ERP Implementation At Tata Steel



Tata Shaktee (Galvanized Corrugated Sheets). Tata Steel's Jamshedpur plant has a capacity of 4 mn tons per year. Backed by captive iron ore and coalmines. construction re-bars. Total Operational Performance. They will help in deciding ERP success. Tata Tiscon (re-bars). 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. Tata Agrico (hand tools and implements) and Tata Wiron (galvanized wire products). Eastern India. tubes. BACKGROUND TATA steel is India¶s largest integrated private sector steel company that started its corporate journey in the year 1907. Six Sigma. They are regularly implemented with the help of committees who report to the selected members from the senior management. . ASPIRE. The company is dedicated to providing laudable services to the stakeholders improve on the quality and as thrive for innovations and improvements constantly. the plant is being expanded to accommodate another million. 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.3 billion. Tata Steel has also developed 'galvannealed' cold rolled steel with technical assistance from Nippon steel for high-end auto applications. As part of its expansion plans the company recently made investments in NatSteel Singapore. Tata Steel¶s quality initiative drive combining TPM. Currently. Tata Steel runs state-of-the-art Cold Rolling Mill complex at Jamshedpur. resulting in production of steel at the lowest cost in the world. Tata Steel has set up an ambitious target of 15 mn ton capacity per year by 2010. to meet growing demands. The company has introduced brands like Tata Steelium (the world's first branded Cold Rolled Steel). Being a large entity does not stop things from being subject to scrutiny and internal audit. While many organizations have not incurred the necessary benefit in terms of money and other measures there are lots who have witnessed multiple profits. Tata Pipes. Tata Bearings. galvanized sheets. The Construction Solution Group explores new avenues for steel utilization by techniques that are economical. Being a large entity does not stop things from being subject to scrutiny and internal audit. Suggestion Management and Quality Circles has reaped rich dividends for the company. Beside this there are several other factors that decide the regular functioning of ERP in organizations. The enterprise has undergone a modernization programme costing $2. wire rods. Studying them will help in understanding the critical success factors for ERP implementation. They are regularly implemented with the help of committees who report to the selected members from the senior management. which will expand its footprint in six countries in the Asia Pacific region and China. rings and bearings. and produces flat as well as long products.Analyzing SAP ERP's success in TISCO The critical success factors of ERP systems mainly include proper implementation and usage. Tata Steel's products include hot and cold rolled coils and sheets.

ERP implementation did in wrong manner have caused havoc to organizations more than bringing profits. is the crucial component for a company¶s IT data backbone. and yes. However TISCO proved to be different from the others by choosing ERP in the right time and implementing it in a proper manner. You need to make good business decisions. Information Systems For A Quickly Changing Steel Industry In a quickly changing industry like steel. 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. Another amazing fact is that they implemented it into the whole systems in one single spree. and improvement initiatives. There are too many different systems. especially in its mature implementations today. one need information systems which quickly provide them the data they need. In order to rectify these issues which would otherwise prove to be major setbacks to the company the organization resolved to take up ERP. Secondly the systems were outdates and the modalities of operation were too complex and not error free. This was instigated by the concerned departments. The net results of their ERP software have been described to be pathbreaking and a trendsetting one. But your IT systems are not well integrated. They have also reported a whooping profit and reduction of costs in the whole process. What Should They Do? Let¶s say you¶re the CEO of a large multi-national steel company.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 can play an essential role in: . 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. The whole system was tuned to the process and very little attention was paid to the customer demands. Infact the success rate of this method itself is low in general and very low as far as bigger companies are concerned. TISCO has achieved that by way of meticulous handling and professionalism. You need a common information backbone. and you rely on your IT systems to provide the data to make those good decisions. a legacy of the company¶s history of mergers. and too many gaps between them. and you¶re running a global operation with plants on four continents. Incase of the rare success organizations will experience effective results in their enterprise operations. Firstly they were not customer friendly. The method of implementing it in one spree carries a lot of risks especially for a bigger company. Leading consultants were hired and the business structure was studied and suitable plans were drafted accordingly. We believe that ERP. You¶ve heard that ERP systems can do that. WHY ERP IN TISCO TISCO faced two major problems from the systems that existed for a long time. acquisitions.

(3) Improved productivity through better sales order handling. client-server architecture. and product distribution. 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 What is ERP? ERP or Enterprise Resource Planning is IT software that integrates business activities across an enterprise²from product planning. parts purchasing. However. ERP Project Risks In the late 1990s many ERP projects started. and should not be viewed as a standalone initiative with the requirement to pay back its implementation cost. ERP has also evolved technologically from a monolithic legacy implementation into flexible. inventory control. SAP and Oracle are the two ERP leading vendors. While ERP projects remain challenging even today. accounting and human resources aspects of a business. The most immediate ERP benefits include (1) Improved visibility of procurement spend and savings from improved sourcing policies. From a business perspective. the most important business benefits will often be delivered after the ERP backbone is established. ERP Business Benefits ERP is an enabler of business benefits. (2) Decrease of work-in progress and days-of-sale-outstanding.y y y y y Driving accurate and fast decisions (product profitability. to order tracking. but more than a few failed. 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. by other initiatives that use the ERP backbone: y y y y y y 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 ³carve-outs´ or divestments Increased regulatory compliance . better procurement operations and more efficient planning. tiered. ERP may also include application modules for the finance. ERP today has expanded from simply coordinating manufacturing processes to being the integrator of enterprise-wide backend processes.

The ERP discussion on investment return is one of mindset more than one of standalone business cases. especially when different ERP implementations are being harmonized. These IT savings include: y Reduced ERP implementation costs due to a common template y Reduced application maintenance costs y Lower integration cost due to standard interfaces y Lower infrastructure costs With an awareness of the best practices and a good understanding of ERP project complexities.y Robust and future-proofed backbone systems There are cost savings on the IT side. . the risks in an ERP implementation are usually outweighed by the benefits. often around 10-15%.

as described below.stock. the bill of material ³stands on its head´ or is ³v-shaped. whereas for the make-to-stock entries. 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. finish-to-order could be a relevant planning strategy as well. This means that the later in the process you define a product. A steel product tend to explode towards the end of production processing. Challenge 1: More than one planning strategy Steelmakers often use a combination of production planning strategies. ERP systems today allow re-assigning flexibly to handle these situations. Characteristics then drive production. Challenge 2: Complex product variations A steel product is made up of a large number of characteristics. but in a make-to-order environment costing happens on an individual order cost collection and forecast basis. the higher the number of products to be defined becomes. This analysis will result in the basic decisions that will be the foundation of the ERP project.´ as shown in Figure 1.Six ERP Design Challenges for Steel Companies A steel company presents six industry-specific design challenges for implementing ERP. Depending on the existence of a ³de-couple point´. A successful ERP project will start by analyzing these challenges in detail across all of the company¶s integrated processes. Challenge 4: Specific Customer Service Requirements . shipping and purchasing processes across the supply chain. ERP systems today can handle this kind of complexity. with unstable production processes and unplanned outputs. on the ³material master´. Such a combination of planning strategies affects the design of most ERP processes. tons. configuration is done in the product definition. This burdens the early discussions during the design phase of an ERP implementation. This requires continuous re-assignment of products to processes and orders dependent on the Characteristics described above. whereas the long products are make to. dimensions. making the product difficult to configure when entering it in the ERP system. ERP solutions today can readily handle the complexities this of the V-shaped bill of material. characteristic value inheritance from sales order header to item level. Cost control in make-to-stock tends to go for standard price approaches. Typically the flat or strip products are make-to-order. entry of multiple order units such as pieces. Challenge 3: Flexible planning Planning for steelmaking often needs to happen on short notice. in other words. Configuration in the make-to-order entries is typically done while entering the order. 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. They allow ³characteristics based product configuration´ with automatic deduction of characteristics. that is. including supply chain processes as well as the financial/cost control processes. and so on.

To cope with high-demanding customer segments such as automotive and construction. The batches need to be selected based on characteristics during production. tight integration with business partners on forecasts. electronic customer orders (EDI. the caster works continuously and the finishing lines work in batches again. preparation and shipment planning. internet etc. Challenge 5: Complex production scheduling combining both continuous and batch production Figure 2 below illustrates the flow in a typical steel mill. ERP systems today support electronic integration with partners. While the blast furnace and converter work in batches.) are typically needed. This means that the planning process needs to be able to derive batches with characteristics .

y y y y y . bottlenecks which can change based on incidents such as production problems in certain process steps. the ERP and BIS systems can. ERP systems today can handle all of these situations. and feed results back into the SCM application in order to optimize the load balancing. it is also essential to differentiate between ³strategic materials´ (cokes and ore. coils etc. via the ERP system. Challenge 6: Detailed margin analysis In today¶s steel industry when prices are high and capacity short. It is at that time when quantities are being translated into pieces (slabs. Production completion then posts an updated status of the orders into the ERP system. On top of segment analysis. the scheduling part of the planning system needs to be able to work with multiple and dynamic bottlenecks ± that is.´ The result is planning blocks of similar products which are then handed over to production planning. sequencing and combining pieces from various orders throughout the mill into lots for optimization. and so forth. 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). A typical flow would be: y The Supply Chain Management (SCM) application provides the rough-cut planning in ³Demand Planning.). improve inventory allocation to late orders. are transferred into the MES layer. 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. ERP systems provide the tools to support these decisions. The mill optimizer then typically would re-shuffle orders in between the blocks. Ni and Cr for stainless) and the other cost elements that may be easier to control. including stock receipts of finished products. When orders are being entered. Working together. Finally.inheritance and history tracing. Right before production starts. The ERP system will also need to work closely with the company¶s Business Information Systems (BIS) to optimize the business benefits. for example. planned orders from the SCM application are converted into production orders and. margin analysis becomes the essential method to tell what money is being made on which customer/product segments. Detailed scheduling then takes place.

Figure 3 is also important because it lets you identify gaps among a company¶s different IT systems. ³Bridging this gap´ properly is essential forrealizing the business benefits of the IT investments. . A typical gap occurs between the ERP and MES (process control and machine control) systems. A recent IBM survey indicates that steel clients process control and MES systems are custombuilt applications 66% of the time. and that these custom-built applications usually differ from mill to mill. Implementation Approaches for ERP The key element for ERP success is to know how to implement an ERP project. where the ³system´ is actually combination of custom-built applications and manual spreadsheets. Clearly. Past experiences recommends best practices such as: y y y Rapid/realistic project timelines due to external pressures (acquisition synergies. integrated and cost efficient. they need to be robust. legacy applications. there¶s much more to it than these few general principles. this risks creating sub-optimal processes and leaves the company open to all the problems of maintaining custom-built. 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. Implementing ERP is complex and takes a team of knowledgeable and experienced ERP professionals to successfully implement an ERP project. If the applications in Figure 3 are to provide true value.

It sounds almost Utopian doesn't it? But that's exactly the result of TISCO's ERP implementation completed within eight months. The company took all efforts to ensure that the change did not produce any sort of resentment in the organization.5 million tonne steel plant and is capable of meeting the most rigorous demands of its customers worldwide. Similarly the supporting functions were named minor ones. In keeping with this . This was done to improve customer focus. Tata steel decided to go for a new robust solution. Not only did it operate as individual islands of information but the technology had outlived its lifetime and was completely obsolete. In addition all apprehensions relating to change were discussed and clarifications made to the fullest satisfaction. The period set for implementation seemed to be another major challenge. Besides. with a study on cost competitiveness and a formal business plan. innovation and refinement of its business operations. several times the information against certain items was found missing. 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. They had to choose top ERP software in order to ensure that it meets the demands of a big firm like TISCO. followed by ISO 9002 certification and benchmarking initiatives. has transited seamlessly from a production-driven company to a customer-driven one. They went ahead with associating and implanting TISCO to all the stakeholders so that they become compatible. An Early Response Responding to changing customer needs started as early as 1991. Further. A plan of action on the proposed ERP's impact was drafted depicting their relation to one another and to the business process. The core functions were denoted to be major ones. facilitating better credit control. Also there was no built-in integrity check for various data sources. Design In 1998-99 a small cross-functional in-house team along with consultants from Arthur D. and reduction of stocks. the reliability of information obtained was questionable because of inconsistency and duplication of data from different departments. Realizing the need to further support the re-engineered core processes and quickly align the business processes to radical changes in the market place. These ideas also contributed to the success. Little (Strategy Consultants) and IBM Global Services (BPR Consultants) redesigned the two core business processes: Order Generation & Fulfillment and the Marketing Development processes. The existing technology was a simple replication of the manual system. TISCO is Asia's first and India's largest integrated private sector steel company. They were also shrewd enough in adopting the modern and most recent technology available in the market. The time granted for the process was 8 months. The employees and management at TISCO faced a cumbersome task exchanging and retrieving information from the system. The business process was divided into two main segments. It has a state-of-the-art 3. This was done by educating everyone on the need and desirability of change.Implementation Process At Tata Steel The company knew well that they had a tough time especially to implement the software in one stroke. The company adopted ERP technology to take a lead in the competitive steel industry and through constant learning.

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. Mapping Technology To Business Processes The path was set to achieve success through SAP. said. which had huge numbers of transactions and complexity.commitment it adopted the latest production and business practices to offer innovative processes that meet the changing demands of its global and local customers. MD (Designate).´ The challenge is compounded if the ERP provider is a world leader . Sandipan Chakravortty.SAP. The implementation of SAP software was associated with certain strategic goals in mind. successful organization. Besides this. transparency and credibility of data and improve responsiveness to customers across all areas. With this implementation. The prime objective of 'Change Management' was to reach out to people involved non-directly in the project to apprise them of the developments taking place. GM (Sales). . time. operability. 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. This would enable TISCO to achieve a world-class status for its products and services and strengthen its leadership position in the industry. The Real Challenge B Muthuraman. All the branches. SAP topped the list of contenders. 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. They all looked forward to knowledge-based. support and future organizational requirements was done. TISCO wanted to bring forth a culture of continuous learning and change. TISCO. esteem. "We wanted that Tata Steel be the number one in the steel industry«we wanted to be the first to have the latest systems«" said Mr. "Implementing any ERP system is a challenge for an organization because of the declining success rate of ERP implementations world-wide. The TEAM ASSET had two simple axioms: y y Go-Live date . 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. cost. compatibility. were identified as a HUB while the smaller branches along with the consignment agents were defined as SPOKES which were attached to these branches. Also another parallel activity called 'Change Management' was initiated within the company. TISCO also wanted the software to result in quick decision-making. In January 99 the team from TISCO was decided and christened 'TEAM ASSET' an acronym for Achieve Success through SAP Enabled Transformation. 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.

it means it would allow anyone to access our SAP R/3 over the Internet. as it would result in sharing of information with enterprise accounts and key customers. the implications are tremendous.To implement SAP modules such as Asset Management & Budget management sub-modules of FICO. y y y Phase I . Driven against the speed of time. On 1st November 1999 Tata Steel pulled off a big bang implementation of all SAP modules at one go across 46 countrywide locations. CO. Web enabling of SAP R/3 is on the cards.To Extend SAP in Works with FI. Production Optimizer (such as SAP APO) Phase III . as per the set deadline. On the surface.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.Tata Steel planned a big-bang approach of going live with all the modules at the same time. Achieving Business Agility Through SAP Marching ahead. MM. Human Resources. But beneath it. PP & QM Phase II . in just a span of eight months. ARCHITECTURE AT TATA STEEL . Plant maintenance. the pace of implementation was fast with all activities backed by a lot of thought process and meticulous planning. 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.

live video streaming for improved communication across geographies VoIP. It is present in 46 nationwide locations. enhanced customer service. Wi-Fi. workflow management and reduction in the number of credit management errors. and resources . integration with cell phones and PDAs to support mobile computing In a Nutshell y y y y The Company TISCO is Asia's first and India's largest integrated private sector steel company. Collaboration using Lotus Notes Data Warehousing and Data Mining for manufacturing processes E-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.Major IT initiatives and implementations at Tata Steel SAP R/3 in Sales. innovation. It had to transit from a production-driven company to a customer-driven one. Procurement. and refinement of its business operations. accelerated transaction time. There have also been significant savings in manpower. The Need The company wanted to keep its lead in the competitive steel industry through constant learning. The legacy systems had outlived its life and was quite obsolete. e-auction. and other e-enablement initiatives Knowledge Management and Intranet Videoconferencing. The Benefits The company now has efficient business processes. reduced costs. inventory levels. The Solution An ERP SAP R/3 was deployed in a 'big bang' approach across all its locations nationwide. improved productivity. Document Management.

This was followed by a massive change in terms of accountability administration and control.THE OUTCOME SAP ERP solutions produced a remarkable result to the company in terms of financial technical and managerial parameters. Finance.170 million in 1999 to Rs 4. . 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. The effective handling and speed delivery resulted in greater sales . Conclusion ERP is a key backbone application for companies in a fast changing industry like steel. the risks in an ERP implementation are usually outweighed by the benefits. TISCO is not determined to stop ERP or attain a saturation point now. "Post the introduction of the ERP solution. "The manpower cost has reduced from over $200 per ton two years ago. Tisco has spent close to Rs 40 crore on its implementation and has saved Rs 33 crore within a few months. The inventory carrying cost has drastically deflated from Rs 190 per ton to Rs 155 per ton. 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." said Ramesh C. While implementing ERP can be challenging and demands sustained commitment from top executive levels. 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. it is fundamental to enhancing the competitive position of a company in the dynamic environment of the steel industry today.Similarly there was a drastic fall in the amount owned to creditors. The ERP discussion is often one of mindset more than one of standalone business cases. The overdue outstanding has been brought down from Rs 5. there have been significant costs savings through management of resources with the implementation of SAP. Vice President. Future Moves This exercise undertaken by TISCO has been a motivating factor for both companies and ERP vendors. The availability of online information has facilitated quicker and reliable trend analysis for efficient decision-making. Given an awareness of the best practices and a good understanding of the project complexities.033 million by June 2000. 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. Nadrajog. the results have been terrific. to about $140 per ton in 2000. To add to this. 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.