The critical success factors of ERP systems mainly include proper

implementation and usage. Beside this there are several other factors that
decide the regular functioning of ERP in organizations.
While many organizations have not incurred the necessary benefit in terms
of money and other measures there are lots who have witnessed multiple
profits. Studying them will help in understanding the critical success factors
for ERP implementation. They will help in deciding ERP success
What is ERP?
ERP or Enterprise Resource Planning is IT software that integrates business
activities across an enterprisefrom product planning, parts purchasing,
inventory control, and product distribution, to order tracking. ERP may also
include application modules for the finance, accounting and human
resources aspects of a business. SAP and Oracle are the two ERP leading
vendors.
From a business perspective, ERP today has expanded from simply
coordinating manufacturing processes to being the integrator of enterprisewide backend processes. ERP has also evolved technologically from a
monolithic legacy implementation into flexible, tiered, client-server
architecture.
ERP Project Risks
In the late 1990s many ERP projects started, but more than a few failed.
While ERP projects remain challenging even today, most can now be
successful because the best practices have been identified and ERP
professionals are more knowledgeable and more experienced with making
the projects successful.

ERP Business Benefits

ERP is an enabler of business benefits, and should not be viewed as a
standalone initiative with the requirement to pay back its implementation
cost. The most immediate ERP benefits include
(1) Improved visibility of procurement spend and savings from improved
sourcing policies,
(2) Decrease of work-in progress and days-of-sale-outstanding,
(3) Improved productivity through better sales order handling, better
procurement operations and more efficient planning.
However, the most important business benefits will often be delivered after
the ERP backbone is established, by other initiatives that use the ERP
backbone:
Integrated supply chain: from network planning through scheduling
and Manufacturing Execution Systems (MES)
Easier integration of business processes with business partners
Shared services and outsourcing of support functions
Increased information transparency to enable better decisions
Agility in acquisitions and carve-outs or divestments
Increased regulatory compliance
Robust and future-proofed backbone systems
There are cost savings on the IT side, often around 10-15%, especially
when different ERP implementations are being harmonized. These IT
savings include:
Reduced ERP implementation costs due to a common template
Reduced application maintenance costs
Lower integration cost due to standard interfaces
Lower infrastructure costs
With an awareness of the best practices and a good understanding of ERP
project complexities, the risks in an ERP implementation are usually
outweighed by the benefits. The ERP discussion on investment return is one
of mindset more than one of standalone business cases.

TISCO PROFILE
This company founded and established in the year 1907 is known to be one
of the leading steel giants in the country offering multiple products and
successfully running many subsidiary corporations. Being a large entity does
not stop things from being subject to scrutiny and internal audit. They are
regularly implemented with the help of committees who report to the
selected members from the senior management. The company is dedicated to
providing laudable services to the stakeholders improve on the quality and
as thrive for innovations and improvements constantly.
BACKGROUND
TATA steel is Indias largest integrated private sector steel company that
started its corporate journey in the year 1907. Backed by captive iron ore
and coalmines, Tata Steel runs state-of-the-art Cold Rolling Mill complex at
Jamshedpur, Eastern India. The enterprise has undergone a modernization
programme costing $2.3 billion, resulting in production of steel at the lowest
cost in the world. Being a large entity does not stop things from being
subject to scrutiny and internal audit. They are regularly implemented with
the help of committees who report to the selected members from the senior
management. The company is dedicated to providing laudable services to the
stakeholders improve on the quality and as thrive for innovations and
improvements constantly. Tata Steel is a relentless pursuer of excellence.
ASPIRE, Tata Steels quality initiative drive combining TPM, Six Sigma,
Total Operational Performance, Suggestion Management and Quality Circles
has reaped rich dividends for the company.
Tata Steel's Jamshedpur plant has a capacity of 4 mn tons per year, and
produces flat as well as long products. Currently, to meet growing demands,
the plant is being expanded to accommodate another million. Tata Steel has
set up an ambitious target of 15 mn ton capacity per year by 2010. As part of
its expansion plans the company recently made investments in NatSteel
Singapore, which will expand its footprint in six countries in the Asia Pacific
region and China.

Tata Steel's products include hot and cold rolled coils and sheets, galvanized
sheets, tubes, wire rods, construction re-bars, rings and bearings. The
company has introduced brands like Tata Steelium (the world's first branded
Cold Rolled Steel), Tata Shaktee (Galvanized Corrugated Sheets), Tata
Tiscon (re-bars), Tata Pipes, Tata Bearings, Tata Agrico (hand tools and
implements) and Tata Wiron (galvanized wire products). The Construction
Solution Group explores new avenues for steel utilization by techniques that
are economical. Tata Steel has also developed 'galvannealed' cold rolled steel
with technical assistance from Nippon steel for high-end auto applications.

ERP IMPLEMENTATION
TISCO deserves lot of credit for implementing ERP because of the fact that
many organizations in the global level have given up the very idea of ERP
due to the fact that there are lots of failures associated with it even in the
implementation stage. ERP implementation did in wrong manner have
caused havoc to organizations more than bringing profits. This being the
case it is natural to expect a large company (in terms of Size and volume of
operations) like TISCO to discourage the idea of Enterprise resource
planning. However TISCO proved to be different from the others by
choosing ERP in the right time and implementing it in a proper manner.
They have also reported a whooping profit and reduction of costs in the
whole process. Another amazing fact is that they implemented it into the
whole systems in one single spree. The method of implementing it in one
spree carries a lot of risks especially for a bigger company. Infact the success
rate of this method itself is low in general and very low as far as bigger
companies are concerned. Incase of the rare success organizations will
experience effective results in their enterprise operations. TISCO has
achieved that by way of meticulous handling and professionalism. The net
results of their ERP software have been described to be pathbreaking and a
trendsetting one.

WHY ERP IN TISCO

TISCO faced two major problems from the systems that existed for a long
time. Firstly they were not customer friendly. The whole system was tuned
to the process and very little attention was paid to the customer demands.
Secondly the systems were outdates and the modalities of operation were too
complex and not error free. In order to rectify these issues which would
otherwise prove to be major setbacks to the company the organization
resolved to take up ERP. This was instigated by the concerned departments.
Leading consultants were hired and the business structure was studied and
suitable plans were drafted accordingly.
What Should They Do?
Lets say youre the CEO of a large multi-national steel company, and youre
running a global operation with plants on four continents. You need to make
good business decisions, and you rely on your IT systems to provide the data
to make those good decisions.
But your IT systems are not well integrated. There are too many different
systems, and too many gaps between them, a legacy of the companys
history of mergers, acquisitions, and improvement initiatives. You need a
common information backbone. Youve heard that ERP systems can do that,
but youve also heard about ERP project failures from years ago.
Can ERP handle the challenges of a steel company today? And will that lead
to business benefits for the company? answer are yes, and yes.

Information Systems For A Quickly Changing Steel Industry

In a quickly changing industry like steel, one need information systems
which quickly provide them the data they need. We believe that ERP,
especially in its mature implementations today, is the crucial component for
a companys IT data backbone. ERP can play an essential role in:
Driving accurate and fast decisions (product profitability, procurement
spend) with consistently defined data
Running broadly known and supported applications
Harmonizing and optimizing back-office processes across the
enterprise that comply with finance requirements such as SOX and
IFRS
Enabling best-practice demand planning for supply-chain processes
Future-proofing global applications that support global enterprises
Six ERP Design Challenges for Steel Companies
A steel company presents six industry-specific design challenges for
implementing ERP, as described below. A successful ERP project will start
by analyzing these challenges in detail across all of the companys integrated
processes. This analysis will result in the basic decisions that will be the
foundation of the ERP project.
Challenge 1: More than one planning strategy
Steelmakers often use a combination of production planning strategies.
Typically the flat or strip products are make-to-order, whereas the long
products are make to- stock. Depending on the existence of a de-couple
point, finish-to-order could be a relevant planning strategy as well. Such a
combination of planning strategies affects the design of most ERP processes,
including supply chain processes as well as the financial/cost control
processes. Cost control in make-to-stock tends to go for standard price
approaches, but in a make-to-order environment costing happens on an

individual order cost collection and forecast basis. ERP systems today can
handle this kind of complexity.
Challenge 2: Complex product variations
A steel product is made up of a large number of characteristics, making the
product difficult to configure when entering it in the ERP system.
Configuration in the make-to-order entries is typically done while entering
the order, whereas for the make-to-stock entries, configuration is done in the
product definition, that is, on the material master.
This burdens the early discussions during the design phase of an ERP
implementation. Fundamental decisions need to be made very early in the
project about how many (finished product) materials should be defined: one
extreme is to define by material group which needs to be configured
completely in the order, or the other end of the spectrum is to define all
possible/feasible characteristic combinations which can possibly explode
into an extremely large number of finished product definitions.
A steel product tend to explode towards the end of production processing; in
other words, the bill of material stands on its head or is v-shaped, as
shown in Figure 1. This means that the later in the process you define a
product, the higher the number of products to be defined becomes. ERP
solutions today can readily handle the complexities this of the V-shaped bill
of material. They allow characteristics based product configuration with
automatic deduction of characteristics, characteristic value inheritance from
sales order header to item level, entry of multiple order units such as pieces,
tons, dimensions, and so on. Characteristics then drive production, shipping
and purchasing processes across the supply chain

Challenge 3: Flexible planning

Planning for steelmaking often needs to happen on short notice, with
unstable production processes and unplanned outputs. This requires
continuous re-assignment of products to processes and orders dependent on
the Characteristics described above. ERP systems today allow re-assigning
flexibly to handle these situations.
Challenge 4: Specific Customer Service Requirements
To cope with high-demanding customer segments such as automotive and
construction, tight integration with business partners on forecasts, electronic
customer orders (EDI, internet etc.) are typically needed. ERP systems today
support electronic integration with partners.

Challenge 5: Complex production scheduling combining both

continuous and batch production
Figure 2 below illustrates the flow in a typical steel mill. While the blast
furnace and converter work in batches, the caster works continuously and
the finishing lines work in batches again.

The batches need to be selected based on characteristics during production,

preparation and shipment planning. This means that the planning process
needs to be able to derive batches with characteristics inheritance and history
tracing. Finally, the scheduling part of the planning system needs to be able
to work with multiple and dynamic bottlenecks that is, bottlenecks which
can change based on incidents such as production problems in certain
process steps. ERP systems today can handle all of these situations.
Challenge 6: Detailed margin analysis
In todays steel industry when prices are high and capacity short, margin
analysis becomes the essential method to tell what money is being made on
which customer/product segments. On top of segment analysis, it is also
essential to differentiate between strategic materials (cokes and ore, Ni
and Cr for stainless) and the other cost elements that may be easier to
control. ERP systems provide the tools to support these decisions.
The ERP system will also need to work closely with the companys Business
Information Systems (BIS) to optimize the business benefits. Working
together, the ERP and BIS systems can, for example, improve inventory
allocation to late orders.

Integrated IT Model for Steel

An integrated IT model as in Figure 3 is important because it lets you see the
systems involved in planning and production. A typical flow would be:
The Supply Chain Management (SCM) application provides the
rough-cut planning in Demand Planning. The result is planning
blocks of similar products which are then handed over to production
planning.
When orders are being entered, availability checks assign the order to
a block (unless inventory already exists that meets the order) and
feeds back a promise date (at the end of the block to allow for the
flexibility of possibly moving to an earlier date).
The mill optimizer then typically would re-shuffle orders in between
the blocks, and feed results back into the SCM application in order to
optimize the load balancing.
Right before production starts, planned orders from the SCM
application are converted into production orders and, via the ERP
system, are transferred into the MES layer. It is at that time when
quantities are being translated into pieces (slabs, coils etc.).
Detailed scheduling then takes place, sequencing and combining
pieces from various orders throughout the mill into lots for
optimization.
Production completion then posts an updated status of the orders into
the ERP system, including stock receipts of finished products, and so
forth.

Figure 3 is also important because it lets you identify gaps among a

companys different IT systems. A typical gap occurs between the ERP and
MES (process control and machine control) systems, where the system is
actually combination of custom-built applications and manual spreadsheets.
Bridging this gap properly is essential forrealizing the business benefits of
the IT investments.
If the applications in Figure 3 are to provide true value, they need to be
robust, integrated and cost efficient. A recent IBM survey indicates that steel
clients process control and MES systems are custom-built applications 66%
of the time, and that these custom-built applications usually differ from mill
to mill. Clearly, this risks creating sub-optimal processes and leaves the
company open to all the problems of maintaining custom-built, legacy
applications.
Implementation Approaches for ERP
The key element for ERP success is to know how to implement an ERP
project. Past experiences recommends best practices such as:
Rapid/realistic project timelines due to external pressures (acquisition
synergies, legal reorganization)
Command-and-control approaches from a central project management
office
A global business process owner who has the authority and credibility
to approve process designs and business model/ organization changes
However, theres much more to it than these few general principles.
Implementing ERP is complex and takes a team of knowledgeable and
experienced ERP professionals to successfully implement an ERP project.

Implementation Process At Tata Steel

The company knew well that they had a tough time especially to implement
the software in one stroke. They had to choose top ERP software in order to
ensure that it meets the demands of a big firm like TISCO. They went ahead
with associating and implanting TISCO to all the stakeholders so that they
become compatible. These ideas also contributed to the success. They were
also shrewd enough in adopting the modern and most recent technology
available in the market. The period set for implementation seemed to be
another major challenge. The time granted for the process was 8 months.
The business process was divided into two main segments. The core
functions were denoted to be major ones. Similarly the supporting functions
were named minor ones. A plan of action on the proposed ERP's impact was
drafted depicting their relation to one another and to the business process.
All of them were made to bear in mind the fact that ERP's implementation
was imperative and that the deadlines were not very comfortable. The
company took all efforts to ensure that the change did not produce any sort
of resentment in the organization. This was done by educating everyone on
the need and desirability of change. In addition all apprehensions relating to
change were discussed and clarifications made to the fullest satisfaction.
It 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-ofthe-art 3.5 million tonne steel plant and is capable of meeting the most
rigorous demands of its customers worldwide.
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, Tata steel 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. In keeping with this commitment it adopted the latest production and
business practices to offer innovative processes that meet the changing
demands of its global and local customers.
Choosing The Platform And Technology
The management at Tata Steel 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 was done, SAP topped the list of contenders.
The implementation of SAP software 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 and 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. The challenge is compounded if the ERP
provider is a world leader - SAP. 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 Tata steel. They all looked forward to
knowledge-based, successful organization. It is inspiring to know that our
TEAM ASSET with support from Pricewaterhouse Coopers and SAP
successfully lived up to our axiom and truly demonstrated leadership skills
by going live across 46 locations within a record time frame of eight months.
Mapping Technology To Business Processes
The path was set to achieve success through SAP. All the branches, which
had huge numbers of transactions and complexity, were identified as a HUB
while the smaller branches along with the consignment agents were defined
as SPOKES which were attached to these branches. In January 99 the team
from TISCO was decided and christened 'TEAM ASSET' an acronym for
Achieve Success through SAP Enabled Transformation. The TEAM ASSET
had two simple axioms:

Go-Live date - 1st November 1999

There are only 24 hours a day

Preparatory task forces activities were conducted and core business

processes were mapped to SAP modules. Also another parallel activity
called 'Change Management' was initiated within the company. The prime
objective of 'Change Management' was to reach out to people involved nondirectly in the project to apprise them of the developments taking place. "We
wanted that Tata Steel be the number one in the steel industrywe wanted
to be the first to have the latest systems" said Mr. Sandipan Chakravortty,
GM (Sales), TISCO.

Tata Steel planned a big-bang approach of going live with all the modules at
the same time, in just a span of eight months. Driven against the speed of
time, the pace of implementation was fast with all activities backed by a lot
of thought process and meticulous planning. On 1st November 1999 Tata
Steel pulled off a big bang implementation of all SAP modules at one go
across 46 countrywide locations, as per the set deadline.
Achieving Business Agility Through SAP
Marching ahead, Web enabling of SAP R/3 is on the cards. On the surface, it
means it would allow anyone to access our SAP R/3 over the Internet. But
beneath it, the implications are tremendous, as it would result in sharing of
information with enterprise accounts and key customers. The success in
Marketing and Sales has prompted a re-visit of the existing system in the
works and a detailed rollout is expected as below.

Phase I - To Extend SAP in Works with FI, CO, MM, PP & QM

Phase II - To implement SAP modules such as Asset Management &
Budget management sub-modules of FICO, Plant maintenance,
Human Resources, Production Optimizer (such as SAP APO)
Phase III - SEM (Strategic Enterprise Management)

The company also plans to adopt the my SAP Customer Relationship

Management solution to enhance its customer relationships in the near term
and eventually realize its dream of a becoming the most efficient and
competitive company in the world in its vertical.

ARCHITECTURE AT TATA STEEL

Major IT initiatives and implementations at Tata Steel

SAP R/3 in Sales, Procurement, Finance and Accounting, Production
Planning Systems for Steel plants using the APO module of SAP
Baan at Tisco growth shop and in spares manufacturing unit
Workflow, Document Management, Collaboration using Lotus Notes
Data Warehousing and Data Mining for manufacturing processes
E-procurement, e-auction, and other e-enablement initiatives
Knowledge Management and Intranet
Videoconferencing, live video streaming for improved communication
across geographies
VoIP, Wi-Fi, integration with cell phones and PDAs to support mobile
computing

In a Nutshell

The Company
TISCO is Asia's first and India's largest integrated private
sector steel company. It is present in 46 nationwide locations.

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.

The Solution
An ERP SAP R/3 was deployed in a 'big bang' approach
across all its locations nationwide.

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

THE OUTCOME
SAP ERP solutions produced a remarkable result to the company in terms of
financial technical and managerial parameters. The effective handling and
speed delivery resulted in greater sales .Similarly there was a drastic fall in
the amount owned to creditors. The systems were made more user friendly
without any complexities and procedural lacunas. This improved the quality
of work and lessened the time taken for work and thereby increased the
productivity. This was followed by a massive change in terms of
accountability administration and control.
"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.
With SAP's solution Tata Steel can now update their customers on a daily
basis 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.
Future Moves
This exercise undertaken by TISCO has been a motivating factor for both
companies and ERP vendors. TISCO is not determined to stop ERP or attain
a saturation point now. They are working on to improve and increase the
scopes of enterprise resource planning software in the organization so that it
benefits the stakeholders in all possible manners. Organizations can take this
as a model guide and combine it with the critical success factors for ERP
systems and critical success factors for ERP implementation in order to
enjoy ERP success.
Conclusion
ERP is a key backbone application for companies in a fast changing industry
like steel. Given an awareness of the best practices and a good understanding
of the project complexities, the risks in an ERP implementation are usually
outweighed by the benefits. The ERP discussion is often one of mindset
more than one of standalone business cases. While implementing ERP can
be challenging and demands sustained commitment from top executive
levels, it is fundamental to enhancing the competitive position of a company
in the dynamic environment of the steel industry today.