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The business environment has been very challenging over the past few decades. Companies have been looking for various opportunities for enhancing their competitive edge over their competitors. The advent of Information Technology (IT) in the last two decades has made the companies to look at IT for creating the competitive edge required to prevail over its competitors. The IT industry has also come out with innovative solutions to help companies of other industries in their respective businesses. Through various solutions provided, IT has become part and parcel of each and every company irrespective of the industry it is in. The solutions provided by the IT companies in the form of software applications have largely been successful. One of the successful software packages is the Enterprise Resource Planning (ERP) software package and SAP has been the pioneer in providing the ideal ERP package known as the SAP R/3 package. TVS group was one of the first companies to implement the SAP R/3 package for its business operations.
Enterprise Resource Planning
non-profit organizations and governments. materials. All modules should have the same look and feel. financial resources. a software package should have the following traits: • • Should be integrated and operate in real-time with no periodic batch updates. To be considered an ERP system. regardless of the organization's business or charter. It is a software architecture whose purpose is to facilitate the flow of information between all business functions inside the boundaries of the organization and manage the connections to outside stakeholders. ERP systems consolidate all business operations into a uniform and enterprise wide system environment. These systems can now be found in non-manufacturing businesses. All applications should access one database to prevent redundant data and multiple data definitions.ABOUT ENTERPRISE RESOURCE PLANNING(ERP) Enterprise resource planning (ERP) is an integrated computer-based system used to manage internal and external resources including tangible assets. expensive computer systems in areas which will not use their full capacity. later manufacturing resource planning) and CIM (Computer Integrated Manufacturing). Built on a centralized database and normally utilizing a common computing platform. An ERP system can either reside on a centralized server or be distributed across modular hardware and software units that provide "services" and communicate on a local area network. The ERP was first employed by research and analysis firm Gartner Group in 1990 as an extension of MRP (Material Requirements Planning. It came into use as makers of MRP software started to develop software applications beyond the manufacturing arena. it has come to represent a larger whole. ERP systems now attempt to cover all core functions of an enterprise. The distributed design allows a business to assemble modules from different vendors without the need for the placement of multiple copies of complex. • 4 . and while not supplanting these terms. and human resources.
more and more companies continue to jump on the ERP bandwagon and reap significant benefits from doing so. activities. Business processes and activities have become increasingly 5 . it can dramatically reduce operating and overhead expenses. and enhanced performance management. improved information flow. many companies have succeeded without one. and growth. as ERP solution vendors begin to focus their efforts on small and mid-market businesses. The primary reason an ERP solution is so vital to a company’s success is efficiency.Need for an ERP solution: An ERP solution can deliver dramatic benefits to businesses of all types and sizes increased productivity. Businesses must operate as lean as possible in order to keep the bottom line in check. Why does a company need an ERP solution? ERP solutions have been around for quite some time. Numerous workflows and procedures – some manual. This can not only boost productivity and worker output. in today’s dynamic and highly competitive marketplace. and failing to automate critical. While this approach may have served its purpose in the past. error-prone. labor-intensive manual processes can drain both time and money. reduced operating expenses. ERP solutions allow companies to achieve true business process automation – streamlining many of the important day-to-day tasks across a business. Cumbersome. profitability. Yet. and until now. some automated – that may or may not be formally documented. yet routine business activities makes it nearly impossible to do that. And a variety of departmental applications and legacy databases that are likely disjointed and not well-integrated. and freeing up staff to focus their efforts on more complex initiatives that require more personalized attention. An ERP solution also bucks the notion that efficiency needs to be considered one department at a time. Countless different processes. and systems are used to run a business. it can seriously hinder productivity.
Many companies still suffer from “multiple versions of the truth” – incorrect and inconsistent information across the business. Modules of an ERP package: A standard ERP package consists of a set of modules. quickly changing strategies to address new customer needs as they emerge. if the accounting department and purchase department access two different databases which aren’t integrated. These problems. The components of the ERP package can be classified as below. a supplier with a payment question will likely get an inaccurate answer if they conduct the purchase person for assistance. can add up. cohesive unit. creating that kind of cross-departmental coordination and workflow execution can be quite challenging. Without an ERP solution in place. But most importantly. or what industry it is in – requiring multiple teams and divisions to operate as a single.complex – no matter how big or small a company is. although they may appear small on the surface. An ERP solution can also empower companies to be more responsive to shifts in the marketplace. and allow everyone to monitor progress towards that goal. This makes companies far more agile by helping them quickly identify problems in the business. ERP solutions enable effective objective setting. an ERP solution makes it easier for employees at all levels – from front line staff members and team supervisors to senior managers and executives – to assess company performance and understand their impact on it. and take immediate corrective action. Another reason ERP solutions are so critical is their ability to increase information consistency and accuracy. • Transactional Backbone o o o o Financials Distribution Human Resources Product lifecycle management 6 . leading to bigger customer satisfaction and retention issues that can negatively impact revenues and market share. For example.
the number of modules. so they don't all need be implemented at once. These firms typically provide three areas of professional services: consulting. A small project (e. There are three types of services that may be employed for . a company of less than 100 staff) can be planned and delivered within 3–9 months. Implementation of ERP: Businesses have a wide scope of applications and processes throughout their functional units. The length of the implementations is closely tied to the amount of customization desired. Support. The length of time to implement an ERP system depends on the size of the business. and support. producing ERP software systems that are typically complex and usually impose significant changes on staff work practices. and the scope of the change and the willingness of the customer to take ownership for the project. multi-site or multi-country implementation can take years.. To implement ERP systems.• Advanced Applications o o o Customer Relationship Management (CRM) Supply chain management (SCM) Warehouse Management System • Management Portal/Dashboard o Decision Support System These components form the backbone of a standard ERP package. a large. Implementing ERP software is typically too complex for "in-house" skill. companies often seek the help of an ERP vendor or of third-party consulting companies. so it is desirable and highly advised to hire outside consultants who are professionally trained to implement these systems. This is typically the most cost effective way. ERP systems are modular. The client organization 7 . however.g. It can be divided into various stages. customization. or phase-ins. The modules are customized based on the company’s requirements and processes.Consulting. the extent of customization. The typical project is about 14 months and requires around 150 consultants. Customization.
culture. Determining the timing of data migration 3. Thus for successful implementation of ERP solution employees play a vital role. Re-engineer the business process before implementing the ERP. But if the employees are not aware of the processes or the processes are not documented. and UAT specialists to ensure their business requirements remain a priority during implementation. Second option offers world class efficient and effective process with built in measures and controls and is likely to be quickly installed. Companies consider the following two options for implementing the ERP package. employee needs and promises relatively less disruption to routine work. Deciding on data archiving In general implementation of ERP is itself a process of Business Process Reengineering. Unfortunately. 2. Directly implement ERP and avoid re-engineering. Only if the employees 8 . Data migration is one of the most important activities in determining the success of an ERP implementation. 1.can also employ independent program management. the employees will develop a good sense of process orientation and ownership. Identifying the data to be migrated 2. Generating the data templates 4. change management. existing IT resources. This would be a customized solution considering the organization’s structure. The following are steps of a data migration strategy that can help with the success of an ERP implementation: 1. and therefore receives minimal attention due to time constraints. business analysis. a significant amount of planning must occur. Freezing the tools for data migration 5. In the first option. Since many decisions must be made before migration. then the employees may not be able to perceive the ERP implementation that is done. data migration is the last activity before the production phase of an ERP implementation. Deciding on migration related setups 6.
your company owns the success or failure of a large ERP project. setting baselines and targets for those measures. This includes ensuring that you have a strong project manager and your "A-players" from the business to support and participate in the project. but in reality. 3. 2. Strong project management and resource commitment: At the end of the day. Focus on business processes and requirements first: Too often. including post-implementation performance measurement: This requires doing more than just developing a high-level business case to get approval from upper management or your board of directors. In some extreme cases. so you should manage it accordingly. It also entails establishing key performance measures.are aware of the business processes of the organization the ERP implementation can be done perfectly and it will be easy for the employees to work on the new system. Once you have this defined. Here are just a few ERP implementation critical success factors that we have seen: 1. This is the only way to maximize the business benefits of ERP. 95% of a project's success or failure is in the hands of the company implementing the software. Many assume success or failure is the fault of the software you purchase. 9 . Critical Success factors for ERP Implementation: The world of technology and business consulting is tainted by horror stories of ERP projects gone wrong. and tracking performance after go-live. Companies have had widely publicized lawsuits against ERP software vendors because of their failed implementations. you can engage in a more effective ERP software selection process. companies get tied up in the technical capabilities or platforms that a particular software supports. None of this really matters. What really matters is how you want your business operations to run and what your key business requirements are. not the software vendor. Focus on achieving a healthy ERP ROI (Return on Investment). these companies sue because they couldn't ship product or their entire business shut down because the software did not work correctly.
or targeted best-of-breed technology will meet your business objectives at a lower cost. organizational redesign.4. job design. Support from a CIO or IT Director is fine. etc. 10 . 6. By clearly understanding your business objectives and what you're trying to accomplish with an ERP system. which may or may not involve ERP. but it's not enough. Ensure adequate training and change management: ERP systems involve big change for people. companies jump right in to a project without validating the software vendor's understanding of business requirements or their project plan. the less time you'll spend fixing problems later on. Take time to plan up front: An ERP vendor's motive is to close a deal as soon as possible. so the CEO and your entire C-level staff needs to be on board to drive some of these 5. The more time you spend ensuring these things are done right at the beginning of the project. Therefore. you will be able to make a more appropriate decision on which route to take. . and the system will not do you any good if people do not understand how to use it effectively. change management. No matter how well-run a project is. It’s the company’s responsibility to make sure it gets done right. Too often. Make sure you understand why you're implementing ERP: It's easy to see that many big companies are running SAP or Oracle but it's harder to consider that maybe you don't need an ERP system at all. Commitment from company executives: Any project without support from its top-management will fail. 7. Perhaps process improvement. spending time and money on training. is crucial to any ERP project. problems arise (such as conflicting business needs).
Chapter 3 Implementation of SAP R/3 at VIRINCHI 11 .
The departments which require the necessary data have to contact other departments for the data that is required. Because of the above two issues VIRINCHI decided to implement an ERP system and opted for BaaN as its ERP solution in the year 1998. it was not getting the exact amount of materials required as the databases of purchase. This is time consuming and hampered the efficiency of the company.Virinchi was one the first companies to implement an ERP system for its business operations. production and warehouse departments were not interconnected. Redundancy of data was found as the same data was entered in the same database by different departments. This led to unnecessary cost to the company. This led to incorrect purchase order and extra cost incurred for the company. The implementation of ERP has helped VIRINCHI to improve its business process significantly. This was mainly because the databases were stand alone and not integrated. when the purchase department browses the database for ordering the materials required. For example for preparing the purchase order. For example if the purchase department has to prepare the purchase order. Earlier VIRINCHI used a legacy system which was a stand-alone system with individual databases for every department. it has to contact the production and the warehouse department for getting the data regarding the materials required. • Transparency: The data entered/prepared by one department is not available for other departments. • Duplication of data: The other major issue faced was the duplication of data. 12 . The implementation of BaaN has helped VIRINCHI to improve its overall business process. Issues faced with Legacy System: There were two major issues faced while using the Legacy system.
• At the beginning Virinchi was enjoying a monopoly in die casting. And this also paved the way for longer lead times for repairing of machines. The support for the Quality Management was minimal with the BaaN system. The major factors are as below. This high demand lead to non possibility of preventive maintenance. But the recent increased competition has made Virinchi to look for new ways to tackle the competition and also change its style of business that is done. Necessity for advanced ERP system at VIRINCHI: Apart from the issues faced with the legacy system. • • Quality Management is very critical in Virinchi. Hence there were frequent breakdowns of machines. The chances of wrong supplies from the suppliers to VIRINCHI were also high.Apart from the above two issues there are certain limitations faced by VIRINCHI with Baan system as below. there are certain factors which made Virinchi to look for an advanced ERP system. • Lean system and Kanban are the two prominent systems that is existent in Virinchi. Providing IT support for all processes and leveraging IT for all initiatives of the company. Integration of various business processes within a VIRINCHI unit. • The communication to the suppliers was done manually and this led to high response time. Since Virinchi was the leader in die casting the demand is very high. 13 . Aiming for faster response time and reduced transaction cost. • • • • • Linking all VIRINCHI units with a single system and standardizing of business processes across all VIRINCHI units. Building a robust integrated information engine and linking all the manufacturing and stocking points. With the Baan system these systems existed but there was no system support.
Improve overall line efficiency. Hence customer satisfaction is very critical for the company. The following metrics are considered before the implementation of SAP R/3 system. Improve supplier delivery performance. Improve inventory turnover ratio. SAP R/3 is one of the best and cost effective ERP systems available in the market. Wide range of functionality availability within the modules that are implemented.• Installing a scalable enterprise system to support business growth. JD EDWARD etc which would suit their business and also provide solutions for its issues and limitations. Reasons for deciding on SAP R/3: After coming to a conclusion that the business needs an advanced ERP system. Reduce premium freight. PEOPLESOFT. Also the SAP R/3 system has advanced solutions like SEM. After doing a detailed analysis Virinchi decided on SAP R/3 system to standardize the ERP solution across the group. • • • • Availability and support for all major business modules that are implemented. Virinchi analyzed other ERP systems such as SAP. The various reasons for selecting SAP R/3 system are as below. Key Objectives considered before Implementation: Virinchi is the leading manufactures in die casting manufacturing for heavy and light commercial vehicles. ORACLE. 14 . SCM and PLM. • • • • • Improve delivery service level. The possibility of continuous up gradation and developments for the system.
What is SAP R/3? SAP the company was founded in Germany in 1972 by five ex-IBM engineers. Virinchi Ltd also had certain Business Requirements that are to be satisfied by the ERP system. SAP functionality included is truly enterprise wide including: Financial Accounting. Back in 1979 SAP released SAP R/2 (which runs on mainframes) into the German market. Cost control with more efficient tracking. There are now more than 121. E-enabling of customers and vendors by integrating them with the ERP system.000 installations of SAP. Management Accounting. SAP AG is now the third largest independent software maker in the world. SAP stands for Systems. Looking for more growth. and had revenues of $16. Towards the end of the 80's. Sales. especially in the North American region into which SAP expanded in 1988. SAP R/2 was the first integrated. Human 15 . client-server architecture became popular and SAP responded with the release of SAP R/3 (in 1992). with more than 12 million users. Purchasing. and Products in Data Processing. Production Planning. and many other optional processes and features turned off. SAP R/3 is delivered to a customer with selected standard process turned on. incorporating 28 languages including Kanji and other double-byte character languages. Operational Productivity.9 billion and Net Income of $2.000 people worldwide today. SAP employs over 50. SAP expanded into the remainder of Europe during the 80's. They are • • • • Improved Customer Satisfaction with greater responsiveness. enterprise wide package and was an immediate success. For years SAP stayed within the German borders until it had penetrated practically every large German company. Applications. SAP also comes in 21 industry-specific versions. This turned out to be a killer app for SAP. Manufacturing. Distribution.Business Requirements at Virinchi: Apart from the key objectives that are considered for the implementation of SAP R/3 system. SAP today is available in 46 country-specific versions. in 120 countries.7 billion in FY08.
No doubt about it. The actual price is negotiated between SAP and the customer and therefore depends on numerous factors which include number of users and modules. They replace an out-dated and inefficient IT Architecture. Implementing SAP is expensive. There are many reasons a company selects and implements SAP. SAP R/3 Architecture: Presentation Layer SAP GUI Application Layer Application Server Database Layer DBMS Database 16 . and to gain competitive advantage.Resources and Payroll etc. SAP sells its R/3 product on a ‘price per user basis’. enabling business process change. But the potential rewards can dwarf the costs.
The task force was responsible for learning the technology and provide sufficient training for the end users. it is made sure that the module is working fine for the individual users first. The total number of consultants employed by Caritor was 15 who worked along with 30 core users of Virinchi. By this process. The project was titled as SIMPLE (SAP Implementation for Excellence). The 30 core users were the task force that was formed within VIRINCHI by selecting people from various departments. Once the Unit testing was successful. at present known as Keane Solutions which also provided the option of least cost for the implementation of SAP. Integration testing 17 . Virinchi has analyzed various experienced implementation partners and decided on one of the most experienced partner Caritor Inc. 1) Unit Testing and 2) Integration Testing. two types of testing were done.SAP Implementation Scope: Brakes Suppliers HSSL Harita Rubber SAP R/3 Die Casting Customers Sundaram Plastics Implementation: SAP R/3 is one of the leading ERP solutions available in the market. In Unit testing each and every module was tested separately and for separate users. Hence the conversion of As-Is process to To-Be process was smooth and successful. SAP R/3 system is implemented by various implementation partners. After implementation. The processes of the company were studied in detail and the modules were customized accordingly.
This audit is called as Toll Gate Audit and this is done be internal auditors of the implementation team. This is generally done after 18 . all the individual modules were linked or integrated across all departments and verified whether it is working fine. In this step. 2) Post Implementation phase. By this process it is made sure that all the integration errors were eliminated. The Pain Points capture step helps in understanding the problem areas and also helps in determining the improvements required from the new system. Pain Points capture is done.was done. The As – Is process mapping helps in getting a clear idea of the processes and practices existing in the company and helps in customizing the modules accordingly. Toll Gate Audit by Internal Auditors: During the implementation of SAP R/3 system regular audit needs to be done. Pre Implementation phase: The pre implementation phase of the SAP R/3 system implementation is the most decisive phase of the implementation. This also helps in framing the To – Be process. Pain Points capture: Once the As – Is process is done. The SAP R/3 implementation can be divided as two phases. The Toll Gate audit is done to check whether the implementation is headed in the right direction. 1) Pre Implementation phase. In Integration testing. Based on this the implementation strategy is framed. Pain Points are the issues faced by the users with the existing system and processes. This phase consists of the following steps. As – Is process mapping: The first step of any SAP R/3 implementation process is the As. A clear understanding of the business is done in this phase. the existing business processes of the company are analyzed and a framework is created.Is process mapping.
design. FMEA analysis is done to identify the potential flaws in the system and suitable corrective actions can be done based on that. These users who are part of the implementation trained the remaining users who were not part of the implementation. The core implementation team contained 30 power users and they were sufficient training on the ERP system. and can be potential or actual. The auditors are the members of the implementation team who will be the involved in implementation and audit the implementation process. Continuous Training to / involvement of power users: Power users are those users who will be working with the SAP R/3 system. The Statutory Auditor will not be directly involved with the implementation process and will be an official from the Top Management. By involving the power users in the implementation enabled the users to know what was exactly done with the system and the way the system works. Discussion with and approval of Statutory Auditors: The implementation of the SAP R/3 system needs to be regularly audited and the developments that happens during the implementation has to be regularly informed to the Statutory Auditors.implementation of every module. Effects analysis refers to studying the consequences of those failures. Failure Mode and Effect Analysis (FMEA): Failure modes are any errors or defects in a process. If any new development is done. or item. 19 . the approval of the Statutory Auditors has to be obtained. especially those that affect the customer.
sales order and all the way towards billing the customer.Pricing . The reviews are done right from the power users to the top management officials. Virinchi after analyzing the business process at Virinchi decided to implement the following modules. A multi tier review system is followed and based on these reviews the success of the SAP R/3 implementation is determined. Weekly review. check for open orders and forecast etc. The most important basic functional features in the SD module are: . Sales and Distribution: The SAP Sales and Distribution (SD) is part of the logistics module that supports customers. The SWEN analysis provides a clear snapshot of the processes of the company. The various types of reviews are as below.Standard. Exits.Availability Check 20 . Not addressed (SWEN) analysis: SWEN analysis is done for each and every process of the implementation. • • • • Daily review. Work Around. Based on the reports of the reviews further modifications are done to the system. Quarterly review. Periodical review. Modules implemented at Virinchi: The SAP R/3 solution has various modules which can be customized based on the business process. starting from quotations. It allows companies to input their customer sales price. Post Implementation phase: In the post implementation phase a series of reviews is done. This is done to frame the business blue print and also to finalize the blue print. It is tightly integrated with the MM and Production Planning functional modules.
Pricing.Display a Order VL02N . Purchase orders. Master raw materials. It supports all the phases of materials management: materials planning and control.Create Customer Order VL01N . inventory management.Text Processing . Goods receipts. The main objectives of the MM module are as below.Tax Determination . Some of the main SAP MM transactions are: • • ME51N . Accounts payable.Output Determination . goods receiving. purchasing.List Orders VF01 . finished goods etc. Picking (and other warehouse processes).Account Determination SD module is used to manage customer-focused activities.Create Requisition.Credit Management . Inventory management. in the right place.. ME21N .Change Customer Delivery (F20 is to post a good issue) VA05 . BOM. from requisitioning to payment. including Requisitions. including RFQ. Packing and Shipping Some of the main SAP SD transactions are: • • • • • • VA01 . from selling to delivery.Create Purchase Order.Create a Invoice Materials Management: The Materials Management (MM) module is fully integrated with the other modules of the SAP System. • • To ensure that we have the right product. at the right quantity and price. 21 . Sales orders. To reduce working capital by monitoring raw and packaging stocks on a continuous basis.Material Determination . SAP MM helps in managing end – to – end procurement and logistics business processes.Create a Delivery VA03 . and invoice verification.
Goods receipt a PO. develop and implement a product or service are effective and efficient with respect to the system and its performance. 'planning without final assembly' etc. quality inspection and quality control throughout an enterprise. The SAP QM module supports tasks associated with quality planning. Repetitive Manufacturing and Production Order processing. SAP QM Module improves the quality of your goods. controls the creation of quality certificates and manages notifications related to quality. Production Planning: SAP R/3 has a highly integrated Production Planning System. Integration with other modules like Material management. goods-in-process and finished goods. It can take care of various planning strategies like 'Make-to-stock'. The Production Planning module of SAP takes care of Master data needed like Bill of Materials. Routings and Work Centers and stores it in one separate component. It sets the specifications for quality and standard testing procedures. Financial Accounting. Various stages of the planning system can be planned by using components like • • • • Sales and Operation Planning Long Term Planning Demand Management Materials Requirement Planning SAP has distinguished various styles of production like Kanban.Create Invoice. Cost Accounting. including 22 . 'make-to-order'. Sales and Distribution etc adds on to reliability of the production planning system in SAP R/3.• • MIGO . Quality Management: Quality management (QM) is a method for ensuring that all the activities necessary to design. The changes in demand and supply are reflected in real time and the production controller can react fast to these changes. MIRO . It also stores the quality data for raw materials.
which stands for Controlling . The FI Module comprises several sub-modules as follows: • • • • • • • • • Accounts Receivables Accounts Payable Asset Accounting Special Purpose Ledger Travel Management Bank Accounting Consolidation Funds Management General Ledger Controlling: SAP CO . The FI (Financial Accounting) Module integrates with other SAP Modules such as MM (Materials Management). The SAP CO (Controlling) Module provides supporting information to Management for the purpose of planning. SD (Sales and Distribution). is the Module where regulatory or statutory data is tracked and managed. reporting. as well as monitoring the operations of their business. PP (Production Planning).is the Module which allows you to perform your management accounting. The SAP FI Module has the capability of meeting all the accounting and financial needs of an organization. Management decision-making can be 23 . and PM (Plant Maintenance).• • • • Planning Execution Inspections Certificates Financial Accounting: SAP FI . It is within this SAP FI Module that Financial Managers as well as other Managers within your business can review the financial position of the company in real time as compared to legacy systems which often times require overnight updates before financial statements can be generated and run for management review.which stands for Financial Accounting.
achieved with the level of information provided by this module. Some of the components of the CO (Controlling) Module are as follows: • • • • • • • Cost Element Accounting Cost Center Accounting Internal Orders Activity-Based Costing ( ABC) Product Cost Controlling Profitability Analysis Profit Center Accounting Plant Maintenance: SAP PM Module is where you maintain your equipment including Labour. to measures and establish the actual condition of a technical system. repair to measures and restore the ideal condition of a technical system and other measures that need to be taken using the maintenance organization. The SAP Plant Maintenance comprises of the following activities such as inspection. preventive maintenance to measures and maintain the ideal condition of a technical system. 24 . Material and Down time and outages. a purchase requisition for nonstock material in the Materials Management/Purchasing area. SAP PM is closely integrated with other modules and the data is always kept current and processes that are necessary for Plant Maintenance and Customer Service are automatically triggered in other areas for example.
Chapter 4 My Role in the Company 25 .
Dhandapani briefed me about the project I would be expected to do in the six week period. I was briefed about the various issues faced before implementing ERP system in the company by Mr. Information Systems Department who guided me with the trainings and the project. Senior Manager. Ashok. Information Systems Department. Ashok explained to me how the flow of the project would be and the trainings I would be required to undertake. I was introduced to Mr. I got exclusive access to documents on SAP R/3 implementation and also the report submitted for the SAP Excellence Awards 2008. T. Corporate CIO. And also I had interaction with some employees of Information Systems department and other departments regarding the difficulties faced with the legacy system and also the earlier ERP system BaaN. Padmavathy from the Personnel Department. During the first week of my project period. The training was aimed at making me to be at ease with the terminologies during the course of the project. General Manager. By being part of the meeting. and met Ms. I was made to go through the training materials and had hands on experience on the system directly under Test environment. Mr. Mr. I missed the opportunity of having a live experience of the implementation. Since there were no live implementations. I was given training on the SAP modules that are implemented in the company. Venkatakrishnan. Dhandapani. The implementation of SAP R/3 has been done in the year 2004 in Virinchi. This gave me an idea about the various issues and the need for an SAP R/3 system in Virinchi. During the second and third week. Also I had the opportunity to witness some live negotiations done in the company for establishing a communication channel for various plants of Virinchi and Corporate Office. After completing the formalities. Venkatakrishnan.G. 26 . I was briefed about the production process and given training on the important terminologies that are used in the Manufacturing Sector. Apart from the above. By this I was made aware of the working of the modules and its applications.I reported to the company on 24th May 2010. Then I was introduced to Mr. I was then introduced to Mr. I gained valuable experience on how to make the deal a favourable one.
Thus the six week period in Virinchi gave me a good exposure about the manufacturing sector and also helped me to witness live managerial decisions taken. The success of the SAP R/3 implementation is purely because of the employees’ dedication and the values of the TVS group. CHAPTER 5 Findings 27 .The documents gave clear idea about the happenings during the implementation and the initiatives taken.
More accurate inventories. Key data of supplier available in portal facilitates E – Kanban and 2 bin systems Dual status – Bought out or sub contracted and in house production Service orders for labour contracts Sales and Distribution Pull system Improved service levels and customer satisfaction. dispatch etc. Module Material Management Inventory Transparency across the supply chain Bar coding of GRN Release strategy for purchase orders/ scheduling agreements E – portals for suppliers Base of extreme excess of decision making for production. The benefits obtained from each module implementation are stated as below. Productivity improvement at brought – out stores. Effective usage of capacity. Particulars Benefits 28 .Module wise Results: The SAP R/3 implementation in Virinchi Ltd has produced excellent results and helped in improving its business. Lower inventory. Work description. faster reconciliation. Immediate communication to supplier. Two stop authorization. supplier schedules. service master maintenance for comparison. Hence better internal control. JIT procurement and reduction of inventory.
Hence reduction in inventory and Capacity and man power planning Production resource tool planning Die life monitoring Quality management Incoming inspection plan. final inspection plans. claim registration. Long term planning and sales & operating plan Robust pricing module Production planning Pull based production system Production is done based on customer requirements. Helps reduce production bottlenecks due to resource non – availability. online and offline inspections in shop floor. Aids in planning with the help of scenario analysis.E – portal for dealers and distributors Instantaneous order booking. Reduced line stoppers and production based on customer requirements. recording of character and test results Rejection analysis is enabled which is base for corrective action and quality rating for suppliers drastic reduction in fire fighting. Die replacement / die procurement made robust. Financial Accounting Evaluated receipts settlement for logistics invoice verification 29 Improvement of productivity . Accurate billing to customers and also able to cater to statutory requirements. Key information aiding faster reconciliation and resolution of issues.
Business benefits: Faster reconciliation. Line stopper on account of shortage of material has been reduced and thus it improved the overall efficiency by 13%. Product wise and customer wise profitability. eliminating duplication of documents. payment details. Effective cost control across the supply chain. factory costing. Cost control aid. supplier and dealer transactions. Major improvements / innovations: The implementation of SAP R/3 systems has introduced three major innovations into the business process of Virinchi Ltd. Cost control aid. • E – Supported Lean manufacturing system. sub contractor transactions. The company could improve the inventory turn by 15% within a short span of time. There were 15 processes having less than 20% process ratio before SAP R/3 implementation and it was brought down to 10 within six months after implementation. These innovations has helped the company to improve its productivity and efficiency. The digitization of Kanban started to yield results immediately on introduction.Form tracking. The E – portal that was developed for suppliers and dealers is extensively used and their visit to the company for administrative reasons and payment follow ups have dropped substantially. reducing process lead time and transmitting time and thereby avoiding costly delays. accurate inventory valuations as per standards. sub contract. The buyers could concentrate on vendor development rather than spending time on chasing for material. 30 . Funds management Controlling Product costing. Processes having less than 20% process ratio (value added time over non value added time in a process) were taken for corrective action. This has significantly helped in minimizing errors. rejection details in E – portals. Break up of raw materials. The major innovations are as below.
• • E – Portals for suppliers and dealers. A Pull system with electronic Kanban is illustrated below. Initiatives along with SAP R/3 implementation: Apart from the SAP R/3 implementation. Kanban card Material pull from stores Issue of material to shop Material issue trigger replenishment request. Download customer daily requirement Update SO or Demand on SAP Dispatch customer requirement from Warehouse Run MRP Parts Consumption Production confirmation. 31 . Virinchi has taken some major initiatives in its business process. Kanban Supplier replenishes material. TPM through SAP Plant Maintenance module. Kanban Production Trigger for production. They are as below.
Apart from the above initiatives. Trigger of alerts quality. machine breakdown. E – Support for working Kanban and Lean system. Direct capture of data from the source electronically. Virinchi also handled certain challenges. Conclusion: The overall implementation of SAP R/3 system at Virinchi has been successful with limited errors.• • • • • • Automation of transaction capturing by bar coding etc. The success of the implementation can be attributed to the clear understanding of the business processes that were in practice in the company and the modules were customized accordingly. The requirements of the suppliers were also reckoned at the design stage and report formats and download facilities were modified to keep the suppliers at full comfort in using the system. The issues faced are more of technical and does not affect the business of the company. and equipment failures etc. E – Portals for vendors and customers information exchange. Data maintenance is done internally by the company instead of outsourcing to an IT company. Business Process Re-engineering due to SAP and customer expectation. VIRINCHI formed a small team of five suppliers and explained them the benefits of the SAP R/3 system. the overall line efficiency went up from 80 to 87 percent and the inventory turns increased to 26 32 . To train the suppliers. The suppliers were used to hard copy and telephonic follow ups for ages. VIRINCHI’s biggest payoff came in the form of a ‘Pull System’ of manufacturing. The implementation was done individually for each department and the integration of the departments was also done successfully. Hence the cost of outsourcing has been saved. The employees at the company were totally aware of the process that existed and the changes that was made in the new system. After the implementation of SAP. Transforming the suppliers to respond to digital request was the major challenge faced by the company. The SAP R/3 system has been used from the year 2004 and in the past six years the solution is working fine and there is significant improvement in the overall business of the organization. This process has helped the solution architects to look at the process from supplier’s point of view. Sufficient training was given to the employees on the new system in such a way the errors are sorted by the employees itself.
thespot4sap. The inventory has been integrated with the finance module.com/ http://www. References: • • • • • • • • http://www.htm http://www.aspx http://www.shine.epx http://www.com/company/Sundaram-Clayton-Limited/810.sundaram-clayton.sap.business-software. Thus the SAP R/3 solution has been cost effective and has improved the overall business of Virinchi Ltd significantly.indiastudychannel. up from 23 percent. The forecasting and calculation of depreciation values as well as the capitalization process have improved.com/ 33 .com/india/index.com/ http://www.com/ http://info.percent.com http://www.sap-basis-abap.com/sapfunc/pp. A major benefit that VIRINCHI now enjoys is that the plant maintenance has been vastly improved ever since the process has been digitized through SAP.erpgenie.
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