan.

Challenges

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 transition.

"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.

Ahead

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 nationwide.

Soutiman Das Gupta can be reached at soutimand@networkmagazineindia.com