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ERP Implementation at Tata Steel: Submitted by
ERP Implementation at Tata Steel: Submitted by
Ashish Daga
IBS
Submitted by
ASHISH DAGA
07BS0835
Analyzing SAP ERP's success in TISCO
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.
TISCO PROFILE
BACKGROUND
TATA steel is India’s 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 Steel’s 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
But your IT systems are not well integrated. There are too many different
systems, and too many gaps between them, a legacy of the company’s
history of mergers, acquisitions, and improvement initiatives. You need a
common information backbone. You’ve heard that ERP systems can do
that, but you’ve 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.
What is ERP?
ERP or Enterprise Resource Planning is IT software that integrates
business activities across an enterprise—from 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.
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
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.
The ERP system will also need to work closely with the company’s
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.
• 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 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-of-the-art 3.5 million tonne steel plant and is capable of
meeting the most rigorous demands of its customers worldwide.
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.
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.
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