Ranbaxy: Taking the ERP Pill

By:

Group A6

 Bhaskar Saha (20PGPM013)

 Burra Trinadh Koushik (20PGPM014)
 Navin Srivastava (20PGPM026)
 Riya Sharma (20PGPM041)
 Ruchita Talreja (20PGPM043)
 Sagyanrth Mahapatra (20PGPM044)
 Supratim Dey (20PGPM059)

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Case summary

Ranbaxy Laboratories Ltd is one of the leading pharmaceutical companies in India, which was
established in 1961. Company had used legacy system such as Tally for the financial
department, MRP-I for inventory and product planning departments and MRP-II for material
requirement planning, product planning, inventory management and manufacturing. However,
there were many issues with this legacy system because they were not connected among each
other. Therefore, it was complex for mangers to avail a streamlined flow of information. But
Ranbaxy decided to use the SAP ERP package, which was implemented to increase organization
efficiency, inventory control, cost reduction, increases profit and proper business flow. Hence,
with the help of SAP, all the departments generate information in more accurate and available
in real time.

First of all, SAP divides a single process into smaller sub-process, and then keeps tracking every
process and coordinates between various departments, as a result, departments identify the
performance and appropriate decision is made to enhance the efficiency of the departments.
Besides this SAP helped to reduce cost and enhanced organizational productivity by reducing
labor cost, transportation cost an integrated with various suppliers and vendors.

The process flows after the implementation of SAP ERP system are given below:

1. Project planning and forecasting

2. Raising indent
3. RFQ (Request for Quotation)
4. Creation of purchase orders (Pos)
5. Receiving and delivering materials
6. Manufacturing request
7. Invoice creation

At first, SAP helps to know required quantity of medicines to be manufactured along with date
of exhaustion of stocks. In second step, SAP is used to indent for requisitioned of materials and
identify the location where materials are needed. In third step, SAP sends request for quotation
to the various approved vendors, then after procurement departments compares and selects
the best suppliers in the basis of cost, quality, time, shipment and other factors. Finalized
quotation are send to purchase department, then after purchase order contains the terms and
condition which is laid out by legal department and copy of purchase order send to finance
department. SAP helps to acknowledge the successful delivery of materials through its receipts.
SAP gives information about materials which are required by the manufacturing personnel
through its move-order request. At last, invoices are generated by SAP for finance department
and they are recorded in General Ledger.

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Therefore, SAP ERP has been successfully implemented to achieve integration and increase the
efficiency of the business process at Ranbaxy.

1) Discuss the flow of information before the implementation of the ERP systems at
Ranbaxy.

 Before implementation of ERP, Ranbaxy used legacy system for its various
operations.
 Tally was used for the financial department, MRP-I for inventory and product
planning departments and MRP-II for material requirement planning, product
planning, inventory management and manufacturing and schedule the inventory
process and activities of various departments.
 The MRP systems kept the stock at Ranbaxy at a very rudimentary level, leading
to frequent ordering of materials.
 There were many issues with this legacy system because they were not
connected among each other. Therefore, it was complex for managers to avail a
streamlined flow of information.

2) Discuss how SAP has helped Ranbaxy overcome its previous problems.

 The SAP ERP package, which was implemented to increase organization

efficiency, inventory control, cost reduction, increases profit and proper business
flow.
 The project managers were responsible for the exact planning, forecasting and
budgeting for a particular project. The functional departments had a clear
understanding of the operations to be performed starting from procurement to
finance, project management and sales.
 SAP divides a single process into smaller sub-process, and then after keep
tracking of every process and coordinated between various departments, as a
result, departments that slows down the process are identified early and
appropriate decision is made to enhance the efficiency of departments.
 SAP helped to reduce cost and enhanced organizational productivity by reducing
labor cost, transportation cost an integrated with various suppliers and vendors.
It also improved the communication between different departments.

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  Unlike MRP system that placed orders haphazardly, the orders in SAP, are placed
accordance to min-max plan of the inventory department, which helped reduce
ordering and transportation costs of the company.
 SAP focuses on each process involved in the manufacturing of medicines and
identifies the processes responsible for defects. Through this information, the
management can take proper steps to ensure the quality of the medicines.
 SAP provides timely information related to inventory, project planning, project
costs, sales and production.

3) Discuss the process flow after the implementation of the SAP ERP system.

The process flow after implementation of SAP ERP is as follows:

 Project Planning and forecasting: The SAP helps managers plan the
manufacturing process effectively. It lets them know the exact quantity of the
medicines to be manufactured along with the date of exhaustion of the stock.
 Raising indent: Whenever there is a need to procure material for manufacturing,
the manager raises an indent using SAP. The indent contains the exact purpose
for which the material is requisitioned and the location at which it is needed.
This indent is forwarded to the store manager for approval, after which the
procurement teams go ahead with the purchase of the material.
 RFQ (request for quotation): This module of SAP sends requests for quotations
and selects the best supplier after taking into consideration cost, quality, time,
shipment and other relevant factors.
 Creation of purchase orders (POs): Once the quotation is finalized, the purchase
department generates a PO for the approved indent. This PO contains the terms
and conditions laid out by the legal department. A copy of this PO is forwarded
to the finance department through the notification summary feature in the SAP
for approval.
 Receiving and delivering material: The ordered material is finally received,
inspected, and delivered to the store. The store generates a receipt in the SAP to
acknowledge the successful delivery of the material.
 Manufacturing requests: The material needed by the manufacturing personnel
is issued through a move-order request. After obtaining the necessary approvals
for the move, the material is issued to the requester.
 Invoice creation: Finally, the SAP generates invoices for the finance department
and records the entries into the GL (general ledger).

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This is how SAP has been successfully implemented to achieve integration among all the
functional departments at Ranbaxy and increase the efficiency of the business
processes.

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