Architecture Unit New

8/2/2019 Architecture Unit New

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Project Report on

Implementation of ERP in

ROYAL CONSTRUCTION LTD.

Contents

I. IntroductionII. Pre-Implementation Stage

(1)Need Analysis(2)Challenges and Opportunities(3)ERP Modules

(a) Sales Module(b)Architecture Module

(c) Execution Module(d)Plant and Machinery

Royal Construction Ltd. Page 1



(e) Purchase and Store Module(f) Payroll Module(g)Finance Module(h)Legal Module

(4)ERP Package

III.Implementation StageIV. Post-Implementation Stage

(1) Benefits(2) ROI

V. ConclusionVI. Appendix

a. Sales Module b. Architecture Modulec. Execution Moduled. Plant and Machinerye. Purchase and Store Modulef. Payroll Moduleg. Finance Module




I. Introduction

About the Company

Royal Construction Ltd. came in to existence in 1964 with the objective of providingconstruction services to strengthen India’s railway infrastructure. The company has richdomain expertise in servicing the Indian Railways—earthwork, ballast, rail-track linking and

welding, bridges, tunnels, electrification and signalling. The company has also extended its business to the construction of roads and highways, bridges and flyovers and sewerage anddrainage networks among others besides venturing in to the attractive marine infrastructurespace, power transmission and distribution segment and aviation infrastructure.




II. Pre Implementation Stage

Need Analysis

Introduction to the Problem

The company had relied upon a manual system to manage its documents and was heavilydependent upon physical files containing valuable documents, records, project applications,

payments, transactions, customer relations etc. This manual system worked fine until thecompany expanded and experienced a phenomenal growth in its business to find that it wassurrounded by islands of paper files that needed to be managed, updated and preserved.Experiencing problems such as incomplete client information, untraceable accounts and thelack of an effective mechanism to address customer queries, the company decided to take itsfirst step in deploying a connected IT infrastructure and implement an ERP solution called ERPmatrix.

Although the company had implemented an ERP system, the solution primarily looked after itsaccounting operations. Data entry and material management related to construction projectscontinued to be handled manually using physical files and Excel spreadsheets.




Furthermore, with no defined procedure of information transfer, the company was spendingvaluable time in sending information from one project site to another resulting in additionalhassles and low productivity. With the data only to be entered at the company’s headquarters inDelhi, it was necessary to collect and collate information and records from the companiesnumerous sites and then put them together at the main branch. The procedure not only proved

to be tedious and cumbersome but also inefficient as the manual consolidation of data resultedin fragmented pools of information.

Then again, accessibility was a major problem and there was no tracking or monitoringmechanism in place to obtain the immediate status of a project resulting in unnecessary delaysand errors on different fronts. Besides, facing hurdles such as the lack of transparency,additional retrieval of important data and data analysis had become a tiresome and a longdrawn process.

Challenges & Opportunity

Following were some of the challenges & opportunities which were take care of byimplementing the new ERP.

• Rapid growth in the company

• Close monitoring of projects and tracking was an imperative for better execution

• Eroding margins due to increased competition and increasing prices of raw materials

• Need for a new business model to increase growth and improve profitability

• Need for diversification within the industry to fuel growth rates

• To improve project tracking for better control and execution

• Company have been in operations for over 40 years. Over the years it has grown

exponentially and has expanded to 20 project sites with one regional office in Delhi.Bur one of the major challenges faced by the company was to save and preserve recordsas those were needed for future.

So the basic objective of ERP implementation in the Royal Construction Ltd. to derivecompetitive advantage by Establish a solid information systems platform for facilitating growthand closely monitor projects to take informed and timely business decisions

ERP Modules

The implementation was modularized type and the each module can linked at any time as per company’s requirement. The system runs both at site as well as at head office independently.The head office is linked with the site office through web server/data transfer protocols andthus enables one to know the status of each site, which increased the effectiveness inmonitoring and executing of site work. Following are the module that has been implemented onRoyal Construction Ltd. Ltd. Each module is linked with each other by single or differentways. Flowchart of each module has given in APPENDIX I TO VII.

1. Sales

Sales module is a comprehensive module which records each and every action of the sales

representative for affecting a sale along with customer feedback. This really strengthens thefront end, without compromising on the basics of the company's sales policy.




Sales persons can check the feasibility of each request posted by the customer along with the project status and explore possibilities of merger of another unit or, transfer from one unit toanother at a click of a button.

This feature enables quick response time and in turn, provides for an excellent and effectiveCustomer Relationship Management (CRM) feature tool.

Salient Features:

• Maintains history of customer enquiries with complete details and its subsequentfollow-ups

• Generates status and demand letters automatically• Report Builder tool for creation of customized reports• Booking details of all unit owners are maintained, including parking availability, rate

and issue of allotment letter in a project• Define base rate for a project and also, define subsequent incremental floor wise rates• Define Transfer fee and also, cancellation charges between dates• Define project wise brokerage charges• Setting up of instalment structure for a project• Configure other various heads under which payments are receivable, e.g. parking,

electric / water meter charges, legal charges, maintenance charges etc.

Reports:

• Enquiries handled between different dates• Unit Occupation Report• Client Feedback / Follow-up Report• Complete Transaction details• Booked Units, Cancelled Units, Merged Units (with reasons, if any)• MIS Reports and more

2. Architecture

Architecture module is a comprehensive application developed to take care of the minutedetails of construction activity in a project, right from the design stage. Plans can be viewedvis-à-vis compliance with all government described norms and buyer preferences.

Salient Features:

• Sets Project Parameters (Fresh / Slum Rehab Project)• Maps the latest status of the project e.g. Under Construction (i.e. Slab status etc.) or

ready for possession, which enables the sales team to plan its activities in advance• Define instalment structure in project• This module can provide a view of the project site, building, wing and structure layout

for sales department and buyer decisions• Create various masters like Project Master, Building Master, Unit Master, and Floor

Master Etc.

• Create Parking Area with allocation of Name / Nos.




• Merge request forms received from Sales module for instant feedback on status,"Approved / Not Approved"

Reports:

• Project Report• Area Certificate copy• Project Completion Certificate• Various types of Issue Certificate

3. Execution

Engineering module is a powerful project management tool to monitor and control project data,evaluate projects and enable design-to-cost engineering to optimize construction costs. QualityManagement - Plan, collect, settle, and evaluate quality related to costs. The solution includesfeatures that provide data to determine standard or user defined quality scores. This module is

also designed to integrate with other modules like Accounting, Architecture, and Sales etc.

The contractors & labour billing is a major part of construction business which has been takencare by this module. It comprises 70% of cash outflow from the organization.

Salient Features:

• Project execution management and running bill generation• The quantities can be generated directly from the user-defined drawings using graphical

building generator •

The user can maintain the detailed library of resources, units, overhead charges andactivities• Daily reports can be had from the site engineer • The actual progress is mapped to the plan of the project to find deviations• Total inventory management of site• Embedded provision for multi-level user security and permissions• Customized reports generation• Analyze the warehouse activities, such as the physical flow of raw materials versus

workloads• Daily labour entry and material consumption entry

Reports:

• Sub Contractor detail list• Activity Time Management• Work Order Processing• Daily Progress Reports• Stores inventory report• Site activity and other MIS reports

4. Plant & Machinery

Plant and Machine Maintenance module provides an integrated solution for supporting theoperational needs of an enterprise-wide system. The module includes an entire family of




products covering all aspects of plant/machine maintenance. All maintenance tasks such asinspection, servicing and repair activities are saved in a historical database.

It also provides technical and business reports and various presentation options, according tothe criteria used: for example organizational unit, location, execution period for tasks, or

system manufacturer. This information helps organization to reduce the duration and costs of plant down times as a result of damage and to recognize possible weak points within your technical system in good time.

Salient Features:

• Maintain the Auditors remarks• Maintain construction equipment along with plant (for concrete production)• Minimize cost of operation• Ensure availability of equipment at every site when these are needed• Ensure availability of spare parts for all the machinery• Manage man power (operator) for all the machinery

Reports:

• Monthly Maintenance Bills• MIS Report• Daily Progress Reports• Breakdown Repair Log• Spare Part Installation Log

5. Purchase & Stores

Purchase & Stores modules cover the entire Purchase and Stores function aspects of anenterprise. It is tightly integrated with the Inventory, Payments and Legal modules. PurchaseManagers can now accurately and easily access information about vendors, stock levels,

purchase analysis, etc. in real time. Store Managers can easily deal with all the items or products required by the organization.

Salient Features:

• Get complete purchase history such as cost average, cost difference and average lead-

time for each vendor, item and delivery schedules• Supports FIFO, LIFO average and standard costing methods• Easy templates for calculation of taxes and Vendor terms and conditions• Maintaining Product wise preferred vendor list• Preparation of Purchase Bill based on GRN• Tracking transfer of stock from company to work site and vice-versa• Updating of stock after receipt of resources• Price comparisons of quotation and finalization of best quotation• Generation of request for the quotation of the procurement• Compilation of available resources from various project sites for procurement analysis.

This helps procurement of the right material at the right time and at the right place

• Requisition directly linked to the Project Plan• Check stock opening balance




• Stock transfer • Generate material receipt• Inventory Management

Reports:

• Vendor Detail List• Indent details report• Enquiry generation• Quotations• Purchase Order • Store Receipt Note• Purchase Invoice• Payment authentication, budget allocations etc.• Stock Report (Updated Stock, Stock as on date, Periodic Stock)

6. Payroll

Payroll module covers every activity dealt by the HR department. This module enables anorganization to capitalize on the workforce - their most important asset. It helps in performingHR activities such as recruitment, salary, leave management, payroll, etc.

Salient Features:

• Maintenance of Employee Details with respect to department, designation, status,income tax category, recruitment agency, payment mode, PF, etc.

•

Leave Management that involves leave opening balance calculations, over time andmonthly leave calculations• Application, processing and sanction of Loan to employee and their repayment• Payroll generation and management based on every department• Statement creation for pay slip, provident fund, professional tax, ESIC, income tax,

housing loan, salary, challan, etc.• MIS reports based on monthly leave details, leave balance and attendance• Voucher creation and management

Reports:

•

MIS reports• Attendance Report• Leave Balance as well as details• Vouchers• Salary Structure

7. Finance

Finance module is a business application capable of totally managing most accounting needs of a company. It enables management to optimize accounting with inventory control along withintegration of payroll, sales, purchase and engineering modules thus delivering a

comprehensive picture of company's financial robustness at any given point of time and at anygiven place through web connectivity.




Finance module is a powerful browser architected enterprise module, providing a completelyintegrated approach to an organization's accounting needs, delivering control, speed andresponsiveness with cost savings.

Salient Features:

• Maintains financial year wise transaction details• Helps in generation of different types of vouchers such as Credit, Internal Transfer,

Journal and Petty cash etc.• Calculations of TDS, VAT and other taxes possible before releasing payments• Maintenance of all payment details made to external parties under various accounting

heads• Bank reconciliation and Cheque return status maintained

• Builder software with a solid accounting foundation enhanced with construction-specific functionality

• Job cost reporting in real-time, including work-in-progress schedules and detailed bonding reports

• Billing and cost tracking by lot, plan and elevations• The ability to import payroll time cards• Residential templates for housing developments• Buyer options and change order tracking software to capture revenue for work outside a

job's original scope

Reports:

• Balance Sheet• Trial Balance• Profit and Loss Account• Account Books like day cash, bank transactions etc.• General Ledger and multiple ledgers• Stock Report• Payable / Receivable• MIS Report• Ratio Analysis, etc.

8. Legal

Legal Module covers the entire legal efficacy involved in the real estate and construction business. This module helps to perform operations in accordance with the laws applicable inthe construction activity.

Salient Features:

• Availability of all the legal documents at one place• Easy access to general legal forms and transfer documents• Provides Ready Reckoned for reference to all facilities made available• Stamp Duty Calculation

• Availability of addresses of important government offices• EMI Calculation for user-specified values




ERP Package

The company evaluated a number of ERP solution vendors including Microsoft and Oracle butfinally decided to go with SAP. For a construction company, the quality and timeliness of itsdata spells success or failure. The SAP solution offered us with industry proven best practices

and the ability to expand the solution according to our changing needs. Another factors whichhelped Royal Construction Ltd., decide in favour of SAP was

• The core features included a project system amongst other modules like finance andcontrolling, purchases & stores and sales which fitted neatly into the company’s core

business requirements.• It’s a powerful systems available for efficient costing and project execution

• SAP also had solutions that were localized for India which would help organization tomeet statutory norms defined by the Indian Government. SAP also had a pay rollsystem customized for India that matched organization’s requirements.

III. Implementation Stage

Once the company zeroed in on SAP ERP, it chose Caritor as its implementation partner (consultant) and began the execution cycle. A 20-member team from Caritor studied therequirement of the company in order to come up with a suitable solution. Besides engaging the

implementation partner the company also bought in its own team of five members representingfive key departments in the company to give a detailed picture to the execution partner of their

business requirements. Excellent communication and coordination between the management,core team and consultants ensured that the process was completed in just eight months.

At a Glance

Name Royal Construction Ltd.s Ltd.

Location Delhi, India

Industry Construction

Products and services Infrastructure

Revenue 162 crore

Employees 400

Concurrent Users 60

Period of implementation 8 months




However during this period the team was faced with certain major challenges:

• Fragmented data : As an established construction company, Royal Construction Ltd. hadhuge piles of records and data. Then again with no systematic storage of information amajor task for the team was to collate and gather as much data as possible and update it

accordingly.• Employee inhibitions : Having no experience in working with SAP, the employees were

initially apprehensive about switching to the new system. They preferred the manualsystem of file handling despite it being tedious as they feared that the new one would

be complicated to understand and difficult to use.

To proceed with the implementation it was necessary for the team to overcome thesechallenges. After an in-depth understanding of the business process, Royal Construction Ltd.

proceeded to re-engineer the system. Orientation and re-orientation as per SAP standards and precise testing gave way to full steam implementation. In order to overcome employeeapprehensions, we not only provided on the go training but also conducted a two-day training

session taking up employee queries after the implementation was complete.

IV. Post Implementation Stage

Benefits

The implementation of the SAP ERP solution has benefited Royal Construction Ltd. in moreways than one. First and foremost, the four core modules of implementation finance, Purchases& store, Execution and sales and distribution have been extremely beneficial to RoyalConstruction’ business. The solution has enabled the company to standardise and integrate allits processes across the country. With a centralised system in place, data is now accessible fromall locations and can be entered on-site. Moreover, the interconnected system automaticallyupdates all related data upon entry, providing reliable and up-to-date information. It has notonly put an end to the tedious and long-winded process of entering, re-entering and checkingdata for each calculation but has also enabled the company to significantly cut down its

bandwidth requirements.

Improved productivity and insight for a broad community

The solution has helped Royal Construction Ltd. improve its operational efficiency and productivity by significantly extending the reach of business processes, which enable it toengage and connect with more people in real time including customers, suppliers, and partners.The secure but easy access to a consolidated and consistent view of each business processencourages wide use and collaboration. Every employee has the necessary information and canact efficiently and respond quickly to market changes and competitive challenges.

Reduced costs through increased flexibility

With the application extending transactions, information, and collaboration functions to a broad

business community. Royal Construction Ltd. can use SAP ERP to add customer relationship




management, supply chain management, and product life-cycle management functionality astheir needs evolve which reduces costs and facilitates change.

Adaptability to support changing industry requirements

With the SAP ERP powered by SAP NetWeaver, Royal Construction Ltd. has been able toseamlessly integrate its end-to-end processes using a scalable and adaptable application thatmeets its industry-specific needs. In addition, it can also take advantage of the latest open,Web-based technology

With the company planning to grow its business overseas, it’s relying on the scalability and thecontrol over business offered to it by the solution.

ROI

Return on investment is one way of considering profits in relation to capital invested. The purpose of the "return on investment" metric is to measure per-period rates of return on dollarsinvested in an economic entity. ROI and related metrics (ROA, ROC, RONA and ROIC)

provide a snapshot of profitability adjusted for the size of the investment assets tied up in theenterprise. Marketing decisions have obvious potential connection to the numerator of ROI(profits), but these same decisions often influence assets usage and capital requirements (for example, receivables and inventories). Marketers should understand the position of their company and the returns expected. ROI is often compared to expected (or required) rates of return on dollars invested.

Return on investment (%) = Net profit ($) / Investment ($) * 100 %

For Old ERP system:

For Royal Construction Ltd., Net profit is 13 crores as compared to 8 crores in the previousyear.Old ERP implementation cost = 100 croresFirst year profit = 5 croresSecond year profit = 3.2 croresFirst year Return on Investment = 5%Second year Return on Investment = 3.2%Return on Investment for the two years is 8.2%

For New ERP system:

New ERP implementation cost = 162 crore Net Profit = 13 croresReturn on Investment for the current ERP = 8%




V.Conclusion

Using the old ERP system, the combined ROI for the two years was 8.2%. But onimplementation of the new ERP, the ROI for the single year has been 8%. Hence, it isadvisable for the company to continue with the new ERP for the coming years. However,deviations can exist which can lower the ROI for the new ERP system too. So, choosing the

best ERP package for this company can be only done if considerable amount of time is given to

the new package and cannot be judged by sole performance in a single year.




VI. APPENDIX

Sales Module


BA Tenderin

Value Proposition &

Differentiation of

Company fits with Client

Requirement?

Bidding

Value Proposition &

Differentiation of Company

Project

Customer

Requirement

Input of Customer

Demand

Customer/Client Database

(Project)

Particular Project

can give profit or

goodwill or both tothe organization?

NoArchitecture

Yes

Yes

No

No

H

Finance

N



Architecture Module


Execution Module

Deliver to

the Client

CRM

Feedback

End

Execution

Module

Cas

B

Parameter set by

analyzing tendering

document

Design

Design done

according to the ISO

standards & Govt

norms

Client likes the

design?

Design Conformed

C

Transfer to Client

CRM

Execution

FeedbackNo

No

Yes

Yes

Sale Module



Execution Module


C A

Bill of Quantity (BOQ)D

Estimated Labour RequirementsEstimated Material

Requirements

Estimated Machinery

Requirements

E

Contractor

Database

Contracted labour fits

with the work

requirement?

Contractor selected

Work in

Billing

Work continue

Client

satisfie

d?CRM

Final Product H

F

C

No

Yes

Feedb

SaleArchitecture

Yes

No

Sale

Architectur

e Module

Purchase &

Store Module

Purchase &

Store Module

Material

G

N

Finance

Finance

P&M Module

Purchase



P&M Module


E

M/c is

available?

Particular M/c gives long-

term profitability?

Contractor

Database

M/c have taken for rent

Prepare Maintenance Prepare Operation Scheduled

Prepare list of spare parts Prepare list of fuel & otheroperating product

Purchase orders J

O

M/c available for

M/c is in

working

condition?

Repair P

Yes

Yes

Purchase

orders

I

No

No

NoNo

Execution

Purchase &

Store Module

Purchase &

Store Module

Purchase &

Store Module

Spare

Operating

M

Purchased

QFinance

Depreciati





Payroll Module


P&M

Employee Selected

Employee

Database

Leavestaken Basic

PF, TA, DA,

Medicalallowances

Salary

CRM

Promotion/DemotionR

Feedback taken

from all the

Feedba

Feedba

Feedba

Finance



Finance Module


D

Budget Allocation

G P

Cash against Bill

Cash dispatch to all

contractor and vendor

N

Cash

Out

Cash In

Recorde

Profit

Calculation

Cash Cash In

Q

Execution

P&M Module

Purchase &

Store Module

ExecutionSale Module

Execution

Depreciati

R

Payroll Module

Salary

Documents

Architecture Unit New